Microeconomics Review

1.

1 point

Economics is the study of

how to increase production

the government's role in society

how society manages its scrace resources

how a market system functions

2.

1 point

The concept of...... is central to the discipline of economics

scarcity

comparative advantage

absolute advantage

need

3.

1 point

A good is considered scarce in a society when

only the richest people in the economy can buy all they want of the good.

everyone in that society cannot have all they want of the good.

the government restricts production of the good.

more output of the good is possible.

4.

1 point

Opportunity cost is

the additional cost of producing an additional unit of output

the additional cost of buying an additional unit of a product

that which we forgo, or give up, when we make a choice or a decision

a cost that cannot be avoided, regardless of what is done in the future

5.

1 point

You have $100 in savings. You could earn 4% interest if you put the $100 in a bank savings account for a year. What is your opportunity cost if you put the $100 under the pillow of your bed instead?

$4

$104

$0

$100

6.

1 point

------ focuses on the prices of individual goods and services and ------ focuses on the rate of inflation

Microeconomics; macroeconomics

Microeconomics; microeconomics

Macroeconomics; microeconomics

Macroeconomics; macroeconomics

7.

1 point

Positive economics is an approach to economics that

analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe preferred courses of action

prescribes roles for government in an economy

seeks to understand behavior and the operation of systems while making judgments about their usefulness to society

describes the economy and how it works

8.

1 point

Normative economics is an approach to economics that

seeks to understand behavior and the operation of systems without making judgments

describes the economy and how it works

analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe preferred courses of action

would never prescribes a role for government in an economy

9.

1 point

Which of the following is a normative question?

How will oil exploration be affected if the government imposes price controls on gasoline?

To reduce the regressive nature of the gasoline excise tax, should a portion of the gasoline excise tax paid by low-income individuals be refunded to them?

Why do gasoline prices increase before holiday weekends?

What will happen to gasoline consumption if excise taxes on gasoline are increased?

10.

1 point

"If the price of a product falls the quantity demanded for that product will rise" is best described as a ------ statement

normative

Marxist ideology

descriptive economics

positive

11.

1 point

In a command economy, the

means of production are privately owned

government sets output targets

market decides what will be produced

market decides distribution

12.

1 point

Which of the following is FALSE about a market economy?

It relies on millions of individual economic decisions to determine economic outcomes

The interaction between buyers and sellers answers the basic economic questions of what gets produced, how it gets produced and who gets it

Decisions are regulated by a central agency

In its pure form, it is also known as a laissez-faire economy

13.

1 point

A(n) ------ is an input into the production process while a(n) ------- is a useable product.

resource; input

output; factor of production

factor of production; good or service

factor of production; resource

14.

1 point

Which of the following is NOT included in the decisions that every society must make?

What goods will be produced?

What determines consumer preferences?

Who will produce goods?

Who will consume the goods?

15.

1 point

Efficiency means that

society is conserving resources in order to save them for the future.

society has lessened its dependence on foreign energy sources.

society’s goods and services are distributed fairly among society’s members.

society is getting the most it can from its scarce resources.

16.

1 point

A market is a

place where only sellers meet.

group of demanders and suppliers of a particular good or service.

group of people with common desires.

place where only buyers come together.

17.

1 point

The demand schedule is a table that shows the relationship between

price and quantity supplied.

profit and price.

demand and quantity.

price and quantity demanded.

18.

1 point

Which of the following would NOT be a determinant of demand?

consumer income

the price of related goods

technology

tastes and preferences

19.

1 point

If the demand for milk increases as income increases, milk is a(n) ----- good.

normal

complementary

inferior

substitute

20.

1 point

A change in consumer tastes and preferences leads to a change in ----- that causes a ----- the demand curve.

quantity demanded, shift of

demand; movement along

quantity demanded; movement along

demand; shift of

21.

1 point

Coca-Cola and Pepsi are substitute goods. An increase in the price of Pepsi would cause

the demand curve for Pepsi to shift up to the right.

the demand curve for Pepsi to shift down to the left.

the demand curve for Coca-Cola to shift up to the right.

the demand curve for Coca-Cola to shift down to the left.

22.

1 point

The Law of Supply says that when price

falls, quantity supplied rises.

falls, quantity supplied falls also.

rises, quantity demanded falls.

rises, quantity demanded rises also.

23.

1 point

A market supply curve is determined by

finding the average quantity supplied of the market’s individual supply curves.

horizontally summing individual supply curves.

vertically summing individual supply curves.

Unlike market demand, there is no such thing as a market supply curve.

24.

1 point

A movement along the supply curve might be caused by a change in

the price of the good or service.

input prices.

technology.

expectations about future prices.

25.

1 point

Suppose there is an increase in input prices. We would expect supply

could increase or decrease.

to decrease.

to remain unchanged.

to increase.

26.

1 point

Advance in technology leads to a change in ----- that causes a ----- the supply curve.

quantity supplied; movement along

supply; movement along

quantity supplied, shift of

supply; shift of

27.

1 point

Equilibrium is the condition that exists when

the demand curve intersects the quantity axis.

there is no government intervention in the market.

quantity demanded equals quantity supplied.

the demand curve intersects the price axis.

28.

1 point

Suppose that the demand for apples increased more than the supply of apples increased. The net effect of these two changes would be a(n)

increase in the equilibrium price and an increase in the equilibrium quantity.

increase in the equilibrium price and a decrease in the equilibrium quantity.

decrease in the equilibrium price and an increase in the equilibrium quantity.

decrease in the equilibrium price and a decrease in the equilibrium quantity.

29.

1 point

Temporary shortages in a market are eliminated by

increases in the price, which cause quantity supplied to fall and quantity demanded to rise.

decreases in the price, which cause quantity supplied to rise and quantity demanded to fall.

increases in the price, which cause quantity supplied to rise and quantity demanded to fall.

30.

1 point

The discovery of new gold in South America will __________ the price of gold and __________ the quantity of gold traded.

raise; lower

lower; lower

raise; raise

lower; raise

31.

1 point

The price elasticity of demand measures

the increase in demand as additional buyers enter the market.

how much more of a good consumers will demand when incomes rise.

the increase in demand that will occur from a change in one of the nonprice determinants of demand.

a buyer’s responsiveness to a change in the price of a good.

32.

1 point

When the price of potatoes increases 5%, quantity demanded decreases 8%. The price elasticity of demand for potatoes is

inelastic.

elastic.

unitary elastic.

perfectly elastic.

33.

1 point

If the demand for oranges is unitary elastic, the price elasticity of demand for oranges is

-1

0

-0.1

-100

34.

1 point

A ---- demand curve is perfectly price elastic.

horizontal

vertical

positively sloped

negatively sloped

35.

1 point

The less substitutes there are for a product, the

more price elastic the demand for the product is.

less price elastic the demand for the product is.

greater the income elasticity for the product.

smaller the income elasticity for the product.

36.

1 point

The price elasticity of demand for bottled water in Texas is – 2, and the price elasticity of demand for bottled water in Missouri is -0.8. In other words, demand in Texas is ----- and demand in Missouri is ------.

elastic; unitary elastic

elastic; inelastic

inelastic; unitary inelastic

inelastic; elastic

37.

1 point

If price ------ and demand is -------, total revenue will decrease.

rises; elastic

falls; inelastic.

falls; elastic.

rises; inelastic.

38.

1 point

Price and total revenue are inversely related when demand is

perfectly inelastic

elastic

unitary elastic

inelastic

39.

1 point

If the price of a hamburger increased from $6 to $8, the number of hamburger demanded falls from 3 to 2. The price elasticity of demand equals

-71

-1.4

-0.72

-2

40.

1 point

Cross-price elasticity of demand measures the response in the

price of a good to a change in the quantity of another good demanded.

quantity of one good demanded when the quantity demanded of another good changes.

quantity of one good demanded to a change in the price of another good.

income of consumers to the change in the price of goods.

41.

1 point

If the cross-price elasticity of demand between fish and chicken is 2, then a 2% increase in the price of fish will result in a ----- in the quantity of chicken demanded.

1% increase

20% decrease

10% increase

4% increase

42.

1 point

Assume that a 10 percent increase in income results in a 6 percent decrease in the quantity demanded of a good. The income elasticity of demand for the good is

negative and therefore the good is an inferior good.

negative and therefore the good is a normal good.

positive and therefore the good is a normal good.

positive and therefore the good is an inferior good.

43.

1 point

Assume that a 4 percent increase in income results in a 6 percent decrease in the quantity demanded of a good. The income elasticity of demand for the good is

positive and therefore the good is an inferior good.

negative and therefore the good is an inferior good.

positive and therefore the good is a normal good.

negative and therefore the good is a normal good.

44.

1 point

If the elasticity of labor supply is positive, the labor supply curve would be

horizontal

upward sloping

downward sloping

vertical

45.

1 point

Elasticity of supply becomes __________ elastic over time because __________.

less; of the growing scarcity of resources

less; suppliers have more time to acquire additional resources to achieve desired capacity

more; suppliers have more time to acquire additional resources to achieve desired capacity

more; demand becomes more inelastic

46.

1 point

When the government issues ration coupons, it is an indication that the government has prohibited the use of which rationing mechanism?

Merit

Price

Age

Need

47.

1 point

If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of bread,

a surplus of bread will emerge.

the demand for bread will decrease because suppliers will reduce their supply.

more bread will be produced to meet the increased demand.

there will be a shortage of bread.

48.

1 point

Rent controls typically end up

encouraging landlords to overspend for maintenance.

increasing rents received by landlords.

discouraging new housing construction.

raising property values.

49.

1 point

A price ceiling is

a minimum price set by government that sellers must charge for a good.

the difference between the initial equilibrium and the equilibrium price after a decrease in supply.

a maximum price set by government sellers may charge for a good.

the minimum price that consumers are willing to pay for a good.

50.

1 point

Assume that the government sets a ceiling on the interest rate that banks charge on loans. If the ceiling is set below the market equilibrium interest rate, the result will be

greater profits for banks issuing credit.

a shortage of credit.

a surplus of credit.

a perfectly inelastic supply of credit in the market place.