Econ Final

Fill in the blank. If a production possibilities curve (PPC) has a bowed out (concave) shape, this implies that the marginal costs of production are _______.

increasing

In which economic system does the government play no economic role except for enforcing contracts and protecting private property?

Laissez-Faire capitalism.

Fill in the blank. In the Production Possibilities Model, a point is said to be efficient if it lies _____ the PPC.

on

Which of the following would be most likely to cause a society’s PPC to shift to the left (shift inwards)?

A powerful earthquake destroys many of the society’s factories.

Fill in the blank. If a society is producing at an inefficient point, then it is _____ for the society to produce more of one good without producing any less of another good

possible

In the Production Possibilities Model, the presence of unemployment in an economy will cause which of the following?

economy will produce at a point inside the production possibilities curve

If a society's PPC shifts to the right in the Production Possibilities Model, which of the following must occur?

It will become possible to produce at a point that was previously infeasible.

Fill in the blank. According to the law of demand, all else being equal, as a good's price increases, _____.

the quantity demanded for that good will decrease

Fill in the blank. The law of demand implies that demand curves will be _____ sloping

downward

In which economic system are resources, goods, and services distributed via a central planner?

The command system.

Which of the following would cause the demand for cellphones to increase?

The price of landline phones, a substitute for cellphones, increases.

Fill in the blank. The law of supply states that as the price of a good increases, _____.

the quantity supplied of that good increases

A decrease in a good's price will cause which of the following?

A leftward movement along the existing supply curve

Fill in the blank. An increase in demand is shown graphically by a _____ shift of the demand curve.

rightward

Suppose that when consumer income increases, this causes the demand for hamburgers to increase. All else being equal, this means that hamburgers must be which type of good?

Normal

All else being equal, if consumers expect the price of televisions to increase in the future, what effect will this have on the current demand for televisions?

Current demand will increase

Fill in the blank. The law of demand implies that demand curves are _____ sloping.

downward

Fill in the blank. One implication of the law of demand is that marginal benefits of consumption are _____.

decreasing

Which of the following would cause the supply of airplanes to decrease?

An increase in the price of aluminum, a resource needed to produce airplanes.

Fill in the blank. Assuming that milk and cereal are complements, an increase in the price of milk will cause _____.

the demand for cereal to decrease

Fill in the blank. A point outside of the production possibilities curve is called an _____.

infeasible point

Unemployment:

causes society to operate at a point inside the production possibilities curve

Which of the following is true about points inside (down and to the left) of the production possibilities curve?

At these points, it is possible to produce more of one good without producing less of another good

Increasing opportunity costs are reflected in a production possibilities curve that is

bowed out from the origin (concave).

Refer to the diagram of a production possibilities curve above. Which of the following points is an efficient point?

Point B

Fill in the blank. A rightward shift of the production possibilities curve _____.

represents an increase in productive capacity

Suppose a hurricane destroys several factories within a society. What effect would this have on that society’s production possibilities curve?

The production possibilities curve would shift to the left.

Which of the following is a characteristic of the command system?

Economic activity is coordinated by a central planner.

A supply curve

indicates the quantity supplied at each price in a series of prices

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by

an increase in the price of bagels, a substitute for donuts

College students frequently consume large amounts of ramen noodles. When they finish school and start earning more income, their consumption of ramen noodles frequently declines. All else being equal, this suggests that ramen noodles are

inferior goods

An increase in the price of product A will

decrease the demand for complementary product C

Refer to the diagram above. An increase in demand is depicted by a

shift from D1 to D2

Suppose that desktop computers and keyboards are complements. If the price of desktop computers increases, which of the following will occur?

Demand for keyboards will decrease.

A legal maximum amount that sellers may charge for a product is called which of the following?

A price ceiling.

Which of the following is true about the equilibrium price?

A. At the equilibrium price, quantity supplied equals quantity demanded.

B. At the equilibrium price, there is neither a surplus nor a shortage.

C. The equilibrium price is the price where supply and demand intersect.

D. All of the above.

Refer to the diagram above. The equilibrium price and quantity in this market will be

$1.00 and 200

Fill in the blank. A price floor set above the equilibrium price will ________.

cause a surplus

Which of the following will cause a decrease in market equilibrium price and a decrease in equilibrium quantity?

a decrease in demand

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium

price must rise, but the effect on equilibrium quantity is indeterminate.

What will happen to the equilibrium price and quantity of plastic if the supply of plastic increases?

Equilibrium price will decrease, equilibrium quantity will increase.

If plastic is a resource needed to produce laptops, then a decrease in the price of plastic will

increase the supply of laptops

If plastic is a resource needed to produce laptops, and the supply of plastic increases, what will happen to the price and quantity of laptops? Assume the plastic and laptop markets always operate at equilibrium.

Equilibrium price will decrease, equilibrium quantity will increase.

Refer to the diagram above. Which of the following would cause a shortage?

A price ceiling set at $20.

The law of demand states that as the price of a good increases,

the quantity demanded of that good decreases.

The fact that supply curves are upward sloping reflect

increasing marginal costs of production

An inferior good is a good whose demand

varies inversely with income.

The law of demand suggests that

demand curves will slope downwards, while the law of supply suggests that supply curves will slope upwards.

If X is a normal good, a rise in consumer income will shift the

demand curve for X to the right

A point on the production possibilities curve (PPC) is called an

efficient point.

Which of the following is true about points outside (up and to the right) of the production possibilities curve?

It is impossible for society to produce at these points currently

The production possibilities curve is typically assumed to be bowed out (concave). This reflects

increasing marginal costs.

An inefficient point

is a point at which it is possible to produce more of one good without producing less of another good.

A leftward shift of the production possibilities curve

represents a decrease in productive capacity

Which of the following is a characteristic of Laissez-Faire capitalism?

The government enforces contracts and protects private property, but has no other economic role

A demand curve

indicates the quantity demanded at each price in a series of prices.

The law of supply states that as the price of a good increases,

the quantity supplied for that good increases

The law of supply implies that the marginal costs of production are

increasing

The law of demand implies that demand curves are

downward sloping.

Suppose that in the past few years, the demand for donuts has greatly increased. This increase in demand could have been caused by

a decrease in the price of coffee, a complement to donuts.

Graphically, an increase in demand is depicted as which of the following?

A rightward shift of the demand curve.

Suppose that pens and pencils are substitutes. If the price of pens increases, then

the demand for pencils will increase.

An increase in consumer income causes the demand for inferior goods to do which of the following?

Decrease

The demand for a normal good will increase as

consumer income increases

A shortage

is a situation in which quantity demanded exceeds quantity supplied

A legal maximum amount that sellers may charge for a product is called which of the following?

A price ceiling

A legal minimum amount that sellers may charge for a product is called which of the following?

A price floor.

A price ceiling set below the equilibrium price will

cause a shortage

A price ceiling set above the equilibrium price will

have no effect on the market.

What will happen to the equilibrium price and quantity of aluminum if the demand for aluminum increases?

Equilibrium price and quantity will both increase.

What will happen to the equilibrium price and quantity of bread if the demand and supply for bread both increase?

The equilibrium quantity will increase. The effect on the equilibrium price is indeterminate

Fill in the blank. A market outcome is said to be efficient if it maximizes _____.

total surplus

Assuming there are no market failures, the market equilibrium will result in which of the following?

The efficient quantity of the good being produced

Fill in the blank. A public good is _____.

nonrival and nonexcludable

Fill in the blanks. Goods with negative externalities cause _____ market failures, so will be _____ in a free market

supply-side; overproduced

An increase in price will cause consumer surplus to do which of the following?

Decrease

A decrease in price will cause producer surplus to do which of the following?

Decrease

Suppose a labor market initially operates at equilibrium, with an equilibrium wage of $10 per hour and no unemployment. Which of the following would cause unemployment in this labor market?

A minimum wage set at $15 per hour.

Suppose that you calculate the income elasticity of demand for ramen noodles to be -7. Based on this, ramen noodles must be what type of good?

An inferior good

Fill in the blank. If two goods are substitutes, then the cross elasticity of demand between those goods must be _____.

positive

Fill in the blank. The law of supply indicates that a good’s price elasticity of supply should always be ____________.

positive

In a particular market, when the price of televisions is $800, the quantity supplied of televisions is 400. When the price of televisions is $1200, the quantity supplied of televisions is 1200. Using the midpoint formula, what is the price elasticity of supply over this region for televisions in this market?

2.5

Suppose that over a particular region of a supply curve, the price elasticity of supply is found to equal 1. Over that region, supply would be said to be which of the following?

Unit elastic

Fill in the blank. If supply is perfectly inelastic, this means that the price elasticity of supply must equal _____.

0

FIll in the blank. A firm's total revenue will be maximized where demand is _____.

unit elastic

Suppose that a Japanese company opens a factory located in Brazil. Any production that occurs at this factory counts towards the GDP of which country? Assume that the factory only produces final goods.

Brazil

If an aluminum manufacturer sells $2 million worth of aluminum to an airplane manufacturer, and the airplane manufacturer uses that aluminum to make airplanes (a final good) that sell for $5 million, what is the total contribution of these transactions to GDP?

$5 million

If C denotes personal consumption expenditures, Ig denotes gross private domestic investment, G denotes government purchases, and Xn denotes net exports, then GDP equals which of the following?

C + Ig + G + Xn

Assuming there are no market failures, the free market will result in

the efficient quantity of the good being produced.

A public good is

neither excludable nor rival

In which of the following markets would you expect a good to be underproduced (compared to the amount that maximizes total surplus) if each market is allowed to operate freely?

The market for vaccines, a good which produces positive externalities.

Suppose that the current price elasticity of demand for cable television subscriptions is found to be 10. This would mean that the demand for cable television subscriptions is currently

elastic

Refer to the diagram above. If this product’s price increases from $2 to $10, the price elasticity of demand over this range is which of the following?

0.25

Suppose that the cross price elasticity of demand for milk and cereal is found to be -5. Based on this information, which of the following must be true?

Milk and cereal are complements.

The income elasticity of demand for a good

can be either negative or positive.

Suppose a steel company sells some steel to a bicycle company for $75. The bicycle company uses the steel to produce a bicycle, which it sells for $100. Assuming the bicycle is a final good, these two transactions together will contribute how much to GDP for the current period?

$100

Suppose a Canadian company opens a factory that produces computers (with computers being a final good) located in Australia. Any production that occurs in this factory will contribute to which country’s GDP?

Australia only.

The dollar value of all final goods and services produced within a country’s borders during a specific period of time is referred to as a country’s

gross domestic product

What is the country’s nominal GDP in 2017?

$5,000

What is the country’s nominal GDP in 2018?

$5,600