Econ 202 Final- Dennis Wilson

what do economists mean when they state that a good is scarce?

the amount of the good that people would like to have exceeds the supply that is freely available from nature

the expression "there's no such thing as a free lunch" implies that

costs are incurred when resources are used to produce goods and services

the best example of decision-making at the margin would be

observing the effect that a small change in income has on the amount tot tax owed and therefore upon after-tax income

the ____ the opportunity cost of doing something, the ____ likely it will be done

higher; less

customarily, economists classify resources into these major groups

land, labor, capital, and entrepreneurship

country C has an economic system that can be described as one with government ownership of non-labor factors of production, government allocation of resources, centralized decision making, and a major role for the government in economic activities. what classification correctly labels the economic system of country C?

a command economy

which of the following might be considered to be a characteristic of a planned economy?

there is no incentive for people to work hard

the basic difference between macro and microeconomics is that

macro looks at the forest (aggregate markets), while micro is concerned with the individual trees (subcomponents)

based on the movie "I, Pencil", the knowledge necessary to make a pencil is generally known by

no one

if an economy is operating at a point inside the production possibilities curve,

its resources are being wasted

does voluntary exchange create wealth (value)?

yes, trade generally permits the trading partners to gain more of what they value; this is why they agree to the terms of exchange

which of the following will most likely occur under a system of clearly defined and enforced private property rights?

resource owners will gain by discovering and employing their resources in what that are highly valued by others

market pricing as a kind of automatic signaling system that responds to changes in relative scarcities and rapidly redirects economic activity is part of

the capitalist vision

increasing opportunity cost while mooing along a production possibility frontier is due to

the fact that resources are not equally productive in alternative uses

entrepreneurship refers to

persons who are risk-taking and who develop new ways of doing things

the "coincidence of wants" problem associated with barter refers to the fact that

for exchange to occur each transactor must have a product which the other transactor wants

refer to quiz 1 w/ jars of PB graph the above graph depicts the mythical country of sandwichia production possibility frontier. sandwichia would have to experience significant technological progress or massive saving and investment before it could feasibly chose to produce at point...

point E

from the above graph, the opportunity cost of producing an extra jar of jelly in Sandwichia is highest at point...

point D

economic capital refers to

money and other financial assists

economic growth can be pictures in a production possibility frontier diagram by

shifting the production possibility frontier outward

Bill Bonecrusher graduates college with a choice of playing professional football at $2 M a year or coaching for $50K a year. he decides to play football, but eight years later, though he could continue playing football for $2M a year, he quits football to make movies for $3M a year. his opportunity cost of playing football at graduation was ____ and eight years later the opportunity cost of making movies was ______.

$2M; $3M

a response to a price change would be described as a

movement along an existing demand curve

according to the law of increasing opportunity costs

the slope of the supply curve is positive

the money payment made to owners of land, labor, capital, and entrepreneurial ability are

rent, wages, interest, and profits respectively

the law of demand implies that when people are asked to conserve water during a drought

they will become more likely to cooperate if the rates charged for water rise

the general relationship of economic freedom and the share of income of the poorest 10% of a country's citizens is

consistent- the poorest 10% receive the same share of income regardless of the level of conic freedom

specialization and trade exploit differences in productivity of workers and on net

make everyone better off

the simple circular flow model shows that

households are on the supply side of the resource market and the demand side of the product market

in a market-based economy

buyers and sellers gain from voluntary exchange

the general relationship between economic freedom and per capita (per person) income is

positive- higher economic freedom leads to a higher per capita income

the law of supply indicates that

producers will offer more of a product at high prices than they will at low prices

which of the following was NOT in the top 10 countries in terms of economic freedom according to the Heritage Foundation (shown and discussed in class)

United States

increasing opportunity cost while moving along a production possibility frontier is due to

the fact that resources are not equally productive in alternative uses

when a market is in equilibrium,

there is no shortage and no surplus at the equilibrium price market

refer to quiz 2 graph at $6 the surplus equals

200 units

refer to quiz 2 graph at $2 the shortage equals

200 unites

according to the theory of comparative advantage, countries gain from trade because

world output can rise when each country specializes in what it does relatively best

if two countries are producing the same two products it is mutually beneficial if the countries specialize then trade. how is it determined who specializes in the production of which product?

by the lowest opportunity cost of production, comparative advantage

the number of people seeking to obtain tickets to a Beyonce concert is nearly always greater than the number of available tickets (and seats) to the concert. this is evidence that the price of the ticket is

below the equilibrium price

one can say that with certainty that equilibrium price declines when supply

increases and demand decreases

an effective minimum wage law will

cause unemployment for some affected workers

assume that land suitable for growing corn is also suitable for growing soybeans. a decrease in the price of corn with therefore

raise the cost o growing soybeans

if prices are expected to rise in the future, today's market

is affected by an increase in demand and a higher equilibrium price

a decrease in supply would result form

an increase in the prices of input resources

improved technology has allowed companies like Chevron to search for oil in places where it would have been impossible only 20 years ago. Technological advancement in oil exploration will, ceteris paribus, _______ the supply of oil, shifting the supply curve _____

increase; down and to the right

at an equilibrium price there is

a surplus

a shortage

excess supply

sub-equilibrium qualities

none

none of the above

a 10M pound decrease in quality of peaches demanded might be attributable to an

increase in the price of peaches

in the market for mechanical pencils, the equilibrium point has moved to a lower price and more quantity sold. what could have caused this?

a fall in the manufacturers expected future prices of mechanical pencils

if the demand in jelly increases, and the price of grapes (used to make jelly) rises, the equilibrium price of jelly

rises and the equilibrium quantity of jelly might rise or fall

refer to graph in quiz 3 if your city imposes a tax of $100 per apt, new monthly rent consumers pay is

$560

a good for which demand decreased when income increases is known as an _____ good

inferior

suppose that a product benefits form a successful advertising campaign. the result is that

a demand for the product increases

suppose that a technological advancement substantially reduces the cost of laser eye surgery. this would cause the equilibrium

quantity of laser eye surgery to increase

australian rice farmers are experimenting with different rice varieties and growing techniques that require less water. if theses techniques are successful and increase the size of the rice harvest, the equilibrium price of rice will ___ and the equilibrium quantity of rice will ____ , ceteris paribus

decrease; increase

the government sometimes creates an excess demand for a product by setting a maximum price at which the product may be sold to consumers. this is sometimes called a

price ceiling

flour is used to produce bread. if the price of flour increases

the supply of bread decreases

consider miller lite and bud light. if the price of miller lite falls, we may predict that

the quantity demanded for miller lite will increase

if the price elasticity of demand is 0.5, this means that a ____ increase in price causes a _____ decrease in quantity demanded

30%; 15%

if the price elasticity of deman is -1.3, demand is

elastic

economic profits for firm is defined as the total revenue of the firm minus its

explicit and implicit costs of production

the primary goal of a firm in a capitalistic market is to

maximize profits

in part, a solution to the principal-agent problem is to

devise compensation rules to induce agents to act in the best interest of principals

if the quantity demanded of peanut butter falls by 12% when income rises by 10%, then peanut butter is

an inferior good

what is the total surplus of a market?

the sum of consumer surplus and producer surplus

the cross elasticity of demand between spaghetti and spaghetti sauce is most likely

negative

holding everything else constant, if the demand for gasoline is relatively inelastic, the government decides to place a tax on it, there should be a relatively ___ price hike and the greatest burden of the tax will be on the ___

large; consumer

which of the following statements is incorrect

the price elasticity of demand tends to be increased when the consumers income decrease

if juan purchases the same number of vials of insulin per week regardless of changes in insulin price, juans demand for insulin is

perfectly inelastic

the price elasticity of demand reflects the responsiveness of

firms to changes in demand

assume that the price of a DVD player is $50. if joshua is willing to pay $50 for that DVD player, his consumer surplus is

$0

given the slope of a supply curve, if a demand curve becomes more price elastic

the share of a tax consumers take becomes smaller

refer to quiz 4 graph from the figure above, the city imposes a fox of $100 per apt, new monthly rent consumers pay is

$560

if the government imposes a quantity restriction on how many shoes can be imported into a country, and the total quantity is below the market equilibrium quantity

total surplus in the market decreases

in the above figure the price is $20 and the shaded area represents

producer surplus

the price elasticity of demand for higher education is about 1.5. a 5% increase in tuition would lead to

a decrease in enrollment by 7.5%

if the demand for school ball caps is inelastic, an increase in price will result in

an increase in total revenue

refer to graph in quiz 5 the above figure illustrates a firms total revenue and total cost curves. which one of the following statements is FALSE?

at output Q2 the firms incurs an economic loss

a competitive market

is made up of many firms that individually cannot effect market prices

suppose Robin's clock works produces in a perfectly competitive market. suppose the average total cost of clocks is $95, the average variable cost of clocks is $90, and the price of clocks is $85. if the firm is producing the level of output where marginal cost equals price, then in the short run the firm:

should shut down

in the short run, ____ factors of production are foxed, while in the long run, _____ of them are

some; none

which of the following is true?

atc=avc-afc

tvc/q=tc/q+tfc/q

delta tc/deltaQ= delta avc/deltaQ

deltaTVC/deltaQ=MC

delta TVC/deltaQ= MC

marginal revenue is equal to price for a perfectly competitive firm because

total revenue increases by the price of the good when an additional unit is sold

if a firm suffers an economic loss, its _______ at the profit maximizing level of production

price is less than its average total costs

when does a firms average variable costs exceed the average total cost?

never

if the marginal cost of producing the next unit of output exceeds the average total cost, then...

the average total cost curve is increasing

when at least one factor of production is feed, firms require more and more workers to produce each additional

diminishing marginal returns

which of the following is the best example of a competitive firm?

Taine's potato farm in eastern Washington

_____ is a cost that independent of the quantity produced by the firm and is incurred by the firm in the short run

fixed cost

refer to graph in quz 5 the above shows the cost structure of a firm in a competitive marker. if the market price is $40, the firms profit maximizing output level is

900

the above shows the cost structure of a firm in a competitive market. if the market price is $40 and the firm is currently producing the profit maximizing output level, the firms profit is

$9,000

the above shows the cost structure of a firm in a competitive market. the price at which the firm is just as well off either operating or shutting down is

$18

if individual firms face a horizontal demand curve at a given market price,

price is equal to marginal revenue

Kevin;s golf-a-rama sells golf balls in a competitive market. at its current level of golf ball production, Kevin has marginal costs equal to $1, and AVC is rising. if the market price of golf balls is $2, Kevin should...

increase the production of golf balls

refer to number of cakes chart quiz 5 if candy produces two cakes; candys marginal cost is

$20

when the firm increases output and the costs rise disproportionately slower, then the long-run average cost curve is____ and the firm is experiencing ______

downward sloping; economies of scale

if a monopolist is maximizing its profits, we know that it has

equated marginal cost and marginal revenue

in short run equilibrium for a competitive firm economic profits

may be positive, negative, or zero

when economists say a market has "barriers to entry" they refer to

factors that prevent other firms form challenging a firm with market power

you notice that the price of butter falls and then rises. the best explanation for this is that

demand for butter decreased causing price to fall, which induced other firms to exit the market causing supply to decrease, which caused the price to go back up

a constant cost industry is one in which

long run simply is horizontal