WKU ECON 202-Wilson Quiz 2

In a market economy, what provides potential investors with reliable information about the financial performance of a firm?

Accounting Rules

The Law of Supply indicates that

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

A response to a price change would be described as a:

Movement along an existing demand curve

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

Rent, wages, interest, and profits respectively

Which of the following was NOT in the top 10 countries in terms of Economic Freedom according to the Heritage Foundation (as shown and discussed in class)

United States

Specialization and trade exploit differences in productivity of workers and

Make everyone better off

When a market is in equilibrium,

There is no shortage and no surplus at the equilibrium price

If the actual price of t-shirts is $7, there is

Surplus of 8 t-shirts

If the actual price of t-shirts is $10, we would expect that

There will be no change since the market is in equilibrium

The Law of Demand can be explained as

The higher the price, the smaller the quantity demanded, ceteris paribus

When producers are willing to sell more than consumers are wiling to buy

There is a shortage for the product in the market

A change in quantity supplied of a product is the result of a change in

The price of the product

Consider two individuals, Celia and Sondra, who will produce bracelets and pendants. The above table shows how much of each good Celia and Sondra can produce in one hour. Celia's opportunity cost of one bracelet is

1/5 of a pendant

According to the law of increasing opportunity costs

The risk involved in producing a good increases as more of the good is produced

In a market system, what provides individuals the information needed to make decisions?

Prices

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

Consistent--poorest 10% receive the same share of income regardless of the level of economic freedom

When is there a change in the quantity demanded it means that

The quantity a consumer is willing to buy changes when the price changes