ECON 103 - Rustici Exam 1 Review

Changes in quantity supplied or quantity demanded (as opposed to changes in supply or demand) arise because of:

Changes in relative prices.

The guiding force behind what economist call the "Invisible Hand" is

1. Self-Interested, maximizing behavior by individuals.

2. Self-Interested, maximizing behavior by individuals.

Which of the following did mercantilists believe?

Exchange is a zero-sum game.

Which of the following was not a feature of Classical price theory?

The value of higher order goods was derived from the value of lower order goods.

Which of the following was not a feature of Classical price theory.

The value of higher order goods was derived from lower order goods.

The "Just Price Doctrine" (the attempt to determine the ethical content of market prices) failed ass a theory of price formation because:

The scholastics were essentially using normative theoretical analysis to explain market prices when a positive theory was needed.

The market equilibrium price of a good varies because of:

None of the above.

Which of the following is not true with respect to buyers, sellers and market prices?

As more parties enter the exchange nexus (cetirus paribus), the limits of price formation are progressively widened.

Suppose we have 6 buyers and 7 sellers in the market for horses:

Maximum Buying Price: Minimum Selling Price:

B-1: $266 S-1: $224

B-2: $242 S-2: $230

B-3: $240 S-3: $232

B-4: $226 S-4: $242

B-5: $222 S-5: $244

B-6: $220 S-6: $250

S-7: $262

The limits of price formation are between what?

$240 and $242

All else held constsant, an increasses in the price of a(n) _____________ causes __________.

Substitute; demand for its substitute good to increase.

Suppose the value scales for Tommy and Chuckie are given below. Chuckie owns 3 apples, and Tommy owns 3 oranges. What is underlined is what they own.

Tommy: Chuckie:

1. first apple 1. first orange

2. first orange 2. first apple

3. second apple 3. second orange

4. second orange 4. second apple

5. third orange 5. third apple

Given this information, which of the following is true?

Two acts of exchange are possible.

Which of the following is true with respect to the "Law of Demand?"

An inverses relationship between the relative price of the good and quantity demanded.

Which of the following is not true with respect to value and economic goods?

The value attached to any given unit of the good is entirely dependent on the most important need satisfied with the available quantities.

The classical economists refused to accept subjective value theory because of inherent "Paradox of Value" for water and diamonds. How did Carl Menger resolve this apparent paradox?

By explaining that value is attached at the margin.

An inferior good is determined as a good in which:

When a person's income increases the demand for the good decreases

Which of the following is true with respect to the "structure of production" and factor pricing?

The value of goods of higher order stages are dependent on the coordination of complementary goods of all higher order stages and all lower order stages or production.

The major problem with the "Equality of Exchange" idea was that:

It could not explain why voluntary trade would ever occur since equal values traded would have no benefits to trading agents.

In "Rinkonomics" by Dan Klein, it is asserted that the market much like a roller rink works without the need for guidance because....

Like roller skaters market participants benefit each other due to solely their own self interests.

In Walter Williams' article "Greed Versus Compassion", what does he claim about the relationship between current and future generations?

Self-interest and private property rights give financial motivations to current generations to conserve more resources.

According to Peter Boettke in "Morality as Cooperation" markets...

None of the above.

The price of Sugar, a compliment, goes down. (TEA)

An increase in demand for tea.

The number of sellers of coffee decreases (Coffee)

A leftward shift of the supply curve

A fixed tax per unit is imposed on the production of gasoline. (Gasoline)

A leftward shift of the supply curve

The discovery that drinking beer causes cancer. (Beer)

None of the above.

A war wipes out half of the automobile factories in a county (Automobiles)

None of the above

A drought in Kansas. (Wheat)

A leftward shift of the supply curve

Your income increasess, shoes are an inferior good. (Shoes)

A decreasse in demadn for shoes.

The price of milk goes up. Milk is used in making butter. (Butter).

A decreases in the supply of butter

Pizza is discovered to prevent cancer (Pizza)

An increase in demand

A decrease in the legal drinking age (beer).

A rightward shift in the demand curve