Econ 2102 Quiz Questions

question

Because resources are scarce society must make decisions about all of the following except:

answer

Whether scarcity exists or not.

question

Indicate if the following statement is True or False.
100 shares of GM stock is an example of capital

answer

false

question

What is the opportunity cost of increasing the number of solar panels in use in the United States?

answer

The land that was used to produce the solar panels that could have been used to produce something else.

question

Which of the following is an assumption under which the production-possibilities curve is drawn?

answer

The supply of resources is fixed.

question

the production possibilities curve demonstrates:

answer

the law of increasing opportunity costs.

question

Over time, an increase in a nation's stock of physical capital will:

answer

shift the production possibilities curve outward.

question

Indicate if the following statement is True or False.
All output combinations that lie outside a production possibilities curve are attainable with available resources and technology.

answer

false

question

The law of demand is the principle that there is ____ relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus.

answer

an inverse

question

Indicate if the following statement is True or False.
The increase in the price of a plane ticket will cause a decrease in demand for airline travel and a leftward shift in the demand curve.

answer

false

question

A very hot summer in Charlotte will cause:

answer

The demand for jackets to decrease.

question

Which of the following would most likely cause the demand for veggie burgers to increase?

answer

An increase in the price of tofu burgers, perceived as a substitute by veggie burger consumers.

question

Indicate if the following statement is True or False.
An increase in the price of one good can cause the demand for another good to increase if the two goods are complements.

answer

false

question

Assuming that automobiles are normal goods, a rise in consumer income, other things being equal, will cause:

answer

the demand curve for automobiles to shift to the right.

question

Business firms supply goods and services to ____ and purchase factors of production in ____.
You Answered

answer

Product markets; factor markets.

question

Which of the following will cause a movement upward along a supply curve?

answer

Increases in the market price of a good, other things being equal.

question

If the price of the factors used to produce a good change, both the demand curve and the supply curve of the good will shift.

answer

false

question

How will an increase in lumber prices influence the home construction market?

answer

The supply of newly constructed homes will decrease.

question

If the quantity demanded of milk is 55,000 and the quantity supplied of milk is 80,000, then:

answer

there is an excess supply of 25,000 units of milk.

question

When prices are allowed to adjust freely, if the quantity demanded of a good is less than the quantity supplied of the good at the current price, then:

answer

The demand curve will shift to the left to create an equilibrium

question

Indicate if the following statement is True or False.
Quantity supplied will exceed quantity demanded if price is above its equilibrium level.

answer

true

question

In the market for smartphones and Verizon data plans, the two goods are complements. If the price of data plans rise, what response do you expect in the market for smartphones?

answer

Price will decrease, and quantity will decrease.

question

Ceteris paribus, if consumer tastes change so that more people are eating broccoli, then what will happen to the market equilibrium for cabbage, a substitute good for broccoli?

answer

Price will decrease, and quantity will decrease.

question

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?

answer

The supply of beef would increase, decreasing beef prices.

question

Suppose there are a series of forest fires which affect the lumber industry. The wooden furniture market would experience:

answer

An increase in price and a decrease in quantity

question

Indicate if the following statement is True or False.
If a government imposed price ceiling legally sets the price of beef below market equilibrium, there will be a surplus of beef.

answer

false

question

Which of the following is a source of market failure?

answer

market power

question

in economics, a public good

answer

Cannot be denied to consumers who have not paid.

question

A paper mill in North Carolina dumps waste into the Pigeon River and as a result, people in Tennessee cannot use the water. What type of market failure is most likely involved?

answer

externalities

question

If the consumption of a good yields external benefits, then

answer

The social demand is greater than the market demand.

question

If the economy relies entirely on the market mechanism to answer the WHAT, HOW, and FOR WHOM questions, it tends to:

answer

Underproduce goods that yield external benefits and overproduce those that generate external costs.

question

Utility refers to the:

answer

Satisfaction obtained from a good or service.

question

Marginal utility for a good is computed as:

answer

The change in total utility divided by the change in quantity.

question

The additional pleasure or satisfaction from a good declines as more of it is consumed in a given period. This is the definition of the:

answer

Law of diminishing marginal utility.

question

Indicate if the following statement is True or False:
If marginal utility is positive, then total utility must be falling.

answer

false

question

Jose goes to an all-you-can-eat buffet at a Chinese restaurant and consumes three plates of food. He does not go back for a fourth plate of food because:

answer

The marginal utility of the fourth plate would be zero or even negative.

question

A consumer maximizes total utility from a given amount of income when the:

answer

marginal utility per dollar spent on each good is the same.

question

Indicate if the following statement is True or False:
If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is elastic:

answer

false

question

If the price elasticity of demand for football tickets is estimated to be 4.5, then a 10 percent increase in football ticket prices would be expected to cause a:

answer

45 percent decrease in quantity demanded.

question

Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of demand for the dolls over this range is:

answer

2.5

question

A completely elastic demand curve has an elasticity coefficient of:

answer

infinity

question

Indicate if the following statement is True or False:
If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, then price elasticity of demand is elastic.

answer

true

question

The price elasticity of demand for a vertical demand curve is:

answer

perfectly inelastic

question

Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?

answer

.80

question

If price is reduced and demand is price inelastic, then total revenue will:

answer

decrease

question

Consider the market for automobiles. If a dealer cuts prices by 10 percent and finds he sells 20 percent more cars, then demand for autos is ______ and his total revenue will _____.

answer

elastic; rise

question

Indicate if the following statement is True or False:
The price elasticity of demand for a product tends to be smaller (i.e. less elastic), if the product has a large number of substitutes.

answer

false

question

If income rises from $100,000 to $110,000 for a year and as a result the quantity of new boats demanded rises from 100 to 120 boats for the year, the value of the income elasticity of demand for boats is closest to:

answer

1.9

question

Suppose the income elasticity of demand for used jet skis is 3.5. If the level of income decreases by 1 percent, the number of used jet skis sold will, ceteris paribus:

answer

Fall by 3.5 percent.

question

Indicate if the following statement is True or False:
The cross-price elasticity of demand for substitute goods must be greater than one.

answer

false

question

The cross price elasticity between two products has been measured at 2.0. If the price of the first product is increased by 8%, demand for the second product will _____ and the two goods must be _________.

answer

Increase by 16%; substitute goods

question

Variable inputs are defined as any resource that:

answer

can be changed as output changes.

question

The period in which at least one input is fixed in quantity is the:

answer

short run

question

The law of diminishing returns states that beyond some point, the:

answer

Marginal physical product of a variable input diminishes as more of that input is used.

question

Indicate if the following statement is True or False:
When the marginal physical product of labor is positive, then total output must be increasing.

answer

false

question

Accounting costs and economic costs differ because:

answer

Economic costs include implicit costs and accounting costs do not.

question

Hideki is the owner/operator of Hideki's Flower Shop. Last year he earned $100,000 in total revenue. His explicit costs were $60,000 paid to his employees and suppliers (assume that this amount represents the total opportunity cost of these resources). During the course of the year he received three offers to work for other flower shops with the highest offer being $60,000 per year. Calculate Hideki's accounting and economic profit.

answer

Accounting profit = $40,000; economic profit = negative $20,000.

question

Indicate if the following statement is True or False:
ATC is TFC + TVC.

answer

false

question

In the short run, if average variable cost equals $50, average total cost equals $75, and output equals 100, the total fixed cost must be

answer

$2,500.

question

Which of the following will become smaller and smaller as the firm expands output?

answer

average fixed cross

question

Indicate if the following statement is True or False:
If the marginal cost curve intersects the average variable cost curve, the average variable cost must be at its minimum.

answer

true

question

Increasing returns to scale are said to exist when:

answer

inputs are increased by some percentage and output increase by a greater percentage, causing average cost to fall

question

If a firm's long-run average cost curve is rising, it is experiencing:

answer

diseconomies of scale.

question

Which of the following is not characteristic of a purely competitive industry?

answer

substantial differences in the products of sellers

question

Indicate if the following statement is True or False:
A perfectly competitive firm faces a demand curve that is perfectly inelastic.

answer

false

question

At the profit-maximizing output for a perfectly competitive firm:

answer

Marginal cost = price.

question

If, at the present output level, price exceeds marginal cost, the purely competitive firm

answer

should increase output to maximize its profit or minimize its loss.

question

In the short run, a perfectly competitive firm should stay in business as long as:

answer

the total revenue it earns is greater than the total variable cost.

question

In the short run, a perfectly competitive firm's supply curve is:

answer

the segment of the marginal cost curve which is rising and above the minimum average variable cost.

question

The existence of short-run economic profits induces perfectly competitive firms to:

answer

enter the industry, which shifts the market supply curve to the right and decreases market price.

question

When long-run perfectly competitive equilibrium exists, then which of the following is true?

answer

Price equals minimum AVC
AND
Price equals marginal cost

question

If the entire output of a market is produced by a single seller, the firm:

answer

is a monopoly

question

Indicate if the following statement is True or False.
A monopolist faces a downward-sloping demand curve which lies above its marginal revenue curve.

answer

true

question

For a monopolist, the profit-maximizing rate of output occurs where:

answer

MR = MC

question

Suppose a monopoly pharmaceutical company produces a drug and sells 100 prescriptions for $80 each. In order to sell 101 prescriptions, the monopolist must lower the price to $79 per prescription. The marginal revenue of the 101st prescription is:

answer

$-21.

question

The individual labor supply curve will be negatively sloped if the substitution effect of wages is:

answer

Weaker than the income effect of wages.

question

Ceteris paribus, if immigration to the United States increases the number of workers, the market labor-supply curve will shift to the:

answer

Right and the equilibrium wage rate will fall.

question

If consumers decide to buy fewer strawberries, then the:

answer

Demand for strawberry pickers will fall.

question

Other things being equal, higher wage rates will:

answer

Decrease the quantity demanded of labor.

question

The marginal revenue product of labor is equal to:

answer

The marginal physical product multiplied by the marginal revenue of the output.

question

Other things being equal, a profit-maximizing employer will employ additional labor as long as:

answer

The MRP of labor exceeds the wage rate.

question

If the elasticity of labor demand is -0.60, a 15 percent increase in the wage rate will induce a:

answer

9 percent decrease in the quantity of labor demanded.

question

If the elasticity of labor demand is -0.60, then as a result of the increase in the wage rate, total labor income will _________.

answer

increase because labor demand is inelastic.

1 of 82

question

Because resources are scarce society must make decisions about all of the following except:

answer

Whether scarcity exists or not.

question

Indicate if the following statement is True or False.
100 shares of GM stock is an example of capital

answer

false

question

What is the opportunity cost of increasing the number of solar panels in use in the United States?

answer

The land that was used to produce the solar panels that could have been used to produce something else.

question

Which of the following is an assumption under which the production-possibilities curve is drawn?

answer

The supply of resources is fixed.

question

the production possibilities curve demonstrates:

answer

the law of increasing opportunity costs.

question

Over time, an increase in a nation's stock of physical capital will:

answer

shift the production possibilities curve outward.

question

Indicate if the following statement is True or False.
All output combinations that lie outside a production possibilities curve are attainable with available resources and technology.

answer

false

question

The law of demand is the principle that there is ____ relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus.

answer

an inverse

question

Indicate if the following statement is True or False.
The increase in the price of a plane ticket will cause a decrease in demand for airline travel and a leftward shift in the demand curve.

answer

false

question

A very hot summer in Charlotte will cause:

answer

The demand for jackets to decrease.

question

Which of the following would most likely cause the demand for veggie burgers to increase?

answer

An increase in the price of tofu burgers, perceived as a substitute by veggie burger consumers.

question

Indicate if the following statement is True or False.
An increase in the price of one good can cause the demand for another good to increase if the two goods are complements.

answer

false

question

Assuming that automobiles are normal goods, a rise in consumer income, other things being equal, will cause:

answer

the demand curve for automobiles to shift to the right.

question

Business firms supply goods and services to ____ and purchase factors of production in ____.
You Answered

answer

Product markets; factor markets.

question

Which of the following will cause a movement upward along a supply curve?

answer

Increases in the market price of a good, other things being equal.

question

If the price of the factors used to produce a good change, both the demand curve and the supply curve of the good will shift.

answer

false

question

How will an increase in lumber prices influence the home construction market?

answer

The supply of newly constructed homes will decrease.

question

If the quantity demanded of milk is 55,000 and the quantity supplied of milk is 80,000, then:

answer

there is an excess supply of 25,000 units of milk.

question

When prices are allowed to adjust freely, if the quantity demanded of a good is less than the quantity supplied of the good at the current price, then:

answer

The demand curve will shift to the left to create an equilibrium

question

Indicate if the following statement is True or False.
Quantity supplied will exceed quantity demanded if price is above its equilibrium level.

answer

true

question

In the market for smartphones and Verizon data plans, the two goods are complements. If the price of data plans rise, what response do you expect in the market for smartphones?

answer

Price will decrease, and quantity will decrease.

question

Ceteris paribus, if consumer tastes change so that more people are eating broccoli, then what will happen to the market equilibrium for cabbage, a substitute good for broccoli?

answer

Price will decrease, and quantity will decrease.

question

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?

answer

The supply of beef would increase, decreasing beef prices.

question

Suppose there are a series of forest fires which affect the lumber industry. The wooden furniture market would experience:

answer

An increase in price and a decrease in quantity

question

Indicate if the following statement is True or False.
If a government imposed price ceiling legally sets the price of beef below market equilibrium, there will be a surplus of beef.

answer

false

question

Which of the following is a source of market failure?

answer

market power

question

in economics, a public good

answer

Cannot be denied to consumers who have not paid.

question

A paper mill in North Carolina dumps waste into the Pigeon River and as a result, people in Tennessee cannot use the water. What type of market failure is most likely involved?

answer

externalities

question

If the consumption of a good yields external benefits, then

answer

The social demand is greater than the market demand.

question

If the economy relies entirely on the market mechanism to answer the WHAT, HOW, and FOR WHOM questions, it tends to:

answer

Underproduce goods that yield external benefits and overproduce those that generate external costs.

question

Utility refers to the:

answer

Satisfaction obtained from a good or service.

question

Marginal utility for a good is computed as:

answer

The change in total utility divided by the change in quantity.

question

The additional pleasure or satisfaction from a good declines as more of it is consumed in a given period. This is the definition of the:

answer

Law of diminishing marginal utility.

question

Indicate if the following statement is True or False:
If marginal utility is positive, then total utility must be falling.

answer

false

question

Jose goes to an all-you-can-eat buffet at a Chinese restaurant and consumes three plates of food. He does not go back for a fourth plate of food because:

answer

The marginal utility of the fourth plate would be zero or even negative.

question

A consumer maximizes total utility from a given amount of income when the:

answer

marginal utility per dollar spent on each good is the same.

question

Indicate if the following statement is True or False:
If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is elastic:

answer

false

question

If the price elasticity of demand for football tickets is estimated to be 4.5, then a 10 percent increase in football ticket prices would be expected to cause a:

answer

45 percent decrease in quantity demanded.

question

answer

2.5

question

A completely elastic demand curve has an elasticity coefficient of:

answer

infinity

question

Indicate if the following statement is True or False:
If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, then price elasticity of demand is elastic.

answer

true

question

The price elasticity of demand for a vertical demand curve is:

answer

perfectly inelastic

question

answer

.80

question

If price is reduced and demand is price inelastic, then total revenue will:

answer

decrease

question

Consider the market for automobiles. If a dealer cuts prices by 10 percent and finds he sells 20 percent more cars, then demand for autos is ______ and his total revenue will _____.

answer

elastic; rise

question

Indicate if the following statement is True or False:
The price elasticity of demand for a product tends to be smaller (i.e. less elastic), if the product has a large number of substitutes.

answer

false

question

answer

1.9

question

Suppose the income elasticity of demand for used jet skis is 3.5. If the level of income decreases by 1 percent, the number of used jet skis sold will, ceteris paribus:

answer

Fall by 3.5 percent.

question

Indicate if the following statement is True or False:
The cross-price elasticity of demand for substitute goods must be greater than one.

answer

false

question

answer

Increase by 16%; substitute goods

question

Variable inputs are defined as any resource that:

answer

can be changed as output changes.

question

The period in which at least one input is fixed in quantity is the:

answer

short run

question

The law of diminishing returns states that beyond some point, the:

answer

Marginal physical product of a variable input diminishes as more of that input is used.

question

Indicate if the following statement is True or False:
When the marginal physical product of labor is positive, then total output must be increasing.

answer

false

question

Accounting costs and economic costs differ because:

answer

Economic costs include implicit costs and accounting costs do not.

question

answer

Accounting profit = $40,000; economic profit = negative $20,000.

question

Indicate if the following statement is True or False:
ATC is TFC + TVC.

answer

false

question

In the short run, if average variable cost equals $50, average total cost equals $75, and output equals 100, the total fixed cost must be

answer

$2,500.

question

Which of the following will become smaller and smaller as the firm expands output?

answer

average fixed cross

question

Indicate if the following statement is True or False:
If the marginal cost curve intersects the average variable cost curve, the average variable cost must be at its minimum.

answer

true

question

Increasing returns to scale are said to exist when:

answer

inputs are increased by some percentage and output increase by a greater percentage, causing average cost to fall

question

If a firm's long-run average cost curve is rising, it is experiencing:

answer

diseconomies of scale.

question

Which of the following is not characteristic of a purely competitive industry?

answer

substantial differences in the products of sellers

question

Indicate if the following statement is True or False:
A perfectly competitive firm faces a demand curve that is perfectly inelastic.

answer

false

question

At the profit-maximizing output for a perfectly competitive firm:

answer

Marginal cost = price.

question

If, at the present output level, price exceeds marginal cost, the purely competitive firm

answer

should increase output to maximize its profit or minimize its loss.

question

In the short run, a perfectly competitive firm should stay in business as long as:

answer

the total revenue it earns is greater than the total variable cost.

question

In the short run, a perfectly competitive firm's supply curve is:

answer

the segment of the marginal cost curve which is rising and above the minimum average variable cost.

question

The existence of short-run economic profits induces perfectly competitive firms to:

answer

enter the industry, which shifts the market supply curve to the right and decreases market price.

question

When long-run perfectly competitive equilibrium exists, then which of the following is true?

answer

Price equals minimum AVC
AND
Price equals marginal cost

question

If the entire output of a market is produced by a single seller, the firm:

answer

is a monopoly

question

Indicate if the following statement is True or False.
A monopolist faces a downward-sloping demand curve which lies above its marginal revenue curve.

answer

true

question

For a monopolist, the profit-maximizing rate of output occurs where:

answer

MR = MC

question

answer

$-21.

question

The individual labor supply curve will be negatively sloped if the substitution effect of wages is:

answer

Weaker than the income effect of wages.

question

Ceteris paribus, if immigration to the United States increases the number of workers, the market labor-supply curve will shift to the:

answer

Right and the equilibrium wage rate will fall.

question

If consumers decide to buy fewer strawberries, then the:

answer

Demand for strawberry pickers will fall.

question

Other things being equal, higher wage rates will:

answer

Decrease the quantity demanded of labor.

question

The marginal revenue product of labor is equal to:

answer

The marginal physical product multiplied by the marginal revenue of the output.

question

Other things being equal, a profit-maximizing employer will employ additional labor as long as:

answer

The MRP of labor exceeds the wage rate.

question

If the elasticity of labor demand is -0.60, a 15 percent increase in the wage rate will induce a:

answer

9 percent decrease in the quantity of labor demanded.

question

If the elasticity of labor demand is -0.60, then as a result of the increase in the wage rate, total labor income will _________.

answer

increase because labor demand is inelastic.

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