Econ 40 - Exam 2
Terms in this set (44)
In a basic circular flow diagram of a market economy:
All of the above. Households are suppliers in the labor market.
Businesses are demanders in the
labor market. Households receive incomes through the labor market.
Which is true about the market for labor?
the labor demand curve is
Which of the following will not
result in a decrease in labor
an increase in the wage rate.
What effect did women entering the workforce in greater numbers after World War II have on labor supply in the United States?
it caused the market labor supply curve to shift right.
If grocery stores increase their use of self-service checkout stations, what will happen to the demand for grocery store cashiers?
the demand for cashiers will decrease
because this increase in capital
substitutes for labor
and fewer cashiers will be needed.
Suppose that an increase in health
consciousness increases the demand for fitness centers across the country. Other things being equal, we can expect the wages of fitness
Suppose that an increase in health
consciousness increases the supply of fitness
instructors across the country. Other things
being equal, we can expect the wages of fitness
Many economists believe that the trend toward greater wage inequality across the U.S. economy has been primarily caused by:
skill-biased technological change.
In studies by economists, minimum wage policies are often analyzed as:
a price floor, causing a surplus in certain labor markets.
In the Demand & Supply model of a financial market, the market "price" is:
the interest rate.
Financial markets are unique when compared to product and labor markets because:
intertemporal decision-making is very important in financial markets.
Many states have _______which impose an upper limit on the interest rate that lenders can charge.
The price elasticity of demand (ED) is used to:
measure how responsive
consumers are to a change in price.
The price elasticity of demand (ED) is measured by the:
percentage change in quantity
demanded divided by the percentage change in price.
If the Sunrise Café increases their prices by 20%, and the number of customers decreases by
40%, we know that the price elasticity of demand for meals at the Sunrise Café is:
If the price of gasoline increases by 10% and the quantity demanded falls by 5%, we know
that the price elasticity of demand for gasoline is:
If the price elasticity of demand for Kleenex is 0.6, then the price elasticity for Kleenex is
considered to be:
If the price elasticity of demand for Kettle Korn is 1.6, then the price elasticity for Kettle
Korn is considered to be:
In general, if there are many substitutes available for a product, we can expect the demand
for that product to be:
In general, if a small percentage of household income is spent on a product, we can expect
the demand for that product to be:
If the price of bagels increases by 5% and the quantity of bagels supplied increases by 20%,
the price elasticity of supply is considered:
Which of the following is an
example of price inelastic supply?
the price elasticity of supply equals 0.8.
Considering the factors that influence the price elasticity of supply, we would expect long
run supply curves _____________ short run supply curves.
to be more price elastic than.
If the demand for a product is perfectly elastic, the demand curve for that product will be:
horizontal at the market price.
If the demand for taxi services is price inelastic, an increase in the price of taxi services will
an increase in the total revenue of taxi companies.
If the demand for taxi service is price elastic, an increase in the price of taxi services will
a decrease in the total revenue of taxi companies.
The income elasticity of demand measures the responsiveness of:
the quantity demanded of a
product is to a change in a
If the income elasticity of demand for lattes is positive, this tells us that lattes are:
a normal good.
Whether two goods are substitutes or complements can be determined by computing the:
cross-price elasticity of demand.
If the cross-price elasticity of demand for peanut butter and jelly is negative, this tells us that
peanut butter and jelly are:
Which of the following is an example of an "implicit cost"
the opportunity cost of the time the owner spends working in the firm.
After factoring in both explicit and implicit costs, if a firm is generating zero profit, it is earning:
Which of the following is an example of a "variable input" in a
bakery's production of apple pies?
In production economics, the "short-run" is defined as:
the time frame in which at least one input is fixed.
When working with a production
function, the change in total output that results from a change in the
variable input (such as labor) is called the:
The "law of diminishing marginal
returns" says that as a firm hires more of a variable input (such as
labor) with a fixed amount of other inputs:
the marginal product increases at first and then decreases.
The cost of production that does not change with the level of output is:
total fixed cost.
Marginal cost is equal to:
the change in total cost divided by the change in output.
Average total cost is equal to:
total cost divided by output.
As a firm increases output, average total cost will:
decrease to a certain point and then increase.
If marginal cost is greater than
average total cost, we know that
average total cost is:
Marginal cost equals average total cost at the point where:
average total cost is at its lowest point.
As output increases, "economies of scale" occur when:
long-run average costs decline.
The main sources of "economies of scale" are:
increasing specialization of
resources and the implementation of new technology.
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