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Microeconomics Exam 1

Terms in this set (66)

Elasticity of demand measures:
Buyers responsiveness to price changes
The basic formula for elasticity of demand is:
percentage change in quantity demanded/percentage change in price
A perfect inelastic demand function:
can be represented by a line parallel to the vertical axis
If the demand for bacon is relatively elastic, a 10 percent decline in the prices of bacon will:
increase the amount demanded by more than 10 percent
If the price of hand calculators falls from $15 to $10 and, as a result, the quantity demanded increases from 100 to 125, then:
demand is inelastic
The demand for autos is likely to be:
less elastic than the demand for Honda Accords
The elasticity of demand is 0.2. the demand is thus:
relatively inelastic
A firm can sell more or less output as a constant price. Demand is thus:
perfectly elastic
a demand curve which is a horizontal line is:
perfectly elastic
The elasticity of supply measures how:
responsive the quantity supplied of X is to changes in the price of X
The main determinant of elasticity of supply is the:
amount of time the producer has to adjust inputs in response to a price change
The supply of product X is unit elastic if the price of X rises by:
8 percent and quantity supplied rises by 8 percent
supply curves tend to be:
More elastic in the long run because there is time for firms to enter or lease the industry
A supply curve that is a vertical straight line indicates that:
A change in price will have no effect on the quantity supplied
compared to coffee, we would expect the cross elasticity of demand for:
tea to be positive, but negative for cream
true or false: An income elasticity of -1.8 means the product is a normal good.
false
true or false: We would expect the cross elasticity of demand for smartphones and USM charging cables to be positive
false
true or false: If the cross elasticity of demand is positive, the two products are complementary goods.
false
Which of the following concepts provides the basic rationale for international trade?
comparative advantage
#20 look at the chart on review slides
1 ton of wheat
#21 look at the chart on review slides
steel
The primary benefits of international trade include:
A more efficient use of world resources and higher living standards
Economics may best be defined as
social science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic wants
Economics involves marginal analysis because:
most decisions involve changes from the present situations
Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:
all factors other than the price of bananas (for example, consumer tastes and income) are assumed to be constant
If there is a trade off between goals A and B
greater fulfillment of A means lesser fulfillment of B
Microeconomics is concerned with:
individual economic units and specific markets
Which of the following is a normative statement
it is too hot to play tennis today
A positive statement is concerned with:
what is
"economics is concerned with using scarce productivity resources efficiently in attempting to satisfy society economic wants". this statement is:
positive and correct
The science of economics stems from the fact that:
resources are scarce relative to peoples demand for goods and services
The four factors of production are:
land, labor, capital and entrepreneurial ability
The production possibilities curve illustrates the basic principle that:
If all the resources of an economy are in use, more of one good can be produced only if less of another good is produced
#34 look at the chart on review slides
2, 4, 6, and 8 units of bread
In drawing the production possibilities curve we hold constant:
both technology and resource supplies
#36 look at chart on review slides
immigration of skilled workers into the economy
true or false: An economy cannot produce as a point outside of its production possibilities curve because human economic wants are insatiable
false
The law of demand states that
price and quantity demanded are inversely related
The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____
direct, inverse
In 2003 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are:
Substitute good and the higher price for oil increased the demand for natural gas
printers and ink cartilages are:
complementary goods
A normal good is one:
the consumption of which varies directly with incomes
The term quantity demanded:
refers to the amount of a product that will be purchased at some specific price
#44 look at the chart on review slides
move from point Y to point X
the law of supply indicates that:
producers will offer more of a product at high prices than they will at low prices
An improvement in production technology will:
shift the supply curve to the right
In moving along a stable supply curve which of the following is not held constant
The price of the product for which the supply curve is relavant
A market is in equilibrium:
If the amount producers want to sell is equal to the amount consumers want to buy
#49 look at the chart on review slides
$60
#50 look at the chart on review slides
increase in the wage rates paid to laborers employed in the production of X
If the supply of a product decreases in the demand for that product simultaneously increases, then equilibrium
price must rise, but equilibrium quantity may either rise, fall, or remain unchanged
#52 look at chart on review slides
the development of more efficient machinery for producing the commodity
an unusually large crop of coffee beans might:
increase the supply of coffee
true or false: consumers but more of normal goods as their incomes rise:
true
#55 look at chart on review slides
land has a comparative advantage in chips while scandia has a comparative advantage in fish
#56 look at chart on review slides
40 chips and 16 fish
macroeconomics can best be described as the:
study of the large aggregates of the economy or the economy as a whole.
Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:
Hollys statement is normative, but bens is positive
An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:
bicycles are normal goods
If Z is an inferior good, a decrease in money income will shift the:
demand curve for Z to the right
#61 look at chart on review slides
increase D, increase P, and Increase Q
#62 look at chart on review slides
A only
A price below the equilibrium:
will cause a shortage
If a price is above the equilibrium:
a surplus of the product will occur
true or false: Surpluses drive market prices up; shortage drive them down
false
True or false: toothpaste and toothbrushes are substitute goods
false
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