Chapter 1 and 3

Question 1

The branch of economics that focuses on decision making for the economy as a whole is called:

Answer 1

macroeconomics.

Question 2

Human wants:

Answer 2

Are unlimited.

Question 3

Scarcity:

Answer 3

is a problem that exists in every economy.

Question 4

A tractor is an example of which of the following factors of production?

Answer 4

capital.

Question 5

Which of the following is a resource or factor of production?
land.
labor.
entrepreneurship.
capital.

Answer 5

all of the above

Question 6

Which of the following is the best example of a nonrenewable resource?

Answer 6

crude oil or natural gas.

Question 7

Which of the following is the best example of a microeconomic topic?

Answer 7

the analysis of Ford Motors’ competitiveness in the automobile industry.

Question 8

An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, Ceteris paribus. The phrase “Ceteris paribus” means that:

Answer 8

other relevant factors like consumer incomes, population, etc. must be held constant.

Question 9

When economists use the term Ceteris paribus, they are indicating that:

Answer 9

all other variables except the ones specified for analysis are assumed to remain unchanged.

Question 10

Which of the following represents a positive economics statement?

Answer 10

a very higher income tax rate will reduce the amount of time that people spend working. It will also lead to a higher level of underground economy.

Question 11

The statement, “Violent crime (statistics show) has decreased in the last five years,” is:

Answer 11

positive because it is testable.

Question 12

Statistics show that an increase in the federal minimum wage causes an increase in unemployment among teenagers:

Answer 12

is a positive economics statement.

Question 13

According to the law of demand, the quantity of a good demanded in a given time period:

Answer 13

Increases as its price falls, ceteris paribus.

Question 14

Ceteris paribus, if the price of a digital camera rises, then we can expect:
HINT: a change (rise or fall) in the current price of “X” is the only variable that, when changes, will not shift the demand curve or supply curve. The demand curve or the supply curve will remain the same. Any variable, other than the current price of “X” will shift the demand curve or supply cure, either to the right (increase) or left (decrease).

Answer 14

A decrease in the demand for digital cameras (an inward shift or a leftward shift in the demand curve).

Question 15

Ceteris paribus, if the price of Swiss cheese falls, then we will see:

Answer 15

An increase in the quantity demanded of Swiss cheese (downward movement along the same demand curve).

Question 16

Ceteris paribus, which of the following is most likely to cause an increase in the quantity demanded of candles?

Answer 16

A decrease in the price of candles.

Question 17

Ceteris paribus, if the price of basketballs rises, then we will see:

Answer 17

A movement to the left along the same demand curve for basketballs.

Question 18

Which of the following would generally cause an increase in the demand for automobiles (outward shift in the demand curve or a shift to the right in the demand curve)?
HINT, once again!! for the remaining questions: any variable other than the current price of “X” will shift the demand curve AND the supply curve either to the right (increase) OR to the left (decrease). The demand curve or the supply curve will not remain the same!!

Answer 18

An increase in consumers’ income.

Question 19

If buyers expect the price of baseballs to fall in the future, then right now (currently) there should be:

Answer 19

A decrease in the demand for baseballs.

Question 20

Assume Pepsi and Coke are substitutes. An increase in the price of one will result in:

Answer 20

An increase in the demand for the other (the demand curve shifts to the right).

Question 21

If there are only two airlines that fly between Dallas and New Orleans, what will happen in the market for one airline if the other one goes out of business?

Answer 21

The demand curve will shift to the right (an increase in demand)

Question 22

Peanut butter & jelly are complements. A decrease in the price of one will result in:
A decrease in the demand for the other.
A decrease in the quantity demanded of the other.
An increase in the demand for the other.

Answer 22

None of the above.

Question 23

Given a downward-sloping market demand curve for web design services, if the price of web design services is decreased from $12 per hour to $9 per hour, then:

Answer 23

The quantity demanded of web design services will increase.

Question 24

An increase in the price of a good causes a:

Answer 24

Movement up along the same supply curve.

Question 25

Which of the following is most likely to cause an increase in the quantity supplied of candles (movement along the same curve)?

Answer 25

An increase in the price of candles.

Question 26

Which of the following events would cause a rightward shift in the market supply curve for automobiles?

Answer 26

A technological improvement which reduces the cost of production.

Question 27

If corn and wheat are alternative pursuits for a farmer, a change in the supply of corn will take place when:

Answer 27

The price of wheat changes.

Question 28

Which of the following can change without shifting either demand or supply curves,

Answer 28

The price of the good itself.

Question 29

If there is a surplus at a given price, then:

Answer 29

That price is greater than the equilibrium price.

Question 30

In most markets, the equilibrium price is achieved:

Answer 30

Through trial and error.

Question 31

If the quantity demanded of a good is greater than the quantity supplied of the good at the current price, then, in the long run (remember! without govt. intervention/interference in this market),

Answer 31

Price will increase until it reaches the equilibrium price.

Question 32

A decrease in quantity demanded (not shifting the demand curve) is given as a (n):

Answer 32

Upward movement along the demand curve.

Question 33

On a supply-and-demand diagram, quantity demanded equals quantity supplied:

Answer 33

Only at the single (one) equilibrium point.

Question 34

There are two universities, A and B, in Michigan. Tuition rises at University A and, as a result, the demand for attending University B rises. It follows that educational services at the two universities are:

Answer 34

Substitutes.

Question 35

Assume that a computer is a normal good. An increase in consumer income would:

Answer 35

Shift the demand curve for computers to the right

Question 36

Imposing a tax on an industry by the government would result in:

Answer 36

A leftward shift of the supply curve

Question 37

The equilibrium price and quantity in the above diagram for a good/service, under perfect competition, occur at a price of:

Answer 37

$150 and a quantity of 300 units.

Question 38

If a price ceiling of $100 was in effect in the above figure (chapter 4!):

Answer 38

A shortage of 200 units would occur.

Question 39

In the above graph for a commodity, say, corn, under a perfectly competitive market structure, at a price of $250:

Answer 39

The quantity supplied is greater than the quantity demanded.

Question 40

Using the above diagram, at a price of $50:

Answer 40

The quantity supplied is 500 units.

Question 41

Assuming Coca-Cola & Pepsi-Cola are substitute goods, the effect of an increase in the price of Coca-Cola would cause which of the following:

Answer 41

A rightward shift in the demand curve for Pepsi-Cola.

Question 42

Decreasing the level of a subsidy (a supply curve shifter!) to an industry by the government would result in:

Answer 42

A leftward shift of the supply curve.

Question 43

The law of supply states that when the price of a commodity rises, the quantity supplied of that commodity rises too and vice versa, ceteris paribus, which means that:

Answer 43

Two variables are changing and everything else is being held constant.

Question 44

Decreasing a tax on an industry by the government would result in:

Answer 44

A rightward shift of the supply curve.

Question 45

T or F When the number of buyers in a market changes, the market-demand curve for goods and services shifts.

Answer 45

True

Question 46

T or F A decrease in the price of personal computers would shift the demand curve for personal computers to the right (increase in demand).

Answer 46

False

Question 47

T or F There are never shortages or surpluses when the price in a market is equal to the equilibrium price for the market.

Answer 47

True

Question 48

T or F As one moves down the demand curve for carrots, the quantity demanded for carrots increases and the price of carrots decreases.

Answer 48

True