economics 226-300

Question 1

If demand for a good is highly elastic, then an increase in price will _______.

Answer 1

significantly decrease quantity demanded

Question 2

What is the formula for price elasticity of demand?

Answer 2

PED = % change in quantity demanded / % change in price

Question 3

If price elasticity of demand is greater than one, then demand is _____.

Answer 3

elastic

Question 4

Pens and pocket protectors are complementary goods. The supply of pocket protectors decreases. What happens to the equilibrium price of pens?

Answer 4

decreases - the price of pocket protectors increases, which causes the demand for pens to decrease; as a result, the price of pens decreases

Question 5

What does price elasticity of demand tell us?

Answer 5

Price elasticity of demand tells us how much quantity demanded will be affected by a change in price.

Question 6

The equilibrium point is at the intersection of what two curves?

Answer 6

the supply curve and the demand curve

Question 7

What does it mean for a market to “clear”?

Answer 7

A market “clears” at the price where the quantity demanded equals the quantity supplied, so there is no surplus or shortage.

Question 8

What effect does a price floor set over the equilibrium price have on a market?

Answer 8

Suppliers supply more, and consumers demand a lesser quantity. A surplus results.

Question 9

Which two curves interest at the point of market equilibrium?

Answer 9

supply and demand

Question 10

What does the market “do” at the point of equilibrium?

Answer 10

it “clears”

Question 11

What is the term for the quantity at which buyers and sellers ask the same price?

Answer 11

equilibrium quantity

Question 12

What usually results from a price floor?

Answer 12

a surplus

Question 13

In a market, what is the “common language” that helps a buyer and seller agree on the value of the resources, goods, and/or services to be exchanged?

Answer 13

price

Question 14

Define “market equilibrium.”

Answer 14

The point at which quantity exchanged equals quantity supplied.

Question 15

How do price signals affect markets?

Answer 15

Price signals are instrumental to markets. Depending on prices, consumers decide whether or not to consume and businesses decide whether or not to produce

Question 16

True or false: A market consists of an exchange that takes place at a given location and at a particular time.

Answer 16

FALSE

Question 17

What effect does a price ceiling set below the equilibrium price have on a market?

Answer 17

Suppliers supply less, and consumers demand a greater quantity. A shortage results.

Question 18

A surplus is a normal result of a price (ceiling/floor).

Answer 18

floor

Question 19

What usually results from a price ceiling?

Answer 19

a shortage

Question 20

What do you call a buyer and a seller, exchanging resources, goods, and/or services?

Answer 20

a market

Question 21

What effect does a price ceiling set over the equilibrium price have on a market?

Answer 21

none

Question 22

Rent control is a price (ceiling/floor).

Answer 22

ceiling

Question 23

To keep farmers in business, the government often sets a price (ceiling/floor) on agricultural goods.

Answer 23

floor

Question 24

What is the common economic language that makes comparison of values easier?

Answer 24

prices

Question 25

What determines price in free market economy?

Answer 25

te interaction of supply and demand

Question 26

What is another term for the equilibrium price?

Answer 26

the market-clearing price

Question 27

Does a market have to occur in a physical place?

Answer 27

No

Question 28

Equilibrium is best represented as a (curve/straight line/single point)/

Answer 28

single point

Question 29

What effect does a price ceiling have on demand?

Answer 29

none

Question 30

As the price of a good increases, what happens to the quantity demanded of that good?

Answer 30

quantity demanded decreases

Question 31

In general, as the price of a good decreases, quantity demanded of that good (increases/decreases/stays the same).

Answer 31

increases

Question 32

As price increases, the quantity demanded (increases/decreases).

Answer 32

decreases

Question 33

in a free market, (self-interest) results from the value of private property.

Answer 33

self-interest

Question 34

do economists think people are selfish?

Answer 34

no

Question 35

what law can explain the bowed-out shape of a typical production possibilities curve?

Answer 35

the law of increasing opportunity cost

Question 36

what will cause a production possibilities curve to shift inward?

Answer 36

a decrease in the amount of a factor of production

Question 37

what will cause a production possibilities to shift outward?

Answer 37

an increase in a factor of production

Question 38

describe the shape of a typical production possibilities curve.

Answer 38

bowed outward from the origin

Question 39

what must an economy do in order to consume at a point beyond its production possibilities curve?

Answer 39

it must engage in trade

Question 40

list two qualities of the points along a possibilities curve

Answer 40

1. all points are attainable and 2. all points are efficient

Question 41

what dos PPC stand for?

Answer 41

production possibilities curve

Question 42

what happen to a production possibilities curve when the amount of a factor of production is increased?

Answer 42

the curve expands outward

Question 43

what happens to a production possibilities curve when the amount of a factor of production diminishes in availibility?

Answer 43

the curve shifts inward

Question 44

in which type of economic system are all resources owned by private fims and individuals?

Answer 44

a pure market system

Question 45

is economic regulation more likely to favor producers or consumers?

Answer 45

producers

Question 46

what type of economic system is in place in cuba?

Answer 46

a mostly command/ planned system

Question 47

What country has the most market-oriented economic system in the world?

Answer 47

the United States

Question 48

what drives self-interest in a market economy?

Answer 48

the value of private property and ownership

Question 49

if two countries have similar resources, but one has a command economic system and the other has a market system, which country will most likely have the higher income per capita?

Answer 49

the country with a market system

Question 50

what type of firm has the greatest amount of market power?

Answer 50

a monopoly

Question 51

what country has the most centrally-planned economic system in the world?

Answer 51

north korea

Question 52

in which type of economic system is a person who owns no resource most likely to starve?

Answer 52

a pure market system

Question 53

"pure capitalism" is another name for which type of economic system?

Answer 53

pure market economy, free enterprise system or free market system

Question 54

since the former soviet union dissolved, what type of economic system has been in place in the majority of the resulting independent republics?

Answer 54

mixed market systems; most are trying to increase privatization

Question 55

what does the herfindahl index measure?

Answer 55

the sales concentration among firms in a given industry; the degree of competition in the industry

Question 56

In a market economy, ho is the question of "what to produce"answered?

Answer 56

by market forces

Question 57

what is a horizontal merger?

Answer 57

a merger of two or more firms in the same market

Question 58

What type of economic system is in place un the U.S.?

Answer 58

a mixed market system

Question 59

What is a trade deficit?

Answer 59

a condition in which a nation spends more on imports than what it receives for its exports

Question 60

How does an embargo differ from a tariff or a quota?

Answer 60

Tariffs and quotas are intended to help domestic producers, but embargoes are intended to hurt foreign consumers

Question 61

How do two nations trade when they each use different currencies and different price structures?

Answer 61

Each nation uses an exchange rate to determine the value of its goods in terms of the other country's currency

Question 62

How do political leaders tend to act toward foreign competition with domestic industries?

Answer 62

Many political leaders urge other countries to engage in free trade, but promote protectionist policies in their own countries

Question 63

What is a product market?

Answer 63

a market in which goods or services are bought and sold

Question 64

What kind of money is a gold coin?

Answer 64

commodity money

Question 65

What is a market system?

Answer 65

an economic system in which a group allows market forces and the behavior of buyers and sellers to influence economic decision-making

Question 66

What is an import?

Answer 66

a good produced in a foreign country but purchased by domestic consumers

Question 67

How do rational people decide how to specialize?

Answer 67

People specialize in the production of the good they can produce for the lowest opportunity cost

Question 68

What does a price floor have on demand?

Answer 68

none

Question 69

As the price of a good increases, what happens to the demand for that good?

Answer 69

nothing

Question 70

Define comparative advantage

Answer 70

the ability of one country to produce a good at a lower opportunity cost (with a greater efficiency relative to other goods) than another country

Question 71

True or False: a change in price results in a change in the quantity demanded

Answer 71

TRUE

Question 72

True or False: a change in price results in a change in the demand

Answer 72

FALSE

Question 73

A minimum wage is a price floor or ceiling

Answer 73

floor

Question 74

Movement along the demand curve represents a change in (demand or quantity demanded)

Answer 74

quantity demanded

Question 75

As price increases, the quantity supplied (increases or decreases)

Answer 75

increases