Exam 1 Practice Test Flashcards
Allocative efficiency best explains ________, and productive efficiency best explains ________.
what will be produced; how something will be produced
A decrease in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point outside the frontier. (T/F)
False
A change in which variable will change the market demand for a product?
population
Which of the following will not shift the demand curve for a good?
an increase in the price of the good
A decrease in the price of pork will result in
a smaller quantity of pork supplied.
A surplus occurs when the market price is lower than the equilibrium price. (T/F)
False
A decrease in the equilibrium price for a product will result
when there is an increase in supply and a decrease in demand for the product.
An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in
an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.
Suppose there is no unemployment in the economy and society decides that it wants more of one good. Which of the following statements is true?
It will have to give up production and consumption of some other good.
If all else is held constant, what would happen to the equilibrium price and quantity of iPhones if the price of an Android phone decreased?
They would both decrease.
If the price of a product is above equilibrium, what forces it down?
When the price is above equilibrium, a surplus occurs. Some producers who are unable to sell the product will have an incentive to offer to sell the product at a lower price. A lower price will simultaneously decrease the quantity supplied and increase the quantity demanded. This downward pressure on price continues until the surplus is eliminated and equilibrium is achieved.
A 10 percent rise in the price of housing reduces the quantity demanded of housing by 3 percent. We can conclude that the demand for housing is:
inelastic
A horizontal demand curve is perfectly elastic. (T/F)
True
A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:
the firm is operating in a range of the demand curve that is unit elastic.
