MIDTERM

Question 1

In a market economy, economic activity is coordinated by_____

Answer 1

prices

Question 2

The quantity supplied of a good varies __ with its price.

Answer 2

directly

Question 3

The reason we cannot all live in beach-front houses is that the prices are too high.

Answer 3

false

Question 4

The true cost of anything is…..

Answer 4

the value it has in alternative uses

Question 5

High prices are usually caused by greedy sellers

Answer 5

false

Question 6

Prices responding to supply and demand cause natural resources to move from places where they are ___________, to places where they are ________.

Answer 6

abundant; relatively scarce

Question 7

With price controls, society can get things we want without having to pay the full cost

Answer 7

false

Question 8

Economics is not moral pronouncements or political creeds about the economy. Rather economics is…

Answer 8

a way of living and finding a way to keep the economy balanced based on cause and effect.

Question 9

In Chapter 4 the author uses a story about a shortage of soviet mining equipment to illustrate the concept of….

Answer 9

individual rationality versus systematic rationality

Question 10

Scarcity necessitates rationing. If rationing is not done through a price mechanism, name an alternative method of how rationing takes place…..

Answer 10

first come, first serve

Question 11

Making something artificially cheap usually means it will be….

Answer 11

wasted

Question 12

Politicians can use laws to bring down the cost of medical care

Answer 12

false

Question 13

In a market economy, pieces rise because the amount demanded ________ the amount supplied at existing prices

Answer 13

exceeds

Question 14

A price ceiling is….

Answer 14

a limit on how high a price is allowed to fall

Question 15

Rent control typically ______ the overall supply of housing.

Answer 15

reduces

Question 16

Rent control typically leads to ____ rents

Answer 16

more controlled

Question 17

Price controls are generally easier than cutting back on printing and spending for politicians.

Answer 17

true

Question 18

Which of the following is not a result of price controls?

Answer 18

money printing

Question 19

Price AND losses are equally important from the standpoint of forcing companies and industries to use scarce resources efficiently.

Answer 19

true

Question 20

John D. Rockerfeller built standard oil into the biggest and most profitable enterprise in the petroleum industry by…..

Answer 20

drastically reducing the cost of delivering finished products to consumers

Question 21

The principal beneficiaries of lower prices made possible by the more efficient allocation of scarce resources which have alternative uses are….

Answer 21

consumers

Question 22

Give an example from the chapter of a company which failed to keep up with changes.

Answer 22

A&P grocery stores

Question 23

Once a company is bigger and has more money than its rivals, it no longer needs to adapt to market conditions.

Answer 23

false

Question 24

Once a factory is built, it is fairly easy to run it profitably.

Answer 24

false