Quiz 1

Question 1

What are the four factors of production used to produce goods and services?

Answer 1

Land, Labor, Capital, Entrepreneurship

Question 2

A natural resource, such as fishing territories, is considered an example of

Answer 2

land only

Question 3

In economics, the term “capital” refers to

Answer 3

buildings and equipment used by firms

Question 4

Opportunity cost is defined as the

Answer 4

highest-valued alternative given up.

Question 5

A production possibilities frontier (PPF)

Answer 5

shows combinations of two goods or services that are attainable with given resources.

Question 6

A society that is on its production possibilities frontier is

Answer 6

fully utilizing its productive resources

Question 7

Increasing opportunity costs suggests that

Answer 7

various types of labor are not perfect substitutes for one another.

Question 8

Economic growth can be pictured in a production possibilities frontier diagram by

Answer 8

shifting the production possibilities frontier outward

Question 9

a person has an absolute advantage in an activity if that person can

Answer 9

produce more goods in a given amount of time than another person

Question 10

a person has a comparative advantage in an activity whenever he or she

Answer 10

can perform the activity at a lower opportunity cost than can anyone else.

Question 11

which of the following is true regarding markets

Answer 11

1. markets coordinate decisions through prices

2. a market enables buyers and sellers to get information about each other and to buy and sell from each other.

Question 12

the “law of demand” is illustrated by a

Answer 12

movement along the demand curve

Question 13

which of the following shifts the demand curve for hot dogs leftward

Answer 13

an increase in the price of a hot dog bun

Question 14

sweatshirts and tee-shirts are complements in consumption and the price of a sweatshirt increases. as a result, the demand for

Answer 14

tee-shirts will decrease that is, the demand curve will shift leftward.
if the price of a complementary good rises, its complements price falls.

Question 15

if the price of chicken falls, then in the market for beef

Answer 15

the demand curve for beef shifts leftward.

less people want beef because chickens cheaper.

Question 16

if consumers but not producers expect that the price of soda will rise next week, the

Answer 16

demand for soda today will increase

Question 17

a severe drought has damaged this year’s lettuce crop. The initial effect on the lettuce market is a

Answer 17

decrease in the supply of lettuce.

Question 18

Which of the following would result in a movement along, but not a shift of the supply curve for spinach?

Answer 18

A rise in the price of spinach

price changes only move you along the curve.

Question 19

which of the following will shift the supply curve for pick-up trucks?

Answer 19

1. an increase in the price of a resource used to produce pick-up trucks.
2. a change in the number of suppliers of pick-up trucks
3. change in production technology.

Question 20

when a market is in equilibrium,

Answer 20

there is no shortage and no surplus at the equilibrium price.

Question 21

when there is a surplus in the market, the quantity sold is

Answer 21

equal to the quantity demanded

Question 22

suppose the equilibrium price of bottled water has risen from $1.00 per bottle to $2.00 per bottle and the equilibrium quantity has increased. These changes are a result of a _____ shift of the ______ curve for bottled water.

Answer 22

rightward; demand

Question 23

Suppose that people find out that eating more fish improves their health, leading them to increase their demand for fish. as a result, the equilibrium price of fish _____ and the equilibrium quantity _____.

Answer 23

rises; increases

Question 24

Which of the following shifts the supply curve for oranges?

Answer 24

disastrous weather that destroys about half of this year’s orange crop

Question 25

what will happen to the equilibrium price and equilibrium quantity of ice cream cones when consumers’ incomes decrease?

Answer 25

if ice cream cones are a normal good, then the equilibrium price and quantity of ice cream cones will decrease.

Question 26

if the price of crude oil (used to produce gasoline) falls, the equilibrium price of gasoline ____ and the equilibrium quantity ______.

Answer 26

falls; increases

Question 27

As a result of an increase in the supply of a good, the equilibrium quantity _____ and the equilibrium price _____.

Answer 27

increases; falls

Question 28

One would speak of a change in the quantity of a good supplied, rather than a change in supply, if

Answer 28

the price of the good changes

Question 29

Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation?

Answer 29

Some consumers will be unable to obtain digital music players at the market price and will have an incentive to offer to buy the product at a higher price.

Question 30

If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until

Answer 30

quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.

Question 31

Assume that the price for swimming pool maintenance services has risen and sales of these services have fallen. One can conclude that

Answer 31

the supply of swimming pool maintenance services has decreased.

Question 32

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall. Holding everything else constant, how would this affect the market for Blu-ray players (a complement to LCD televisions)?

Answer 32

The demand for Blu-ray players would increase and the equilibrium price of Blu-ray players would increase.

Question 33

In response to a surplus the market price of good will fail; as the price falls, the quantity demanded will increase and quantity supplies will decrease until equilibrium is reached.

Answer 33

True

Question 34

Market equilibrium occurs where supply equals demand.

Answer 34

False

Question 35

A shortage occurs when the market price is lower than the equilibrium price.

Answer 35

True