Quiz 1 Flashcards
What are the four factors of production used to produce goods and services?
Land, Labor, Capital, Entrepreneurship
A natural resource, such as fishing territories, is considered an example of
land only
In economics, the term “capital” refers to
buildings and equipment used by firms
Opportunity cost is defined as the
highest-valued alternative given up.
A production possibilities frontier (PPF)
shows combinations of two goods or services that are attainable with given resources.
A society that is on its production possibilities frontier is
fully utilizing its productive resources
Increasing opportunity costs suggests that
various types of labor are not perfect substitutes for one another.
Economic growth can be pictured in a production possibilities frontier diagram by
shifting the production possibilities frontier outward
a person has an absolute advantage in an activity if that person can
produce more goods in a given amount of time than another person
a person has a comparative advantage in an activity whenever he or she
can perform the activity at a lower opportunity cost than can anyone else.
which of the following is true regarding markets
- 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.
the “law of demand” is illustrated by a
movement along the demand curve
which of the following shifts the demand curve for hot dogs leftward
an increase in the price of a hot dog bun
sweatshirts and tee-shirts are complements in consumption and the price of a sweatshirt increases. as a result, the demand for
tee-shirts will decrease that is, the demand curve will shift leftward.
if the price of a complementary good rises, its complements price falls.
if the price of chicken falls, then in the market for beef
the demand curve for beef shifts leftward.
less people want beef because chickens cheaper.
if consumers but not producers expect that the price of soda will rise next week, the
demand for soda today will increase
a severe drought has damaged this year’s lettuce crop. The initial effect on the lettuce market is a
decrease in the supply of lettuce.
Which of the following would result in a movement along, but not a shift of the supply curve for spinach?
A rise in the price of spinach
price changes only move you along the curve.
which of the following will shift the supply curve for pick-up trucks?
- an increase in the price of a resource used to produce pick-up trucks.
- a change in the number of suppliers of pick-up trucks
- change in production technology.
when a market is in equilibrium,
there is no shortage and no surplus at the equilibrium price.
when there is a surplus in the market, the quantity sold is
equal to the quantity demanded
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.
rightward; demand
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 _____.
rises; increases
Which of the following shifts the supply curve for oranges?
disastrous weather that destroys about half of this year’s orange crop
what will happen to the equilibrium price and equilibrium quantity of ice cream cones when consumers’ incomes decrease?
if ice cream cones are a normal good, then the equilibrium price and quantity of ice cream cones will decrease.
if the price of crude oil (used to produce gasoline) falls, the equilibrium price of gasoline ____ and the equilibrium quantity ______.
falls; increases
As a result of an increase in the supply of a good, the equilibrium quantity _____ and the equilibrium price _____.
increases; falls
One would speak of a change in the quantity of a good supplied, rather than a change in supply, if
the price of the good changes
Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation?
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.
If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until
quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.
Assume that the price for swimming pool maintenance services has risen and sales of these services have fallen. One can conclude that
the supply of swimming pool maintenance services has decreased.
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)?
The demand for Blu-ray players would increase and the equilibrium price of Blu-ray players would increase.
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.
True
Market equilibrium occurs where supply equals demand.
False
A shortage occurs when the market price is lower than the equilibrium price.
True
