Unit 1 Homework

Question 1

As the amount of an activity increases, its marginal benefit ______

Answer 1

decreases

Question 2

Decreasing marginal benefit describes ________

Answer 2

the inverse relationship between the marginal benefit associated with the use of a good or a service and the quantity consumed

Question 3

The more of a good or a service that produced in a given period of time, the high/low, the marginal ___ that is associated with each additional unit

Answer 3

the higher the marginal cost

Question 4

The more of a good or a service that is consumed in a given period of time, the high/low, the marginal ___ that is associated with each additional unit

Answer 4

the lower the marginal benefit

Question 5

When resources are allocated in such a way that it is possible to increase/decrease the production of one good without increasing/decreasing the production then the allocation of resources is efficient/inefficient

Answer 5

to increase, without decreasing, inefficient

Question 6

When resources are allocated in such a way that it is possible to increase/decrease the production of one good only by increasing/decreasing the production of another then the allocation of resources is efficient/inefficient

Answer 6

to increase, only by decreasing, efficient

Question 7

Anytime the terms of trade change and move closer to someone’s opportunity cost, that person is going to benefit more/less from trade than he or she did before

Answer 7

benefit less

Question 8

In a world characterized by scarcity, the most reliant mechanism for allocating goods, services, and resources between competing uses is _______

Answer 8

Price mechanism

Question 9

Because of diminishing marginal utility , the benefit of consuming more a good:

Answer 9

Falls with each additional unit, so the price consumers are willing and able to pay falls with increased consumption

Question 10

The horizontal summation of individual demand curves:

Answer 10

gives the market demand curve

Question 11

How much a nonprice determinant changes will ultimately determine:

Answer 11

the size of the shift in the demand curve

Question 12

For inferior goods, a decrease in income will have what effect on demand?

Answer 12

The demand curve will shift to the right

Question 13

If consumers expect prices to fall:

Answer 13

current demand will fall

Question 14

Taxes and subsidies matter because:

(2 reasons)

Answer 14

Stimulate production or collect revenue

Have unanticipated effects on other markets

Question 15

A subsidy to producers:

(Opporutnity cost)

Answer 15

lowers the cost of producing

Question 16

A change in supply:

(2 reasons)

Answer 16

Has the effect of shifting the entire supply curve to the right or left

Occurs when a nonprice determinant of supply changes

Question 17

If the production of a good incurs at a lower cost:

(Opportunity cost - 2 reasons)

Answer 17

1. The opportunity cost of producing other goods (in terms of the amount of this good that could have been produced) has increased
2. The opportunity cost (in terms of other goods that could have been produced) has decreased

Question 18

Firms expecting a cold winter will anticipate an increased demand for scarves resulting in an increased future price. How will the market adjust today?

(Opposite of demand)

Answer 18

Supply will decrease at every possible price

Question 19

When producers expect lower future prices, current supply shifts to the left or right

When producers expect high future prices, current supply shifts to the left or right

Answer 19

Low future prices, shifts to the right

High future prices, shifts to the left

Question 20

Shortages cannot push the market to an equilbrium in the prescence of ______

Answer 20

price controls

Question 21

When the government sets the price below market equilibrium, a shortage/suprlus/none will result

Answer 21

shortage

Question 22

When demand increases, equilibrium price and quantity increase. As a result with other things remaning constant what happens?

(POV - Consumers)

Answer 22

Consumers benefit because more is available to buy

Question 23

When there is a change in a non-price determinant of supply ______

(market equilibrium)

Answer 23

The supply curve shifts and there is a movement along the demand curve

Question 24

The equilibrium price decreases and the equilibrium _____ is indeterminant when demand increases/decreases and supply increases/decreases

Answer 24

Equilibrium quantity

Demand decreases and supply increases

Question 25

The equiliibrium quantity increases and the equilibrium ____ is indeterminant when demand and supply both increase/decrease

Answer 25

Equilibrium price

Demand and supply both increase

Question 26

When a shortage exists in a competitive market, the price provides incentives for buyers to:

Answer 26

Buyers to decrease the quantity of a good or service purchased in the market