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133 Cards in this Set

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In Cuba, a bureaucratic committeemakes the production decisions for the country's firms and factories.Therefore, Cuba is an example of a:

centralized economy

A good example of central planning at work inthe U.S. would be:

New York City's rent control

the entire group of buyers and sellers of aparticular good or service makes up:

a market

Suppose you bought three tickets to a concert inadvance at the University ticket window. At the last minute one friendcancelled, so you could use only two of those tickets. You scalped, or sold, the third ticket just outside the entrance to theconcert for slightly more than the price you had originally paid. Whichtransaction occurred in a market?

Both transactions, the one at the University ticket window as well as the sale at the concert entrance, occurred in markets.

Suppose you camped out in front of anelectronics store to be one of the 200 lucky people able to purchase the latestgaming system. You bought the system for $350. Two weeks later you see that thesame system can be sold on e-Bay for $600, so you sell your system. Your marketrole is as:

a consumer at the electronics store and as a seller on e-Bay.

In order to understand how the price of a goodis determined in the free market, one must account for the desires of:

D. purchasers and sellers.

Buyers and sellers of a particulargood comprise the:

market for the good

In a market, the demanders are the _______, andthe suppliers are the ______.

buyers;sellers

Holding all other relevant factors constant,consumers will purchase more of a good as the price falls." This statementreflects the behavior underlying:

the demand curve

The demand curve illustrates the fact thatconsumers:

tend to purchase more of a good as its price falls

Which of the following is NOT true of a demand curve?

D. It shows how an increase in price leads to an increase in quantity demanded of a good.

A demand curve is ________ sloping because__________________.

downward; fewer people are willing to buy an item at higher prices

As coffee becomes more expensive, Joe startsdrinking tea, and therefore quantity demanded for coffee decreases. This iscalled:

the substitution effect

You can spend $5 for lunch and you would like tohave two double cheeseburgers. When you get to the restaurant, you find out theprice for double cheeseburger has increased from $2.50 to $2.99. You decide tohave just one double cheeseburger for lunch. This is best described asa(n):

income effect

The quantity of Revlon nail polish demanded byJen decreased after the price of Revlon nail polish increased. Jen decides tofind a cheaper brand of nail polish. This is called a(n):

substitution effect of a price change

When the price of an item increases, buyers tendto purchase less of that item:

because of both the subsitution and the income effects

The buyer's reservation price of a particulargood or service is the:

maximum amount the buyer would be willing to pay for it.

Shelly purchases a leather purse for $400. Onecan infer that:

her reservation price was at least $400

Gertie saw a pair of jeans that she was willingto buy for $35. The price tag, though, said they were $29.99. Therefore:

C. Gertie should buy the jeans because the price is less than her reservation price.

One reason for the ________ slope of the demandcurve is that as prices fall ________.

downward; more people find that the price isless than their reservation price.

When a slice of pizza at the student union soldfor $2, Moe did not purchase any. When the price fell to $1.75, Moe purchased aslice each day for lunch. Moe's reservation price for a slice of pizza mustbe:

at least $1.75 but less than $2.

Sellers tend to offer _______ for sale as priceincreases, and so the supply curve is ______ sloping.

more; upward

the supply curve illustrates that firms:

increase the quantity supplied of a good whenits price rises

As the price of a good rises:

more firms can cover their opportunity costs of producing the good.

Supply curves are generally _______ slopingbecause _______________.

upward; of the principle of increasingopportunity costs

Last summer, real estate prices in your townsoared. You started noticing more "For Sale" signs in your neighbors'yards. You conclude that:

when housing prices rose, they started to exceedsome of your neighbors' reservation prices.

Jessica's marginal cost for producing a pitcherof lemonade is $0.25. Therefore, $0.25 can also be called her:

reservation price

Suppose that the market price for hot dogs soldby street vendors has just risen from $4.50 to $5, and that Curly has now begunoperating a hot dog cart. We can assume that:

Curly's reservation price is greater than $4.50but no more than $5

A seller's reservation price is generally equalto:

the sellers's opportunity coasst

A seller's reservation price is generally equalto:

the sellers marginal cost

A market comprised of a downward-sloping demandcurve that intersects an upward-sloping supply curve is said to be stablebecause:

at any price other than equilibrium, forces inthe market move price towards the equilibrium

Which of the following is NOT a characteristic of a market in equilibrium?

B. All consumers are able to purchase an amount equal to their quantity demanded.

A market in disequilibrium would feature:

either excess supply or excess demand

The equilibrium price and quantity of any goodor service is established by:

both demanders and suppliers

A shortage occurs when:

quantity demanded exceeds quantity supplied

Whenever the quantity demanded is not equal tothe quantity supplied, the quantity that is actually sold in the marketis:

C. the smaller of the quantity demanded and the quantity supplied.

Almost every holiday season at least one giftidea achieves fad status. When that happens, prices tend to increasedramatically. Why?

Quantity demanded exceeds quantity supplied

If the market for sport utility vehicles hasexcess supply, then one can say that:

quantity supplied is greater than quantitydemanded

You notice that your grocery store always hasday-old bakery products at a reduced price. Why might that be?

At the original price, quantity supplied wasgreater than quantity demanded.

Why does your grocery store sell day-old bakerygoods but not day-old canned goods?

B. An excess supply of bakery goods will quickly spoil, but excess canned goods will not.

When the price of a good is below itsequilibrium value

consumers will bid the price up

When the price of a good is below itsequilibrium value:

consumers will bid the price up

In a free market, if the price of a good isbelow the equilibrium price, then;

C. demanders, to acquire the good, will bid the price higher.

In a free market, if the price of agood is above the equilibrium price, then;

suppliers, dissatisfied with growinginventories, will lower the price

Which of following is NOT true of an equilibrium price?

It is always a fair and just price

When a market is not in equilibrium:

the economic motives of sellers and buyers willmove the market to its equilibrium.

Suppose you bought a concert ticket fromTicketmaster for $50, but when you got to the concert scalpers (individuals whore-sell tickets at the event) were selling tickets in the same seating area asyours for $25. What is probably true?

There is an excess supply of tickets for thisconcert at the Ticketmaster price

You have noticed that there is a persistentshortage of teachers in an inner-city school district in your state. Based onthis observation, you suspect that:

he wage for teachers at those schools is lowerthan the equilibrium wage

Suppose you notice that more and more people aredriving gas-guzzling cars. Since you drive an economy car, their increaseddemand for gas:

causes the price you pay for gas to increase

The tendency of markets to automaticallygravitate toward equilibrium is an application of which core principle?

The Incentive Principle

Which of the following is NOT a characteristic of governmental rent controls?

A. Equitable distribution of apartments.

Minimum wage laws are an example of:

regulated price

Suppose one knows two facts: first, the marketfor prescription drugs experiences chronic shortages and second, governmentsets the price for prescription drugs. One can conclude that the:

government has set the price below the equilibrium price.

A regulated maximum price that is above theequilibrium price:

B. will have no effect on the market.

A regulated maximum price that is above theequilibrium price:

will have no effect on the market

In a market where government has set the maximumprice below the equilibrium price, one might expect:

a black market to develop as individuals try to take advantage of unexploited opportunities.

According to the textbook, government pricecontrols fail because:

legislation cannot repeal basic economicmotives.

a movementalong a demand curve from one price-quantity combination to another iscalled:

change inquantity demanded

"As the price of personalcomputers continues to fall, demand increases." This headline isinaccurate because:

a falling price for personal computers increases quantity demanded, not demand.

An increase in the quantity demanded of teaoccurs whenever:

the price of the tea falls

If the demand for a good decreases as incomedecreases, it is a(n):

normal good

In the market for coffee, for manyconsumers:

tea is a substitute

in the market for office workers:

computers are complements.

What might cause a demand function to shift tothe right?

An increase in the price of a substitute.

If the demand for steak increases as incomeincreases, this means that steak is a(n):

normal good

If the price of computers increases and thedemand for monitors decreases as a result, then:

A. computers and monitors are complements.

Whether or not a good can be classified as acomplement depends on whether;

C. an increase in demand for one good follows a decrease in the price of the other.`

A decrease in the price of pizza will cause a(n):

increase in quantity demanded

if the demand for computers shifts to the rightas consumers' incomes rise, computers are

normal goods

As consumers' incomes increase, the demand forground beef decreases. Ground beef is called a(n):

inferior good

As consumers' incomes decrease, the demand curvefor bologna sandwiches shifts to the right. Therefore bologna sandwichesare:

inferior goods

Suppose the price of gasoline increases and thatsport utility vehicles get poor gas mileage compared to other available cars.One would expect:

the demand for sport utility vehicles todecrease

Suppose one could either rent a car or take atrain to travel to Chicago from Washington, D.C. If the price of train ticketsincreases:

the demand for rental cars will increase

Suppose that the price of doughnuts decreasesand that doughnut-holes are a by-product of producing doughnuts. One wouldexpect:

the quantity supplied of doughnuts to decrease

Suppose that the price of doughnuts decreasesand that doughnut-holes are a by-product of producing doughnuts. One wouldexpect:

the supply of doughnut holes to decrease

For two goods X and Y to be classifiedas substitutes, it must be the case that

when the price of X rises, the demand for Yincreases

At the beginning of the fall semester, collegetowns experience large increases in their populations, causing a(n):

C. increase in the demand for apartments.

Suppose one observes that when the price ofpeanut butter increases, the demand for jelly increases. One must concludethat:

peanut butter and jelly are substitutes

Suppose that a disease that affects people whoconsume beef has been discovered in the United States. One likely resultis:

a decrease in demand for beef

Assume consumers eat either rice or pasta fordinner every night. If the price of rice increases, in the pasta market onewould expect to see:

an increase in the demand for pasta

Suppose that two recent studies conclude thatincreased fiber in the diet does not reduce the risk of developing colon canceras was previously thought. The likely result will be that the:

demand for high-fiber foods will decrease.

A decrease in the demand for bananas with noconcurrent change in the supply of bananas will result in a ________equilibrium price and a(n) ________ equilibrium quantity.

lower; lower

As the price of cookies increases, firms thatproduce cookies will:

increase the quantity supplied of cookies.

Which of the following would cause an increasein quantity supplied of wheat?

The price farmers receive for their wheat rises.

As the price of flour (an input into the cookieproduction process) increases, firms that produce cookies will:

decrease the supply of cookies.

Suppose that the technology used to manufacturelaptops has improved. The likely result would be:

an increase in the supply of laptops

What might cause a supply function to shift tothe left today?

C. An expectation that the product's price will rise in the future.

An increase in the demand for GM automobilesresults in:

an increase in the quantity supplied of GMautomobiles

which of the following is NOT a determinant of demand for gasoline?

The quantity of gasoline supplied

Suppose one observes that when the price ofpeanut butter increases, the demand for jelly increases. One must concludethat:

peanut butter and jelly are substitutes

Assume consumers eat either rice or pasta fordinner every night. If the price of rice increases, in the pasta market onewould expect to see:

an increase in the demand for pasta.

suppose that two recent studies conclude thatincreased fiber in the diet does not reduce the risk of developing colon canceras was previously thought. The likely result will be that the:

demand for high-fiber foods will decrease

A decrease in the demand for bananas with noconcurrent change in the supply of bananas will result in a ________equilibrium price and a(n) ________ equilibrium quantity.

lower; lower

As the price of cookies increases, firms thatproduce cookies will:

increase the quantity supplied of cookies.

Which of the following would cause an increasein quantity supplied of wheat?

The price farmers receive for their wheat rises

As the price of flour (an input into the cookieproduction process) increases, firms that produce cookies will:

decrease the supply of cookies

Suppose that the technology used to manufacturelaptops has improved. The likely result would be:

A. an increase in supply of laptops.

What might cause a supply function to shift tothe left today?

C. An expectation that the product's price will rise in the future.

An increase in the demand for GM automobilesresults in:

B. an increase in the quantity supplied of GM automobiles.

Which of the following is NOT a determinant of demand for gasoline?

The quantity of gasoline supplied.

When the supply of a good decreases, consumerswill eventually:

C. decrease their quantity demanded.

In general, when the supply curve shifts to theleft and demand is constant then:

the equilibrium price will rise

In general, when the demand curve shifts to theright and supply remains constant then:

C. the equilibrium quantity will rise.

Suppose that the equilibrium price of rice fallsand the equilibrium quantity falls. Which of the following best fits theobserved data?

A decrease in demand with supply constant.

Suppose that the equilibrium price of DVDplayers increases and the equilibrium quantity increases. Which of thefollowing best fits the observed data?

An increase in demand with supply constant

Suppose that the equilibrium price of T-shirtsincreases and the equilibrium quantity falls. Which of the following best fitsthe observed data?

A decrease in supply with demand constant

Suppose that the equilibrium price of applesfalls and the equilibrium quantity increases. Which of the following best fitsthe observed data?

An increase in supply with demand constant.

If a market is in equilibrium and demandincreases while supply decreases, the change in the equilibrium price is________ and the change in the equilibrium quantity is _________.

positive; indeterminate

If both supply and demand increasesimultaneously, the new equilibrium price is ___________ and the newequilibrium quantity is _________________.

indeterminate; higher

if both supply and demand decreasesimultaneously, the new equilibrium price is ___________ and the newequilibrium quantity is _________________.

indeterminate; lower

if supply decreases while demand increasessimultaneously, the new equilibrium price is ___________ and the newequilibrium quantity is _________________.

higher; indeterminate

Suppose that both the equilibrium price andquantity of ketchup fall. The most consistent explanation for theseobservations is:

A. a decrease in demand for ketchup with no change in supply.

Suppose that the equilibrium price of picklesfalls while the equilibrium quantity rises. The most consistent explanation forthese observations is:

an increase in the supply of pickles with no change in demand.

Suppose that the equilibrium price of Frenchfries rises while the equilibrium quantity falls. The most consistentexplanation for these observations is:

D. a decrease in the supply of French fries with no change in demand.

Assume the demand for coffee increases while thesupply decreases. Which of the following outcomes is certain to occur?

The equilibrium price of coffee will rise.

Assume the demand for sugar decreases while thesupply of sugar increases. Which of the following outcomes is certain tooccur?

he equilibrium price of sugar will fall

Assume both the demand and the supply of beefdecrease. Which of the following outcomes is certain to occur?

The equilibrium quantity of beef will fall

Assume both the demand and the supply of bagelsincrease. Which of the following outcomes is certain to occur?

B. The equilibrium quantity of bagels will rise.

Suppose that both supply and demand for iPadsdecrease. One can predict that the:

equilibrium quantity will fall but the equilibrium price can rise or fall.

An outcome is socially optimal if it:

maximizes total economic surplus

Efficiency occurs when:

B. the socially optimal quantity of goods and services is being produced.

Efficiency is an important goal in economicsbecause it:

assures a higher level of output.

Assume that Joe is willing to produce anotherhamburger that costs $1 to make. Mary is hungry and is willing to buy ahamburger for $3. According to the NoCash on the Table Principle, Joeand Mary:

A. will make a trade.

When two people agree to a price in anegotiation, we can assume that:

both parties will benefit.

if, in a particular market, all unexploitedopportunities have been realized, one can conclude that:

the market is in equilibrium

The situation described in the book as"Smart for One, Dumb for All" occurs when:

individuals, when acting rationally, fail to takeadvantage of all opportunities for social benefit.

Suppose the local slaughterhouse gives off anunpleasant stench. The price of meat would then be _______ because not all ofthe _________ are accounted for in the marketplace.

too low; costs

Suppose that the production of oranges reducesglobal warming. The equilibrium price of oranges is _______ because not all ofthe _________ are accounted for in the marketplace.

too low; benefits

Which of the following is NOT a condition for maximizing total economic surplus in aparticular market?

D. Government regulation of the market is needed.

Everyone in the neighborhood has been complainingabout the deteriorating condition of the park, but nobody has cleaned it up.Why not?

No single person's reservation price to clean the park makes it worth cleaning it.

The NoCash on the Table Principleasserts that:

D. in equilibrium, all opportunities have been exploited.

Which of the following directly follows from theNo Cash on the Table Principle?

For a transaction to occur, the buyer'sreservation price must be greater than the seller's reservation price.

according to the equilibrium principle:

market equilibrium exploits all opportunitiesfor individual gain, but may not exploit gains possible through collectiveaction.