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Scarcity arises from wants exceeding available resources
True
There is a negative relationship between the price of a good and the quantity supplied of that good
False
Scarcity is an issue only in a centrally planned economy.
False
An increase in the price of attending college will reduce the supply of college education available.
False
Markets work best when the government dictates the price.
False
Supply is upward sloping due to increasing opportunity costs.
True
A decline in the price of vanilla ice cream will increase the demand for vanilla ice cream.
False
An increase in the price of hot dogs will likely increase the demand for hot dog buns.
False
An inferior good is one that experiences a decline in market demand when consumers' income increases.
True
If I get more benefit out of the second hot dog than popcorn, I will buy the second hot dog before the popcorn.
True
If the demand for gas decreases as supply increases, then the price of gas wil wal.
True
If the income elasticity for rice is -0.8, rice is a normal good.
False
The choice with the lwoest opportunity cost also has the greatest net benefit.
True
A reduction in price will increase the quantity demanded.
True
Trade takes place when both the buyer and seller expect to be better off.
True
Increasing price provides an incentive to suppliers to make more available for sale.
True
Opportunity cost is what we give up when we act on a decision.
True
Always buy the item that provides the greatest utility.
False
Marginal utility always slopes upward.
False
A person will be willing to buy a good if the ratio of marginal utility to marginal cost is less than one.
False
An explicit cost is one that must be paid to another party.
True
Consumers have no impact on the prices they pay for goods at Wal-Mart or other retail stores.
False
My decision of purchasing an iPod depends on how many iPods are available in Columbia.
False
Scarcity can result from increases in demand.
True
Since I enjoy fishing, everyone must enjoy fishing, is an example of the fallcy of composition.
True
Marginality refers to incremental change.
True
If there is a price increase for steak, we expect the demand for seafood to decline.
False
Incentives change at least some of our decisions.
True
Voluntary exchange makes buyers worse off buy sellers better off.
Fals
An increase in price reduces demand.
False
As a result of limited resources
People buy more goods
Businesses sell more products
Output choice must be made, which involves tradeoffs
In economics, "capital" refers to
goods that can be used to produce other goods
A market is:
Any arrangement that brings buyers and sellers together
The quantity demanded of a good or service is:
One quantity at one price
The price of cotton falls. As a result
the quantity demanded of cotton clothing increases
(supply moves right, demand is constant)
Because the supply of computers is increasing, the quantity demanded is ________.
increasing
The cross elasticity of demand for butter and margarine is likely to be
positive because they are substitues.
If the cross elasticity of demand between coke and pepsi is 2.02, then coke and pepsi are,
substitues
The income elasticity of demand is
positive for a normal good
The cross elasticity between computers and software is
negative because they are complements
What do all supply curves have in common when graphed?
upward slope
What causes a movement along the demand curve?
when a change in price causes the quantity demanded to change
What causes a shift of the demand curve?
when there is a change in any non-price determinant of demand
What happens to the demand for computers when consumer income decrease?
quantity sold decreases
What do all demand curves have in common when graphed?
downward slope
If suddently we expect prices for furniture to decline in the future, what happens to the current demand for furniture?
consumers would wait to purchase furniture at a lower price
What happens to the demand for most goods when income increases
demand increases
How does the marginal utility from a good change as the quantity of the good increases?
marginal utility decreases
Decisions are made at the..
margin
Economics is focused on money and making profits
False
Utility is a comprehensive term for benefits, value, satisfaction, preferences, and other terms used to describe what we get from a decision, activity, or good.
True
Decisions about what goods to purchase will be efficient if based on average values or sizes.
False
The decision rule states you should make the decision that provides the greatest marginal utility divided by marginal cost or greatest net marginal utility per dollar.
True
A person is said to have demand for a good when the person has both the willingness and ability to buy the good.
True
The ceteris paribus assumption is that other variables not being examined are not changing or are held equal.
True
The quantity demanded (not demand as a whole) will increase in response to..
lower price of the good
As we eat more food, eventually the extra consumption causes
the law of diminishing marginal utility.
If the demand and supply of apples both increase by the same amount, the price for apples should rise and thequantity sold will remain the same.
False
The principle of diminishing marginal utility means as more of a product is consumed, the total utility from the good diminishes.
False
If the percent change in the price of a good exceeds the percent change in the quantity demanded, then the supply is
Inelastic
Normal profit is the minimum return to ownership required to keep the owner's resources invested in an enterprise.
True
The demand curve represents the highest opportunity cost selection at every price
False
Own-Price elasticity measures how much the demand curve shifts when the price of a good changes
False
Improvements in technology related to building computers will decrease demand
False
A PPC shows how we respond to changes
False
A reduction in profits decreases the PPC or frontier
False
A nation possesses a comparative advantage if it has a lower opportunity cost when producing a good.
True
A reduction in input costs will increase supply.
False
Improvements in technology tend to reduce production possibilities.
False
Property rights must be protected for free markets to function effectively.
True
Building a new plant or facility is a short run decision.
Flase
A comparative advantage is held by a person/region that has a lower opportunity cost compared to another person/region.
True
We buy products or services bases on the utility we anticipate recieving constrained by prices and incomes.
True
An oligopolistic firm can be identified by being one of many sellers.
False
Businesses in pure competition or monopolistic competition, on average, breakeven during a typical production cycle.
True
The two basic market outcomes are utility and demand.
False
A firm generally should shut down if it cannot at least cover its variable cost at the output it sells.
True
The sellers of shoes in Columbia are operating in a monopolistically competitive industry.
True
Higher costs could cause some cattle ranchers to get out of the business.
True
Because there is always a cost, we seldom want to totally ban any good.
True
Exxon Mobil would be expected to make more money by lowering prices to sell more gasoline.
False
Best Buy is closing its UK big box stores because they are profitable.
False
An increase in advertising by Nike will increase costs in an effort to increase revenue.
True
If the price of McDonald's sandwiches increased, a reduction in demand will result
False
The income elasticity of grapefruit is a measure of how much the demand for grapefruit will change or shift if income changes.
True
A price and the quantity purchased at that price represent only one point on a demand curve or one point in a demand schedule.
True
The long run average cost curve only measures fixed costs.
False
Increased concentration in markets is expected over time.
True
The most profitable firms tend to be ologopolists.
False
A point below the PPC suggests a high opportunity cost because resources or technology are not fully or efficiently used.
True
A comparative advantage is achieved by having a lower opportunity cost than others.
True
Govt interference with market outcomes causes a deadweight loss, which is a reduction in the net value created for buyers and sellers through markets.
True
An individual firm will not sell a good if the firm would recieve no producer surplus from the sell.
True
Productivity gains would cause workers to be paid less while the selling price of the good produced remains the same or is even reduced.
False
Hurricanes will impact costs of effected sellers.
True
Columbia Power and Light is a monopoly, as is Wal-Mart.
False
Mutual interdependence tells us that the industry is perfectly competitive.
False
Economies of scale are the rising costs that result from a firm adopting new technology.
False
Price discrimination is charging different buyers different prices for reasons not related to the costs of production.
True
Barriers to entry may cause an increase in the number of firms in an industry.
False
Average total costs
varies with the rate of output
Is a U-shapd curve
is equal to total costs divided by total output
Profit is maximized where MR=MC for a monopolist
True
An industry in which a few large firms supply most or all of a product is a(n)..
oligopoly
If a firm increases output in the short run, total costs will rise because of a change in
comparative costs
Diminishing returns
Is shown by a declining marginal product
Happens when you study for 10 straight hours
Causes MC to rise
If the percent change in quantity demanded is greater than the relative change in price, demand is
elastic
Complements have a ____ cross price elasticity.
less than one
If I want to increase the revenue I earn from selling a product and the own price elasticity of demand is 0.82, you should...
raise the price
ATC - AVC =
AFC
MR = MC
Max profit
If after I consume three pieces of pizza, the value of the utility is less than the price, I will buy a fourth piece.
False
Diminishing marginal utility will lead to an increase in my willingness to pay more for subsequent units of a good.
False
Property rights of citizens must be protected for free markets and capitalism to be effective at creating wealth.
True
If demand is elastic, then the elasticity coefficient is greater than one and MR is positive.
True
A firm need not provide utility in excess of cost to a consumer after the firm becomes large.
False
Demand represents the lowest opportunity cost for a good at various levels of price.
True
An increase in the price of corn will likely cause the price of other goods producers could produce to fall.
False
Decisions are made based on marginal benefits and costs, not total benefits and costs.
True
Demand for rice slopes downward because of the income and substitution effects.
True
A rising price is a signal to sellers to produce less.
False
We always rent housing that will provide us with the greatest utility.
False
Demand will change as the price of complements and substitutes change.
True
An increase income will cause the short run supply to increase or shift to the right.
False
An increase in the price of corn will likely increase the price of ethanol and increase the quantity of ethanol consumed.
False
Prices provide a current relative measure of scarcity for a good.
True
Choosing an alternative with the lowest opportunity cost will lead to maximizing utility.
True
We expect an increase in disposable income to reduce the market demand for most goods.
False
Even though there is as much land in the U.S. today as there was 100 years ago, land is scarcer today.
True
A market is where buyers and sellers meet, though not necessarily in person, to exchange goods.
True
An individual will not buy a good if the person woud recieve no consumer surplus form the purchase.
True
Subsidies are incentives designed to provide support for a particular action or behavior.
True
The opportunity cost of an action is the highest valued alternative foregone.
False
The relative price of a good is more important in our decision making than the absolute price of a good.
True
Price ceilings tend to create shortages.
True
Exports from a market benefit consumers at the expense of sellers.
False
A movement along the demand curve is caused by a change in one of the determinants.
False
A monitor and computer are complements
True
A market need not be a physical location
True
Price floors are likely to cause increases in the welfare of consumers.
False
A relatively elastic demand exists if 10% change in the price of a good results in a percent change in quantity demanded that is.
greater than 10
Suppose your local golf course increases the greens fees for using the course. If demand for gold is relatively inelastic, you would expect
An increase in total revenue received by the course
There are several close substitutes for Bayer aspirin, but fewer substitutes for a complete medical exam. Therefore you would expect demand for medical exams to be.
more inelastic.
The cross elasticity of demand for complementary goods is
less than 0
The ability to supply a good is primarily based on
limited wants and needs
The specific quantity of a good that sellers are willing and able to sell at a given price is the
quantity supplied
The net benefit of buyers of purchasing a good is what?
consumer surplus
What will happen to the market outcomes (P&Q) if supply increases more than demand?
Price decreases
Quantity increases
How do increases in income and wealth affect market outcomes?
The consumers willingness to buy a good increases
If demand is inelastic and price is reduced, what will happen to the quantity sold?
Quantity increases
What will happen to the total revenue of the firm?
Total Revenue increases
Suppose your local golf course increases the greens fees for using the course. If demand for golf is relatively inelastic, you would expect
An increase in total revenue received by the course
There are several close substitutes for Bayer aspirin, but fewer substitutes for a complete medical exam. Therefore you would expect demand for medical exams to be.
more inelastic.
The cross elasticity of demand for complementary goods is
less than 0
The ability to supply a good is primarily based on
limited wants and needs
The specific quantity of a good that sellers are willing and able to sell at a given price is the...
quantity supplied
The net benefit of buyers of purchasing a good is what?
consumer surplus
What will happen to the market outcomes (P&Q) if supply increases more than demand?
Price decreases
Quantity increases
How do increases in income and wealth affect market outcomes?
The consumers willingness to buy a good increases
If demand is inelastic and price is reduced, what will happen to the quantity sold?
Quantity increases
What will happen to the total revenue of the firm?
Total Revenue increases
Own price elasticity is a __________ demand curve
movement along the
Cross price elasticity is a _________ demand curve
shift of
A shift of the demand curve takes place when
there is a change in any non-price determinant of demand
A movement along the demand curve takes place when
a change in price causes the quantity demanded to change
A normal good is
when income increases and demand increases
An inferior good is
when income increases and demand decreases
Three types of market dimensions
legal, cultural, physical
Law of supply states that..
price increases and quantity supplied increases
Law of demand states that
buyers will purchase larger quantities only if the price is reduced.
Income effect is
as price increases, we become poorer and buy fewer goods
Substitution effect is
if the price of one good rises relative to another, the quantity purchased of the good, with the rising price, will decrease
Two goods that complement each other show a ____ cross price elasticity
negative
Two goods that substitute each other show a ______ cross price elasticity
positive
The difference between what the consumer is willing to pay and what they actually paid is
consumer surplus
The diference between what the supplier is selling and what the product is actually worth is
producer surplus
producer surplus is shown ____ the price and ____ the supply curve
below the price
above supply curve
Consumer surplus is shown ____ the price and ____ the demand curve
above the price
below demand curve
Price ceiling/controls
Example: ?
price can't go above "ceiling"
rent
Price floor
Example: ?
price can't go below "floor"
minimum wage
Subsidies are an _______ to price ceilings and floors
Example: ?
alternative
food stamps, tax break
Producers shift the supply curve ____
out
Consumers shif the demand curve _____
out
Excess demand is when.... it is a ______ along the demand curve
quantity demanded is greater than quantity supplied at a particular price

movement
Excess supply is when.....
quantity supplid is greater than quantity demanded at a particular price
The exporter
receives payments
uses resources
raises costs/prices
ships goods, information, and ties
The importer
makes payment
saves income
saves resources
gets goods, information, and alternatives
Why do we have trade barriers?
successful lobbying by domestic producers
unfair trade
national security
Profit =
TR - TC
Economic profit is...
the return to ownership in excess of all costs
Normal profit is....
the minimum return to owners to keep resources in the enterprise.
Productivity is the...
meausure of efficiency
Production is
the sum of outputs at whatever level of inputs
PPC shows...
the possible combinations of two goods that could be produced using all available resources efficiently
Some determinants of PPC...
resources
technology/management
Comparative advantage is when..
a person, region, or country can produce a good at a lower opportunity cost than another person, region, or country.
Three types of productivity?
increasing returns
constant "
diminishing "
Marginal product is...
the additional output generated from adding another unit of input
Marginal cost is...
the price of the last unit divided by the marginal product of the last unit
What is the goal of a firm?
to maximize profit
The phrase "tax incidence" refers to who
actually bears the burden of paying the tax
A point on the demand curve shows the price and the corresponding quantity demanded and...
the marginal benefit from consuming that unit
A firms total revenue minus its total opportunity cost is called..
its economic profit
TC = ?
VC +FC
MC is a change in VC or ?
TC
AVC = ?
VC/q
AFC = ?
FC/q
ATC = ?
TC/q
ATC = ?
ATC + AVC
AFC is always _____.
declining
When resources are unemployed, it is possible to produce more of a good without decreasing the production of another good.
True
When demand is elastic, marginal revenue is _____
positive
Proprietership has ___ owner(s)
one
Partnership has ______ owner(s)
multiple
Lower prices for the resources used to produce the product..
increase the supply of a product
The short run is...
the time frame in which some resources are fixed
To produce more output in the short run, a firm must
employ more of its variable resources
If, when prices fall, total revenue decreases, demand is ______
elastic
The marginal cost curve slopes upward because of....
increasing marginal cost
The marginal benefit of tacos is measured by the amount of another good is a person is willing to give up to get one more taco.
True
Implicit costs are
costs of production that don't entail a direct money payment
A firm that faces a small amount of competitors is
an oligopoly
A monopoly is able to set the price for its product
True
There is a large nnumber of firms producing slightly different products in a...
monopolistic competition
What are some potential barriers to entry?
govt created
name brands
natural barriers
high costs
Commodities are:
generic type of products
How do you decide how much of something to buy?
keep buying until the benefit of the additional good equals the benefit of the second best choice
If marginal cost exceeds price, a competitive firm can increase profit by
decreasing outputs
A monopoly is a firm that has control of a market because it is
the only seller
If a perfectly competitive firm finds a price that is less than its ATC, it is incurring a(n)...
economic loss
TR = ?
P x q
TC = ?
ATC x q
Externalities are the..
spillover effects on individuals not consuming nor producing the good. They are external to the market results
An example of external benefits ?
Christmas decorations
An example of external cost ?
pollution
If a good has an external cost, the competitive market outcome is effiecient
True
If a substitute is easy to find, then demand for the good is elastic.
True
The pleasure that Sarah gets from painting is called
benefit or utlility
An increase in the quantity demanded is shown as a movement along the demand curve
True
In monopolistic competition, the products of different sellers are assumed to be similar.
True
How are externalities dealt with?
Regulations or laws
zoning
lawsuits
A change in demand directly implies a shift in ______
the demand curve
At the beginning of the fall semester, college town experiences large increases in their population, causing an _______ in demand for apartments.
increase
Price elasticity of demand shows quantity demanded responds to price changes
true
Opportunity cost is the value of the highest value alternative foregone in making a choice
True
There is an increased supply of a product because lower prices for the resources used to produce the product
True
A point on the demand curve shows the price and the corresponding quantity demanded and marginal cost to the seller producing the unit.
True
A deadweight loss from a tax is called the net loss from taxation
True
A housing shortage results when a rent ceiling below the equilibrium is imposed.
True
A black market is a potential outcome of a price ceiling.
True
A price floor set above the equilibrium creates a...
surplus
The producer surplus for workers from a job is equal to the wage rate minus the marginal cost of work
True
One result of minimum wage is illegal hiring of people at wages below minimum wage.
True
If the demand for gas decreases as supply increases, then the price of gas will _____.
fall
If the demand for gas decreases as supply increases, then the price of gas will _____.
fall
An incentive is
the motivation behind most decisions.
The Law of diminishing marginal utility says...
marginal utility will decline as acquisition of a good increases.
Capital means
man-made resource
A change in price causes a change in _____ _______.
quantity supplied
A supply curve shows the lowest marginal opportunity cost of producing alternative levels of the product.
True
Coase theorem says if there are low transaction costs, the problem should be solved ______.
Example ?
privately
neighbor's properties rights
The Coase theorem says if there are high transaction costs, the problem should be resolved publicly or by using government assistance.
True
You can save resoures by solving _____ rather than publicly.
privately (low transaction costs)
Public goods deals with ___________
properties rights
Non-rival public goods are when...
Examples ?
many people can consume the same good at once
National defense
public lighting
Non-excludable public goods are when...
you are unable to exclude one person from consuming the same good.
The cost of producing an additional unit of a good that falls on otheginr people other than the producer is the..
marginal external cost
An incentive is an inducement to take a particular action.
True
A buyer is said to have the demand for a good only when the buyer is wiling and able to purchas the good.
True
A country has a comparative advantage in the production of a good if it can produce the good at the lowest opportunity cost.
True
A free rider is a person or entity that....
reaps benefits without paying all the cost
A local fire department is not a public good.
True
Enviornmental protection can and cannot be a public good when...
If there are low transaction costs, like neighbor pollution, it is not a public good.
If there are high transaction costs, like river pollution, it is a public good.
Utility is the difference between the most a buyer is willing to pay for a good and the price the buyer actually pays for the good.
False
An increase in plywood and lumber prices would cause the supply for new furniture to shift left.
True
PPC's bow outward because of the increasing opportunity cost associated with producing more of one good.
True
Own-price elasticity deals with demand shifts and cross-price elasticity deals with movements along a demand curve.
False
A price decrease for steel will not increase the demand for steel.
True
Economic profit is profit in addition to normal profit.
True
If demand becomes more inelastic, your clientele is willing to pay more without large relative declines in the quantity purchased.
True
Resources will be directed toward more profitbale enterprises.
True
If John Deere sells a quantity that is less than where MR = MC, its marginal profit may be greater but its total profit will be less than at the output where MR = MC.
True
The federal govt's role in protecting the enviornment is justified by considerations of...
externalities
Where does a firm maximize profit?
MR=MC
Following the decision rule will lead to
utility maximization.
The PPC shows that...
production possibilities for an economy or firm are limited
The prodcution of all goods involves opportunity costs
Producing more of one good means producing less of another.
Factors that can shift the demand curve are..
Income, preferences, the price of the good itself, number of buyers (non-determinants)
Which market structure tends to use the most non-price competition? Give an example?
monopoly, local store