If e-cigarettes were banned and tobacco use increased, we might conclude that

e-cigarettes and tobacco products are substitutes.

reflects an inverse relationship between price and quantity.

A marginal thinker takes action when marginal benefits are _________to marginal costs.

are less than., are greater than.

are set above market equilibrium.

The production possibilities curve that is a straight line has

a negative slope that is constant as we move along it from left to right.

A market is said to be in disequilibrium if

it exhibits either a surplus or a shortage.

Ceteris paribus means

"all other things constant" or "nothing else changes"

At the equilibrium price

there are no pressures on price to either rise or fall.

The law of supply states that price and quantity supplied are

directly related, ceteris paribus

An advance in technology would cause,

the supply curve to shift right.

Refer to the diagram for athletic shoes. If the current level of output is at Q3, then

Society should produce fewer shoes.

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Review for Test 1

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Covering Chapters 1-6

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Questions 25

Answers

1
The law of demand states that price and quantity demanded are
directly related.
related to supply.
inversely related.
positively related.
2
If e-cigarettes were banned and tobacco use increased, we might conclude that
e-cigarettes are not a normal good.
e-cigarettes are an inferior good.
e-cigarettes and tobacco products are substitutes.
e-cigarettes and tobacco products are complements.
3
To an Economist, an increase in quantity demanded is the same thing as an increase in demand.
False
True
4
The minimum wage is a good example of a price ceiling
False
True
5
Each of the following is a demand curve shifter except
the price of the good itself.
future expectations of price changes.
a change in consumer incomes.
prices of related products.
6
The optimal allocation of resources is found
where MB=MC.
when Consumer and Producer Surplus are maximized.
All of the above
at equilibrium.
7
The demand curve
is curved (bowed) outward.
reflects an inverse relationship between price and quantity.
shifts left when more participants enter the market.
is positively sloped.
8
A marginal thinker takes action when marginal benefits are _________to marginal costs.
are equal to.
are less than.
are greater than.
none of the above.
9
Refer to the diagram. The minimum wage law might best illustrated by
Price C
Price B
Quantity E
Price A
10
Price Floors
cause shortages.
are set above market equilibrium.
improve market efficiency.
are set below market equilibrium.
11
The production possibilities curve that is a straight line has
a negative slope that decreases as we move along it from left to right.
a negative slope that increases as we move along it from left to right.
a positive slope that increases as we move along it from left to right.
a negative slope that is constant as we move along it from left to right.
12
Discouraged workers are counted as unemployed
False
True
13
Another way to describe Consumer Surplus would be
willingness to pay.
marginal benefit.
All of the above
value.
14
A market is said to be in disequilibrium if
it exhibits either a surplus or a shortage.
it exhibits a shortage but not a surplus.
it is a market for an inferior good.
it exhibits a surplus but not a shortage.
15
Price floors and ceilings both
help with the rationing function of prices.
cause inefficiencies.
are favored by most economists to help improve market outcomes.
cause the supply and demand curves to shift.
16
The Free Rider problem corresponds to which Category of Goods?
Club Goods
Public Goods
Common Resources
Private Goods
17
Where would the allocation of resources be most efficient?
B + C
A + B + C + D
A +B
C + D
18
Ceteris paribus means
"the correct relationship specified"
"all other things constant" or "nothing else changes"
"one variable too many"
"assuming economic motives"
19
The CPI was 238 in one year and 244 the following year. How much did prices rise between those 2 years?
2.5%
5.46%
6.67%
0.07%
20
At the equilibrium price
there are forces that cause price to fall.
quantity supplied may exceed quantity demanded or vice versa.
there are forces that cause price to rise.
there are no pressures on price to either rise or fall.
21
John has been described as lazy and is not interested in finding work. We would count him as
none of the above.
naturally unemployed.
frictionally unemployed.
structurally unemployed.
22
Refer to the Diagram. A price of $60 in this market will result in
equilibrium.
a surplus of 50 units.
a shortage of 50 units.
a surplus of 100 units.
23
The law of supply states that price and quantity supplied are
fixed.
inversely related, ceteris paribus.
directly related, ceteris paribus
not related.
24
An advance in technology would cause,
the demand curve to shift left.
the supply curve to shift right.
the supply curve to shift left.
the demand curve to shift right.
25
Refer to the diagram for athletic shoes. If the current level of output is at Q3, then
Society should produce fewer shoes.
Shoes are more valuable to society than alternative products
Society should produce more shoes.
Resources are being allocated efficiently.

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