If a price ceiling is set above the current market clearing price, then:

quantity dem will remain equal to quantity sup at the market clearing price

helps to explain why rent seeking by special interest groups occur.

Which of the following is an example of a normative statement?

public school teachers are not paid enough.

The reason it is important to understand the difference between the "real" and "nominal" values of money is:

what matters to people is the purchasing power of money.

Normative Economics is:

analysis involving value judgments of "what ought to be".

price floors are designed to

establish a minimum allowable price

is always the value of the best forgone opportunity.

protects US jobs in specific industry, but causes job loss in another.

The real value of money:

reflects the purchasing power of money.

Collective bargaining contracts between management and union negotiators,

also apply to the workers at the worksite who are not members of union.

Which of the following is the problem with the labor theory of value?

it suffers from circular reasoning because labor itself has a price.

price floors are designed to:

establish a minimum allowable price.

The term "invisible hand" refers to:

The power of individual self-interest to create spontaneous order.

Which of the following is a zero-sum game?

somebody steals $5 out of your pocket.

The demand curve is downward sloping because:

a reduction in price of a good causes individuals to purchase good inc.

Under a free market system, the decision of resource allocation is made by:

individuals who own the resource

The market clearing price occurs at the point at which:

quantity demanded equals quantity supplied.

is considered founder of economics.

Which of the following describes a problem with the labor theory of value?

It suffers from circular reasoning becuase labor itself has a price.

Suppose cross price elasticity of goods A&B are 1.5. Which is true?

A&B are substitutes because the cross price elasticity is positive.

Which of the following is a problem with the exchange of equivalents theory of prices?

if people value two goods equally, there is nothing to be gained.

Which of the following is a positive economic statement:

scarcity necessitates that people make trade offs.

Self interest relates to:

both monetary and nonmonetary objectives

Which of the following is NOT a mercantilist idea:

the price of a good is determined by its marginal utility

Suppose price of cheese rises. in the market for pizza (cheese is an input) one would expect that:

the supply of pizza would decrease, price would rise.

Which of the following must occur as a result of ceilings on apt. rents that are set below market clearing rent rates.

there is a decrease in quantity of apts that property owners offer for rent

The concept of "Demand" in econ means:

dif quantities of a good ppl will buy at dif prices.

when demand is elastic:

quantity demanded is very responsive to change in price.

At a market clearing price:

the quantity demanded will just equal quantity supplied

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Microeconomic Final Exam

85 termsStudBud Administration11 plays

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Questions 85

Answers

1
If a price ceiling is set above the current market clearing price, then:
A surplus must immedietly occur.
there will be incentives for black markets to develop.
a shortage must immediately occur.
quantity dem will remain equal to quantity sup at the market clearing price
2
Rational Ignorance:
explains condorcet's paradox.
refers to attempts by special interest to use gov action to be better off
explains why consumers ignore fixed costs when they vote.
helps to explain why rent seeking by special interest groups occur.
3
a 10% inc. in price of smartphones lead to 10% dec. in quantity demanded of smartphones. What is abs value of demand
20
0.01
1.0
2
4
The distribution of world income is _______ the distribution of U.S. income
not comparable to
the same as
less equal than
more equal than
5
Which of the following is an example of a normative statement?
the average public school teacher earns less than the average truck driver.
public school teachers are not paid enough.
the average public school teacher earns more than the average truck driver.
Students in smaller classes perform better on standerdized testing.
6
The reason it is important to understand the difference between the "real" and "nominal" values of money is:
What matters to people is the face value of money.
what matters to people is the purchasing power of money.
people respond to more explicit, or nominal costs than implicit.
7
The absolute value of the price elasticity of demand for automobiles is 0.75, So:
there is a strong responsiveness of quantity demanded to automobiles
none is correct
the demand is elastic
the demand is inelastic
8
Normative Economics is:
analysis of the behavior of the economy as a whole.
analysis involving value judgments of "what ought to be".
analysis that is strictly limited to scientific predictions.
decision making undertaken by households or business firms.
9
price floors are designed to
create shortages where none existed befoer
allow free market prices to be achieved
none of the above.
establish a minimum allowable price
10
Opportunity Cost:
is always the lowest valued alternative.
does not exist since there are no receipts.
is always the value of the best forgone opportunity.
can only be measured as a paid cost.
11
Scarcity:
is caused by production problems.
does not exist in the US
applies only to developing contries
is not a shortage
12
As an economic concept, scarcity applies to
caroline blondell.
Money but NOT TIME.
none.
both money and time.
13
Economists assume people behave:
instinctively
irrationally
rationally
greedily
14
The time period which at least one input cannot be changed is the:
long run
short run
production time.
calendar year
15
Import restrictions;
protects US jobs in specific industry, but causes job loss in another.
cannot protect American jobs in any sector of the economy.
hurt people who work in importing companies, but makes consumers better off
protect US jobs in protected industry and inc. economic welfare in country
16
The real value of money:
matters less to people than its nominal value.
reflects the purchasing power of money.
is the same as its nominal value.
is another word for face value.
17
Collective bargaining contracts between management and union negotiators,
cover wages and fringe benefits only.
also apply to the workers at the worksite who are not members of union.
usually are settled only after a strike.
cover wages only
18
The abs value of demand for good x is 4, good y is 1. which quantity demanded is more responsive to a change in $.
they are equally responsive.
not enough information is given.
Good X
Good Y
19
Central planning is a key characteristic of which economic system?
free market economy
mixed economic system
command economy
price system
20
Which of the following is the problem with the labor theory of value?
it holds that value is subjective
it predicts demand curve will slope up
it fails to resolve water diamonds paradox
it suffers from circular reasoning because labor itself has a price.
21
the price floor that is set ABOVE equilibrium price will cause:
queuing on the part of consumers.
shortage
surplus
excess in quantity demanded
22
price floors are designed to:
create shortages where none existed before.
establish a minimum allowable price.
none of the above.
allow free market prices to be achieved.
23
The term "invisible hand" refers to:
A powerful order of scholarly monks who promulgated the Just Price Theory.
The way that economic decisions are made behind "closed doors" in economy.
The power of individual self-interest to create spontaneous order.
The moral spirit that guides all buyers and sellers to trade.
24
If equilibrium price falls, and quantity of good decreases, what happens to either side of supply or demand curve?
supply increases
demand decreases.
demand increases
supply decreases.
25
Which of the following is a zero-sum game?
Chinese steel producers export steel to consumers in the U.S.
Chef refusing to serve you a sirloin under $15.
somebody steals $5 out of your pocket.
You buy an apple at the grocery store.
26
The water/diamonds paradox theory states that things with the __ value in use frequently have __ value in exchange.
greatest; the greatest
least; little or no
greatest; little or no
least; the least
27
The basic economic problem of ____ has always existed and will continue to exsist.
inflation
efficiency
scarcity
recession
28
The demand curve is downward sloping because:
an increase in the price will cause a leftward shift in the demand curve.
the price must rise to induce firms to increase quantity supplied.
a reduction in price of a good causes individuals to purchase good inc.
all of the above.
29
Under a free market system, the decision of resource allocation is made by:
a queen or king
no one
individuals who own the resource
the head of government
30
Normative economic statements:
violate the law of ceteris paribus.
contain value judgments
are usually irrational
are easily testable
31
after the US exports a good production in the US __ and consumption in the US ____.
decreases; increases
decreases; decreasees
increases; decreases
increases; increases
32
The U.S. is described as a:
dictatorship
free market system.
command economy.
mixed economic system.
33
The market clearing price occurs at the point at which:
quantity demanded equals quantity supplied.
there is a shortage of the desired good.
The supply curve intersects the horizontal axis.
The supply curve intersects the vertical axis.
34
Adam Smith:
is best friends with eli kennel.
introduced the concept of ceteris paribus
is considered founder of economics.
is responsible for creating supply and demand
35
Which of the following describes a problem with the labor theory of value?
It holds that value is subjective
It predicts that demand curves will slope up.
It fails to resolve the water-diamonds paradox.
It suffers from circular reasoning becuase labor itself has a price.
36
Suppose cross price elasticity of goods A&B are 1.5. Which is true?
A&B are substitutes because the cross price elasticity is positive.
A&B are complements because the cross price elasticity is positive.
37
The assumption that "other things are constant" is also known as the:
ceteris paribus assumption.
rational self-interest assumption.
distinguishing characterstic of economics as a science.
relationships assumption.
38
Which of the following is a problem with the exchange of equivalents theory of prices?
sellers are greedy
if people value two goods equally, there is nothing to be gained.
it assumes that price of a good is determined by its cost of production
none of the above.
39
The special interest groups model of government:
suggests that gov. often have incentives to produce inefficient outcomes.
is most applicable when benefits apply to few people but costs apply to all
is based on small groups manipulate the government
ALL OF THE ABOVE.
40
a tariff imposed on imported shoes will cause domestic price of shoes to ___ and the domestic production of shoes to ___
increase; increase
increase; decrease
decrease; increase
decrease; decrease
41
Which of the following is a positive economic statement:
people should not buy SUVs.
The government should mandate electric automobiles
We should all wear hats to the final next Thursday .
scarcity necessitates that people make trade offs.
42
Self interest relates to:
normative economic analysis.
both monetary and nonmonetary objectives
the ceteris paribus assumption
only monetary objectives.
43
Which of the following is NOT a mercantilist idea:
money constitutes real wealth for a nation.
the price of a good is determined by its marginal utility
exchange is a zero sum game
44
the mercantilists promoted "public interest" existed separately from individual people. what does this contradict?
Rational Choice
Scarcity
Unlimited Desires
Methodological Individualism
45
Suppose price of cheese rises. in the market for pizza (cheese is an input) one would expect that:
demand for pizza would decrease, price would fall.
the demand for pizza would increase, price would increase
the supply of pizza would decrease, price would rise.
supply of pizza would increase, price would fall.
46
Which of the following must occur as a result of ceilings on apt. rents that are set below market clearing rent rates.
property owners respond to the ceilings by constructing new apts.
property owners respond to the ceilings by increasing maintance & repairs.
there is a decrease in quantity of apts that property owners offer for rent
there is a dec. in the quantity of apt that prospective tenants rent.
47
The concept of "Demand" in econ means:
da economists
dif quantities of a good ppl will buy at dif prices.
changes in people's consumption behavior over time.
how changes in prices of all goods affect people's buying behavior
48
when demand is elastic:
there will be incentives for black markets to develop.
quantity demanded is very responsive to change in price.
the proportional change in quantity demanded is equal to change in price.
quantity demanded is not very responsive to a change in price.
49
At a market clearing price:
the demand function will shift outward.
there will be a tendency for price to rise over time.
the quantity demanded will just equal quantity supplied
there will be a shortage
50
when output is 100 units, firms total cost is $500. what will this forms total fixed cost be if it doubles 200 units.
$1000
ECON SUCKS
$250
$500
51
what is the nominal value of money?
face value.
what can be purchased.
Halle Rubino.
savings by shopping on specific days.
52
Central planning is key characteristic of what economy?
mixed economy.
free market economy
price system
command economy
53
What is the voting paradox?
idea that wealthy corporations sway politicians
observation that less than 60% of those eligible actually vote.
people are aware their votes will not change the political outcome
observation that majority voting may not always result in consistent choice
54
Mercantalist promoted idea of "public interests" which of the following ideas does this contradict?
rational choice
methodological individualism
scarcity
unlimited desires.
55
How could Adam Smith's comment about the Butcher, the Brewer, and the Baker be accurately rephrased in modern terms?
The B, B, & B give us our dinner because they want to be well liked.
The B, B, & B give us our dinner because they each earn a living from it.
B, B, & B give us our dinner because they view doing so as public service
The B,B, & B give us our dinner becuase they will be sued if they don't
56
Suppose that the demand curve for apples is downward sloping and the price per bushel goes from $6.50 to $7.50:
the demand curve to shift toward the origin.
the quantity of apples demanded to increase.
The quantity demanded of apples to fall.
the demand for apples to decrease.
57
The law of diminishing marginal utility implies that:
demand curves always slope downward and to da right.
a consumer will always buy positive amounts of all goods.
total utility will always inc by an increasing amount as consumption inc.
supply curves always slope upward and to da right.
58
average fixed costs will
rise then fall as output rises.
fall then rise as output rises.
rise as an output rises
fall as output rises
59
The US imposes a tariff on imported cars, the:
US demand curve shifts rightward
US supply curve shifts rightward
the price in US rises but neither US demand or supply curve shifts.
US demand curve shifts leftward.
60
What led the classical economists to reject the subjective theory of price?
The theory of marginal utility.
the water-diamonds paradox
none of the above.
The exchange of equivalents theory.
61
the own-price elasticity of demand measures
the change in quantity demanded due to a change in price of a substitute
the responsiveness of price to a change in competition.
the change in price due to a change in demand
the responsiveness of quantity demanded to a change in price
62
The costs in time and other resources that parties incur in the process of facilitating an exchange is:
enforcement costs.
explicit costs
implicit costs
transaction costs
63
Which of the following situations will both market clearing price AND quantity decrease?
increase in demand no change in supply
decrease in supply no change in demand.
a decrease in demand with no change in supply.
an increase in supply with no change in demand.
64
According to principle of comparative advantage, nations should specialize in economic activities
that incur higher opportunity costs
that incur lower opportunity costs
for which it has an absolute advantage.
for which it has no absolute advantage
65
Fred & Ann both decide to see the same movie when they are given free movie tickets. We know that:
both bear an opportunity cost since they could have done other things.
neither bears an oppurtunity cost.
both bear the SAME opportunity cost.
the cost of going to the movie is greater for one.
66
The theory that the price of a good is determined by its cost of production is called:
the cost theory of value
The labor theory of value
the production theory of value
the subjective theory of price
67
ceteris paribus means:
to break up with your boyfriend right after econ class.
the study of scarcity.
all other things remaining constant or equal.
the greatest good for all.
68
Suppose cross price elasticity of goods A & B equal 1.5; what is true?
A&B are complements because the cross price elasticity is greater than 1.
A&B are complements because the cross price elasticity is positive.
A&B are substitutes because the cross price elasticity is greater than 1.
A&B are substitutes because the cross price elasticity is positive.
69
The face value of money or income is called its _____ value.
marginal
real
nominal
external
70
As a result of establishing a legal minimum wage above market clearing price;
fewer workers will want to work
firms will hire more workers
there will be a shortage of workers.
firms will hire fewer workers
71
suppose the equilibrium quantity of ethanol has decreased. which of the following could have caused this change?
an increase in supply.
a decrease in demand
an increase in quantity demanded.
an increase in quantity supplied
72
In economics, choices must be made becauase we live in a world of:
scarcity
unemployment
greed
unlimited resources
73
By human capital, economists mean
machines that replace humans.
machines engineered to avoid operator injury.
humans who perform repetitive tasks.
the accumulated skill and knowledge of humans.
74
In a market-based economy, the government:
allocates production.
decides how much to produce.
enforces property rights.
ecourages insurance risk.
75
According to the law of demand:
price and quantity demanded move in opposite directions.
price and quantity demanded are unrelated
ceteris paribus does not apply.
price and quantity demanded move in the same direction.
76
Adam smith argues that:
individuals are motivated by self interest.
are not concerned with economic questions.
individuals always act in altruistic manner.
always consider the impact of their actions on others.
77
What is social costs of production:
the cost of the environmental damage created by production.
the total cost of producing a product, both implicit and explicit.
sum of all costs to ind. in society, regardless of whether cost is borne
the costs of the natural resources used up in production.
78
A positive externality causes: (MSB marginal social) (MPC Marginal Private)
MSB to be equal to MPC of the last unit produced.
MSB exceeds the MPC of the last unit produced.
MSB to be less than MPC of last unit produced.
MPB exceeds the MSC of the last unit produced.
79
In economics, "demand" refers to
The satisfaction a good will provide a person.
The quantities of a good that people will buy at various prices.
The amount of good people need rather than the amount they want.
the intensity of desire for a good.
80
A tariff is:
a subsidy on domestically produced goods.
tax on imported good.
81
The law of demand implies that the demand curve:
has a negative slope
shifts to the right when the price of a good increases
has a positive slope
shifts to the left when the price of a good decreases
82
The price per unit times the total quantity sold is
price revenue.
average revenue
total revenue
marginal revenue
83
Ceteris paribus, as the price of good or service increases,
people will buy more of it.
people will want less of it.
people will want more of it
people will buy less of it
84
Minimum wages are examples of
the rationing function of prices not working
price floor
government increasing the demand for certain products
price ceiling.
85
When rent controls establish a legal maximum rental rate below the equilibrium rental rate:
supply exceeds demand
demand exceeds supply
quantity demanded exceeds quantity supplied.
quantity supplied exceeds quantity demanded

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