The Ultimate Microeconomics Quiz!
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Even the smartest people out there in the field of economics have difficulty figuring out how to allocate scarce resources, and that’s because they look too hard at the big picture and don’t focus in on the fine details that you get when you study microeconomics. Take the following quiz on the topic and see just how much you know about it personally! Think you can achieve full marks?
- 1.
Sometimes the government spends more or less, depending on the needs of the country. This statement best represents this economic concept:
- A.
Resources should be used as efficiently as possible to achieve society's goals.
- B.
When markets don't achieve efficiency, government intervention can improve society's welfare.
- C.
Overall spending sometimes gets out of line with the economy's productive capacity.
- D.
Government policies can change spending.
Correct Answer
D. Government policies can change spending.Explanation
Government policies can change spending. This statement suggests that the government has the power to influence the level of spending in the economy through its policies. Depending on the needs of the country, the government can increase or decrease spending to stimulate or slow down economic activity. This reflects the idea that government intervention can have an impact on the overall level of spending in the economy.Rate this question:
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- 2.
Lena and Jess are roommates. Lena hates to clean the bathroom. Jess will agree to clean the bathroom only if Lena vacuums the living room. This statement best represents this economic concept:
- A.
The real cost of something is what you must give up to get it.
- B.
“How much” is a decision at the margin.
- C.
People usually exploit opportunities to make themselves better off.
- D.
There are gains from trade.
Correct Answer
D. There are gains from trade.Explanation
This statement best represents the economic concept of "There are gains from trade." In this scenario, Lena and Jess are engaging in a trade-off where Lena agrees to vacuum the living room in exchange for Jess cleaning the bathroom. Both roommates are benefiting from this trade as they are able to divide the household chores and save time and effort. This exemplifies the concept of gains from trade, where individuals can improve their well-being by engaging in mutually beneficial exchanges.Rate this question:
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- 3.
Nate and Dylan are brothers. They have to mow the lawn and clean their rooms before they can go to the high school football game. Nate mows the lawn and Dylan picks up the rooms, and they make it to the football game on time. This statement best represents this economic concept:
- A.
People usually exploit opportunities to make themselves better off.
- B.
There are gains from trade.
- C.
Markets usually lead to efficiency.
- D.
One person's spending is another person's income.
Correct Answer
B. There are gains from trade.Explanation
The statement "Nate mows the lawn and Dylan picks up the rooms, and they make it to the football game on time" suggests that Nate and Dylan are engaging in a form of trade. They are both contributing their respective skills and completing tasks in order to achieve a common goal, which is attending the football game. This exemplifies the concept of gains from trade, as both brothers are benefiting from the exchange of their services.Rate this question:
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- 4.
Which of the following principles underlies the gains from trade?
- A.
Resources are scarce.
- B.
Marginal analysis is used for “how much” decisions.
- C.
Resources should be used as efficiently as possible to achieve society's goals.
- D.
People usually exploit opportunities to make themselves better off.
Correct Answer
C. Resources should be used as efficiently as possible to achieve society's goals.Explanation
The principle that underlies the gains from trade is that resources should be used as efficiently as possible to achieve society's goals. This means that by allocating resources in the most efficient way, society can maximize its overall welfare and benefit from trade. By using resources efficiently, society can produce more goods and services, increase productivity, and ultimately improve the standard of living for its members. This principle recognizes the importance of optimizing resource allocation to achieve the greatest benefit for society as a whole.Rate this question:
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- 5.
The federal government regulates how much carbon dioxide a factory can emit. This statement best represents this economic concept:
- A.
Resources are scarce.
- B.
“How much” is a decision at the margin.
- C.
Markets usually lead to efficiency.
- D.
When markets don't achieve efficiency, government intervention can improve society's welfare.
Correct Answer
D. When markets don't achieve efficiency, government intervention can improve society's welfare.Explanation
The given statement implies that the federal government regulates the amount of carbon dioxide emissions from factories. This suggests that the market, on its own, has not been able to achieve efficiency in terms of reducing carbon emissions. Therefore, government intervention is necessary to improve society's welfare by regulating and reducing harmful emissions. This aligns with the concept that when markets fail to achieve efficiency, government intervention can be beneficial.Rate this question:
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- 6.
During the Great Depression, consumers and producers in the United States dramatically reduced their spending as compared to the quantity of goods and services available at the time. This statement best represents this economic concept:
- A.
Resources are scarce.
- B.
When markets don't achieve efficiency, government intervention can improve society's welfare.
- C.
Overall spending sometimes gets out of line with the economy's productive capacity.
- D.
Government policies can change spending.
Correct Answer
C. Overall spending sometimes gets out of line with the economy's productive capacity.Explanation
During the Great Depression, consumers and producers reduced their spending significantly, causing a mismatch between overall spending and the economy's productive capacity. This means that there was an imbalance between the quantity of goods and services available and the amount of money being spent on them. This statement best represents the economic concept that overall spending sometimes gets out of line with the economy's productive capacity.Rate this question:
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- 7.
A resource is
- A.
Anything that can be used to produce something else.
- B.
A sum of money used to start a business.
- C.
A physical attribute of land.
- D.
An intangible aspect of a society, such as its culture.
Correct Answer
A. Anything that can be used to produce something else.Explanation
The correct answer is "anything that can be used to produce something else." This answer encompasses a broad definition of a resource, including both tangible and intangible items that have the potential to be utilized in the production of other goods or services. It recognizes that resources can take various forms, such as natural resources, human capital, technology, or even knowledge and skills. By emphasizing the ability to produce something else, it highlights the productive and transformative nature of resources in economic and societal contexts.Rate this question:
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- 8.
The opportunity cost of an item is
- A.
Whatever is given up to obtain it.
- B.
The monetary price paid.
- C.
The monetary price paid, plus any interest.
- D.
The monetary price paid, plus any taxes.
Correct Answer
A. Whatever is given up to obtain it.Explanation
The opportunity cost of an item refers to the value of the next best alternative that is forgone in order to acquire that item. It encompasses not only the monetary price paid for the item but also any other sacrifices made, such as time, effort, or resources, to obtain it. This concept highlights the trade-offs involved in decision-making, as choosing one option means giving up the benefits that could have been gained from the alternative option.Rate this question:
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- 9.
An economic system is in __________ when no individual would be better off by making a different choice.
- A.
Chaos
- B.
Decline
- C.
Jeopardy
- D.
Equilibrium
Correct Answer
D. EquilibriumExplanation
An economic system is in equilibrium when no individual would be better off by making a different choice. This means that the system is balanced and there is no incentive for individuals to change their decisions because they are already maximizing their benefits. In an equilibrium state, the supply and demand are in balance, prices are stable, and resources are efficiently allocated.Rate this question:
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- 10.
Making a trade-off at the margin means
- A.
Making a decision without considering the alternatives.
- B.
Comparing the costs and benefits of doing a little bit more of something versus doing a little bit less.
- C.
Making a decision without considering the opportunity cost.
- D.
Acquiring information that will help with a future decision.
Correct Answer
B. Comparing the costs and benefits of doing a little bit more of something versus doing a little bit less.Explanation
Making a trade-off at the margin involves evaluating the additional costs and benefits of doing slightly more or slightly less of something. It requires comparing the advantages and disadvantages of increasing or decreasing an action or decision. This approach allows individuals to make informed choices by considering the incremental impact of their decisions. It does not involve disregarding alternatives or opportunity costs, but rather focuses on weighing the pros and cons of small adjustments.Rate this question:
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- 11.
Market failure results when the:
- A.
Pursuit of individual self-interest leads to bad results for society as a whole.
- B.
Market fails to create an equal distribution of wealth.
- C.
Market fails to create an equal distribution of income.
- D.
Market fails to eliminate scarcity.
Correct Answer
A. Pursuit of individual self-interest leads to bad results for society as a whole.Explanation
Market failure occurs when the pursuit of individual self-interest leads to negative outcomes for society as a whole. This means that when individuals act in their own self-interest without considering the broader impact on society, it can result in inefficiencies, externalities, and unequal distribution of resources. In such cases, the market fails to allocate resources efficiently and maximize societal welfare.Rate this question:
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- 12.
Which of the following is a decision made at the margin?
- A.
Penny and Emilio are deciding whether or not to get married.
- B.
Natasha and Jake are deciding whether or not to buy a house.
- C.
Theresa is deciding whether or not to join the military.
- D.
Vincent is deciding how much to spend on an engagement ring.
Correct Answer
D. Vincent is deciding how much to spend on an engagement ring.Explanation
Vincent's decision of how much to spend on an engagement ring is a decision made at the margin because it involves weighing the costs and benefits of different options. He is considering the amount of money he is willing to allocate towards the ring, balancing it with his financial situation and his desire to make a meaningful gesture to his partner. This decision is made at the margin because Vincent is evaluating the additional benefit he will receive from spending more on the ring and comparing it to the additional cost he will incur.Rate this question:
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- 13.
If you choose to specialize in becoming a pharmacy, what gives you confidence that you will be able to purchase food, clothing, and shelter?
- A.
The fact that there is no opportunity cost associated with your decision
- B.
The fact that there is no trade-off associated with your decision
- C.
The existence of government-provided consumer products
- D.
The existence of markets
Correct Answer
D. The existence of marketsExplanation
The existence of markets gives confidence that one will be able to purchase food, clothing, and shelter. Markets provide a platform for the exchange of goods and services, allowing individuals to buy and sell products. As a specialized pharmacist, there will always be a demand for medication and healthcare products, ensuring a steady income. With a stable income, one can afford to purchase essential items like food, clothing, and shelter from the market. Therefore, the existence of markets provides the assurance that necessary consumer products will be available for purchase.Rate this question:
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- 14.
An efficient economy is one that
- A.
Has eliminated scarcity.
- B.
Does not face any trade-offs.
- C.
Relies on a sense of civic duty, rather than incentives, to motivate its citizens.
- D.
Has produced the maximum gains from trade made possible by its resources.
Correct Answer
D. Has produced the maximum gains from trade made possible by its resources.Explanation
An efficient economy is one that has produced the maximum gains from trade made possible by its resources. This means that the economy is able to effectively utilize its available resources to generate the highest possible level of trade and economic growth. By maximizing gains from trade, the economy can achieve optimal allocation of resources, increase productivity, and improve overall living standards. This requires efficient production, distribution, and consumption of goods and services, as well as the ability to engage in international trade to benefit from comparative advantages.Rate this question:
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- 15.
The incentives built into a market system tend to
- A.
Lead to inefficient outcomes.
- B.
Lead people to be self-sufficient, rather than to specialize.
- C.
Prevent equilibrium outcomes.
- D.
Ensure that resources are put to good use.
Correct Answer
D. Ensure that resources are put to good use.Explanation
In a market system, the incentives created encourage individuals and businesses to make efficient use of resources. This is because they are motivated by the potential for profit and success. As a result, resources are allocated to their most productive and valuable uses, leading to optimal outcomes.Rate this question:
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- 16.
Your elderly grandma tells you: “I haven't been taking my beloved walks because I'm concerned about falling and getting hurt. See, there is always a cost to doing something. But if you don't do anything, then there is no cost.” Your grandma does not understand the concept of:
- A.
Scarcity in economics.
- B.
Efficiency in economics.
- C.
Opportunity cost in economics.
- D.
Marginal analysis in economics.
Correct Answer
C. Opportunity cost in economics.Explanation
The correct answer is opportunity cost in economics. The explanation for this is that your grandma believes that there is no cost associated with not doing anything, which is a misunderstanding of the concept of opportunity cost. In economics, opportunity cost refers to the value of the next best alternative that is forgone when a choice is made. In this case, the opportunity cost of not taking walks is the potential health benefits and enjoyment that could be gained from them. Your grandma's belief that there is no cost to not doing anything ignores this concept of opportunity cost.Rate this question:
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- 17.
Marginal analysis:
- A.
Refers to decisions about whether to do a bit more or a bit less of an activity.
- B.
Helps when making a “how much” choice.
- C.
Involves trade-offs.
- D.
Refers to decisions about whether to do a bit more or a bit less of an activity, helps when making a “how much” choice, and involves trade-offs.
Correct Answer
D. Refers to decisions about whether to do a bit more or a bit less of an activity, helps when making a “how much” choice, and involves trade-offs.Explanation
The correct answer is "refers to decisions about whether to do a bit more or a bit less of an activity, helps when making a 'how much' choice, and involves trade-offs." This answer encompasses all the statements provided in the question, stating that marginal analysis involves making decisions about doing more or less of an activity, helps in determining the quantity or extent of the activity, and involves considering the trade-offs associated with the decision.Rate this question:
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- 18.
Twelve friends got together to celebrate a birthday. If the birthday cake is cut into 12 pieces of the same size and one slice is given to each of the 12 partygoers, this cake distribution is:
- A.
Efficient but not equitable.
- B.
Equitable but not efficient.
- C.
Efficient and equitable.
- D.
Equitable.
Correct Answer
D. Equitable.Explanation
If the birthday cake is cut into 12 pieces of the same size and one slice is given to each of the 12 partygoers, this cake distribution is equitable. This means that each person receives an equal share of the cake, ensuring fairness in the distribution. However, it may not be efficient as some people may want more or less cake than others, and the distribution does not take into account individual preferences or needs.Rate this question:
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- 19.
In Ventura County, California, strawberry production is limited by the number of acres available for agriculture production. This statement best represents this economic concept:
- A.
Resources are scarce.
- B.
“How much” is a decision at the margin.
- C.
There are gains from trade.
- D.
Resources should be used as efficiently as possible to achieve society's goals.
Correct Answer
A. Resources are scarce.Explanation
The statement "In Ventura County, California, strawberry production is limited by the number of acres available for agriculture production" implies that there is a limited amount of land available for strawberry production. This scarcity of resources, in this case, the limited number of acres, is the reason why strawberry production is limited in Ventura County. Therefore, the correct answer is "Resources are scarce."Rate this question:
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- 20.
Fertilizer, used to grow pumpkins, is an example of a factor of production.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because fertilizer is not considered a factor of production. Factors of production refer to the resources and inputs used in the production process, such as land, labor, capital, and entrepreneurship. Fertilizer is a resource that aids in the growth of pumpkins, but it is not considered a factor of production itself.Rate this question:
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- 21.
To achieve the gains from trade, each nation should specialize in the production of a good or service if:
- A.
Its production possibility frontier is larger than that of any other country.
- B.
Its production possibility frontier is smaller than that of any other country.
- C.
The country can make the product using fewer resources than any other country.
- D.
The country can make the product while forgoing fewer alternative products than any other country.
Correct Answer
D. The country can make the product while forgoing fewer alternative products than any other country.Explanation
Each nation should specialize in the production of a good or service if it can make the product while forgoing fewer alternative products than any other country. This means that if a country can produce a specific product with a smaller opportunity cost compared to other countries, it should specialize in producing that product. By doing so, countries can maximize their efficiency and take advantage of the gains from trade.Rate this question:
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- 22.
If the opportunity cost of manufacturing automobiles is lower in the United States than in Britain and the opportunity cost of manufacturing airplanes is higher in the United States than in Britain, then the United States will:
- A.
Export both airplanes and automobiles to Britain.
- B.
Import both airplanes and automobiles from Britain.
- C.
Export airplanes to Britain and import automobiles from Britain.
- D.
Import airplanes from Britain and export automobiles to Britain.
Correct Answer
D. Import airplanes from Britain and export automobiles to Britain.Explanation
If the opportunity cost of manufacturing automobiles is lower in the United States than in Britain, it means that the United States can produce automobiles more efficiently compared to Britain. On the other hand, if the opportunity cost of manufacturing airplanes is higher in the United States than in Britain, it means that Britain can produce airplanes more efficiently compared to the United States. Therefore, it would be beneficial for the United States to import airplanes from Britain, where they have a comparative advantage, and export automobiles to Britain, where they have a comparative advantage. This would allow both countries to specialize in the production of goods in which they have a lower opportunity cost, leading to increased efficiency and trade between the two countries.Rate this question:
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- 23.
If the opportunity cost of manufacturing automobiles is higher in the United States than in Britain and the opportunity cost of manufacturing airplanes is lower in the United States than in Britain, then the United States will:
- A.
Export both airplanes and automobiles to Britain.
- B.
Import both airplanes and automobiles from Britain.
- C.
Export airplanes to Britain and import automobiles from Britain.
- D.
Import airplanes from Britain and export automobiles to Britain.
Correct Answer
C. Export airplanes to Britain and import automobiles from Britain.Explanation
If the opportunity cost of manufacturing automobiles is higher in the United States than in Britain, it means that it is more expensive for the United States to produce automobiles compared to Britain. On the other hand, if the opportunity cost of manufacturing airplanes is lower in the United States than in Britain, it means that it is less expensive for the United States to produce airplanes compared to Britain. Therefore, the United States will export airplanes to Britain because it is more cost-effective for them to produce airplanes. At the same time, the United States will import automobiles from Britain because it is more cost-effective for them to obtain automobiles from Britain.Rate this question:
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- 24.
Which of the following is a normative statement?
- A.
International trade leads to expanded consumption opportunities.
- B.
Higher expenditures on health care will reduce infant mortality rates.
- C.
We would all be better off if we could reduce our dependence on oil imports.
- D.
Increased defense spending will lead to higher budget deficits.
Correct Answer
C. We would all be better off if we could reduce our dependence on oil imports.Explanation
The statement "We would all be better off if we could reduce our dependence on oil imports" is a normative statement because it expresses an opinion or value judgment about what should or ought to be. It is not a statement of fact that can be proven or disproven, but rather a subjective belief about what would be desirable or beneficial.Rate this question:
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- 25.
Which of the following is an example of a positive statement?
- A.
The poverty rate is 14%.
- B.
A high rate of economic growth is good for the country.
- C.
Everyone in the country needs to save money for retirement.
- D.
Basketball players should not be paid higher salaries than teachers.
Correct Answer
A. The poverty rate is 14%.Explanation
The statement "The poverty rate is 14%" is an example of a positive statement because it is a factual statement that can be objectively measured and verified. It does not express any value judgments or opinions.Rate this question:
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- 26.
The U.S. production possibility frontier will ________ if there is a large influx of immigrants.
- A.
Shift in
- B.
Shift out
- C.
Not change
- D.
Cannot be determined from the information provided
Correct Answer
B. Shift outExplanation
If there is a large influx of immigrants, the U.S. production possibility frontier will shift out. This means that the country's production capacity will increase, allowing for the production of more goods and services. The influx of immigrants brings in additional labor, which can contribute to increased productivity and economic growth. As a result, the production possibility frontier expands, indicating that the economy can now produce more output than before.Rate this question:
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- 27.
The bowed-out shape of the production possibilities frontier reflects
- A.
The fact that all resources are scarce.
- B.
Increasing opportunity cost.
- C.
The nature of economic growth.
- D.
The increase in resources that will result from more production.
Correct Answer
B. Increasing opportunity cost.Explanation
The bowed-out shape of the production possibilities frontier reflects increasing opportunity cost. This means that as more of one good is produced, the opportunity cost of producing additional units of that good increases. This is because resources are not equally suited to produce all goods and as more resources are allocated to one good, the resources that are best suited for producing the other good are being used less efficiently, resulting in a higher opportunity cost. Therefore, the production possibilities frontier curves outward to show this increasing opportunity cost.Rate this question:
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- 28.
If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has:
- A.
A zero slope.
- B.
A constant, negative slope.
- C.
An increasing, negative slope.
- D.
A decreasing, negative slope.
Correct Answer
B. A constant, negative slope.Explanation
If an economy has to sacrifice only one unit of good X for each unit of good Y produced, it means that the opportunity cost of producing good Y is constant. This implies that the production possibility frontier has a constant, negative slope. As the economy produces more of good Y, it has to give up an increasing amount of good X, resulting in a negative slope. However, since the opportunity cost remains constant, the slope is not changing as more of good Y is produced. Therefore, the correct answer is a constant, negative slope.Rate this question:
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- 29.
The ________ apples will decrease when apple prices rise.
- A.
Demand for
- B.
Quantity demanded of
- C.
Supply of
- D.
Equilibrium of
Correct Answer
B. Quantity demanded ofExplanation
When the price of apples rises, consumers will be less willing and able to purchase them, resulting in a decrease in the quantity demanded of apples. This is because as the price increases, it becomes more expensive for consumers to buy apples, leading to a decrease in the quantity of apples they are willing to buy at any given price. Therefore, the correct answer is "quantity demanded of".Rate this question:
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- 30.
Which of the following factors would cause a movement along the demand curve for a particular good?
- A.
A change in the prices of related goods
- B.
A change in the price of that good
- C.
A change in the size of the population
- D.
Both a change in the price of that good and a change in the size of the population
Correct Answer
B. A change in the price of that goodExplanation
A movement along the demand curve for a particular good occurs when there is a change in the price of that good. This is because the quantity demanded of a good is inversely related to its price, according to the law of demand. When the price of a good increases, the quantity demanded decreases, resulting in a movement upwards along the demand curve. Similarly, when the price of a good decreases, the quantity demanded increases, causing a movement downwards along the demand curve. Therefore, a change in the price of that good is the factor that causes a movement along the demand curve.Rate this question:
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- 31.
A shift of the demand curve for thin-crust pizza would not be caused by a change in:
- A.
Buyers' incomes.
- B.
The price of thin-crust pizza.
- C.
The price of thick-crust pizza.
- D.
The popularity of thin-crust pizza.
Correct Answer
B. The price of thin-crust pizza.Explanation
A shift of the demand curve for thin-crust pizza would not be caused by a change in the price of thin-crust pizza because the price of a good is a determinant of quantity demanded, not the demand itself. A shift in the demand curve is caused by factors such as buyers' incomes, the price of related goods (such as thick-crust pizza), and the popularity of thin-crust pizza. These factors can influence consumers' preferences and willingness to buy thin-crust pizza, leading to a shift in the overall demand for the product.Rate this question:
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- 32.
If goods A and Z are complements, an increase in the price of good Z will:
- A.
Increase the demand for good A.
- B.
Decrease the demand for good A.
- C.
Decrease the demand for good Z.
- D.
Decrease the demand for both good A and good Z.
Correct Answer
B. Decrease the demand for good A.Explanation
When two goods are complements, they are typically consumed together. An increase in the price of good Z will make it more expensive for consumers to purchase, which will lead to a decrease in the demand for good Z. As a result, the demand for good A, which is complementary to good Z, will also decrease. Therefore, an increase in the price of good Z will decrease the demand for good A.Rate this question:
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- 33.
Over the past several years, consumers have had an increasing interest in getting a tattoo. This means that the ________ for tattoos has ________.
- A.
Quantity demanded; increased
- B.
Demand; decreased
- C.
Demand; increased
- D.
Quantity demanded; decreased
Correct Answer
C. Demand; increasedExplanation
The given answer is "demand; increased". This is because the statement mentions that consumers have had an increasing interest in getting a tattoo over the past several years. This indicates a higher demand for tattoos, which aligns with the answer choice.Rate this question:
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- 34.
If chicken and beef are substitutes, then a fall in the price of chicken will bring about:
- A.
An increase in the demand for beef.
- B.
A decrease in the demand for beef.
- C.
A decrease in the quantity demanded of beef.
- D.
No change in the demand for beef.
Correct Answer
B. A decrease in the demand for beef.Explanation
When chicken and beef are substitutes, it means that consumers can choose between the two products based on their preferences and prices. If the price of chicken decreases, it becomes relatively cheaper compared to beef. As a result, consumers will switch from beef to chicken, leading to a decrease in the demand for beef. Therefore, a fall in the price of chicken will bring about a decrease in the demand for beef.Rate this question:
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- 35.
A shift to the left of a supply curve is caused by:
- A.
An increase in the number of sellers.
- B.
A technological improvement in production.
- C.
An increase in the cost of an input.
- D.
An increase in the number of buyers.
Correct Answer
C. An increase in the cost of an input.Explanation
A shift to the left of a supply curve indicates a decrease in the quantity supplied at every given price level. This can be caused by an increase in the cost of an input, as higher input costs would lead to higher production costs for suppliers. As a result, suppliers would be less willing or able to produce and sell the same quantity of goods at each price level, leading to a leftward shift in the supply curve.Rate this question:
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- 36.
Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price of its motorcycles, we can expect:
- A.
A shift to the right in the supply curve of Hondas and lower prices for Hondas.
- B.
A shift to the left in the supply curve of Hondas and higher prices for Hondas.
- C.
A shift to the right in the demand curve for Hondas and higher prices for Hondas.
- D.
A shift to the left in the demand curve for Hondas and lower prices for Hondas.
Correct Answer
C. A shift to the right in the demand curve for Hondas and higher prices for Hondas.Explanation
If Harley-Davidson raises the price of its motorcycles, it is likely that some consumers will be deterred from purchasing their motorcycles and instead opt for a more affordable option. This would result in a decrease in demand for Harley-Davidson motorcycles. As a result, the demand curve for Hondas, a competing brand, would shift to the right as more consumers choose to purchase Hondas instead. This increase in demand for Hondas would give the company the ability to raise their prices, leading to higher prices for Hondas.Rate this question:
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- 37.
An increase in the price of sugar (an ingredient for soft drinks) and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following in the soft drink market?
- A.
There will be an increase in both the equilibrium price and quantity.
- B.
Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.
- C.
There will be a decrease in both equilibrium price and quantity.
- D.
Equilibrium quantity will increase, but equilibrium price may decrease, increase, or stay the same.
Correct Answer
B. Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.Explanation
An increase in the price of sugar and increased concern about tooth decay will lead to a decrease in the equilibrium quantity of soft drinks. This is because higher costs for sugar will make it more expensive for soft drink manufacturers to produce their products, leading to a decrease in the quantity supplied. Additionally, the increased concern about tooth decay may result in a decrease in the quantity demanded as consumers become more conscious of the health effects of soft drinks. However, the impact on equilibrium price is uncertain as it depends on the relative magnitude of the changes in supply and demand. It is possible that the increase in cost could lead to a decrease in price, but other factors such as consumer preferences and market competition could also influence the price.Rate this question:
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- 38.
Rice and potatoes are substitutes. If the price of rice rises and there is a bumper crop of potatoes, in the market for potatoes one would expect the:
- A.
Equilibrium price to rise, fall, or stay the same and equilibrium quantity to rise.
- B.
Equilibrium price to rise and the equilibrium quantity to fall.
- C.
Equilibrium price and quantity both to fall.
- D.
Equilibrium price to rise and the equilibrium quantity to fall, rise, or stay the same.
Correct Answer
A. Equilibrium price to rise, fall, or stay the same and equilibrium quantity to rise.Explanation
If rice and potatoes are substitutes, it means that they can be used interchangeably to satisfy a consumer's needs. If the price of rice rises, consumers may switch to buying more potatoes instead, leading to an increase in demand for potatoes. Additionally, if there is a bumper crop of potatoes, the supply of potatoes would increase. The combination of increased demand and increased supply would lead to an increase in the equilibrium quantity of potatoes. However, the effect on the equilibrium price is uncertain. It could rise if the increase in demand outweighs the increase in supply, fall if the increase in supply outweighs the increase in demand, or stay the same if the increases in demand and supply are proportional.Rate this question:
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- 39.
The law of demand states that other things equal:
- A.
As the price increases, the quantity demanded will increase.
- B.
As the price decreases, the demand curve will shift to the right.
- C.
As the price increases, the demand will decrease.
- D.
As the price increases, the quantity demanded will decrease.
Correct Answer
D. As the price increases, the quantity demanded will decrease.Explanation
The law of demand states that as the price of a good or service increases, the quantity demanded by consumers will decrease. This is because consumers will be less willing or able to pay higher prices for the same quantity of a good. As a result, the demand curve will slope downward, indicating that as price increases, quantity demanded decreases. This relationship between price and quantity demanded is a fundamental principle in economics and helps to explain consumer behavior in the market.Rate this question:
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- 40.
Gasoline, a derivative of oil, is a large part of transportation costs for many producers. If the price of oil increases at the same time that incomes fall for many consumers, one would expect the equilibrium price of many normal goods to ________, while their equilibrium quantities would ________.
- A.
Fall; rise
- B.
Fall, rise, or stay the same; decrease
- C.
Decrease; fall, rise, or stay the same
- D.
Fall; fall
Correct Answer
B. Fall, rise, or stay the same; decreaseExplanation
If the price of oil increases, it leads to higher production costs for gasoline, which is a derivative of oil. This increase in production costs would likely result in a decrease in the equilibrium price of many normal goods, as producers would pass on the higher costs to consumers. Additionally, if incomes fall for many consumers, their purchasing power decreases, which would lead to a decrease in the equilibrium quantities of many normal goods, as consumers would buy less. Therefore, the equilibrium price of many normal goods would fall, rise, or stay the same, while their equilibrium quantities would decrease.Rate this question:
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- 41.
French fries and hamburgers are complements. Suppose the cost of the ingredients used to make hamburgers rises, so that the price of a hamburger rises. Then the equilibrium relative price of french fries ________ and the equilibrium quantity ________.
- A.
Rises; increases
- B.
Rises; decreases
- C.
Falls; increases
- D.
Falls; decreases
Correct Answer
D. Falls; decreasesExplanation
If the cost of ingredients used to make hamburgers rises, the price of hamburgers will also rise. As a result, the demand for hamburgers will decrease, leading to a decrease in the equilibrium quantity. French fries are complements to hamburgers, meaning that they are typically consumed together. Therefore, if the demand for hamburgers decreases, the demand for french fries will also decrease. This will cause the equilibrium relative price of french fries to fall and the equilibrium quantity to decrease.Rate this question:
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- 42.
The total consumer surplus for good X can be calculated in all except one of the following ways. Which is the exception?
- A.
The sum of the individual consumer surpluses for all buyers of X
- B.
The area below the demand curve for X and above the price of X
- C.
The area bounded by the demand curve for X and the two axes
- D.
The sum, for all buyers of X, of the difference between what each buyer is willing to pay for X and the amount actually paid
Correct Answer
C. The area bounded by the demand curve for X and the two axesExplanation
The correct answer is the area bounded by the demand curve for X and the two axes. This is because the area bounded by the demand curve and the two axes represents the total revenue for the seller, not the consumer surplus. The total consumer surplus for good X can be calculated by summing the individual consumer surpluses for all buyers, which is the difference between what each buyer is willing to pay and the amount actually paid. It can also be calculated as the area below the demand curve and above the price of X, representing the additional benefit consumers receive from paying a lower price than their willingness to pay.Rate this question:
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- 43.
Adie wants to take some online classes this semester. She is willing to pay $1,000 for the first class, $800 for the second, $700 for the third, and $500 for the fourth. If online classes cost $750, Adie will take ________ online classes and her consumer surplus will equal ________.
- A.
3; $350
- B.
4; $600
- C.
2; $400
- D.
2; $300
Correct Answer
D. 2; $300Explanation
Adie's consumer surplus refers to the difference between the maximum price she is willing to pay and the actual price she pays for a product or service. In this case, Adie is willing to pay $1,000 for the first class, $800 for the second, $700 for the third, and $500 for the fourth. Since the online classes cost $750, Adie will take two classes because she is willing to pay more than the actual cost for these two classes. Her consumer surplus will be $300, which is the difference between the total amount she is willing to pay ($1,800) and the actual cost ($1,500) of the two classes she takes.Rate this question:
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- 44.
Well-defined property rights:
- A.
Can allow for mutually beneficial trades.
- B.
Will result in government regulation.
- C.
Often result in more market failures.
- D.
Lead to more centralized decision making.
Correct Answer
A. Can allow for mutually beneficial trades.Explanation
Well-defined property rights can allow for mutually beneficial trades because they provide individuals with clear ownership and control over their resources. When property rights are well-defined, individuals have the incentive to invest in and improve their resources, knowing that they will reap the benefits. This creates an environment where individuals can freely exchange their resources and negotiate mutually beneficial trades, leading to overall economic growth and prosperity.Rate this question:
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- 45.
Markets work because they allocate sales to the potential sellers who most value the right to sell a good, as indicated by their ability to produce the good at the lowest cost. This statement illustrates:
- A.
Producer surplus.
- B.
Consumer surplus
- C.
Total surplus.
- D.
Deadweight loss.
Correct Answer
A. Producer surplus.Explanation
This statement explains how markets allocate sales to sellers who value the right to sell a good the most, based on their ability to produce it at the lowest cost. This concept is known as producer surplus, which represents the difference between the price a producer receives for a good and the minimum price they are willing to accept.Rate this question:
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- 46.
The medallion system used to license taxicabs in New York City is an example of a(n):
- A.
Price floor.
- B.
Price ceiling.
- C.
Quota
- D.
Excise tax
Correct Answer
C. QuotaExplanation
The medallion system used to license taxicabs in New York City is an example of a quota because it restricts the number of taxicabs that can operate in the city. The government sets a limit on the number of medallions available, creating a scarcity of licenses. This helps control the supply of taxicabs and ensures that there is not an oversaturation of vehicles on the streets.Rate this question:
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- 47.
If minimum wages are set above the equilibrium wage in the market, then the number of workers hired will be _______ the number of people who are willing to work.
- A.
Less than
- B.
Greater than
- C.
Equal to
- D.
Either less than, greater than, or equal to
Correct Answer
A. Less thanExplanation
If minimum wages are set above the equilibrium wage in the market, it means that the minimum wage is higher than what the market would naturally determine. This creates a situation where the cost of hiring workers is higher than what employers are willing to pay. As a result, employers will hire fewer workers, leading to a decrease in the number of workers hired compared to the number of people who are willing to work. Therefore, the correct answer is "less than".Rate this question:
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- 48.
The Atlanta Symphony wants to make sure that its concerts are affordable for all residents of Atlanta and therefore prices all its tickets at $25 each. However, outside Symphony Hall, people can sell the same tickets for $75 or more. The true cost to the concertgoer of a ticket to the symphony is at least:
- A.
25
- B.
50
- C.
75
- D.
100
Correct Answer
C. 75Explanation
The true cost to the concertgoer of a ticket to the symphony is at least $75. This is because even though the Atlanta Symphony prices all its tickets at $25, people outside Symphony Hall can sell the same tickets for $75 or more. Therefore, if someone wants to attend the symphony and doesn't want to purchase from scalpers, they would need to pay at least $75 for a ticket.Rate this question:
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- 49.
If the U.S. government imposes a quota on the amount of French wine allowed into the United States and the quota is set at a quantity below equilibrium, the price of French wine in the United States will ________ while the U.S.-produced wine will ________.
- A.
Increase; increase
- B.
Increase; decrease
- C.
Decrease; increase
- D.
Decrease; decrease
Correct Answer
A. Increase; increaseExplanation
If the U.S. government imposes a quota on the amount of French wine allowed into the United States and the quota is set below equilibrium, it means that the quantity of French wine available in the U.S. market will be limited. This scarcity of French wine will lead to an increase in its price in the United States. On the other hand, since the quota only affects French wine and not U.S.-produced wine, the supply of U.S.-produced wine remains unaffected. With increased demand for wine due to the limited availability of French wine, the price of U.S.-produced wine will also increase. Hence, both the price of French wine and U.S.-produced wine will increase.Rate this question:
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- 50.
Producers may supply an inefficiently low quality of a good if the government imposes:
- A.
A price control.
- B.
An excise tax.
- C.
A binding price floor.
- D.
A binding price ceiling.
Correct Answer
D. A binding price ceiling.Explanation
Producers may supply an inefficiently low quality of a good if the government imposes a binding price ceiling. This is because a price ceiling sets a maximum price that can be charged for a good, and if this maximum price is set below the equilibrium price, it creates a shortage in the market. In order to continue selling their goods at the lower price, producers may reduce the quality of the goods they supply in order to cut costs. This can result in a decrease in the overall quality of the goods available in the market.Rate this question:
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Mar 20, 2023Quiz Edited by
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Sep 25, 2012Quiz Created by
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