Scarcity Answers + Test Questions

Economics is the study of choice under conditions of: SCARCITY A sustained increase in the overall level of prices is known as: INFLATION The stock of computers, factory buildings, and machine tools used to produce goods is known as: PHYSICAL CAPITAL Which of the following is not an opportunity cost of attending college? THE COST OF HOUSING The principle of opportunity cost evolves from the concept of: SCARCITY One of the first steps in deciding whether to complete your education is to: evaluate the marginal cost and marginal benefit of that decision. Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer? How do we produce the products? What is the name given to the development of a new good or service? INVENTION When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of? A MARKET The previous table shows the marginal benefit that Ted earns from keeping his store open one more hour. Ted has a marginal cost of $90 per hour. How many hours should Ted stay open? 22 HOURS (because 110>90, means profit, and 70<90, means loss) Economics: is concerned with how people respond to incentives Which of the following is a positive economic statement? If minimum wage rates rise, then unemployment will rise. (NO SHOULD/COULD) One of the primary goals of most governments with regard to the economy is: FULL EMPLOYMENT According to the rationality assumption, people: Do not intentionally make decisions that would leave them worse off. In what type of economy does the government decide how economic resources will be allocated? a centrally planned economy Understanding economics can help policymakers devise strategies to do all of the following except: guarantee new technological discoveries. The resources provided by nature and used to produce goods and services are also known as: natural resources Factors ofproductionreferstoalloftheresources,notonlynatural resourcesbutalsolabor,physicalcapital,humancapital,andentrepreneurship,used to produce goods and services;theyarealso knownasproductioninputs. Macroeconomics can be used to understand all of the topics listed below, except: how a consumer decides between the purchase of two different cars Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority? North Korea Macroeconomics is concerned with all of the following except: POLITICAL PARTY AFFILIATION CHAPTER 7 Nada is a freelance writer who could work for a newspaper at $23,000 a year but instead runs her own business earning revenues of $104,000 a year. Her only business expenses are $2,000 for writing materials and $18,000 for rent. What are Nada's economic profits from working as a freelance writer? 61,000 Economists use the term long−run market equilibrium to describe a market where quantitydemandedequalsquantitysupplied, economicprofitsarezero,andthereisnotendencyforchange. Abdul operates his own business and pays himself a salary of $20,000 per year. He refused a job that pays $30,000 per year. What is the opportunity cost of Abdul's time in the business? 30,000 The definition of accounting profits can also be written as Revenues−ObviousCosts. Abdul operates his own business and pays himself a salary of $20,000 per year. He refused a job that pays $30,000 per year. What is the opportunity cost of Abdul's time in the business? 30,000 One night Joanna and Clinton decided to open a chocolate cheesecake bakery. Joanna cashed in a $20,000 savings deposit that was paying 4% interest per year. Clinton sold a $20,000 bond that was paying 1% interest per year. They also borrowed $1000 on their VISA cards for a year at 22% per year. Financing the chocolate cheesecake bakery in this way has implicit costs of 1,000 a year If your business earns accounting profits of $50,000 and has economic profits of −$20,000, what are your hidden opportunity costs? (Pay attention to the negative sign of economic profits.) 70,000 If your business earns accounting profits of $40,000 and economic profits of $20,000, what are your hidden opportunity costs? 20,000 Zabeen borrows $10,000 from her father to open her accounting practice. She cashed in a $10,000 savings bond that paid her 2% per year. Zabeen agrees to pay her Dad interest of 1% per year. CIBC bank would have loaned Zabeen the money, but at an interest rate of 5% per year. Zabeen's explicit costs of this loan from her Dad are 100 If your business earns revenues of $80,000, has total obvious costs of $35,000, and total hidden opportunity costs of $50,000, you are likely to leave the industry. What are your economic profits or losses? -5,000 If you use your own money to start up a business, the interest you could have earned is animplicitcost. Thecompensationforabusinessowner'stimeandmoney makeup normal profits A business owner should leave an industry when revenuesarelessthanallopportunitycosts. With economic losses, businesses leave the industry, supply decreases, pushing quantities sold down and prices up, until prices just cover all opportunity costs of production and economic profits are zero. Implicitcostsincurredbyafirmarefirm’s opportunitycosts. A business has $500 in explicit costs and sells the resulting output for $750. The average profits in other industries are 30 percent of explicit costs. Which of the following statements is true? Implicitcostsare $150. Tina wants to be a rock 'n' roll singer. She cashed in all of her bank accounts that were paying her 2% interest. She took this $2,000 and spent it to produce a CD. Tina did not quit her day job at Abercrombie. After one year her CD sales had earned $600 in accounting profits. Tina's economic profits are $560 Christine wants to sell you a rafÒe ticket. There is a 1−in−50 chance that you will win $3,000. With this rafÒe, your expected winnings are $60  Question 1 0.4444 out of 0.4444 points If a 50 percent rise in price causes a 20 percent increase in quantity supplied, the elasticity of supply is  Question 2 0 out of 0.4444 points Preferences for cabbage increase. The price of cabbage does not change if the price elasticity of  Question 3 0.4444 out of 0.4444 points If a rise in the price of sandals from $9 to $11 causes an increase from 9,500 to 10,500 units supplied, then using the midpoint formula  Question 4 0.4444 out of 0.4444 points Moving down a straight-line demand curve, price elasticity of demand  Question 5 0.4444 out of 0.4444 points A given percentage increase in the price of a product causes asmallerpercentage decrease in quantity demanded  Question 6 0.4444 out of 0.4444 points Moving up a straight-line demand curve, price elasticity of demand  Question 7 0.4444 out of 0.4444 points All inferior goods have income elasticities of demand that are  Question 8 0 out of 0.4444 points Sam's Records is planning a sale and wants to make sure it will have enough supply to meet the increased quantity demanded. If you can't make it to the store until the end of the sale period, your best chance to find the music you want is if  Question 9 0.4444 out of 0.4444 points Which factor leads a business to have aninelasticsupply?  Question 10 0.4444 out of 0.4444 points If price elasticity of demand is zero, then as price falls  Question 11 0.4444 out of 0.4444 points If the supply of a product is perfectly elastic, then a tax on the product is paid  Question 12 0.4444 out of 0.4444 points Business people speak about cross elasticity of demand without using the actual term. Which statement reflects cross elasticity of demand?  Question 13 0 out of 0.4444 points At a price of $2, Jackie is willing to sell 400 bags of peanuts. If the price is $3, she is willing to sell 500 bags of peanuts. Jackie's elasticity of supply using the simple formula is  Question 14 0 out of 0.4444 points Lady Gaga (LG) and Tony Bennet (TB) record a CD together. LG claims they would be better off raising the price of their CDs, while TB claims they would be better off lowering the price. That means  Question 15 0 out of 0.4444 points Figure 5.1.1 Price per Volleyball $19 $21 Quantity Demanded 55 45 Look at Figure 5.1.1. The table shows two points on the demand curve for volleyballs. The price elasticity of demand between these two points using the midpoint formula is  Question 16 0.4444 out of 0.4444 points Figure 6.2.1 Look at the market for apartments in Figure 6.2.1. If a price ceiling on rents is set at $2,000, then  Question 17 0.4444 out of 0.4444 points A rent ceiling setabovethe market-clearing rent  Question 18 0 out of 0.4444 points When governments set a price in a market that isnotan equilibrium price, the quantity actually sold at that price  Question 19 0 out of 0.4444 points Lowering the minimum wage creates many new jobs if labour  Question 20 0.4444 out of 0.4444 points A new minimum wage law besthelpsthe working poor when  Question 21 0.4444 out of 0.4444 points In an unregulated housing market with no rent ceiling, rents are determined by the  Question 22 0 out of 0.4444 points A right-leaning politician probably  Question 23 0 out of 0.4444 points A price ceiling for gasoline setabovethe market-clearing price  Question 24 0.4444 out of 0.4444 points When prices are fixedabovethe equilibrium price,  Question 25 0.4444 out of 0.4444 points Eliminating rent controls results in large increases in rents if  Question 26 0 out of 0.4444 points When governments fix pricesbelowmarket-clearing levels,  Question 27 0 out of 0.4444 points When government sets the hourly minimum wage at $8, 4,000 workers are unemployed. Suppose the demand for labour increases so that quantity supplied equals quantity demanded of labour at a $10 wage. The new equilibrium wage rate is  Question 28 0 out of 0.4444 points In the U.S. health care system, priority treatment goes to the patients who are  Question 29 0.4444 out of 0.4444 points Government housing subsidies are a better policy alternative to rent controls because  Question 30 0.4444 out of 0.4444 points Look at the market for apartments in Figure 6.2.2. The market-clearing outcome, without rent controls, is a rent of ________ and a quantity of ________.  Question 31 0 out of 0.4444 points Theimplicit costsof starting a business donotinclude  Question 32 0.4444 out of 0.4444 points The interest you pay on money borrowed from the bank to buy equipment for your business is  Question 33 0 out of 0.4444 points Lance cashes a bond paying 5% per year and invests this $1,000,000 in his courier business. He quit a $40,000-a-year job as a letter carrier to open the business. After one year he earned an accounting profit of $150,000. Depreciation costs were $10,000. Hiseconomic profitsare  Question 34 0 out of 0.4444 points When a business exits an industry,  Question 35 0.4444 out of 0.4444 points An industry is in short-run equilibrium, and there are economic losses. What willnothappen in the long run?  Question 36 0.4444 out of 0.4444 points Christine wants to sell you a $5 lottery ticket. There is a 1-in-100 chance that you will win $2,500. Your expected winnings from playing this lottery  Question 37 0.4444 out of 0.4444 points What "signals the way" for businesses to enter or exit an industry?  Question 38 0.4444 out of 0.4444 points Economic profitsare  revenues minus Question 39 0.4444 out of 0.4444 points Christine wants to sell you a lottery ticket. There is a 1-in-100 chance that you will win $2,500. Your expected winnings are $25. If you arerisk averse, the most you will pay for this ticket is  Question 40 0.4444 out of 0.4444 points Opportunity costsequal  Question 41 0 out of 0.4444 points Tina wants to be a rock 'n' roll singer. She cashes in all of her bank accounts that were paying her 5% interest. She takes this $2,000 and spends it to produce a CD. Tina didnotquit her day job at Roots. After one year her CD sales had earned $800 in accounting profits. Tina'seconomic profitsare  Question 42 0 out of 0.4444 points Mariya works for $10 an hour at Scotiabank and gets paid $8 an hour to grade papers at the university. There is no risk of being injured in either job. Mariya is offered a job as a lion tamer at the local zoo. There is a 20% chance that a big lion will eat her. Mariya isrisk averse. For Mariya to take the job at the zoo, they would have to pay her  Question 43 0.4444 out of 0.4444 points Economic profitsequal revenues minus  Question 44 0.4444 out of 0.4444 points An industry is in short-run equilibrium, and there are economic losses. In the long run,  Question 45 0 out of 0.4444 points Joanna quit her $40,000-a-year job to open her own business. Her boss offered her a $10,000-a-year raise not to quit. When Joanna still insisted on leaving, the boss offered an additional $15,000-a-year raise. Joanna's yearlyimplicit costsof her own business are