ECO349H5 Lecture Notes - Lecture 1: Demand Curve, Shortage, Relative Price
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Question 26 pts
Which of the following is not a reason why specialization and trade are beneficial to society?
| Specialization fosters learning by doing, thus lowering the unit-costs of products | |
| Firms and workers become less dependent on others for producing goods and services |
| The total output of economic goods may be increased even without any increase in resources | |
| Scarce resources are utilized more efficiently by exploiting differences among them |
Question 27 pts
Laissez-faire capitalism limits the government's economic functions to the following, except:
| Protecting private property rights | |
| Establishing a legal environment to enforce contracts among individuals |
| Setting prices of individual goods and services | |
| Preventing individuals and firms from coercing others |
Question 28 pts
A production system where various workers concentrate on different specialized tasks to contribute towards a whole product is referred to as:
| Roundabout production | |
| A coincidence of wants |
| Freedom of enterprise | |
| Division of labor |
Question 29 pts
The market system is said to be characterized by "consumer sovereignty." This is because:
| A sovereign government determines which consumer goods will be produced | |
| Firms must match their production decisions to the consumers' choices |
| The prices of consumer goods are regulated by a sovereign government | |
| Consumer goods are considered to be more important than capital goods |
Question 30 pts
Consumers express self-interest when they:
| Seek the lowest price for a product | |
| Reduce business losses |
| Exclude others in their thinking | |
| Collect economic profits |
Question 311 pts
Refer to the above graph with three demand curves. An "increase in quantity demanded" would be illustrated by a change from:
| Point 5 to point 1 | |
| Point 4 to point 1 |
| Point 2 to point 5 | |
| Point 4 to point 6 |
Question 32 pts
The table below shows the weekly demand for hamburger in a market where there are just three buyers.
Refer to the above table. At a price of $6, the weekly market quantity demanded for hamburger is:
| 17 | |
| 23 |
| 24 | |
| 18 |
Question 33pts
If farmers withhold some of their current corn harvest from the market because they anticipate a higher price of corn in the near future, then this would cause a(n):
| Movement up along the current supply curve of corn | |
| Movement down along the current supply curve of corn |
| Leftward shift in the current supply of corn | |
| Rightward shift in the current supply of corn |
Question 34 pts
Which of the following will not cause the supply curve to shift?
| A technological change in the production of the good | |
| A change in the prices of other goods that producers could be producing |
| A change in the costs of resources needed to produce the good | |
| A change in the price of the good |
Question 35 pts
All of the following would affect the position of the supply curve for cranberries, except the:
| Price of agricultural land for cranberries | |
| Cost of fertilizers for cranberry production |
| Popularity of cranberry drinks | |
| Development of a new pest control for cranberries |
Question 36 pts
When high-school and college graduates apply for jobs in the labor markets,
| Job applicants and employers are both "buyers". | |
| Job applicants are the "sellers" while employers are the "buyers". |
| Job applicants and employers are both "sellers". | |
| Job applicants are the "buyers" while employers are the "sellers". |
Question 37 pts
Refer to the figure above, which shows three supply curves for corn. Which of the following would cause the supply of corn to shift from S1 to S2?
| A decrease in consumer incomes, assuming corn is a normal good | |
| The development of a more effective insecticide against corn rootworm |
| An increase in the price of fertilizer | |
| A change in consumer tastes away from cornbread |
Question 38 pts
Which is of the following statements is correct?
| If demand increases, then price will decrease | |
| If demand decreases, then price will decrease |
| If price decreases, then demand will decrease | |
| If price increases, then demand will decrease |
Question 39 pts
Which would be a likely cause of an increase in the demand for pizza?
| A decrease in the price of hamburger sandwiches | |
| A health report showing eating pizza reduces stress |
| A reduced desire for take-out and fast-food dining | |
| A decrease in the prices of cheese, pepperoni, and mushrooms |
Question 40 pts
A market for a product reaches equilibrium when:
| Price falls further after there is a shortage | |
| The price rises further after there is a surplus |
| Buyers intend to buy a quantity equal to the quantity that sellers intend to sell | |
| The actual quantity bought by buyers equals actual quantity sold by sellers |
Question 41 pts
A higher price reduces the quantity demanded for a product because:
| Individuals can afford less of the product and will switch to substitutes | |
| The financial assets of individuals increase |
| Individuals will buy more of the product and less of its substitutes | |
| The purchasing power of individuals increases |
Question 42 pts
The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?
| Price of electric cars | |
| How much sellers are charging customers for electric cars |
| Price of gasoline cars | |
| Quantity of electric cars demanded by buyers |
Question 43 pts
Use the following graph of the demand for coffee:
Refer to the above diagram of three demand curves for coffee. An increase in the price of coffee, other factors constant, would cause a:
| Movement from point a to point b | |
| Movement from point b to point a |
| Shift from D1 to D2 | |
| Shift from D1 to D3 |
Question 44 pts
Which of the following factors will decrease the current demand for a product?
| A decrease in the current price of a complementary product | |
| A decrease in the current price of a substitute product |
| An increase in the current price of a substitute product | |
| An expected increase in the future price of the product |
Question 45pts
In competitive markets, a surplus or shortage will:
| Cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage | |
| Cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage |
| Cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage | |
| Never exist because the markets are always at equilibrium |
Question 46 pts
Which of the following would cause a leftward shift in the supply curve for car washes?
| A decrease in taxes on car washes | |
| An increase in the price of car washing equipment |
| A decrease in the price of water | |
| An increase in the number of cars in the city |
Question 47pts
The market system automatically corrects a surplus condition in a competitive market by:
| Raising the price of the commodity in question while decreasing the quantity demanded | |
| Raising the price of the commodity in question while increasing the quantity demanded |
| Reducing the price of the commodity in question while increasing the quantity demanded | |
| Reducing the price of the commodity in question while decreasing the quantity demanded |
Question 48 pts
A leftward shift of the supply curve for oil in the United States is most likely to result from:
| A decrease in the world price of oil | |
| An increase in the costs of exploration and drilling for oil |
| An increase in the subsidy for oil exploration and drilling | |
| A decrease in the fees that oil companies must pay for drilling licenses |
Question 49 pts
A fall in the price of milk, used in the production of ice cream, will:
| Decrease the supply of ice cream | |
| Have no effect on the supply of ice cream |
| Increase the supply of ice cream | |
| Cause a movement along the supply curve of ice cream |
Question 50 pts
Refer to the above graph, which shows the market for beef where demand shifted from D1 and D2. The change in equilibrium from E1 to E2 is most likely to result from:
| An increase in the cost of cattle feed | |
| A decrease in consumer incomes |
| A decrease in the tax on beef products | |
| An increase in the price of pork |
1) Which of the following transactions would be included in GDP?
a) The purchase of a Monet painting.
b) The purchase of paper clips.
c) The purchase of Telstra shares.
d) The purchase of a used car.
2) Economics is the study of
a) the choices everybody makes to attain their goals, given their scarce resources.
b) supply and demand.
c) how to make money in a market economy.
d) how to make money in the stock market.
3) The economy is considered to be at full employment when
a) all unemployment is voluntary.
b) all unemployment is frictional or structural.
c) there are no unemployed workers.
d) there are more unemployed workers than job vacancies
4) An example of an intermediate good would be
a) a can of cool drink sold by a superâmarket.
b) a microwave used at home.
c) the bread that goes into a sandwich sold by a lunch bar.
d) the petrol purchased by consumers for their cars
5) From 2004 to 2005, the CPI for medical care increased from 260.8 to 272.8. What was the inflation rate for medical care?
a) 12 percent
b) 11.1 percent
c) 4.9 percent
d) 4.6 percent
6) A shift outwards of the nation's production possibility frontier can occur from
a) a reduction in unemployment.
b) an increase in the size of the labour force.
c) a change in the amounts of one good desired.
d) a natural disaster like a hurricane or severe earthquake
7) What assumptions about humans do economists make?
a) People are greedy and selfish.
b) None, because economics takes humans as given.
c) People are rational and respond to incentives.
d) Humans prefer to live in a society that values fairness above all else.
8) The labour force is the
a) a number of people employed minus the number of people unemployed.
b) ratio of the number of people employed by the number of people unemployed.
c) ratio of the number of people employed to the working-age population.
d) the number of people employed plus the number of people unemployed.
9) The production possibility frontier shows
a) attainable combinations of two products that may be produced with available resources.
b) the various products that can be produced now and in the future.
c) what an equitable distribution of products among citizens would be.
d) the rate of substitution between capital and labour.
10) Which of the following transactions would be included in the official calculation of GDP?
a) Bridgestone sells $2 million worth of tyres to General Motors Holden
b) You illegally download music off the Internet to put on your new iPod.
c) A new iPod.
d) A student buys a used textbook at the bookstore.
11) What are the three fundamental questions that any economy must answer?
a) What will be the prices of goods, how will these goods be produced, and who gets them?
b) What will be the prices of goods, what will be produced, and who gets them?
c) What will be produced, how will these goods be produced, and who gets them?
d) How much will be saved, what will be produced, and how can these goods be fairly distributed?
12) If the nominal interest rate is 6% and the inflation rate is 2%, then the real interest rate is
a) 3%.
b) 2%.
c) 4%.
d) 8%.
14) Suppose that a very simple economy produces three goods: movies, burgers, and bikes. Suppose the quantities produced and their corresponding prices for 2004 and 2009 are shown in the following table:
| 2004 | 2009 | |||
| Quantity | Price | Quantity | Price | |
| Movies | 20 | $6 | 30 | $7 |
| Burgers | 100 | $2 | 90 | $2.5 |
| Bikes | 3 | $1000 | 6 | $1100 |
What is real GDP in 2009, using 2004 as the base year?
a) $3690
b) $7035
c) $6360
d) $3320
15) If the production possibility frontier is graphed as a straight line, what does this mean?
a) Opportunity costs are constant as production shifts from one product to the other.
b) It is easy to efficiently produce output.
c) Nothing, there is no significance of a straight line production possibility frontier.
d) Opportunity costs are increasing as production shifts from one product to the other.
16) If you have both an economics exam and a management exam tomorrow, but find that you have time to fully study for only one of them, what are you facing?
a) A failing grade in both exams
b) A zero opportunity cost
c) A tradeâoff
d) An impossible situation
17) Which of the following is a problem inherent in centrally planned economies?
a) Production managers do not satisfy consumer wants but the government's orders.
b) Too much production of lowâcost, highâquality goods and services.
c) There are no problems, everyone, including consumers are satisfied.
d) None of these describe the problem inherent in a centrally planned economy.
18) Inflation is an increase in the
a) average hourly wage rate.
b) general price level in the economy.
c) the overall level of economic activity.
d) rate of growth of GDP.
19) Total production in the economy is measured as the
a) dollar value of all final goods and services produced in the economy.
b) the total number of services produced in the economy.
c) the total number of goods produced in the economy.
d) the total number of goods and services produced in the economy.
20) An increase in the price of dairy products produced domestically will be reflected in
a) Both the GDP deflator and the consumer price index.
b) Neither the GDP deflator nor the consumer price index.
c) The GDP deflator but not in the consumer price index.
d) The consumer price index but not in the GDP deflator.
21) The reason that opportunity cost arises is that
a) money has proven to be an inefficient means of facilitating exchange in a market.
b) sometimes there are no alternative decisions that can be made.
c) resources are limited at any point in time. d) people have unlimited wants.
21) You have an absolute advantage whenever you
a) are better educated than someone else.
b) can produce something at a lower opportunity cost than others.
c) can produce more of something than others with the same resources.
d) prefer to do one particular activity.
22) Which of the following is an example of a worker experiencing cyclical unemployment?
a) A Freightliner employee who was sacked because of a recession.
b) A worker who quits his job because he does not get along with his boss
c) A worker that changes jobs to move closer to her family.
d) An assembly line worker who loses his job because of automation.
23) A company named Home Depot sells new and used doors to contractors who build new homes. Home Depot also sells new and used doors to homeâowners. Which of the following would be counted in GDP?
a) The sale of a used door to a homeâowner
b) The sale of a used door to for construction for installation into a new home.
c) The sale of a new door to for construction for installation into a new home.
d) The sale of a new door to homeâowner.
24) If you buy shares, the dollar value is
a) not included in GDP.
b) included in GDP under consumer expenditure.
c) included in GDP as a business expense.
d) included in GDP under-investment.
25) During the 1930s, Australia and other industrialised countries experienced the Great Depression with a large number of workers and factories unemployed.Which of the following points on a production possibility frontier model would represent this experience?
a) A point on the frontier
b) A point inside the frontier
c) An increase in the opportunity cost of the substitution between capital and labour
d) A point outside the frontier
26) How is the decision about what goods and services will be produced made in a market economy?
a) The government decides on what will be produced.
b) Producing firms decide to produce only what the firms' owners say must be produced.
c) By consumers, firms, and government choosing which goods and services to buy.
d) What will be produced is determined by what society needs the most.
27) In the country of Shem, the CPI is calculated using a market basket consisting of 5 apples, 4 loaves of bread, 3 robes and 2 gallons of gasoline. The perâunit prices of these goods have been as follows: Using 2002 as the base year, what was the inflation rate between 2003 and 2004?
a) 28.5 percent
b) 34.2 percent
c) 47 percent
d) It is impossible to determine without knowing the base year.
28) Given the following information, calculate the unemployment rate: Fullâtime employed = 80 Partâtime employed = 25 Unemployed = 15 Discouraged workers = 5 Members of underground economy = 6 Consumer Price Index = 110
a) 18.8 per cent.
b) 12.5 per cent.
c) 16.7 per cent.
d) 25 per cent.
29) If the quantity of resources available is fixed, as more of a good is produced, the opportunity cost of producing it increases. The most probable reason for this is that
a) as more of a good is produced, the quality of technology available to produce additional units declines.
b) the price of the inputs used to produce the good will rise.
c) consumers are unwilling to pay higher prices to cover the increases in production costs.
d) resources are not equally wellâsuited to producing all goods.
30) Which of the following is a normative statement?
a) The current high price of petrol is the result of strong worldwide demand.
b) The price of petrol is too high.
c) Larger vehicles always use more fuel per kilometre than smaller vehicles
d) The supply of petrol has not been able to meet the demand for petrol.
31) Transfer payments are not included in GDP because
a) they do not generate income.
b) their market value is difficult to measure.
c) they are not purchases of goods or services.
d) their value is included in government expenditure.
32) The opportunity cost of going to your economics class
a) depends on the cost of your transport getting to class.
b) is equal to the highest value of alternative use of the time.
c) is zero because there is no admission charged if you are enrolled in the class.
d) depends on the salary of the lecturer.
33) Establishing employment agencies that speeds up the process of matching unemployed workers with unfilled jobs are an attempt to lower
a) cyclical unemployment.
b) seasonal unemployment.
c) structural unemployment.
d) frictional unemployment.
34) Suppose that money GDP for 2009 was $15 000 billion and the price index was 150 and in 2010 money GDP was $17 050 billion with a price index of 155. What is the rate of economic growth?
a) 5%
b) 10%
c) 2%
d) 1%
35) An individual has a comparative advantage in activity whenever she
a) also has an absolute advantage in that activity.
b) can perform the activity at a lower opportunity cost than another person can.
c) can do everything better than everyone else can.
d) can do the activity in less time than anyone else.
36) GDP is not a perfect measure of wellbeing because
a) GDP is adjusted for increases in drug addiction.
b) GDP is not adjusted for the effects of pollution.
c) GDP is adjusted for changes in crime.
d) the value of leisure is included in GDP.
37) What does an entrepreneur do in a market economy?
a) Organise the factors of production in a working unit.
b) Stand to lose the personal funds provided.
c) Develop the vision for the firm and ensure funding for the firm.
d) An entrepreneur does all of these things.
38) An example of a transfer payment is
a) the purchase of a new government office block.
b) a teacher's pay is transferred electronically from the government to the teacher.
c) interest repayments on a loan.
d) an unemployment benefit.
39) Which of the following is a microeconomics question?
a) What will be the level of total production in the national economy?
b) How much income will be saved and how much will be spent on consumer goods?
c) What factors determine the price of computers in the market?
d) Why is the rate of unemployment rising?
40) The measure of production that values production using current prices is called
a) value-added GDP.
b) nominal GDP.
c) black economy GDP.
d) real GDP.
41) Which of the following causes the official measure of the unemployment rate to understate the true extent of joblessness?
a) People who collect unemployment benefits report themselves to be searching for a job.
b) Discouraged workers are counted as unemployed.
c) Discouraged workers are not counted as unemployed.
d) Many full-time workers really want to be part-time workers.
42) A production possibility frontier will shift inwards if
a) inefficiency in production processes arise.
b) there is an increase in the rate of unemployment.
c) productive resources are destroyed due to war.
d) all of these options are correct.
43) Structural unemployment would increase when
a) discouraged workers drop out of the workforce.
b) the economy enters a recession.
c) the number of individuals who quit their job to find another increase.
d) workers are replaced by machines and the workers do not have the skills to perform new jobs.
44) The 2005 CPI was 196 and the 1982 CPI was 96.5. If your parents put aside $1,000 for you in 1982, how much would you have needed in 2005 in order to buy what you could have bought with the $1,000 in 1982?
a) $1,834.20
b) $2,031.09
c) $2,308.89
d) None of the above is correct.
45) What is an economic model?