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Chapter 1 Chapter 2 Question 1 1 When economists say that people choose rationally this means people respond in predictable ways to changes in costs and benefits Question MA Sam values his boat at 4 000 and Brenda values it at 9 000 If Brenda buys it from Sam for 7 000 which of the following is true Brenda gains 2 000 Sam gains 3 000 Question When private ownership of a resource is clearly defined and enforced the private owner will develop and direct their property toward uses that others value highly because the market will generally reward them for doing so Question In the fictitious country of Econoland the government allows private ownership of chicken but not of bison If the demand for pork and the demand for beef both permanently increased in Econoland in the long run we would expect the population of chicken to rise and the population of bison to fall Question Over time an increase in a person s education will shift that person s production possibilities curve outward Question According to the law of comparative advantage both individuals and nations will be able to produce a larger joint output if each productive activity is undertaken by the low opportunity cost producer Question If Kim can either wash 10 cars or wax 2 cars during a day and Vince can either wash 17 or wax 2 cars during a day then according to the law of comparative advantage their total output can be expanded if Kim specializes in waxing and Vince in washing Question Opportunity costs differ among nations primarily because nations have different endowments of land labor skills capital and technology Question When voluntary trade occurs which statement is most accurate Both people gain some value Chapter 3 Question PMA Consumers buy less of a good as its price increases because substitute goods are now relatively cheaper the income of consumers has effectively decreased Question 3 2 In economics the demand for a good refers to the amount of the good people are willing to buy at various prices Question 3 3 When economist say the quantity demanded of a product has increased they mean the price of the product has fallen and consequently consumers are buying more Question 3 4 When economists say the demand for a product has decreased they mean the demand curve has shifted to the left Question Which of the following best explains the source of consumer surplus for good A Many consumers would be willing to pay more than the market price for good A Question According to the law of supply more of a good will be offered by suppliers as the price rises Question When economists say the demand of a product has increased they mean the demand curve has shifted to the right Question When economists say the supply of a product has increased they mean the supply curve has shifted to the right Question When economists say the quantity demanded of a product has decreased they mean the price of the product has risen and consequently consumers are buying less of it Question When economists say the quantity supplied of a product has decreased they mean the price of the product has fallen and consequently suppliers are producing less of it Question How will an increase in lumber prices influence the home construction market The supply of newly constructed homes will decrease Question 3 8 MA Which of the following statements are true With a shortage quantity demanded exceeds quantity supplied and price will be pushed up with a surplus quantity supplied exceeds quantity demanded and price will be pushed down Question 3 9 If there is a decrease in demand for laptop computers we would expect both the price and quantity sold to decrease Question If the demand for a good decreased what would be the effect on the equilibrium price and quantity Price would decrease and quantity would decrease Question If Georgia experiences a late frost that damages the peach crop we should expect the supply curve for peaches to shift to the left and the price of peaches to rise Question 3 10 Which of the following would reduce the price of DVD players and increase the quantity sold An increase in the supply of DVD players Question 3 11 PMA If there is a simultaneously an increase in demand and an increase in supply we would expect an increase in equilibrium price and an increase in equilibrium quantity a decrease in equilibrium price and an increase in equilibrium quantity Q3 12 Adam Smith s invisible hand principle stresses the tendency of the competitive market process to direct self interested individuals into activities that enhance the economic welfare of society Question Which of the following is a major implication of the invisible hand concept When directed by competitive market prices the actions of self interested individuals will tend to promote overall economic prosperity Question If air travel and bus travel are substitutes a decrease in the price of bus travel will decrease the demand for air travel Question If coffee and cream are complements an increase in the price of coffee will cause the demand for cream to fall Chapter 4 Question An increase in the number of students attending college would tend to increase the demand for college professors increase the number of college professors employed increase wages of college professors Question What would happen in a market where a price ceiling was set above equilibrium price Equilibrium price would become the market price Question When a shortage of a good is present due to a price ceiling non price factors such as discrimination or waiting in line will play a greater role in the allocation of the good Question If the gov t imposes a price floor on the market for milk which of the following will most likely happen There will be a surplus of milk Question Both price floors and price ceilings lead to a reduction in the quantity traded Deadweight cost Question If a 5 000 tax is placed legally statutorily on the sellers of new automobiles and as a result the price of automobiles to consumers rises by 4 000 then the actual burden of the tax is 4 000 on automobile buyers and 1 000 on sellers Question The burden of a tax will fall primarily on sellers when the demand for the product is highly elastic and the supply is relatively inelastic Quesetion When the gov t increases the tax rate what happens to tax revenue It depends Question According to the Laffer curve when marginal tax rates are high a reduction in tax rates may increase tax revenue Question The actual benefit of a government


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FSU ECO 2023 - Chapter 1

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