Surpluses drive market prices up shortages drive them down

1: Because economic generalizations are simplifications from reality, they are impractical and useless.

A. True B. False

2: Normative statements are expressions of facts.

A. True B. False

3: Macroeconomics explains the behavior of individual households and business firms; microeconomics is concerned with the behavior of aggregates or the economy as a whole.

A. True B. False

4: Marginal analysis means that decision-makers compare the extra benefits with the extra costs of a specific choice.

A. True B. False

5: The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment.

A. True B. False

6: The present choice of position on the production possibilities curve will not influence the future location of the curve.

A. True B. False

7: In drawing a particular budget line, money income and the prices of the two products are fixed.

A. True B. False

8: The lower the consumer's income, the higher his or her budget line.

A. True B. False

9: The guiding function of prices tends to keep resources flowing toward their most highly valued uses.

A. True B. False

10: The invisible hand refers to the many indirect controls that the Federal government imposes in a market system.

A. True B. False

11: Central planning often suffers from a coordination problem and an incentive problem.

A. True B. False

12: Surpluses drive market prices up; shortages drive them down.

A. True B. False

13: Consumers buy more of normal goods as their incomes rise.

A. True B. False

14: Producing a good in the least costly way is known as allocative efficiency.

A. True B. False

15: A market that achieves productive efficiency is producing the quantity of goods most desired by society.

A. True B. False

16: A government tax per unit of output reduces supply.

A. True B. False

17: A ceiling price in a competitive market will result in persistent surpluses of a product.

A. True B. False

18: If the elasticity coefficient of supply is 0.7, supply is elastic.

A. True B. False

19: Antiques tend to have highly inelastic supply curves.

A. True B. False

20: The smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it.

A. True B. False

21: Generally speaking, the smaller the percentage of one's total budget devoted to a particular product, the more price elastic will be the demand for that product.

A. True B. False

22: Generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities.

A. True B. False

23: If price changes and total revenue changes in the opposite direction, demand is relatively elastic.

A. True B. False

24: The substitution effect suggests that when consumers judge product quality by price, they will substitute high-priced products for low-priced products.

A. True B. False

25: When the price of a product falls, the income effect induces the consumer to purchase more of it while the substitution effect prompts her to buy less.

A. True B. False

26: Firms would rather shrink package sizes than raise prices because consumers will feel less of a loss from the change.

A. True B. False

27: Because of framing effects, a worker will be happy with a five percent raise regardless of how much of a raise her fellow employees receive.

A. True B. False

28: The short run is a period of time during which all costs are fixed costs.

A. True B. False

29: Economic profit is found by subtracting accounting costs from total revenue.

A. True B. False

30: Diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise.

A. True B. False

31: Variable costs are costs that change directly with output.

A. True B. False

32: The law of diminishing returns explains why short-run marginal cost curves are upsloping.

A. True B. False

33: The term imperfect competition refers to every market structure besides pure competition.

A. True B. False

34: Although individual purely competitive firms can influence the price of their product, these firms as a group cannot influence market price.

A. True B. False

35: The demand curve for a purely competitive industry is perfectly elastic, but the demand curves faced by individual firms in such an industry are downsloping.

A. True B. False

36: A competitive firm will produce in the short run so long as its price exceeds its average fixed cost.

A. True B. False

37: The short-run supply curve slopes upward because producers must be compensated for rising marginal costs.

A. True B. False

38: Professor Homer Simpson decided to become a crab fisherman for one year and made as much as he usually makes in 8 weeks teaching students for the year so the rest of the time he could write. Homer, would be removed from the employment register and would be counted as unemployed.

A. True B. False

39: The long-run supply curve for a decreasing-cost industry is downsloping.

A. True B. False

40: Because the equilibrium position of a purely competitive seller entails an equality of price and marginal costs, competition produces an efficient allocation of economic resources.

A. True B. False

41: The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

A. True B. False

42: Other things equal, the shorter the loan period and the larger the loan size, the higher is the interest rate charged by the lender.

A. True B. False

43: In a competitive market, every consumer willing to pay the market price can buy a product and every producer willing to sell the product at that price can sell it.

A. True B. False

44: Macroeconomics explains the behavior of individual households and business firms; microeconomics is concerned with the behavior of aggregates or the economy as a whole.

A. True B. False

45: Producing a good in the least costly way is known as allocative efficiency.

A. True B. False

46: The invisible hand refers to the many indirect controls that the Federal government imposes in a market system.

A. True B. False

47: Critics of the minimum wage contend that higher minimums cause employers to move up their labor demand curves, reducing employment of low-wage workers.

A. True B. False

48: The supply of loanable funds is perfectly elastic.

A. True B. False

49: If two resources are complementary, a decrease in the price of one will reduce the demand for the other.

A. True B. False

50:

http://www.bcconline.info/eco2/midtermpic.gif

Refer to the above diagram. The movement from curve (a) to curve (c) suggests an improvement in civilian goods technology but not in war goods technology.

A. True B. False