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Bluefin tuna travel in schools throughout the world's oceans. Fishing boats from many nations harvest
bluefin tuna as the schools migrate through their national waters.
The schools of bluefin tuna are best described as:
a. a common resource.
b. a public good.
c. an artificially scarce resource.
d. a private good.
 
Regardless of whether or not they pay for them, people cannot be excluded from receiving the benefits of:
a. public goods.
b. public goods and common resources.
c. private goods.
d. common resources.
 
Television programs are nonrival because:
a. the supplier cannot prevent consumption by people who do not pay for it.
b. individuals ignore the effect their use has on the amount of the resource remaining for others.
c. more than one person can consume the same unit of the good at the same time.
d. the market suffers from inefficiently low consumption.
 
Public goods differ from common resources in that:
a. both are excludable, but public goods are nonrival in consumption while common resources are rival in consumption.
b. both are rival in consumption, but public goods are nonexcludable while common resources are excludable.
c. both are nonrival in consumption, but public goods are excludable while common resources are nonexcludable.
d. both are nonexcludable, but public goods are nonrival in consumption while common resources are rival in consumption.
 
The best example of a private good is:
a. law enforcement.
b. public education.
c. national defense.
d. an automobile.
 
An artificially scarce good is a good or service for which exclusion is:
a. not possible and is nonrival in consumption.
b. not possible and is rival in consumption.
c. possible and is rival in consumption.
d. possible and is nonrival in consumption.
 
A private good is:
a. excludable and rival in consumption.
b. nonexcludable and nonrival in consumption.
c. nonexcludable and rival in consumption.
d. excludable and nonrival in consumption.
 
The free-rider problem refers to:
a. a situation in which consumers have no incentive to pay for a nonexcludable good.
b. a variation on the phrase, “There's no such thing as a free lunch,” which is replaced by, “There's no such thing as a free ride.”
c. qualifications or “riders” that clients do not request, but which lawyers tend to include in contracts anyway at no extra charge.
d. the situation in the Old West when land was largely unfenced and riders had unfettered access to private range land.
 
For a good to be efficiently provided by a market economy, which of the following characteristics is essential?
a. It is rival in consumption and it is excludable.
b. It is rival in consumption.
c. It is excludable.
d. It is a common resource.
 
When comparing the characteristics of common resources and artificially scarce goods, we find that:
a. artificially scarce goods are nonrival in consumption (while common resources are not), and common
resources are nonexcludable (while artificially scarce goods are not).
b. common resources are nonrival in consumption (while artificially scarce goods are not), and artificially
scarce goods are nonexcludable (while common resources are not).
c. they are both nonrival in consumption.
d. they are both excludable.
 
Which of the following goods is most likely a public good?
a. fire protection provided by the government
b. the Internet
c. a park
d. a pair of pants
 
A good that is nonexcludable, but rival in consumption, is considered a:
a. normal good.
b. private good.
c. public good.
d. common resource good.
 
A fish in an ocean is a common resource because we ________ prevent consumption by people who do
not pay for it, and the same unit ________ be consumed by more than one person at the same time.
a. can; cannot
b. can; can
c. cannot; can
d. cannot; cannot
 
Which of the following is an example of a nonexcludable good?
a. education
b. national defense
c. ice cream
d. health care
 
Becky works for a large grocery store that provides a health insurance program to all workers. This is an example of:
a. employment-based health insurance.
b. a single-payer health care system.
c. Medicaid.
d. government health insurance.
 
Some of the major causes of poverty are lack of education, bad luck, lack of English language proficiency, and:
a. differences in religious preference.
b. geographic region.
c. racial and gender discrimination.
d. government restrictions.
 
Redistribution programs are means tested. To qualify for such a program, a person must demonstrate that:
a. his or her average (or mean) family income has fallen (or not gone up) during the past three years.
b. his or her family is larger than the mean family size for the country as a whole.
c. he or she is making serious efforts to get a job, even though he or she is currently unemployed.
d. his or her income (or means) is below a certain specified level.
 
Measured by the amount of money spent by the U.S. government, which of the following American welfare
programs is the largest?
a. unemployment insurance
b. Medicare
c. Social Security
d. food stamps
 
Which of the following countries gives all of its citizens a choice between private doctors and hospitals and care
in a system run directly by the government?
a. Great Britain
b. Canada
c. United States
d. France
 
Which of the following is associated with poverty?
a. lack of adequate employment
b. lack of education
c. lack of proficiency in English
d. lack of adequate employment, lack of education, and lack of proficiency in English
 
Children raised in poverty have a greater likelihood of living in poverty as adults than do those raised in nonpoor
families, because low income is highly correlated with higher:
a. high school dropout rates, risk of mental problems and behavioral disorders, and with higher rates of
illness and hospitalization.
b. rates of illness and hospitalization.
c. high school dropout rates.
d. risk of mental problems and behavioral disorders.
 
The percentage of the population that falls below the poverty line is called the:
a. poverty rate.
b. poor rate.
c. homeless rate.
d. absolute number of people in poverty.
 
Which of the following countries has a health care system which directly employs health care workers and runs
hospitals and clinics that are free to the public?
a. France
b. Great Britain
c. United States
d. Canada
 
Which of the following American welfare programs is a monetary benefit (monetary transfer) that is not means tested?
a. Earned Income Tax Credit
b. Medicare
c. Social Security
d. food stamps
 
Food stamps are an example of:
a. an in-kind benefit.
b. a negative income tax.
c. a monetary benefit.
d. unemployment insurance.
 
Health care in the United States is different from that of other wealthy countries in which of the following way:
a. Americans spend more per person on health care.
b. Americans rely more on private health insurance.
c. The United States is the only country in which large numbers of people lack health insurance.
d. All of the answers are correct.
 
The provision of specific goods and services (rather than cash) to needy people is:
a. in-kind benefits.
b. Rawlsian assistance.
c. the income effect.
d. the wealth effect.
 
Human capital:
a. is the improvement in labor created by education and knowledge that is embodied in the workforce.
b. is the improvement in labor created by education, which has become less important due to the progress in technology.
c. has become less important due to the progress in technology.
d. consists of man-made resources such as buildings and machines.
 
Actual wage differentials can be partially explained by which of the following?
a. different amounts of human capital
b. compensating differentials
c. differences in talent
d. differences in talent, different amounts of human capital, and by compensating differentials
 
In the United States in 2006, 70% of total income, by far the largest share, took the form of:
a. rental income.
b. corporate profits.
c. compensation of employees.
d. interest income.
 
The key distinction between a factor of production and an input is that:
a. an input earns income from the selling of its services over and over again but a factor of production cannot.
b. a factor of production earns income from the selling of its services over and over again but an input cannot.
c. a factor of production has limited earning potential.
d. an input represents an enduring source of income, but a factor of production is used up in the production process.
 
As a general rule, a profit-maximizing restaurant owner employs each factor of production up to the point
at which the value of the marginal product of the ________ unit of the factor employed is ________ that factor's price.
a. first; greater than
b. first; equal to
c. last; less than
d. last; equal to
 
When a person becomes more educated and is able to produce a better product, the person's education is referred to as:
a. physical capital.
b. human capital.
c. land.
d. labor.
 
A firm's demand curve for labor is:
a. its marginal cost curve.
b. its marginal product curve.
c. horizontal if it is in perfect competition.
d. its VMPL curve.
 
A firm is in equilibrium when the wage is:
a. equal to the average product.
b. greater than the average product.
c. equal to the VMPL.
d. less than the price of the product.
 
When a person receives more education, this is referred to as ________. When a firm buys a new copy machine,
this is referred to as ________.
a. labor; labor
b. human capital; land
c. human capital; physical capital
d. labor; capital
 
If a firm is hiring labor and at its current position W = VMPL, then profit:
a. can be increased by hiring more labor.
b. can be increased by decreasing the wage rate.
c. can be increased by hiring less labor.
d. is maximized.
 
A profit-maximizing firm will hire workers up to the quantity of labor where ________.
a. VMPL = W
b. MP × MR = VMPL
c. VMPL > W
d. VMPL < W
 
Unions represent approximately ________% of employees of private businesses.
a. 9
b. 29
c. less than 1
d. 19
 
A binding price ceiling is designed to:
a) prevent shortages.
b) increase the quality of the good.
c) keep prices low.
d) increase efficiency.
 
A price ceiling will have no effect if:
a) the equilibrium price is above the price ceiling.
b) it is set below the equilibrium price.
c) it is set above the equilibrium price.
d) it creates a shortage.
 
A price ceiling is:
a) a maximum price sellers are allowed to charge for a good or service.
b) a minimum price buyers are required to pay for a good or service.
c) the deadweight loss caused by an inefficiently low quantity.
d) the difference between the quantity supplied and quantity demanded.
 
If the government sets out to help low-income people by establishing a rent control:
a) a price floor has been set and a shortage of rental units may occur.
b) a price ceiling has been set and a shortage of rental units may occur.
c) the quality of rental units will be inefficiently high.
d) in the long run more rental units will appear.
 
Rent controls in New York City cause which of the following:
a) black markets.
b) wasted resources resulting from the opportunity cost of time associated with trying to find an apartment.
c) inefficiently low quality.
d) All of the answers are correct.
 
The United States and the European Union impose price floors on many agricultural products. These price
floors lead to unwanted surpluses. To deal with a surplus:
a) the U.S. government typically pays farmers to produce as much as possible.
b) the U.S. government in some cases has destroyed the surplus production.
c) the U.S. government holds auctions to sell the surplus to the highest bidder.
d) the European Union pays farm exporters to sell products for a profit overseas.
 
Setting a price floor in the market for wheat usually:
a) decreases the price paid by consumers.
b) decreases the price received by farmers.
c) increases the price paid by consumers.
d) does not change the price received by farmers.
 
In Europe the minimum wage has led to:
a) European governments hiring the surplus of workers.
b) widespread evasion of the minimum wage law in the black market for labor.
c) lower unemployment, especially among young workers.
d) a proliferation of large companies in Italy.
 
When the government imposes a limit on sales of a good or service by a quota, it usually issues a license that
gives the owner the right to sell a given quantity of the good. The market price of the license is equal to:
a) the quota rent and the wedge that represents the difference between the demand price and the supply price.
b) the demand price of the good.
c) the price floor.
d) the price ceiling.
 
A price ceiling will create a persistent ________ and a price floor will create a persistent ________.
a) shortage; surplus
b) surplus; surplus
c) surplus; shortage
d) shortage; shortage
 
Price elasticity of demand measures the change in _______________ due to change in _______________.
demand; price.
 
Demand is elastic if...
Quantity demanded changes significantly as the result of a price change, sensitive and responsive.
 
Demand is inelastic if..
Quantity demanded changes a small amount as a result of a price change, insensitive and unresponsive.
 
What does the price elasticity of demand measure?
The responsiveness of quantity demanded to a change in price.
 
If a friend says, "I am never going to buy another Dua Lipa remix again!" his or her price elasticity of
demand for Dua Lipa remixes is _______.
Inelastic
 
Salima is a devoted Coca-Cola consumer, whereas Antonia will drink either Coca-Cola or Pepsi products.
Salima's demand for Coca-Cola will be_________________________, while Antonia's demand will be
relatively more ________________________.
inelastic; melastic.
 
Five determinants in influencing whether demand will be elastic or inelastic
1. existence of substitutes
2. the share of the budget spent on the good
3. necessities versus luxury goods
4. whether the market is broadly or narrowly defined
5. time and the adjustment process
 
Suppose that when the price of cereal rises by 10%, the quantity demanded of cereal falls by 20%.
Based on this information, what is the approximate price elasticity of demand for cereal?
-20/10 = -2
 
Does the cost of producing a good affect the good's price elasticity of demand?
No, the actual price of the good is what forms the relationship
 
When the price increases by 20% and the quantity demanded drops by 20%, the price elasticity of
demand is ______________ elastic.
-20/20 = -1, unitary
 
When the price of scooters drops by 5%, the quantity demanded changes by 15%. We know that the
price elasticity of demand for scooters is_________________ elastic.
very
 
At a price of $2, the quantity demanded for pens is 16. When the price increases to $3, the quantity
demanded for pens is 14. Using the midpoint method, the price elasticity of demand for pens is
________________________.
inelastic
 
Suppose that the price elasticity of demand is -0.80 for aspirin. We could then say that the demand for aspirin is____________________.
Inelastic, since it is less than 1
 
Demand is almost always more price-elastic in the long run. T or F? Why?
True, more options become available and people can make different choices.
 
What is the responsiveness of quantity consumers buy to price changes, if a business finds that demand
for its good is very price elastic?
Price changes for these goods cause substantial changes in their demand or their supply.
 
"No matter the price, I will always buy five gallons of ice cream a week. I love ice cream!"
This statement reflects a price elasticity of demand that is ________________.
Perfectly inelastic, the price doesn't affect the consumers wants.
 
What kind of graph represents a relatively price-elastic demand for a good?
The demand curve is relatively flat
 
What kind of graphs depicts a price elasticity of demand of -0.2?
Since this is less than 1, the demand is inelastic, this graph is steep.
 
What kind of graphs depicts a price elasticity of demand of -5?
Since this is less than 1, the demand is inelastic, this graph is steep.
 
As we move downward along the demand curve, the price elasticity of demand _________________.
becomes more inelastic
 
When can a firm lower price and still increase revenue?
when the demand is elastic, a small decrease in price will lead to a large increase in quanitity
 
When the price elasticity of demand is - 0.36, a decrease in price will__________________.
result in a smaller percentage change in quantity demanded
 
A 15% increase in the price of cookies results in a 9% decrease in the quantity of cookies sold.
The revenue received by cookie suppliers will ______ because the price elasticity of demand for cookies is________.
increase, inelastic
 
A local merchant raises the price of his good and finds that his total revenues increase.
The demand for this good must have been ___________.
inelastic
 
When Heavenly Cookies prices its sugar cookies at $1.00, it sells 75 cookies. It lowers the price to $0.50 and
sells 200 cookies. Its total revenue _________________ because the price elasticity of demand for sugar cookies is ____________________.
rose, elastic
 
What good amongst gourmet pizza, steak, designer/fancy clothing or instant noodles is most likely to have
a negative income elasticity of demand?
instant noodles
 
When two goods are substitutes for each other, what will the cross-price elasticity be?
Positive
 
When you measure the change in the quantity demanded of one good because of a change in the price of
another good, you are measuring ___________________.
Cross price elasticity
 
If the cross-price elasticity of demand is -3, Goods A and B are _______________.
Complementary goods
 
If the cross-price elasticity of demand is 4, Goods A and B are _________________.
Substitute goods
 
Are Pepsi and Coke likely to have a positive or negative cross-price elasticity of demand? Why?
Positive since they are substitutes
 
Are Shoes and Socks likely to have a negative or positive cross-price elasticity of demand? Why?
Negative since they are complements
 
If the percentage change in quantity demanded of Good B is 2% and the percentage change in the price of
Good A is -10%, what is the cross-price elasticity of demand?
2/-10 = -0.2
 
If the supply of a good is perfectly inelastic, then the price elasticity of supply will equal ___________.
Zero
 
What is price elasticity of supply?
Shows the responsiveness of supply to a change in price
 
Over time, the price elasticity of supply becomes more inelastic. True or False?
False
 
A vertical supply curve can be described as _________________ inelastic.
Perfectly
 
A perfectly elastic supply curve is ___________________ . (vertical or horizontal)
Horizontal
 
Over time, the price elasticity of supply for sunglasses will become _______. (more elastic, more inelastic, or unchanged)
Elastic
 
As price elasticity of supply becomes more elastic over time, the overall shape of the supply curve
becomes________. (more horizontal, more vertical, or completely vertical)
more horizontal
 
If the price elasticity of supply is 1.5, we know that supply is __________________ elastic.
Relatively
 
A binding price ceiling is designed to:
keep prices low.
 
A price ceiling will have no effect if:
it is set above the equilibrium price
 
A price ceiling is:
a maximum price sellers are allowed to charge for a good or service.
 
If the government sets out to help low-income people by establishing a rent control:
a price ceiling has been set and a shortage of rental units may occur.
 
Rent controls in New York City cause which of the following:
black markets.
wasted resources resulting from the opportunity cost of time associated with trying to find an apartment.
inefficiently low quality.
All of the answers are correct.
 
The United States and the European Union impose price floors on many agricultural products.
These price floors lead to unwanted surpluses. To deal with a surplus:
the U.S. government in some cases has destroyed the surplus production.
 
Setting a price floor in the market for wheat usually:
increases the price paid by consumers
 
In Europe the minimum wage has led to:
widespread evasion of the minimum wage law in the black market for labor.
 
When the government imposes a limit on sales of a good or service by a quota, it usually issues a license that
gives the owner the right to sell a given quantity of the good. The market price of the license is equal to:
the quota rent and the wedge that represents the difference between the demand price and the supply price.
 
A price ceiling will create a persistent ________ and a price floor will create a persistent ________.
shortage; surplus
 
Price elasticity of demand measures the change in _______________ due to change in _______________.
demand; price.
 
Demand is elastic if...
Quantity demanded changes significantly as the result of a price change, sensitive and responsive.
 
Demand is inelastic if..
Quantity demanded changes a small amount as a result of a price change, insensitive and unresponsive.
 
What does the price elasticity of demand measure?
The responsiveness of quantity demanded to a change in price.
 
If a friend says, "I am never going to buy another Dua Lipa remix again!" his or her price elasticity of demand
for Dua Lipa remixes is ___________________.
Inelastic
 
Salima is a devoted Coca-Cola consumer, whereas Antonia will drink either Coca-Cola or Pepsi products.
Salima's demand for Coca-Cola will be________, while Antonia's demand will be relatively more _________.
inelastic; melastic.
 
Five determinants in influencing whether demand will be elastic or inelastic
1. existence of substitutes
2. the share of the budget spent on the good
3. necessities versus luxury goods
4. whether the market is broadly or narrowly defined
5. time and the adjustment process
 
Suppose that when the price of cereal rises by 10%, the quantity demanded of cereal falls by 20%.
Based on this information, what is the approximate price elasticity of demand for cereal?
-20 / 10 = -2
 
Does the cost of producing a good affect the good's price elasticity of demand?
No, the actual price of the good is what forms the relationship
 
When the price increases by 20% and the quantity demanded drops by 20%, the price elasticity of demand is ______ elastic.
-20 / 20 = -1, unitary
 
When the price of scooters drops by 5%, the quantity demanded changes by 15%. We know that the price
elasticity of demand for scooters is_________________ elastic.
very
 
At a price of $2, the quantity demanded for pens is 16. When the price increases to $3, the quantity demanded
for pens is 14. Using the midpoint method, the price elasticity of demand for pens is
________________________.
inelastic
 
Suppose that the price elasticity of demand is -0.80 for aspirin. We could then say that the demand for aspirin is_________.
Inelastic, since it is less than 1
 
Demand is almost always more price-elastic in the long run. T or F? Why?
True, more options become available, and people can make different choices.
 
What is the responsiveness of quantity consumers buy to price changes, if a business finds that demand for
its good is very price elastic?
Price changes for these goods cause substantial changes in their demand or their supply.
 
"No matter the price, I will always buy five gallons of ice cream a week. I love ice cream!" This statement reflects a price
elasticity of demand that is _______.
Perfectly inelastic, the price doesn't affect the consumers wants.
 
What kind of graph represents a relatively price-elastic demand for a good?
The demand curve is relatively flat
 
What kind of graphs depicts a price elasticity of demand of -0.2?
Since this is less than 1, the demand is inelastic, this graph is steep.
 
What kind of graphs depicts a price elasticity of demand of -5?
Since this is less than 1, the demand is inelastic, this graph is steep.
 
As we move downward along the demand curve, the price elasticity of demand _________________.
becomes more inelastic
 
When can a firm lower price and still increase revenue?
when the demand is elastic, a small decrease in price will lead to a large increase in quantity
 
When the price elasticity of demand is - 0.36, a decrease in price will__________________.
result in a smaller percentage change in quantity demanded
 
A 15% increase in the price of cookies results in a 9% decrease in the quantity of cookies sold. The revenue received
by cookie suppliers will _________________ because the price elasticity of demand for cookies is_____________.
increase, inelastic
 
A local merchant raises the price of his good and finds that his total revenues increase.
The demand for this good must have been __________________.
inelastic
 
When Heavenly Cookies prices its sugar cookies at $1.00, it sells 75 cookies. It lowers the price to $0.50 and
sells 200 cookies. Its total revenue _______ because the price elasticity of demand for sugar cookies is _________.
rose, elastic
 
What good amongst gourmet pizza, steak, designer/fancy clothing or instant noodles is most
likely to have a negative income elasticity of demand?
instant noodles
 
When two goods are substitutes for each other, what will the cross-price elasticity be?
Positive
 
When you measure the change in the quantity demanded of one good because of a change in the
price of another good, you are measuring ___________________.
Cross price elasticity
 
If the cross-price elasticity of demand is -3, Goods A and B are _______________.
Complementary goods
 
If the cross-price elasticity of demand is 4, Goods A and B are _________________.
Substitute goods
 
Are Pepsi and Coke likely to have a positive or negative cross-price elasticity of demand? Why?
Positive since they are substitutes
 
Are Shoes and Socks likely to have a negative or positive cross-price elasticity of demand? Why?
Negative since they are complements
 
If the percentage change in quantity demanded of Good B is 2% and the percentage change in the price
of Good A is -10%, what is the cross-price elasticity of demand?
2 / -10 = -0.2
 
If the supply of a good is perfectly inelastic, then the price elasticity of supply will equal __________.
Zero
 
What is price elasticity of supply?
Shows the responsiveness of supply to a change in price
 
Over time, the price elasticity of supply becomes more inelastic. True or False?
False
 
A vertical supply curve can be described as _________________ inelastic.
Perfectly
 
A perfectly elastic supply curve is ___________________ . (vertical or horizontal)
Horizontal
 
Over time, the price elasticity of supply for sunglasses will become _______.
(more elastic, more inelastic, or unchanged)
Elastic
 
As price elasticity of supply becomes more elastic over time, the overall shape of the supply curve
becomes_________. (more horizontal, more vertical, or completely vertical)
more horizontal
 
If the price elasticity of supply is 1.5, we know that supply is __________________ elastic.
Relatively