Markets & Consumer Behavior
When economists refer to utility, they are referring to: only when something is useful; what must be sacrificed to obtain something else; a situation where what we want exceeds what we have; the satisfaction gained from consuming a good
the satisfaction gained from consuming a good
Libraries and museums are quasi-public goods because: government also provides them to avoid an underallocation of resources to this type of good; exclusion from such goods is not possible; the private market system will not produce them; they have large negative externalities.
government also provides them to avoid an underallocation of resources to this type of good.
The price elasticity of demand coefficient measures: buyer responsiveness to price changes; the extent to which a demand curve shifts as incomes change; the slope of the demand curve; how far business executives can stretch their fixed costs.
buyer responsiveness to price changes.
To the economist, total cost includes: explicit and implicit costs; neither implicit nor explicit costs; implicit, but not explicit, costs; explicit, but not implicit, costs.
explicit and implicit costs
Economic systems differ according to which two main characteristics? (how goods are produced and who gets them) or (who owns the factors of production and the methods used to coordinate economic activity)?
who owns the factors of production and the methods used to coordinate economic activity
According to the concept of diminishing marginal utility, consumers will purchase more of a good when the price falls because: substitutes are relatively more expensive; consumers' real income has increased; the marginal benefit of additional units of the good now outweigh the marginal cost; the good is now perceived as having higher quality
the marginal benefit of additional units of the good now outweigh the marginal cost
Market failures: concern when they result in prices that are too high; apply exclusively to situations where markets do not produce any of an economically desirable good; result in overproduction or underproduction of a good; result from government interference in markets
result in overproduction or underproduction of a good
What two conditions must hold for a competitive market to produce efficient outcomes? (Demand curves must reflect all costs of production, and supply curves must reflect consumers' full willingness to pay) OR (Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay)
Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay.
Which of the following would not shift the supply curve for beef? an increase in the number of cattle ranches; an increase in cattle feed; an effective advertising campaign by pork producers; new technologies that provide real-time tracking of cattle
an effective advertising campaign by pork producers
ch of the following is a distinguishing feature of laissez-faire capitalism? public ownership of all capital; central planning; minimal government intervention; an economy based on bartering
minimal government intervention
Which of the following best explains the difference between neoclassical economics and behavioral economics? Neoclassical economics believes that government should play a minimal role in the economy, while behavioral economics calls for a more active role for government; OR Neoclassical economics assumes that people are rational in their decision making, while behavioral economics believes people make systematic errors.
Neoclassical economics assumes that people are rational in their decision making, while behavioral economics believes people make systematic errors.
T/F: In a market economy, the government is not the dominant economic force in deciding what to produce, how to produce it, and who will get it.
True
Which of the following is is not characteristic of the demand for a commodity that is elastic? The relative change in quantity demanded is greater than the relative change in price; Buyers are relatively sensitive to price changes; Total revenue increases if price is increased; The elasticity coefficient is greater than one.
Total revenue increases if price is increased
Which of the following is most likely to be an implicit cost for the Nike Shoe Company? rent paid for the building space used by Nike; payments to the firm's rubber suppliers; shipping costs for the finished products; the interest income the owners are not receiving because their money is tied up in the business
the interest income the owners are not receiving because their money is tied up in the business
In which of the following industry structures is the entry of new firms the most difficult? monopolistic competition; oligopoly; pure monopoly; pure competition
pure monopoly
When economists say that people act rationally in their self-interest, they mean that individuals: generally disregard the interests of others; look for and pursue opportunities to increase their utility; are mainly creatures of habit; are usually impulsive and unpredictable.
look for and pursue opportunities to increase their utility
Nonrivalry and nonexcludability are the main characteristics of: consumption goods; capital goods; private goods; public goods.
public goods
T/F: The smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it.
False
Which of the following is most likely to be an explicit cost for the Nike Shoe Company? rent that could have been received if the company-owned building wasn't used for production and storage; payments to the firm's rubber suppliers; the interest income forgone by the owners because their money is tied up in the business; These are all explicit costs.
payments to the firm's rubber suppliers
An industry comprising four firms, each with about 25 percent of the total market for a product, is an example of; monopolistic competition; oligopoly; pure monopoly; pure competition
oligopoly
Total utility may be determined by: multiplying the marginal utility of the last unit consumed by the number of units consumed; summing the marginal utilities of each unit consumed; multiplying the marginal utility of the last unit consumed by product price; multiplying the marginal utility of the first unit consumed by the number of units consumed.
summing the marginal utilities of each unit consumed
Demand-side market failures occur when: demand curves underreport how much consumers are willing to pay for a good or service; demand curves don't reflect the full cost of producing a good or service; government imposes a tax on a good or service; a good or service is not produced because no one wants it.
demand curves underreport how much consumers are willing to pay for a good or service
If the demand for Product X is inelastic, a 4 percent decrease in the price of X will ___________ the quantity of X demanded by _______ than 4 percent. (increase/decrease;more/less)
If the demand for Product X is inelastic, a 4 percent decrease in the price of X will increase the quantity of X demanded by less than 4 percent.
Accounting profits are typically: greater than economic profits because the former do not take explicit costs into account; equal to economic profits because accounting costs include all opportunity costs; greater than economic profits because the former do not take implicit costs into account.
greater than economic profits because the former do not take implicit costs into account.
Which of the following is a distinguishing feature of a command system? private ownership of all capital; central planning; heavy reliance on markets; widespread dispersion of economic power
central planning