Question 1

The rationing function of prices refers to the:

Accepted Answer

capacity of a competitive market to equalize quantity demanded and quantity supplied.

Question 2

There will be a surplus of a product when:

Accepted Answer

b. consumers want to buy less than producers offer for sale.

Question 3

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes:

Accepted Answer

a. the income effect.

Question 4

One reason that the quantity demanded of a good increases when its price falls is that the:

Accepted Answer

d. lower price increases the real incomes of buyers, enabling them to buy more.

Question 5

An effective price floor will:

Accepted Answer

d. result in a product surplus. Correct

Question 6

A price ceiling means that:

Accepted Answer

a. government is imposing a legal price that is typically below the equilibrium price. Correct

Question 7

A market is in equilibrium:

Accepted Answer

c. if the amount producers want to sell is equal to the amount consumers want to buy.

Question 8

Price floors and ceiling prices:

Accepted Answer

c. interfere with the rationing function of prices.

Question 9

A government subsidy to the producers of a product:

Accepted Answer

b. increases product supply.

Question 10

By an increase in demand, economists mean that:

Accepted Answer

d. the quantity demanded at each price in a set of prices is greater.

Question 11

The French term laissez-faire means:

Accepted Answer

let it be

Question 12

The term laissez-faire suggests that:

Accepted Answer

government should not interfere with the operation of the economy

Question 13

Command systems are also known as:

Accepted Answer

Communism

Question 14

Specialization in production is important primarily because it:

Accepted Answer

results in greater total output

Question 15

Barter:

Accepted Answer

entails the exchange of goods for goods

Question 16

the competitive market system

Accepted Answer

encourages innovation because successful innovators are rewarded with economic profits.

Question 17

In a competitive market economy, firms select the least cost production technique because:

Accepted Answer

to do so will maximize the firms' profits

Question 18

The market systems answer to the fundamental question How will the goods and services be produced? is essentially:

Accepted Answer

in ways that minimize the cost per unit of output

Question 19

The market systems answer to the fundamental question how will the system accommodate change? is essentially:

Accepted Answer

Through the guiding function of prices and the incentive function of profits

Question 20

The advent of dads has virtually demolished the market for videocassettes This is an example of:

Accepted Answer

Creative destruction

Question 21

Consumer sovereignty means that:

Accepted Answer

buyers determine what will be produced based on their dollar votes for the goods and services offered by sellers

Question 22

The invisible hand refers to the:

Accepted Answer

notion that, under competition, decisions motivated by self-interest promote the social interest

Question 23

Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is now way to exploit this opportunity for personal gain. This situation best identifies the:

Accepted Answer

Incentive problem under communist central planning

Question 24

Which of the following will enable a nation to obtain a combination of consumer goods and capital goods outside its production possibilities curve?

Accepted Answer

a. International specialization and trade.

Question 25

A production possibilities curve shows:

Accepted Answer

b. the maximum amounts of two goods that can be produced, assuming the full use of available resources. Correct

Question 26

Unemployment:

Accepted Answer

is illustrated by a point inside the production possibilities curve.

Question 27

Any point inside the production possibilities curve indicates:

Accepted Answer

c. that more output could be produced with the available resources.

Question 28

The typical production possibilities curve is:

Accepted Answer

a. a downsloping line that is bowed out from the origin. Correct

Question 29

The slope of the typical production possibilities curve:

Accepted Answer

c. increases as one moves southeast along the curve.

Question 30

The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve indicates that:

Accepted Answer

b. the principle of increasing opportunity costs is relevant.

Question 31

(Consider This) The assertion by economists that there is no free lunch:

Accepted Answer

b. remains true even for goods given away free by firms. Correct

Question 32

Other things equal, an increase in a consumer's money income:

Accepted Answer

b. shifts the individual's budget line rightward because she can now purchase more of both products.

microeconomics chapters 1-3 example #54437

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