American Military University ECON 201 / ECON201 - Midterm - Quiz 4

ECON 201 – Midterm Question 1 of 28 Economics is the study of: A. increasing the level of productive resources so there is maximum output in society. B. increasing the level of productive resources so there is a minimum level of income. C. how people, institutions, and society make choices under conditions of scarcity. D. the efficient use of scarce resources paid for at the minimum level of cost to consumers and businesses. Question 2 of 28 Which of the following is not a central focus of the "economic perspective"? A. Scarcity and choice. B. The scientific method. C. Purposeful behavior. D. Marginal analysis. Question 3 of 28 The satisfaction or pleasure one gets from consuming a good or service is: A. price. B. utility. C. consumption. D. preferences. Question 4 of 28 The private ownership of property resources and use of prices to direct and coordinate economic activity is characteristic of: A. a command system. B. a market system. C. communism. D. socialism. Question 5 of 28 Which statement best describes a capitalist economy? A. The production of goods and services is determined primarily by markets, but the allocation of goods and services is determined primarily by government. B. The production of goods and services is determined primarily by government, but the allocation of goods and services is determined primarily by markets. C. The production and allocation of goods and services is determined primarily through markets. D. The production and allocation of goods and services is determined primarily through government. Question 6 of 28 Capitalism is an economic system that: A. produces more capital goods than consumer goods. B. produces more consumer goods than capital goods. C. gives the government the right to tax individuals and corporations. D. private individuals and corporations the right to own productive resources. Question 7 of 28 In a market system, well-defined property rights are important because they: A. reduce unnecessary investment. B. limit destructive economic growth. C. create economic problems. D. encourage economic activity. Question 8 of 28 If two goods are complements: A. they are consumed independently. B. an increase in the price of one will increase the demand for the other. C. a decrease in the price of one will increase the demand for the other. D. they are necessarily inferior goods. Question 9 of 28 When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. In this range of prices, demand for this product is: A. elastic. B. inelastic. C. cross-elastic. D. unitary elastic. Question 10 of 28 Demand can be said to be inelastic when: A. an increase in price results in a reduction in total revenue. B. a reduction in price results in an increase in total revenue. C. a reduction in price results in a decrease in total revenue. D. the elasticity coefficient exceeds one. Question 11 of 28 Economic growth is shown by a shift of the production possibilities curve outward and to the right. A. True B. False The four factors of production are land, labor, capital, and government services. A. True B. False Question 13 of 28 If demand increases and supply simultaneously decreases, equilibrium price will rise. A. True B. False Question 14 of 28 Property rights have a positive effect in a market economy because they encourage owners to maintain their property. A. True B. False Question 15 of 28 In the price range where demand is inelastic, a decrease in price will result in a decrease in total revenue. A. True B. False Question 16 of 28 Price elasticity of supply decreases the longer the time period. A. True B. False Question 17 of 28 Toothpaste and toothbrushes are substitute goods. A. True B. False A government-set price ceiling will lower equilibrium price and quantity in a market. A. True B. False Question 19 of 28 Exhibit: Demand for Shirts) The price elasticity of demand for the segment AB is: A. -13 B. -11 C. -0.91 D. -0.1 Exhibit: Demand for Shirts) The price elasticity of demand for the segment BC is: A. greater than 3.33 (absolute value). B. -3.33. C. -3. D. -0.33. Exhibit: Demand for Shirts) The price elasticity of demand for the segment CD is: A. greater than 1 (absolute value). B. -1. C. -0.71. D. -0.29. (Exhibit: Markets and Efficiency) In panel (a): A. the price of apples is $0.80 and the quantity demanded is Q1. B. the equilibrium price ensures that quantity demanded will match quantity supplied. C. the equilibrium price ensures that there will be neither surpluses nor shortages. D. all of the above are true. (Exhibit: Markets and Efficiency) The equilibrium price in Panel (a) tells us that the marginal cost of a pound of apples is: A. less than $0.80. B. equal to $0.80. C. greater than $0.80. D. equal to the average cost of producing apples. (Exhibit: Markets and Efficiency) The price and marginal cost in Panel(a) are equal because of: A. the marginal decision rule. B. the law of demand. C. the law of supply. D. the law of increasing cost. (Exhibit: Markets and Efficiency) What is the marginal benefit to a producer of an extra pound of apples in Panel (a)? A. It is the price the producer receives. B. It is the price the consumer receives. C. It is the price the producer pays. D. It is all of the above. (Exhibit: Markets and Efficiency) What is the marginal cost of an extra pound of apples to a producer in Panel(a)? A. It is greater than the price. B. It is the value that must be given up to produce an extra pound of apples. C. It must be less than the price. D. It is the cost of the least satisfactory apples. (Exhibit: Markets and Efficiency) In Panel (b) demand shifted from D1 to D2, reflecting a change in consumer preferences. The price of apples will change to the new equilibrium price: A. where the marginal benefit of apples is again equal to the marginal cost. B. of $0.70. C. where an efficient solution is again achieved. D. that is described by all of the above. Question 28 of 28 What effect on the price elasticity of demand for commuter rail is there likely to be from a decrease in the price of gasoline? Explain your answer. Maximum number of characters (including HTML tags added by text editor): 32,000 The effect a decrease in the price of gasoline may have on the price elasticity of demand for commuter rail depends on the area. Economists explain this through the concept of elasticity that can be calculated. Elasticity is demonstrated in a percentage change between a dependent variable to an independent variable. A price lower than the equilibrium price increases the quantity demanded and reduces the quantity supplied, causing a shortage.