Saylor Academy ECON101: Direct Credit Exam Questions and Answers

Saylor Academy ECON101: Direct Credit Exam Questions and Answers Q: Why does scarcity exist? - answerResources are limited. Which of the following is the most fundamental concept in economics? - answerScarcity The Greek word for "economy" is oikonomos, which literally means a person who: - answermanages a household. What does the term "capital" refer to in economics? - answerThe equipment, and buildings used by firms According to the production possibility frontier below, the economy of this country can produce 50 boats and 25 cars (point Z). For strategic reasons the government would like to produce 45 boats and 35 cars (point Y). What advice would you give to the government of this country? IMAGE - answerIt is an impossible goal because there are too few resources. Equality and efficiency are both terms used to judge economic outcomes. Although they share similarities in meaning, they are different in which of the following ways? - answerEquality refers to a uniform distribution of economic benefits, while efficiency refers to a maximization of economic benefits. A firm has the lowest opportunity cost to produce a product when it: - answergives up the least to make the product. In the circular flow model, what are the two main groups of actors in the economy? What are the two markets that make up the economy? - answerThe main groups of actors are households and firms, and the two markets are the goods/services market and the market for the factors of production. Suppose that baristas at a coffee shop currently earn the legal minimum wage. What is likely to happen if the minimum wage increases to $15 an hour? - answerThe supply of coffee will shift to the left. Hops is an input in the production of beer. The demand for beer is declining. How will this affect hops? - answerThe demand for hops will decrease. The supply of a good is determined by: - answersellers of the good present in the market Some of the determinants of demand are: - answerprice, price of compliments and tastes/preferences. If producers of a certain product are pessimistic or uncertain about the future business climate, how will the supply of the product behave? - answer-TRY This expectation will affect future supply but not today's supply -NOT This expectation will cause movement along the supply curve. The price for a good decreases in price from $2.50 per unit to $1.50 per unit. As a result, the amount purchased increases from 300 units per day to 500 units per day. What is the price elasticity of demand for this good? - answer-TRY 1.0 The Smith family's income increases by 25%. What impact will this have on their spending habits? - answerThere will be a shift in demand for all goods, and the Smiths will consume more compared to before the increase in income. Effective price control will result in either shortage or surplus. What additional actions are needed to counter these unwanted effects? - answerProduction quotas and rationing must be imposed. The following table presents the supply and demand schedules for volleyballs. There are protests, and volleyball supporters march on Washington to demand that volleyballs be made more affordable. A concerned President approaches Congress, and Congress repeals its policy of a price floor for volleyballs and imposes a price ceiling of $9 ($1 below the former price floor of $10). What are the consequences of this price ceiling? IMAGE - answerThere will be market equilibrium with 600 volleyballs sold at a price of $8 each. In a competitive market people: - answercompete to achieve the collective good. Why are markets more responsive to the preferences of people with high incomes than to those of people with low incomes? - answerConsumer demand is affected by income, and the market responds in an efficient manner to consumer demand. According to the figure below, how much is spent by consumers purchasing bananas? How much does it cost producers to supply that amount? IMAGE - answerConsumers spend $9,000, and producers' costs are $9,000. According to the figure below, t