If the state government allocates additional spending on education, the opportunity cost is measured in terms of
the alternative uses for that money
A good is inferior: when income increases, demand
decreases
If an increase in the price of a good leads to an increase in total revenue, then the demand curve
must be price inelastic
Peanut butter is an inferior good. If there is an increase in income, total surplus in the peanut butter market will
decrease
Maximum total surplus in the market for chocolate occurs when
the market is in equilibrium
Egg producers know that the elasticity of demand for eggs is 0.1. If they want to increase sales by 5%, they will have to lower the price by
50%
When the price of an inferior good falls, the substitution effect contributes to a(n) _________ in the quantity demanded and the income effect _________ the substitution effect.
increase; opposes
If a good is a necessity with few substitutes, then the price elasticity of demand will tend to be
lower
A shift to the left of a supply curve is caused by
an increase in the cost of an input
The Kansas market for corn is considered a competitive market. This means there are ______ buyers and _____ sellers of corn in Kansas.
many; many
If there price of chocolate-covered peanuts increases and the demand for strawberry-flavored soft drinks decreases, this indicates that these two goods are
complementary goods
Hugo Chavez is the current president of Venezuela. Venezuela is a major producer of oil products, which remain the keystone of Venezuela's economy. Suppose President Chavez wants to increase his popularity with his citizens and enacts a government policy
price ceiling
The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to 0.2 and demand is described as
inelastic
Taxes paid on the purchase of specific items such as gasoline, cigarettes, or alcoholic beverages would fall into the category of
excise taxes
When an individual knows more about his or her own actions than other people do, incentives are distorted, which creates
moral hazard
We are forced to make choices because of
scarcity
Consider the market for iPods. What happens if a fantastic new MP3 player is developed and, at the same time, a boat carrying a large shipment of iPods is attacked by sea monsters and sunk? The change in price is ___________ and quantity ________
indeterminate; decreases
If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price is above the
market equilibrium price
Consider the market for milkshakes. An increase in the consumer surplus may result form
an increase in the supply of milkshakes
The income effect of a price change is the effect on the consumption of a good due to a change in purchasing power caused by
a change in the price of a good
Abe starts exercising regularly, and after a few month discovers he can now do twice as much of everything-in a single day Abe can now make 10 hamburgers and 8 milkshakes, rather than the 5 hamburgers and 4 milkshakes he made in the past. We now know that
right; are unchanged
Economists usually make the assumption that production is subject to increasing opportunity costs because
all resources are not equally suited to produce every good
If the government imposes an excise tax in a market in which the demand curve is perfectly inelastic, the burden of the tax will fall completely on the ________ and the deadweight loss will equal ________
consumers; zero
An economy that has the lowest cost for producing a particular good is said to have a(n)
comparative advantage
The opportunity cost of something is
what is given up to acquire it
Suppose the government imposes a $10 excise tax on the sale of sweaters by changing suppliers $10 for each sweater sold. Based on economic analysis, we would predict that the equilibrium price of sweaters will
increase by less than $10
In the simplest circular-flow model, household supply ______ and demand _______
factors of production; goods and services
Which of the following will not cause an increase in the supply of cornflakes?
an increase in the price of cornflakes
If Brazil gives up 3 automobiles for each ton of coffee it produces, while Peru gives up 7 automobiles for each ton of coffee it produces, then Brazil has a ____________ in coffee production and should specialize in coffee production
comparative advantage
Nico's DVD rentals increase by 10% when his income increases by 20%. Based on this information, we know that
DVDs are a normal good
A men's tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie. The absolute value of the price elasticity of demand, using the midpoint method is
equal to 1
U.S. workers moving to Canada may be represented by a(n) _______ shift in the U.S. economy's production possibility frontier
Inward
The increase of income of buyers may result in a shift to the ________ on the demand curve for videos
right
Painting by Van Gogh would most likely have a ______ supply curve
vertical
The price elasticity of demand is computed as the percentage change in
quantity demanded divded by the percentage change in price
A Giffen good is one in which the demand curve is sloped
positively
A newspaper story recently reported that the price of new cars has decreased, and the quantity of new cars sold has dropped. The price and quantity changes were probably caused by
a decrease in buyer's income
In Kessy's old kitchen, he could bake 10 cookies or mix 15 glasses of lemonade in one day. Now Kessey has a larger oven and refrigerator. How does this impact his production possibility frontier?
It increases his production possibility froniter
Buying a house directly from the previous owner is an example of a situation where ___________ is most likely a problem
adverse selection