Foundations of Microeconomics Scarcity, Choice, and Opportunity Cost. 25 Questions and Answers.

Foundations of MicroeconomicsScarcity, Choice, and Opportunity CostPeople respond to incentives blank_______.A by ignoring negative incentives and responding to positive incentives onlyB only when they are irrationalC by calculating their individual costs and benefits and determining which is greaterD when they have low incomesBecause the resources immediately available for use are limited, blank_______.A only the wealthiest people will get everything they wantB people must make choices about resource useC eventually population growth will exceed resource availability, leading to famineand starvationD markets can become arenas for vicious competition between producers andconsumersAn incentive blank_______.A is the opposite of a tradeoffB could be a reward but could not be a punishmentC could be either a reward or a punishmentD could be a punishment but could not be a rewardIn economics, the opportunity cost of doing something is blank_______.A total costsB the money, out-of-pocket expenditureC the value of the next best opportunity not takenD the value that you place on the opportunity takenThe optimal amount of studying is determined by comparing the blank_______.A marginal benefit and the total cost of studyingB marginal benefit and the total benefit of studyingC marginal benefit and the marginal cost of studyingD total benefit and marginal cost of studyingSupply and DemandFor any good or service, we can represent the quantity demanded under various prices by blank_________.A a demand curveB a point on a demand curveC the value of goods and services purchased and held by consumersD the intercept on the Y-axisPotatoes are used in the production of potato chips. Suppose the price of potatoes falls. Then,_______.A it is likely that the demand for potato chips will fallB it is likely that a movement along the supply curve of potato chips will occurC it is unlikely that there will be a change in demand or supply D it is likely an outward shift in the supply curve of potato chipsGiven that digital music players are used to play music downloaded from the Internet, a fall in the price of digitalmusic players will lead to blank_______.A an increase in the price of broadband plansB an increase in the price of personal laptopsC an increase in the demand for downloaded songsD a decrease in the price of a song downloadWhich of the following would necessarily cause a decrease in the price of a product?A An increase in the number of buyers and a decrease in the price of an input.B An increase in the number of buyers and a decrease in the number of firmsproducing the product.C A decrease in the price of a substitute product and an improvement in productiontechnology.D An increase in average income and an improvement in production technology.Suppose the price of hamburgers rises, and you observe that as a result, the demand for hotdogs rises. This makeshotdogs and hamburgers blank_______.A normal goods B complementsC substitutesD inferior goodsElasticitySuppose the demand is perfectly inelastic. The implication would be that the smallest change in price would resultin________.A no change in quantityB a small change in quantityC no change in priceD a small change in priceFor goods and services that have an elastic demand, if price is increased, total revenue_______.A does not changeB is not a function of price C decreasesD increasesGoods and services that are independent of each other have a cross elasticity of demand that is ________.A negativeB positiveC 0D positive infinityA perfectly elastic demand is a ___________curve.A verticalB horizontalC negativeD positiveWhich of the following products is likely to have the most elastic demand? A CigarettesB Coca ColaC Life-saving medicineD GasolineProduction and CostsWhat of the following statements best summarizes the law of diminishing marginal returns?A As more labor is hired, the length of time that defines the short run diminishes.B In the short run, as more labor is hired, output diminishes.C In the short run, the amount of labor a firm will hire diminishes as output increases. D In the short run, as more labor is hired, output increases at a diminishing rate.A legal entity, in its own right, that can be closely held (with few shareholders) or widely held (with hundreds ofthousands of shareholders is called________.A sole proprietorshipB partnershipC cooperativeD corporationAll other inputs remaining the same, the additional output that may result from an additional unit of laboris________.A marginal costB marginal productC marginal revenueD marginal utilityAverage total costs is equal to which of the following?A The sum of average variable costs, average fixed costs, and marginal costs B The product of average variable costs and quantity producedC Total variable costs divided by total marginal costsD The sum of average variable costs and average fixed costsProfit maximization occurs when_____________.A firm expands output until marginal revenue is exceeded by marginal costB a firm expands output until marginal revenue is equal to marginal costC the price in the market is equal to the firm’s marginal revenueD total costs equal total revenue