Questions and Answers
Which of the following statements is true about scarcity?
A grocery store sells a bag of potatoes at a fixed price of $2.30. Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?
According to the figure above, point A is:
Trina's Tropical Fish Store sells goldfish for $2 each and angelfish for $10 each. What is the opportunity cost of buying a goldfish?
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Refer to the table above, which of the following statements is true?
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If, in response to an increase in the price of chocolate, the quantity of chocolate demanded decreases, economists would describe this as:
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If the product in question is an inferior good, an increase in income would be represented by a movement from:
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Which of the following would cause a decrease in the supply of drinking milk?
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Assume that both the demand curve and the supply curve for MP3 players shift to the right, but the supply curve shifts more than the demand curve. As a result:
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Blu-ray players were introduced to the market in 2006, and new technology has allowed for the cost of manufacturing the players to decline significantly since their initial introduction. How did this change in technology affect the market for Blu-ray players?
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Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is the price elasticity of demand (in absolute value) over this range?
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Based on the table above, which of the following statements is true?
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If the demand for a life-saving drug was perfectly inelastic and the price doubled, the quantity demanded would:
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The price elasticity of demand for beef is estimated to be -0.60. This means that a 20 percent increase in the price of beef, holding everything else constant, will cause the quantity of beef demanded to:
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Seth is a competitive bodybuilder. He says he has to have his 12-gram package of protein powder to 'feed his muscles' every day. On the basis of this information, what can you conclude about his price elasticity of demand for protein powder?
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A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor. This is an example of:
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Red Stone Creamery currently hires 5 workers. When it added a 6th worker, its output actually fell. Which of the following statements is true?
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When a firm produces 50,000 units of output, its total cost equals $6.5 million. When it increases its production to 70,000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is:
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Suppose you have just opened a store to sell espresso machines. Both you and a competing store buy this machine from a manufacturer for $130 each. Your competitor, who has a store of the same size as yours, is currently selling about 10 machines a month at a price of $200 per machine. You expect to sell about 6 machines a month at a price of $220 per machine. If you lower your price, you expect to incur a loss. Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for both of you?
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Based on the table above, which of the following statements is true?
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Study Notes
Scarcity and Economics
- Scarcity is a fundamental economic problem affecting all individuals, regardless of wealth.
- It arises due to limited resources compared to unlimited wants and is not solely a population issue.
- Opportunity cost represents the value of the next best alternative forgone when making decisions.
Revenue and Profit
- Marginal Revenue refers to the additional income from selling one more unit of a good.
- Opportunity cost of purchasing a goldfish involves considering the alternatives, such as the value of angelfish foregone.
Comparative Advantage
- Comparative advantage occurs when a party can produce a good at a lower opportunity cost than another party.
- In production, if one jeweller has a higher output efficiency for one good, they possess a comparative advantage in that good over the other.
Demand and Supply
- A decrease in quantity demanded occurs with an increase in price, illustrating the law of demand.
- The graph representation of inferior goods indicates demand shifts when income changes. An increase in income typically decreases demand for inferior goods.
Market Dynamics
- Supply for goods like milk can decrease due to rising prices of complementary goods, showing interdependence in markets.
- When both supply and demand shift, the effect on equilibrium price and quantity depends on the relative magnitudes of these shifts.
Price Elasticity
- Price elasticity of demand quantifies consumer reaction to price changes. A perfectly inelastic demand results in unchanged quantity regardless of price.
- If demand is elastic, price increases could lead to decreased total revenue, contrary to inelastic demand where total revenue rises.
Supply Side Considerations
- Firms might experience diminishing returns, where adding extra labor results in lower output efficiency.
- Marginal cost, derived from changes in total cost with production volume, is crucial for profit maximization decisions in production.
Economic Strategies
- Competitive advantages such as lower marginal costs can allow companies to price competitively.
- Understanding the relationship between average total costs and output levels aids firms in deciding optimal production quantities for profit maximization.
Aggregate Knowledge
- For effective decision-making in economics, knowing concepts like scarcity, opportunity cost, comparative advantage, elasticity, and cost structures is essential.
- These concepts form the backbone of understanding consumer behavior, firm strategy, and market dynamics.
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Description
Test your understanding of basic economics concepts with this multiple choice quiz. Questions cover topics such as scarcity and pricing in grocery markets. Ideal for students looking to reinforce their knowledge in economic principles.
