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### 16 Cards in this Set

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• Back
 A law requiring sellers to pay the government a tax per pack on cigarettes has the effect of: a.) shifting the supply curve to the right b.) shifting the demand curve to the right c.) shifting the supply curve to the left d.) shifting the demand curve to the left c.) shifting the supply curve to the left Unintended costs that are imposed in third parties as a result of an economic activity are called: a.) marginal costs b.) direct costs c.) negative externalities d.) positive externalities e.) positive costs c.) negative externalities *missed this one Assume the total utilities corresponding to the first four units of a product consumed are 8,12,14,and 15. The marginal utility of the 2nd unit consumed is. a.) 0 b.) 4 c.) 12 d.) 20 b.) 4 Assume the price of pizza decreases. As a result, your real income increases and you increase the quantity of pizza purchased each month. This is an example of the: a.) substitution effect b.) income effect c.) revenue effect d.) consumer price effect b.) income effect To determine whether two goods are substitutes or complements, an economist would estimate the: a.) price elasticity of demand b.) income elasticity of demand c.) cross-elasticity of demand d.) price elasticity of supply c.) cross-elasticity of demand Assume that an individual consumes only coffee and bagels and that the last cup of coffee yields 12 utils and the last bel 6 utils. If the price of a cup of coffee is \$1 and the price of the bagel is .50, we can conclude: a.) consume should consume more coffee and fewer bagels b.) price of coffee is too high relative to bagels c.) consumer should consume less coffee and more bagels d.) consume is in equilibrium d.) consume is in equilibrium Assume that the production of a good imposes external costs upon third parties. If the price and quantity of this good is set by supplly and demand the price will be too: a.) high and quantity too low for efficient resource allocation b.) low and quantity too low for efficient resource allocation c.) low and quantity to high for efficient resource allocation d.) high and quantitiy too high for efficient resource allocation c.) low and quantity to high for efficient resource allocation *missed this one When marginal product is less than average product: a.) marginal product must be rising b.) total product must be declining c.) average product must be falling d.) marginal product may be rising, falling, or at its maximum c.) average product must be falling A negative sign under cross-price elasticity of demand would indicate that the product involved would be: a.) normal good b.) subsititute good c.) inferior good d.) complimentary good d.) complimentary good When externalitities are presetn, the private or free market system will tend to: 1) underallocate resources to the production of goods that generate social costs and 2) overallocate resources to the productions of goods that generate social benefits a.) 1 is true, 2 is false b.) 1 is true, 2 is true c.) 1 is false, 2 is true d.) 1 is false, 2 is false d.) 1 is false, 2 is false When the price of a product decreases, and it is now perceived to be relatively cheaper than other products whose price has not changed, and as a result consumers increase their quantity demanded of this product -- this phenomenon in econimcs is called. a.) the substitution effect in consumer demand theory b.) the law of demand only c.) the income effect in consumer demand theory d.) a change in the price-of-relate-goods determinant of demand. a.) the substitution effect in consumer demand theory The elasticity of damnd for a product is likely to be smaller: a.) the larger the number of subsitute products available. b.) the larger the proportion of on'es income spent ont eh products c.) the greater the amount of time over which buyers have to adjust to a price change d.) if the product is considered as a "necessity" rather than as a "luxury" d.) if the product is considered as a "necessity" rather than as a "luxury" The statement "as more of a good is consume, the utitlity of a person derives from each additional unti diminishes" is know as the: a.) water and diamond paradox b.) law of diminishing marginal utility c.) law of total utility d.) marginal-utility-to-price ratio equalization rule e.) law of diminishing demand b.) law of diminishing marginal utility Costs taht do not vary with the level of output are called: a.) variable costs b.) fixed costs c.) marginal costs d.) total costs b.) fixed costs If a tax is imposed on a market with inelastic demand and elastic supply, a.) buyers wll bear most of the burden of the tax b.) sellers will bear most of the burden of the tax c.) the burden of the tax will be shared equally between buyers and sellers d.) it is impossible to determine how the burden of the tax will be shared a.) buyers wll bear most of the burden of the tax The simple circular flow diagram shows that: a.) business are on the dmand side of both product and resource markets b.) business are on the demand side of the product market and on the supply side of the resource market. c.) households are on the supply side of the resource market and on the demand side of the product market. d.) households are on the demand side of both product and resource markets c.) households are on the supply side of the resource market and on the demand side of the product market.