Principles of Econ D089

Principles of Econ D089 5.0 (1 review) Students also studied Terms in this set (121) Western Governors UniversityD 089 Save pre assessment d089 70 terms Loveysbg21610 Preview Economics Pre-Test 62 terms savy_menkePreview Econ 101 Pre test 34 terms Vaun17Preview WGU D 70 terms Trac Which set of questions is answered when a society decides how to distribute its scarce resources?

• What, when, and how to produce goods and services
• How, why, and when to produce goods and services
• What, why, and for whom to produce goods and

services

• What, how, and for whom to produce goods and

services

• What, how, and for whom to produce goods and services

Reason: These are the basic questions when it comes to economics. WHFW

A newspaper is trying to help citizens understand economic principles. Which misconception should the article address?

• Consistent rising prices often result in inflation of

goods and services.

• Printing too much money causes the price of goods to

increase.

• Increasing the money supply raises the standard of

living for consumers in the long run.

• Inflation decreases the value of money and makes

goods more expensive

• Increasing the money supply raises the standard of living for consumers in the

long run.

Reason: This is a common misconception because managed money supply is

crucial, simply increasing it will not improve standard of living What accurately characterizes capital?

• It is in the form of cash.
• It is reliant on a natural resource.
• It must be in the form of physical objects.
• It can be in the form of intellectual discoveries
• It can be in the form of intellectual discoveries

Reason: Capital can take various forms, including physical assets and intellectual discoveries, with the latter contributing to economic value through inventions, innovations, and knowledge. It goes beyond being just in the form of cash or reliant on natural resources.

A country produces two goods (A and B) and currently operates on the bowed-out production possibilities frontier. What is the relationship between the productions of Good A and Good B?

• If the production of Good A increases, then the

production of Good B will decrease.

• If the production of Good A increases, then the

production of Good B will increase .C. If the production of Good A is constant, then the production of B will increase.

• If the production of Good A is constant, then the

production of B will decrease.

• If the production of Good A increases, then the production of Good B will

decrease.

Reason: In a bowed-out production possibilities frontier, choosing to produce

more of one good (Good A) comes at the expense of producing less of the other good (Good B), reflecting the increasing opportunity cost. Therefore, if the production of Good A increases, the production of Good B will decrease.Which description accurately characterizes demand?

• Changes in buyers' expectations will shift the demand

curve, and changes in buyers' income will result in a movement along the curve.

• Changes in the price of a substitute good will shift the

demand curve, and changes in buyers' tastes and preferences will result in a movement along the curve.

• Changes in the number of buyers in a market will shift

the demand curve, and changes in the price of a complementary good will result in a movement along the curve.

• Changes in income will shift the demand curve, and

changes in the market price of the good will result in a movement along the curve.

• Changes in the price of a substitute good will shift the demand curve, and

changes in buyers' tastes and preferences will result in a movement along the curve.

Reason: Option B is correct because it highlights that changes in the price of

substitute goods can shift the demand curve, and changes in buyers' tastes and preferences lead to movements along the existing demand curve. This reflects how factors like price and consumer preferences affect the demand for a product.Why do markets with excess demand move toward equilibrium?

• Excess demand produces excess supply over time.
• Excess demand declines as prices fall.
• Consumers are willing to pay higher prices, and firms

will seek higher profits.

• New market entrants will leave the industry.
• Consumers are willing to pay higher prices, and firms will seek higher profits.

Reason: Who the f*** knows

Which statement describes how higher input costs affect equilibrium in the market for a good?

• They increase demand, causing prices to rise.
• They reduce supply, causing prices to rise.
• They increase supply, causing prices to fall.
• They reduce demand, causing prices to fall.
• They reduce supply, causing prices to rise.

Reason: Higher input costs increase the production costs for firms, which can lead to a reduction in the supply of goods. When supply decreases, and demand remains constant or increases, prices tend to rise, moving the market toward a new equilibrium.

The market price of a product increased by 7%. The absolute value of the price elasticity of demand for this product is 3.8.What is the percent of change in quantity demanded?

• 1.8?crease
• 26.6?crease
• 73.4% increase
• 98.2% increase
• 26.6?crease

Reason: Percent Change in Quantity Demanded=3.8×7

Percent Change in Quantity Demanded=26.6Percent Change in Quantity Demanded=26.6 The average price of eggs increases from $1.10 to $1.30. In response, the quantity supplied increases from 220 to 260 eggs. The elasticity of supply is equal to 1.Which term describes the price elasticity of this supply?

• Elastic
• Inelastic
• Unit elastic
• Perfectly inelastic
• Unit elastic

Reason: The supply is considered "unit elastic" because the percentage change in quantity supplied is the same as the percentage change in price. In other words, if the price goes up by a certain percentage, the quantity supplied increases by the same percentage, making it balanced and unit elastic.Where does a price floor need to be set to create a surplus?

• Above the market equilibrium price
• Below the market equilibrium price
• Below the marginal external cost
• Above the marginal external cost
• Above the market equilibrium price

Reason: A price floor needs to be set above the market equilibrium price to

create a surplus because it prevents the market price from reaching its natural balance point. When the floor is set higher than the equilibrium, it creates a situation where the quantity supplied exceeds the quantity demanded, resulting in a surplus of goods.Which result occurs when adding additional variable inputs according to the law of diminishing marginal returns?

• Larger increases in output from each unit of input
• Cost per unit of output dropping by larger amounts
• Cost per unit of output dropping by smaller amounts
• Smaller increases in output from each unit of input
• Smaller increases in output from each unit of input

Reason: The law of diminishing marginal returns states that as additional units of a variable input are added to fixed inputs, the marginal product of the variable input will eventually decrease. This means that each additional unit of input will contribute less to the total output, resulting in smaller increases in output.Why is a firm's total costs in the long run always as low or lower than in the short run?

• In the long run, a firm has fixed costs but no variable

costs.

• In the short run, a firm has variable costs but no fixed

costs.

• In the long run, a firm can alter its use of all factors of

production.

• In the short run, a firm cannot alter its use of the

factors of production.

• In the long run, a firm can alter its use of all factors of production.

Reason: In the long run, a firm has the flexibility to adjust all factors of production, including both fixed and variable costs. This allows the firm to optimize its production process and minimize costs more effectively than in the short run.

What are firms trying to accomplish when they choose particular combinations of inputs such as land, labor, and capital?

• To maximize the quantity, or output, of products sold
• To maximize the marginal cost of producing the

products sold

• To maximize the difference between total revenue and

total costs

• To maximize total revenue generated from the

products sold

• To maximize the difference between total revenue and total costs

Reason: The goal of firms in choosing particular combinations of inputs such as

land, labor, and capital is generally to maximize their profit. In economic terms, profit is the difference between total revenue and total costs. Therefore, the most

accurate answer would be:

Which situation occurs for a firm in the long run?

• The quantities of all inputs are variable.
• The firm will be unable to build a bigger plant.
• The economic efficiency is achieved.
• The quantities of all inputs are constant.
• The quantities of all inputs are variable.

Reason: In the long run, a firm has the flexibility to adjust all inputs, including the size of its plant and the quantities of all inputs, to optimize its production process and achieve economic efficiency Generic drugs start appearing after pharmaceutical firms' patents expire. These generic drugs have the same formulation as name-brand drugs, but they are priced below name-brand medications. Producing generic drugs requires a significant capital investment to establish a modern manufacturing facility and established distribution networks.What is the market structure for these drugs?

• Monopoly
• Oligopoly
• Perfect competition
• Monopolistic competition
• Oligopoly

Reason: Who the f*** knows

Which statement accurately describes a concentration ratio for an industry?

• The combined profits of the most profitable firms
• The combined market shares of the top-selling firms
• The combined assets of the firms acquiring the most

competitors

• The combined stock market valuation of the fastest

growing firms

• The combined market shares of the top-selling firms

Reason: The concentration ratio measures the total market share of the largest

firms in an industry. In option B, it accurately reflects this concept by referring to the combined market shares of the top-selling firms, which helps assess the level of competition in the market.Which early tool was used to measure the degree of monopoly power in an industry?

• Concentration ratio
• Acquisition
• Herfindahl-Hirschman Index
• Cartel
• Concentration ratio

The concentration ratio is an early tool used to measure the degree of monopoly power in an industry by indicating the total market share held by a specific number of the largest firms.