Question 1

Firms that fail to compete with lower prices and/or better products will:

Accepted Answer

A)  go bankrupt and increase economic efficiency. 
B)  go bankrupt and decrease economic efficiency. 
C)  have to merge with other companies to stay in business. 
D)  often increase economic efficiency if they stay in business even though they are making losses since this will increase competition in the market. 
A)  go bankrupt and increase economic efficiency. 
B)  go bankrupt and decrease economic efficiency. 
C)  have to merge with other companies to stay in business. 
D)  often increase economic efficiency if they stay in business even though they are making losses since this will increase competition in the market.

Question 2

Recently, economic engineers have begun to design ________ to increase the signal to noise ratio of ________.

Accepted Answer

A)  prices; markets 
B)  markets; prices 
C)  incentives; behaviors 
D)  opportunity costs; prices 
A)  prices; markets 
B)  markets; prices 
C)  incentives; behaviors 
D)  opportunity costs; prices

Question 3

When gasoline prices are high, oil refiners have an incentive to pull every last drop of gasoline out of a barrel of crude. This implies that an increase in the demand for gasoline will cause a(n) ______ quantity supplied of gasoline and ______ the supply of the remaining crude oil products.

Accepted Answer

A)  increased; increase 
B)  increased; reduce 
C)  reduced; increase 
D)  reduced; decrease 
A)  increased; increase 
B)  increased; reduce 
C)  reduced; increase 
D)  reduced; decrease

Question 4

Speculators:

Accepted Answer

A)  generally cause prices to rise. 
B)  generally cause prices to fall. 
C)  rarely influence prices. 
D)  sometimes cause prices to rise and sometimes cause prices to fall. 
A)  generally cause prices to rise. 
B)  generally cause prices to fall. 
C)  rarely influence prices. 
D)  sometimes cause prices to rise and sometimes cause prices to fall.

Question 5

Futures contracts reduce future uncertainty. Which statement(s) show how this is achieved?
I. Futures contracts allow the parties involved to mitigate possible shortages in quantities of the good.
II. Futures contracts allow the parties involved to mitigate unexpected changes in price that could hurt earnings.
III. Futures contracts always allow the seller to receive a price that is higher than the market price for the product.

Accepted Answer

A)  I and II only 
B)  I only 
C)  I and III only 
D)  I, II, and III 
A)  I and II only 
B)  I only 
C)  I and III only 
D)  I, II, and III

Question 6

Because people have short memories, an oil speculator will be more accurate about future oil prices than a political pundit.

Accepted Answer

A) True 
 B)False

Question 7

An equilibrium price splits the uses of the good into ________ part(s).

Accepted Answer

A)  one 
B)  two 
C)  three 
D)  four or more 
A)  one 
B)  two 
C)  three 
D)  four or more

Question 8

The great economic problem is to:

Accepted Answer

A)  increase resources to satisfy as many of our limited wants as possible. 
B)  equally allocate resources in order to satisfy as many of our limited wants as possible. 
C)  create unlimited resources to satisfy as many of our infinite wants as possible. 
D)  arrange our limited resources to satisfy as many of our infinite wants as possible. 
A)  increase resources to satisfy as many of our limited wants as possible. 
B)  equally allocate resources in order to satisfy as many of our limited wants as possible. 
C)  create unlimited resources to satisfy as many of our infinite wants as possible. 
D)  arrange our limited resources to satisfy as many of our infinite wants as possible.

Question 9

Use the following to answer question 154:
Figure: Speculation  
-(Figure: Speculation) Speculators anticipating trouble in the Middle East will ______ future oil supplies by storing oil now and then selling oil out of storage, ______.

Accepted Answer

A)  decrease; driving down the market price from C to D 
B)  decrease; driving up the market price from D to C 
C)  increase; driving down the market price from C to D 
D)  increase; driving up the market price from D to C 
A)  decrease; driving down the market price from C to D 
B)  decrease; driving up the market price from D to C 
C)  increase; driving down the market price from C to D 
D)  increase; driving up the market price from D to C

Question 10

A common, contemporary alternative to central planning at the national level is a:

Accepted Answer

A)  market system with currency pricing. 
B)  market system with bartering. 
C)  system of regional planning within a nation. 
D)  system of international planning. 
A)  market system with currency pricing. 
B)  market system with bartering. 
C)  system of regional planning within a nation. 
D)  system of international planning.

Question 11

War is expected to break out in the Middle East. Use two separate supply and demand diagrams to illustrate (1) the current price of oil and (2) the future price of oil. Using the same two supply and demand diagrams, show how speculators affect the current price of oil and the future price of oil.

Accepted Answer

The answer of War is expected to break out in...

Question 12

If in 2012 a $10 share of Barack Obama is selling for $4.40, it suggests that:

Accepted Answer

A)  Obama has a 44% chance of winning the next election. 
B)  Obama has a 56% chance of winning the next election. 
C)  Obama will get 4.4% more votes than the other candidate in the next election. 
D)  Obama's rival will win the next popular election in 44% of the states. 
A)  Obama has a 44% chance of winning the next election. 
B)  Obama has a 56% chance of winning the next election. 
C)  Obama will get 4.4% more votes than the other candidate in the next election. 
D)  Obama's rival will win the next popular election in 44% of the states.

Question 13

It is Valentine's Day in the United States, and you give your lover one dozen roses that were freshly picked 72 hours ago from the fields of Kenya. What made this gift possible?

Accepted Answer

A)  the United Nations Director of Horticultural Operations, who oversees the planting and transportation of flowers around the world 
B)  the Jennifer Flowers Act, which helps coordinate the logistics of agricultural trade flows between the United States and Kenya 
C)  economic markets 
D)  tariff laws in the United States 
A)  the United Nations Director of Horticultural Operations, who oversees the planting and transportation of flowers around the world 
B)  the Jennifer Flowers Act, which helps coordinate the logistics of agricultural trade flows between the United States and Kenya 
C)  economic markets 
D)  tariff laws in the United States

Question 14

Based on economist Richard Roll's work, the BEST way to predict future weather in Florida, where oranges are grown, may be:

Accepted Answer

A)  to listen to meteorologists. 
B)  to look at the difference between futures and spot prices of orange juice. 
C)  to wait and see what the weather turns out to be. 
D)  to look at past trends in orange production. 
A)  to listen to meteorologists. 
B)  to look at the difference between futures and spot prices of orange juice. 
C)  to wait and see what the weather turns out to be. 
D)  to look at past trends in orange production.

Question 15

In general, central planning has:

Accepted Answer

A)  been the great success story of the twentieth century. 
B)  provided a high standard of living in many places, for example, Cuba and North Korea. 
C)  been a large failure. 
D)  caused India to become a fast-growing economy. 
A)  been the great success story of the twentieth century. 
B)  provided a high standard of living in many places, for example, Cuba and North Korea. 
C)  been a large failure. 
D)  caused India to become a fast-growing economy.

Question 16

When the price of oil rises, consumers economize by buying ________ and by ________.

Accepted Answer

A)  more oil; finding substitutes 
B)  less oil; recycling 
C)  less oil; finding substitutes 
D)  more oil; recycling 
A)  more oil; finding substitutes 
B)  less oil; recycling 
C)  less oil; finding substitutes 
D)  more oil; recycling

Question 17

Suppose there was no "great economic problem." Which option would have had to occur for this to happen?

Accepted Answer

A)  There are zero transportation costs. 
B)  Resources are no longer subject to scarcity. 
C)  There are zero transaction costs. 
D)  All humans die, except one. 
A)  There are zero transportation costs. 
B)  Resources are no longer subject to scarcity. 
C)  There are zero transaction costs. 
D)  All humans die, except one.

Question 18

A future is a standardized contract to buy or sell specified quantities of a commodity or ________ at a specified ________.

Accepted Answer

A)  financial instrument; price 
B)  financial instrument; level of risk 
C)  unspecified quantities; price 
D)  unspecified quantities; level of risk 
A)  financial instrument; price 
B)  financial instrument; level of risk 
C)  unspecified quantities; price 
D)  unspecified quantities; level of risk

Question 19

Explain what Adam Smith meant when he said that the market operates as if "an invisible hand" is guiding the process.

Accepted Answer

He meant that through the information de

Question 20

Increasing prices act as a signal to:

Accepted Answer

A)  politicians that price gouging is occurring. 
B)  suppliers to increase the quantity supplied in those markets. 
C)  consumers that the good is overvalued. 
D)  speculators that the opportunity cost of the good is falling. 
A)  politicians that price gouging is occurring. 
B)  suppliers to increase the quantity supplied in those markets. 
C)  consumers that the good is overvalued. 
D)  speculators that the opportunity cost of the good is falling.

Exam 7: The Price System

Firms that fail to compete with lower prices and/or better products will:

Recently, economic engineers have begun to design ________ to increase the signal to noise ratio of ________.

When gasoline prices are high, oil refiners have an incentive to pull every last drop of gasoline out of a barrel of crude. This implies that an increase in the demand for gasoline will cause a(n) ______ quantity supplied of gasoline and ______ the supply of the remaining crude oil products.

Speculators:

Because people have short memories, an oil speculator will be more accurate about future oil prices than a political pundit.

An equilibrium price splits the uses of the good into ________ part(s).

The great economic problem is to:

Use the following to answer question 154: Figure: Speculation -(Figure: Speculation) Speculators anticipating trouble in the Middle East will ______ future oil supplies by storing oil now and then selling oil out of storage, ______.

A common, contemporary alternative to central planning at the national level is a:

War is expected to break out in the Middle East. Use two separate supply and demand diagrams to illustrate (1) the current price of oil and (2) the future price of oil. Using the same two supply and demand diagrams, show how speculators affect the current price of oil and the future price of oil.

If in 2012 a $10 share of Barack Obama is selling for $4.40, it suggests that:

It is Valentine's Day in the United States, and you give your lover one dozen roses that were freshly picked 72 hours ago from the fields of Kenya. What made this gift possible?

Based on economist Richard Roll's work, the BEST way to predict future weather in Florida, where oranges are grown, may be:

In general, central planning has:

When the price of oil rises, consumers economize by buying ________ and by ________.

Suppose there was no "great economic problem." Which option would have had to occur for this to happen?

A future is a standardized contract to buy or sell specified quantities of a commodity or ________ at a specified ________.

Explain what Adam Smith meant when he said that the market operates as if "an invisible hand" is guiding the process.

Increasing prices act as a signal to:

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

Recently, economic engineers have begun to design to increase the signal to noise ratio of .

When gasoline prices are high, oil refiners have an incentive to pull every last drop of gasoline out of a barrel of crude. This implies that an increase in the demand for gasoline will cause a(n) quantity supplied of gasoline and the supply of the remaining crude oil products.

Use the following to answer question 154: Figure: Speculation -(Figure: Speculation) Speculators anticipating trouble in the Middle East will future oil supplies by storing oil now and then selling oil out of storage, .

When the price of oil rises, consumers economize by buying and by .

A future is a standardized contract to buy or sell specified quantities of a commodity or at a specified .