Exam 7: The Price System

Asphalt is the refined residue from crude oil. When gasoline prices are high, oil refiners pull every last drop of gasoline out of a barrel of crude. This would imply that higher gasoline prices mean a(n):

The true cost of a good is its money price rather than its opportunity cost.

A United States. manufacturer arranges to purchase parts from a German supplier for 500,000 euros in six months. The United States manufacturer is concerned that the dollar will depreciate against the euro, meaning the dollar cost of the 500,000 euros will rise. The United States manufacturer should:

The demand curve above the equilibrium point represents ______ demands. The demand curve below the equilibrium point represents ______ demands.

Prices have one critical role in solving the great economic problem: signaling to people what is and what is not scarce.

Prediction markets regularly outperform political polls in predicting the winners of elections.

What happens in one particular market may have an effect on other markets.

Like a tango, it takes two to make a futures contract. But unlike the tango, the participants in a futures contract:

A market in which buyers and sellers trade shares of stock, where the share prices reflect the probability of some future event is called a:

The central planning approach failed because of information and incentives problems.

After natural disasters such as hurricanes, the prices of necessity goods such as bottled water, generators, milk, and so forth, in the areas hit by the hurricane tend to increase dramatically. Many consumers and politicians have termed these increases "price gouging," as they insinuate that suppliers are taking advantage of consumers when they are most vulnerable. Governments have even gone so far as to make price gouging illegal, saying in many places that it is illegal to charge any price significantly higher than "pre-hurricane prices." From an economic standpoint, are these laws that prohibit price gouging efficient? What would happen if these laws were repealed and prices were allowed to increase?

Legalizing insider trading may have some advantages if managers of a company could freely trade its stock. For instance, corporate accounting scandals would be detected sooner if:

A "buy low, sell high" strategy allows the speculator to make a profit from differences in market prices.

Brazil is the world's largest sugar cane producer and sugar cane can be used for producing sugar and the fuel ethanol for automobiles. Which sequence of events is correct?

About the price system, Friedrich Hayek wrote, "I have deliberately used the word 'marvel' to shock the reader out of the complacency with which we often take the working of this mechanism for granted. I am convinced that if it were the result of deliberate human design . . . this mechanism would have been acclaimed as one of the greatest triumphs of the human mind." He means that: