Question 1

The equilibrium price in the market represents the:

Accepted Answer

A)  value of the good in its next highest-valued use. 
B)  value of the good in all its uses. 
C)  price of the good in its lowest-valued use. 
D)  average cost of producing the good. 
A)  value of the good in its next highest-valued use. 
B)  value of the good in all its uses. 
C)  price of the good in its lowest-valued use. 
D)  average cost of producing the good.

Question 2

The market price of copper gives us information on:

Accepted Answer

A)  the value of labor used to mine copper. 
B)  the value of copper in its next highest-valued use. 
C)  how much capital equipment was used in its production. 
D)  the competitiveness of the copper market. 
A)  the value of labor used to mine copper. 
B)  the value of copper in its next highest-valued use. 
C)  how much capital equipment was used in its production. 
D)  the competitiveness of the copper market.

Question 3

People use futures contracts to:

Accepted Answer

A)  increase prices. 
B)  reduce risk. 
C)  profit from past prices. 
D)  reduce information in the market. 
A)  increase prices. 
B)  reduce risk. 
C)  profit from past prices. 
D)  reduce information in the market.

Question 4

Market prices are:

Accepted Answer

A)  equal across periods. 
B)  convey different information in prediction markets than in regular goods markets. 
C)  signals that convey valuable information. 
D)  useful in the current period, but cannot provide any information on the future. 
A)  equal across periods. 
B)  convey different information in prediction markets than in regular goods markets. 
C)  signals that convey valuable information. 
D)  useful in the current period, but cannot provide any information on the future.

Question 5

Speculators:

Accepted Answer

A)  serve no important economic function, except buying low and selling high. 
B)  move resources from periods of low-value use to periods of high-value use. 
C)  move resources from poor countries to rich counties. 
D)  are a key source of inflation. 
A)  serve no important economic function, except buying low and selling high. 
B)  move resources from periods of low-value use to periods of high-value use. 
C)  move resources from poor countries to rich counties. 
D)  are a key source of inflation.

Question 6

Factors other than war in the Middle East-e.g., OPEC decisions, oil discoveries, and the demand for oil-also impact oil futures, so the future price of oil is a:

Accepted Answer

A)  pure signal of war in the Middle East. 
B)  mixed signal of war in the Middle East. 
C)  noisy signal of war in the Middle East. 
D)  signal of war in the Middle East. 
A)  pure signal of war in the Middle East. 
B)  mixed signal of war in the Middle East. 
C)  noisy signal of war in the Middle East. 
D)  signal of war in the Middle East.

Question 7

Imagine the existence of prediction markets for grades in Ray's economics class. The weekend before a test, Ray observes a classmate at a party who has had too much to drink. He does not think that she will recover enough to study for the test on Monday. None of Ray's other classmates observes this. How could Ray profit from this information?

Accepted Answer

A)  bet on himself to do well on the exam 
B)  bet on himself to do poorly on the exam 
C)  bet on his classmate to do well on the exam 
D)  bet on his classmate to do poorly on the exam 
A)  bet on himself to do well on the exam 
B)  bet on himself to do poorly on the exam 
C)  bet on his classmate to do well on the exam 
D)  bet on his classmate to do poorly on the exam

Question 8

Suppose that war in the Middle East reduces the supply of oil, forcing the country to economize on oil. How would a central planner optimize the economic problem under this situation?

Accepted Answer

A)  shift oil out of uses for which good substitutes for oil exist 
B)  supply oil for uses for which good substitutes for oil exist 
C)  increase demand for oil in all production processes 
D)  decrease supply for oil in all production processes 
A)  shift oil out of uses for which good substitutes for oil exist 
B)  supply oil for uses for which good substitutes for oil exist 
C)  increase demand for oil in all production processes 
D)  decrease supply for oil in all production processes

Question 9

Use the following to answer questions:
Figure: Demand Curve  
-(Figure: Demand Curve) Refer to the figure. Which part of the demand curve represents the satisfied wants?

Accepted Answer

A)  Point B 
B)  Segment AC 
C)  Segment AB 
D)  Segment BC 
A)  Point B 
B)  Segment AC 
C)  Segment AB 
D)  Segment BC

Question 10

The Hollywood Stock Exchange is useful for:

Accepted Answer

A)  predicting ratings (e.g., G, PG, PG-13, and R) of yet-to-be-released films. 
B)  predicting movie spoilers of yet-to-be-released films. 
C)  estimating the future profits of films. 
D)  estimating the future production costs of films. 
A)  predicting ratings (e.g., G, PG, PG-13, and R) of yet-to-be-released films. 
B)  predicting movie spoilers of yet-to-be-released films. 
C)  estimating the future profits of films. 
D)  estimating the future production costs of films.

Question 11

Speculation often:

Accepted Answer

A)  helps smooth price fluctuations. 
B)  generates large profits for only a small group of individuals. 
C)  is illegal. 
D)  decreases economic efficiency. 
A)  helps smooth price fluctuations. 
B)  generates large profits for only a small group of individuals. 
C)  is illegal. 
D)  decreases economic efficiency.

Question 12

Futures markets are often good predictors of what will happen to the price of goods in the future because:

Accepted Answer

A)  speculators typically have better information than consumers. 
B)  the markets are more complete. 
C)  speculators have an incentive to "get it right" because their own money is on the line. 
D)  the markets are highly regulated. 
A)  speculators typically have better information than consumers. 
B)  the markets are more complete. 
C)  speculators have an incentive to "get it right" because their own money is on the line. 
D)  the markets are highly regulated.

Question 13

Suppose you have been hired by the Hollywood Stock Exchange to make predictions on how much a movie will make during its first four weekends at the box office. What kind of information would you use to make your forecast?

Accepted Answer

The forecasted revenue from the film wou

Question 14

As the price of oil increases, Brazilians will shift sugar cane from sugar production to ethanol production, thereby holding down fuel costs and reducing the price of sugar.

Accepted Answer

A) True 
 B)False

Question 15

Ignoring any third-party commissions, the profit one party earns in a futures contract equals the loss the other party suffers.

Accepted Answer

A) True 
 B)False

Question 16

Millions of producers working across the world cooperate to ensure that many more millions of consumers can have the goods and services they desire. These producers do not know each other and are not coordinated by a central agency. Their actions are directed simply by:

Accepted Answer

A)  self-interest. 
B)  robotic technology. 
C)  their governments. 
D)  computer technology. 
A)  self-interest. 
B)  robotic technology. 
C)  their governments. 
D)  computer technology.

Question 17

A market is a form of:

Accepted Answer

A)  decentralized economic planning. 
B)  centralized economic planning. 
C)  economic nonplanning. 
D)  regional economic planning. 
A)  decentralized economic planning. 
B)  centralized economic planning. 
C)  economic nonplanning. 
D)  regional economic planning.

Question 18

Markets work well because of the information delivered by:

Accepted Answer

A)  the government. 
B)  the supply curve. 
C)  the demand curve. 
D)  prices. 
A)  the government. 
B)  the supply curve. 
C)  the demand curve. 
D)  prices.

Question 19

One advantage of prediction markets is that they create incentives for traders to relay:

Accepted Answer

A)  specific information. 
B)  detailed information. 
C)  advanced information. 
D)  accurate information. 
A)  specific information. 
B)  detailed information. 
C)  advanced information. 
D)  accurate information.

Question 20

John and Tom enter into a futures contract in which John agrees to deliver 500 crates of coffee to Tom one year from now. Tom agrees to pay a price of $200 per crate. A year from now, John and Tom find that the market price of coffee is $210 per crate. How might they make a cash settlement on the contract?

Accepted Answer

A)  John will offer $5,000 to Tom and deliver the 500 crates of coffee. 
B)  Tom will offer $5,000 to John and deliver the 500 crates of coffee. 
C)  John will offer $5,000 to Tom and not deliver any crates of coffee. 
D)  Tom will offer $5,000 to John and not deliver any crates of coffee. 
A)  John will offer $5,000 to Tom and deliver the 500 crates of coffee. 
B)  Tom will offer $5,000 to John and deliver the 500 crates of coffee. 
C)  John will offer $5,000 to Tom and not deliver any crates of coffee. 
D)  Tom will offer $5,000 to John and not deliver any crates of coffee.

Exam 7: The Price System

The equilibrium price in the market represents the:

The market price of copper gives us information on:

People use futures contracts to:

Market prices are:

Speculators:

Factors other than war in the Middle East-e.g., OPEC decisions, oil discoveries, and the demand for oil-also impact oil futures, so the future price of oil is a:

Suppose that war in the Middle East reduces the supply of oil, forcing the country to economize on oil. How would a central planner optimize the economic problem under this situation?

Use the following to answer questions: Figure: Demand Curve -(Figure: Demand Curve) Refer to the figure. Which part of the demand curve represents the satisfied wants?

The Hollywood Stock Exchange is useful for:

Speculation often:

Futures markets are often good predictors of what will happen to the price of goods in the future because:

Suppose you have been hired by the Hollywood Stock Exchange to make predictions on how much a movie will make during its first four weekends at the box office. What kind of information would you use to make your forecast?

As the price of oil increases, Brazilians will shift sugar cane from sugar production to ethanol production, thereby holding down fuel costs and reducing the price of sugar.

Ignoring any third-party commissions, the profit one party earns in a futures contract equals the loss the other party suffers.

Millions of producers working across the world cooperate to ensure that many more millions of consumers can have the goods and services they desire. These producers do not know each other and are not coordinated by a central agency. Their actions are directed simply by:

A market is a form of:

Markets work well because of the information delivered by:

One advantage of prediction markets is that they create incentives for traders to relay:

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