Question 1

Prices are the heart of the:

Accepted Answer

A)  political process. 
B)  market process. 
C)  business cycle. 
D)  theory of markets. 
A)  political process. 
B)  market process. 
C)  business cycle. 
D)  theory of markets.

Question 2

If we observe that the price of orange juice futures is extremely high, we might conclude that:

Accepted Answer

A)  there will be a bumper crop of oranges in the future. 
B)  bad weather is expected to destroy orange crops. 
C)  there will be weak demand conditions for oranges in the future. 
D)  good weather is expected in orange-growing areas. 
A)  there will be a bumper crop of oranges in the future. 
B)  bad weather is expected to destroy orange crops. 
C)  there will be weak demand conditions for oranges in the future. 
D)  good weather is expected in orange-growing areas.

Question 3

The value of a unit of a good is given by the height of the:

Accepted Answer

A)  supply curve at equilibrium. 
B)  supply curve at the quantity level corresponding to the unit. 
C)  demand curve at equilibrium. 
D)  demand curve at the quantity level corresponding to the unit. 
A)  supply curve at equilibrium. 
B)  supply curve at the quantity level corresponding to the unit. 
C)  demand curve at equilibrium. 
D)  demand curve at the quantity level corresponding to the unit.

Question 4

During World War II, natural rubber (from rubber trees) became incredibly scarce. Some even feared its complete exhaustion. The development of synthetic rubber staved off this doomsday scenario. Explain why, just when the Allies needed it most, this turn in good fortune was likely not a coincidence?

Accepted Answer

A)  Scarcity raised the price of natural rubber, creating the incentive to invent a substitute. 
B)  The opportunity cost of planting more rubber trees was high. 
C)  They lacked the incentive to create higher-producing natural rubber trees. 
D)  Natural rubber went out of fashion because of the superior quality of synthetic rubber. 
A)  Scarcity raised the price of natural rubber, creating the incentive to invent a substitute. 
B)  The opportunity cost of planting more rubber trees was high. 
C)  They lacked the incentive to create higher-producing natural rubber trees. 
D)  Natural rubber went out of fashion because of the superior quality of synthetic rubber.

Question 5

Use the following to answer questions:
Figure: Supply and Demand  
-(Figure: Supply and Demand) According to the figure, the value of this product's next highest-valued use is

Accepted Answer

A)  $6. 
B)  $2.50. 
C)  $5.01. 
D)  $5. 
A)  $6. 
B)  $2.50. 
C)  $5.01. 
D)  $5.

Question 6

The United States attempted to centrally plan the allocation of oil under the ______ administration.

Accepted Answer

A)  Clinton 
B)  Carter 
C)  Reagan 
D)  Nixon 
A)  Clinton 
B)  Carter 
C)  Reagan 
D)  Nixon

Question 7

Which of the following encompasses all the relevant information about the uses of a particular good?

Accepted Answer

A)  the cost of producing the good 
B)  the price of the good 
C)  the value of the good to consumers 
D)  none of these on its own 
A)  the cost of producing the good 
B)  the price of the good 
C)  the value of the good to consumers 
D)  none of these on its own

Question 8

South Africa, with large natural diamond deposits, is famous for its diamond exports. The international demand for diamonds for industrial and other purposes, such as jewelry, has led to the production of synthetic diamonds by other countries, such as the United States. Which answer BEST describes the concept highlighted in this scenario?

Accepted Answer

A)  International cooperation has been reduced over the years. 
B)  Consumers prefer synthetic diamonds to natural ones. 
C)  Prices provide incentives for sellers. 
D)  Markets are no longer linked together. 
A)  International cooperation has been reduced over the years. 
B)  Consumers prefer synthetic diamonds to natural ones. 
C)  Prices provide incentives for sellers. 
D)  Markets are no longer linked together.

Question 9

Prediction markets:

Accepted Answer

A)  are speculative markets designed so that prices can be interpreted as probabilities and used to make predictions. 
B)  are not very reliable sources of information. 
C)  incentivize random guessing about the future. 
D)  are widely subsidized by the government to improve information-gathering. 
A)  are speculative markets designed so that prices can be interpreted as probabilities and used to make predictions. 
B)  are not very reliable sources of information. 
C)  incentivize random guessing about the future. 
D)  are widely subsidized by the government to improve information-gathering.

Question 10

A forward market allows for the exchange of commodities in the ______ at prices that are settled upon in the ______.

Accepted Answer

A)  past; present 
B)  present; present 
C)  future; present 
D)  present; future 
A)  past; present 
B)  present; present 
C)  future; present 
D)  present; future

Question 11

What do economists consider to be "the great economic problem"?

Accepted Answer

A)  eliminating scarcity 
B)  maximizing employment while minimizing inflation 
C)  using limited resources to satisfy as many of our unlimited wants as possible 
D)  utilizing tax policies to eliminate business cycles 
A)  eliminating scarcity 
B)  maximizing employment while minimizing inflation 
C)  using limited resources to satisfy as many of our unlimited wants as possible 
D)  utilizing tax policies to eliminate business cycles

Question 12

Futures contracts:

Accepted Answer

A)  allow individuals to speculate in various markets without having to store the product. 
B)  typically increase risk. 
C)  almost always result in the delivery of the product. 
D)  decrease economic efficiency by skewing the information delivered by prices. 
A)  allow individuals to speculate in various markets without having to store the product. 
B)  typically increase risk. 
C)  almost always result in the delivery of the product. 
D)  decrease economic efficiency by skewing the information delivered by prices.

Question 13

Oil futures prices are a noisy signal of war in the Middle East. Explain whether this statement is true or false.

Accepted Answer

A noisy signal is one where the signal i

Question 14

What links the flower growers in Kenya with romantic American teenagers who give flowers as gifts of affection?

Accepted Answer

A)  markets 
B)  hierarchical authority 
C)  central planners 
D)  the United States Senate 
A)  markets 
B)  hierarchical authority 
C)  central planners 
D)  the United States Senate

Question 15

The market acts like a computer because:

Accepted Answer

A)  prices are information processors. 
B)  people "connect with" each other when they buy and sell. 
C)  much of the Internet is used for buying and selling. 
D)  computers were developed to create new markets. 
A)  prices are information processors. 
B)  people "connect with" each other when they buy and sell. 
C)  much of the Internet is used for buying and selling. 
D)  computers were developed to create new markets.

Question 16

Coffee growers in Mexico have no interest in the world price of oil since they do not produce oil.

Accepted Answer

A) True 
 B)False

Question 17

A person who tries to profit by guessing changes in future prices is a:

Accepted Answer

A)  profiteer. 
B)  marketer. 
C)  speculator. 
D)  price raider. 
A)  profiteer. 
B)  marketer. 
C)  speculator. 
D)  price raider.

Question 18

The information problem for a central planner refers to the fact that he or she may not know what resources are available.

Accepted Answer

A) True 
 B)False

Question 19

The high prices for ice in hurricane-devastated areas:

Accepted Answer

A)  is not justified by the laws of supply and demand. 
B)  makes it difficult for consumers to find ice to buy. 
C)  signals entrepreneurs around the country that it is profitable to supply ice to these devastated areas. 
D)  provides an example of self-interested behavior in direct conflict with public interest. 
A)  is not justified by the laws of supply and demand. 
B)  makes it difficult for consumers to find ice to buy. 
C)  signals entrepreneurs around the country that it is profitable to supply ice to these devastated areas. 
D)  provides an example of self-interested behavior in direct conflict with public interest.

Question 20

Which statement would be consistent with the effect of oil speculation?

Accepted Answer

A)  Society becomes worse off from speculation because speculators intend to drive up the price of oil. 
B)  Society becomes worse off as speculators decrease the value of oil by moving it to a time when its value is lower. 
C)  Society becomes better off as speculators increase the value of oil by moving it to a time when its value is higher. 
D)  Society is indifferent about the activities of speculators. 
A)  Society becomes worse off from speculation because speculators intend to drive up the price of oil. 
B)  Society becomes worse off as speculators decrease the value of oil by moving it to a time when its value is lower. 
C)  Society becomes better off as speculators increase the value of oil by moving it to a time when its value is higher. 
D)  Society is indifferent about the activities of speculators.

Exam 7: The Price System

Prices are the heart of the:

If we observe that the price of orange juice futures is extremely high, we might conclude that:

The value of a unit of a good is given by the height of the:

Use the following to answer questions: Figure: Supply and Demand -(Figure: Supply and Demand) According to the figure, the value of this product's next highest-valued use is

The United States attempted to centrally plan the allocation of oil under the ______ administration.

Which of the following encompasses all the relevant information about the uses of a particular good?

Prediction markets:

A forward market allows for the exchange of commodities in the ______ at prices that are settled upon in the ______.

What do economists consider to be "the great economic problem"?

Futures contracts:

Oil futures prices are a noisy signal of war in the Middle East. Explain whether this statement is true or false.

What links the flower growers in Kenya with romantic American teenagers who give flowers as gifts of affection?

The market acts like a computer because:

Coffee growers in Mexico have no interest in the world price of oil since they do not produce oil.

A person who tries to profit by guessing changes in future prices is a:

The information problem for a central planner refers to the fact that he or she may not know what resources are available.

The high prices for ice in hurricane-devastated areas:

Which statement would be consistent with the effect of oil speculation?

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

A forward market allows for the exchange of commodities in the at prices that are settled upon in the .