Market structures

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1. Scarcity
d. all of the above

2. In economics, capital is defined as (Think about the factors of production.)
C. human creations used in the production process

3. According to the law of comparative advantage, an individual should produce a good if he or she

c. has the lowest opportunity cost of producing the good regardless of whether it is produced with the fewest resources

4. The effect of a decrease in the price of laptop computers, other things constant, is likely to be best represented by which of the following?

d. a movement down along the demand curve

Price is already factored into the demand curve; the demand curve shows how quantity demanded changes with price, other things held constant.

5. Which of the following will not change the demand for movie tickets?

a. a change in the price of movie tickets

Changes in price cause movement along a demand curve, but do not shift demand.

6. Which of the following would be most likely to increase the demand for downtown parking in a large city?
a. a major employer moves to the suburbs

7. Attempts are being made to develop a biodegradable plastic using agricultural produce such as potatoes. If these attempts are successful, what will happen to the equilibrium price and quantity of potatoes? (You may want to relate this question to what has recently happened with corn and ethanol.)
b. Price will increase and quantity increase.

8. If an increase in the price of a product from $100 to $200 per unit leads to a decrease in the quantity demanded from 10 to 8 units, then demand is

b. inelastic

This is a 100% increase in price, and the change in quanity is only 5%. When % change in quantity/% change in price is less than one, demand in inelastic.

9. Two separate groups of people use New York City subways. One group uses them only during rush hour to travel to and from work. The other group uses them only in midday for leisure activity. If New York City wants to increase transit fares with the smallest possible reduction in revenue, for which group should it increase the fare?

b. The rush-hour group because its demand for subway service is less elastic than that of the midday group.

People traveling to work will be more tolerant of price increases than people for whom the travel is optional.

10. As price falls along a given demand curve for pretzels,

c. quantity demanded, total utility, and consumer surplus increase; marginal utility decreases; consumer expenditure might increase, decrease, or remain constant

Consumer expenditure is price x quantity. Since price is falling, but quantity is increasing, we cannot predict whether the change in consumer expenditure will be positive, negative, or neutral.

11. Suppose a lawyer ...