Wache Hs Economics Final
Questions and Answers
- 1.
Along a supply curve, if the price of oil falls, what will happen to the quantity of oil supplied?
- A.
Decrease
- B.
Increase
- C.
No Change
Correct Answer
A. DecreaseExplanation
When the price of oil falls, it becomes less profitable for oil producers to supply oil. As a result, they will reduce the quantity of oil they supply in order to maintain their profitability. This decrease in the quantity of oil supplied is in line with the law of supply, which states that as prices decrease, the quantity supplied also decreases. Therefore, a decrease in the price of oil will lead to a decrease in the quantity of oil supplied.Rate this question:
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- 2.
If the price of cars fall, which option is the most likely behavior of car manufacturers?
- A.
Make more cars
- B.
Make less cars
- C.
Maintain same level of cars
Correct Answer
B. Make less carsExplanation
If the price of cars falls, it is most likely that car manufacturers will make less cars. This is because when the price of cars decreases, the demand for cars may also decrease. In order to avoid excess inventory and potential losses, car manufacturers would reduce their production to match the lower demand. By making less cars, they can adjust their supply to meet the new market conditions and maintain profitability.Rate this question:
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- 3.
When the price of a good increases the quantity demanded ____.
- A.
Increases
- B.
Decreases
- C.
Stays the same
Correct Answer
B. DecreasesExplanation
When the price of a good increases, the quantity demanded decreases. This is because as the price of a good rises, consumers are less willing and able to purchase it. As a result, the demand for the good decreases, leading to a decrease in the quantity demanded. This inverse relationship between price and quantity demanded is known as the law of demand.Rate this question:
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- 4.
When will people search harder for substitutes for oil?
- A.
When oil prices are low
- B.
When oil prices are at equilibrium
- C.
When oil prices are high
- D.
People will not search for substitutes for oil
Correct Answer
C. When oil prices are highExplanation
When oil prices are high, people are more likely to search for substitutes for oil. This is because high oil prices make alternative energy sources more economically viable and attractive. When the cost of oil is high, it becomes more expensive to rely solely on it for energy needs, prompting individuals and businesses to explore alternative options such as renewable energy sources or energy-efficient technologies. Therefore, the higher the oil prices, the greater the incentive for people to seek out substitutes for oil.Rate this question:
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- 5.
If the price in a market is above the equilibrium price, this creates ___________.
- A.
Shortage
- B.
Surplus
- C.
Neither
Correct Answer
B. SurplusExplanation
If the price in a market is above the equilibrium price, this creates a surplus. A surplus occurs when the quantity of a good or service supplied exceeds the quantity demanded at a given price. In this case, the higher price encourages suppliers to produce more of the good or service, but consumers are less willing to purchase it at the higher price. As a result, there is excess supply, leading to a surplus in the market.Rate this question:
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- 6.
When the price is above the equilibrium price, greed (in other words, self-interest) tends to _________.
- A.
Drive up the price
- B.
Have no effect
- C.
Drive down the price
Correct Answer
C. Drive down the priceExplanation
When the price is above the equilibrium price, greed or self-interest tends to drive down the price. This is because when the price is higher than what consumers are willing to pay, sellers will be motivated to lower the price in order to attract more buyers and increase their own profits. As a result, competition among sellers increases, leading to a decrease in price until it reaches the equilibrium level where supply and demand are balanced.Rate this question:
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- 7.
Jon is on eBay, bidding for a first edition of the influential Frank Miller graphic novel Batman: The Dark Knight Returns. In this market, who is Jon competing with?
- A.
The seller of the graphic novel
- B.
The other bidders
- C.
EBay’s stakeholders
Correct Answer
B. The other biddersExplanation
Jon is competing with the other bidders on eBay. As stated in the question, Jon is bidding for a first edition of the graphic novel on eBay. Therefore, it can be inferred that the competition for the item comes from the other individuals who are also bidding on the same platform.Rate this question:
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- 8.
Now, Jon is in Japan, trying to get a job as a full-time translator; he wants to translate English TV shows into Japanese and vice versa. He notices that the wage for translators is very low. Who is the “competition” that is pushing the wage down?
- A.
Businesses who hire translators
- B.
Other translators
- C.
Prospective clients
Correct Answer
B. Other translatorsExplanation
Other translators are the competition that is pushing the wage down. Since there are many translators available in the market who are willing to work for lower wages, businesses hiring translators have the option to choose from a larger pool of candidates and negotiate lower wages. This increased supply of translators leads to a decrease in the overall wage level in the industry. Prospective clients, on the other hand, are not directly involved in setting the wages for translators.Rate this question:
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- 9.
Your roommate just bought an iPod for $200. She would have been willing to pay $500 for a machine that could store and replay that much music. How much consumer surplus does your roommate enjoy from the iPod?
- A.
$200
- B.
$300
- C.
$500
- D.
$0
Correct Answer
B. $300Explanation
Consumer surplus is the difference between the price a consumer is willing to pay for a product and the actual price they pay. In this scenario, the roommate was willing to pay $500 for a machine that could store and replay that much music, but she only paid $200 for the iPod. Therefore, her consumer surplus is the difference between these two amounts, which is $300. This means that she enjoys $300 worth of additional value from the iPod compared to what she actually paid for it.Rate this question:
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- 10.
The economist Bryan Caplan recently found a pair of $10 arch supports that saved him from the pain of major foot surgery. As he stated on his blog, he would have been willing to pay $100,000 to fix his foot problem, but instead he only paid a few dollars. ------ a. How much consumer surplus did Bryan enjoy from this purchase?
- A.
$10
- B.
$10,00
- C.
$15,000
- D.
$99,990
Correct Answer
D. $99,990Explanation
The consumer surplus is the difference between the maximum price a consumer is willing to pay for a product and the actual price paid. In this case, Bryan was willing to pay $100,000 to fix his foot problem but only paid a few dollars for the arch supports. Therefore, the consumer surplus is $99,990 ($100,000 - $10).Rate this question:
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- 11.
Michael is an economist. He loves being an economist so much that he would do it for a living even if he only earned $30,000 per year. Instead, he earns $80,000 per year. (Note: This is the average salary of new economists with a Ph.D. degree.) How much producer surplus does Michael enjoy?
- A.
$30,000
- B.
$50,000
- C.
$80,000
Correct Answer
B. $50,000Explanation
The producer surplus is the difference between the price a producer is willing to accept for a good or service and the actual price they receive. In this case, Michael is willing to be an economist even if he only earns $30,000 per year. However, he actually earns $80,000 per year. Therefore, the producer surplus that Michael enjoys is the difference between these two amounts, which is $50,000.Rate this question:
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- 12.
The industrial areas in northeast Washington, DC, were relatively dangerous in the 1980s. Over the last two decades, the area has become a safer place to work (although there are still seven times more violent crimes per person in these areas compared with another DC neighborhood, Georgetown). When an area becomes a safer place to work, what probably happens to the “supply of labor” in that area?
- A.
The supply of labor increases
- B.
The supply of labor decreases
- C.
The supply of labor does not change
Correct Answer
A. The supply of labor increasesExplanation
When an area becomes a safer place to work, the supply of labor is likely to increase. This is because improved safety conditions attract more people to work in the area, as they feel more secure and confident in their personal safety. As a result, more individuals are willing to supply their labor in this area, leading to an increase in the overall supply of labor.Rate this question:
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- 13.
Since it’s become much easier to build better laptop computers in recent years, laptop supply has increased. What does this do to the price of laptops?
- A.
The price of laptops increases.
- B.
The price of laptops decreases.
- C.
An increase in laptop supply will not change its price.
Correct Answer
B. The price of laptops decreases.Explanation
The given answer is "The price of laptops decreases." This is because when there is an increase in the supply of laptops, it leads to a greater availability of laptops in the market. With more options available, the competition among sellers increases, which ultimately puts downward pressure on prices. As a result, the price of laptops tends to decrease when there is an increase in supply.Rate this question:
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- 14.
When demand increases, what happens to price and quantity in equilibrium?
- A.
Price increases and quantity decreases
- B.
Price decreases and quantity increases
- C.
Price and quantity both increase
- D.
Price and quantity both decrease
Correct Answer
C. Price and quantity both increaseExplanation
When demand increases, it creates a situation where there is more demand for a product or service than there is supply. As a result, the price of the product or service increases because suppliers can charge more for it. Additionally, the quantity of the product or service being produced and sold also increases to meet the higher demand. This is because suppliers want to take advantage of the higher prices and make more profit by producing and selling more of the product or service. Therefore, both the price and quantity increase in equilibrium when demand increases.Rate this question:
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- 15.
When supply increases, what happens to price and quantity in equilibrium?
- A.
Price increases and quantity decreases
- B.
Price decreases and quantity increases
- C.
Price and quantity both increase
- D.
Price and quantity both decrease
Correct Answer
B. Price decreases and quantity increasesExplanation
When supply increases, it leads to a surplus in the market. This surplus causes sellers to compete with each other by lowering the price in order to attract buyers. As a result, the price decreases. Additionally, with more supply available, buyers are able to purchase more goods or services at the lower price, leading to an increase in quantity. Therefore, when supply increases, price decreases, and quantity increases in equilibrium.Rate this question:
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- 16.
When demand decreases, what happens to price and quantity in equilibrium?
- A.
Price increases and quantity decreases
- B.
Price decreases and quantity increases
- C.
Price and quantity both increase
- D.
Price and quantity both decrease
Correct Answer
D. Price and quantity both decreaseExplanation
When demand decreases, there is a surplus of goods or services in the market. In order to sell the excess supply, sellers will lower the price of the product. This decrease in price will lead to a decrease in quantity demanded. Therefore, both price and quantity will decrease in equilibrium when demand decreases.Rate this question:
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- 17.
When supply decreases, what happens to price and quantity in equilibrium?
- A.
Price increases and quantity decreases
- B.
Price decreases and quantity increases
- C.
Price and quantity both increase
- D.
Price and quantity both decrease
Correct Answer
A. Price increases and quantity decreasesExplanation
When supply decreases, it means that there is a decrease in the quantity of goods or services available in the market. This leads to a decrease in the equilibrium quantity as there is less supply to meet the demand. At the same time, the decrease in supply creates a scarcity in the market, which leads to an increase in the equilibrium price. Therefore, when supply decreases, the price increases and the quantity decreases in equilibrium.Rate this question:
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- 18.
What is a business that has no competition called?
- A.
Equilibrium
- B.
Surplus
- C.
Monopoly
- D.
Shortage
Correct Answer
C. MonopolyExplanation
A business that has no competition is called a monopoly. In a monopoly, a single company or entity has exclusive control over a particular product or service in a market, allowing them to dominate and set prices without any competition. This lack of competition can lead to higher prices for consumers and limited choices in the market.Rate this question:
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- 19.
If a business that formerly had competition suddenly has no competition, what is the most likely behavior of the business?
- A.
Increased sales prices
- B.
Decreased sales prices
Correct Answer
A. Increased sales pricesExplanation
When a business that previously had competition suddenly has no competition, the most likely behavior of the business would be to increase their sales prices. With no competition, the business can take advantage of their monopoly position and raise prices without fear of losing customers to competitors offering lower prices. This allows them to maximize their profits and potentially increase their revenue.Rate this question:
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- 20.
If a business has a profit margin of 5%, then the government taxes that business at 6%, which of the following options could keep the business profitable?
- A.
Decrease prices
- B.
Increase prices
- C.
Lower costs to produce goods
- D.
Cut staffing costs (fire employees)
Correct Answer(s)
B. Increase prices
C. Lower costs to produce goods
D. Cut staffing costs (fire employees)Explanation
Increasing prices, lowering costs to produce goods, and cutting staffing costs (firing employees) could all potentially help keep the business profitable. Increasing prices would allow the business to generate more revenue per unit sold, which could offset the higher tax rate. Lowering costs to produce goods would reduce expenses, increasing the profit margin. Cutting staffing costs would also decrease expenses, potentially improving the profit margin. However, without further information about the specific circumstances of the business, it is difficult to determine which option would be the most effective in maintaining profitability.Rate this question:
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- 21.
Nike hired Tiger Woods to be their spokesperson with the idea that he could generate increases in sales for the company. If they paid Tiger $100m/year AND the cost to make their products was another $100m/year, how much money in sales would they need to generate a profit?
- A.
$100m
- B.
$150m
- C.
$200m
- D.
$250m
Correct Answer
D. $250mExplanation
Nike hired Tiger Woods as their spokesperson to generate increases in sales for the company. They paid Tiger $100m/year and the cost to make their products was another $100m/year. In order to generate a profit, Nike would need to make enough sales to cover these expenses. Therefore, they would need to generate $250m in sales.Rate this question:
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Mar 21, 2023Quiz Edited by
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May 04, 2020Quiz Created by
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