UMUC ECON 203 Full Course-Latest 2015 November

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Question homework 1

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Chapter 1_ a command economy

Question 1 1 / 1 point

In countries like _____________ the command economy predominates.

a) Germany and France

b) Cuba and North Korea

c) China and Vietnam

d) South Africa and Kenya

Chapter 1_market-oriented economy


Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?

a) command economy

b) division of labour

c) economies of scale

d) international trade

Chapter 1_Black market


Which of the following best denotes the reason for the existence of substantial black markets?

a) a market-oriented economy

b) a command economy

c) government laws and rules

d) the microeconomy

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Chapter 1_type of market


In the ______________, households receive goods and services and pay firms for them.

a) labor market

b) savings market

c) goods and services market

d) financial capital market

Chapter 1_Specialization


_____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.

a) Specialization

b) Economies of scale

c) Division of labor

d) Skill

Chapter 1 _The circular flow diagram


In the circular flow diagram model:

a) households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses.

b) businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households.

c) households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses.

d) Both (a) and (b) are correct.

Chapter 2 _positive statements_ppf


Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

a) opportunity cost

b) trade-off

c) budget constraint

d) normative statement

Chapter 2_scarcity


Scarcity exists because of:

a) specialization and division of labor.

b) the allocation of goods by prices

c) the market mechanism.

d) unlimited wants and limited resources.

Chapter 2 _opportunity costs


The opportunity cost of an action:

a) is a subjective valuation that can be determined only by the individual who chooses the action.

b) can be determined by adding up the bills incurred as a result of the action.

c) can be objectively determined only by economists.

d) can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action.

Chapter 2_opportunity cost problems


"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

a) $0

b) $40

c) $44

d) $4

Chapter 2 _budget constraint


The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

a) personal preference

b) utility level


d) opportunity set

Chapter 2 _ The marginal benefit


The marginal benefit of a slice of pizza is the:

a) difference between the value of the slice to the consumer and the price of the slice.

b) price of the slice of pizza

c) total amount that a consumer is willing to pay for a whole pizza, divided by the number of slices

d) maximum amount that a consumer is willing to pay for the slice.

Chapter 2 _utility


The lesson of __________ is to forget about the money that’s irretrievably gone and instead to focus on the marginal costs and benefits of future options.

a) budget constraints

b) sunk costs

c) marginal analysis

d) marginal utility

Chapter 2 _marginal utility


The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.

a) utility

b) diminishing marginal utility

c) marginal analysis

d) consumption

Chapter 2 _opportunity cost _sunk costs


In many cases, it is reasonable to refer to the ________________ as the price.

a) budget constraint

b) sunk cost


d) opportunity cost

Chapter 2 _opportunity costs_budget constrains


In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income.

a) utility

b) budget constraint

c) opportunity set

d) production possibilities frontier

Chapter 2 _law of diminishing marginal utility


The choice on a production possibilities set that is socially preferred, or the choice on an individual’s budget constraint that is personally preferred, will display _____________________.

a) allocative efficiency

b) scarcity

c) the production possibilities frontier

d) trade-offs

Chapter 2 problems


The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

a) Opportunity cost

b) production possibilities frontier

c) productive efficiency

d) budget constraint

homework 2

hapter 3 Random


According to the law of supply:

a) there is a direct relationship between price and quantity demanded.

b) there is a direct relationship between price and the quantity supplied.

c) there is an inverse relationship between price and the quantity supplied.

d) there is an inverse relationship between price and quantity demanded.


The nature of demand indicates that as the price of a good increases:

a) suppliers wish to sell less of it.

b) buyers desire to purchase less of it.

c) more of it is desired.

d) more of it is produced.


______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.

a) Subsidies

b) Rent controls

c) Price floors

d) Price ceilings


Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________.

a) law of demand

b) price model

c) income gap

d) market equilibrium


The ____________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.

a) supply schedule

b) demand schedule

c) quantity demanded

d) equilibrium quantity


Any given demand or supply curve is based on the ceteris paribus assumption that ___________________.

a) what is true for the individual is not necessarily true for the whole.

b) all else is held equal

c) everything is variable.

d) no one knows which variables will change and which will remain constant.


_________________ refers to the total number of units that are purchased at that price.

a) quantity demanded

b) quantity

c) market quantity

d) supply


The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases.

a) price, quantity demanded

b) quantity supplied, quantity demanded

c) price, quantity supplied

d) quantity demanded, price


In economics, the demand for a good refers to the amount of the good that people:

a) will buy at various prices.

b) would like to have if the good were free.

c) need to achieve a minimum standard of living.

d) will buy at alternative income levels.

Chapter 3 MC Random


A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:

a) cross-price elasticity of demand for iced tea is 2.

b) elasticity of demand for iced tea is 2 and is elastic.

c) cross-price elasticity of demand for soda is -0.5.

d) elasticity of demand for soda 0.5 and is inelastic.


__________ is the change in what is on the horizontal axis (quantity) divided by the change in what is on the vertical axis (price).

a) Demand

b) Elasticity

c) Supply

d) Revenue


The longer the time period considered, the more the elasticity of supply tends to:

a) increase

b) converge to zero

c) remain constant

d) decrease

Chapter 3 Problems


Refer to Figure 4-2. A change from Point A to Point B represents a(n):

a) increase in demand.

b) increase in quantity demanded.

c) decrease in quantity demanded.

d) decrease in demand.

Chapter 5 elastisity definition


Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.

a) inelastic

b) unit elastic

c) independent

d) elastic


The price elasticity of demand measures the:

a) responsiveness of quantity demanded to a change in price.

b) responsiveness of price to a change in quantity demanded.

c) responsiveness of quantity demanded to a change in quantity supplied.

d) responsiveness of quantity demanded to a change in income.


Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.

a) unit elastic

b) independent

c) inelastic

d) elastic

Chapter 5 Graph


Refer to Figure 7-1. With reference to Graph A, at a price of $10, total revenue equals:

a) $1,000.

b) $200.

c) $500.

d) $400.

Chapter 5 Elasticity dem_sup


Supply is said to be ____________ when the quantity supplied is very responsive to changes in price.

a) inelastic

b) elastic

c) unit elastic

d) independent

Chapter 5 Problems


A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that:

a) elasticity of demand for potato chips is 3.

b) cross-price elasticity of demand for soda is -3.

c) elasticity of demand for soda 3.

d) elasticity of demand for potato chips is 3.


A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:

a) total revenue will remain constant.

b) total revenue will decrease.

c) the elasticity of demand will increase.

d) total revenue will increase.

Chapter 5 economists are sketching examples of demand and supply


A demand or supply curve with ______________ would be horizontal in appearance.

a) infinite elasticity

b) zero elasticity

c) infinite cost elasticity

d) unitary elasticity


When economists are sketching examples of a demand or supply curve that is close to horizontal, they refer to that demand or supply curve as ____________.

a) elastic

b) inelastic

c) price inelasticity

d) having zero elasticity


The evidence on the supply curve of financial capital is controversial, but at least in the short run, the elasticity of savings with respect to the interest rate appears to be __________.

a) inelastic

b) negative

c) elastic

d) perfectly elastic


Youth smoking seems to be more __________ than adult smoking—that is, the quantity of youth smoking will fall by a greater percentage than the quantity of adult smoking in response to a given percentage increase in price.

a) elastic

b) inelastic

c) unitary elastic

d) cross-price elastic


When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as _________.

a) inelastic

b) elastic

c) income elasticity

d) unitary elasticity

homework 3

Submission View


Chapter 6 utility definition


Economists are able to determine total utility by:

a) multiplying the marginal utility of the first unit consumed by the number of units consumed.

b) summing up the marginal utilities of each unit consumed.

c) multiplying the marginal utility of the last unit consumed by the unit price.

d) multiplying the marginal utility of the last unit consumed by the number of units consumed.


The term _____________ describes a situation where a ________________ causes a reduction in the buying power of income, even though actual income has not changed.

a) substitution effect; lower price

b) income effect; higher price

c) intertemporal budget; lower price

d) intertemporal budget; higher price

Chapter 6 American households


Approximately what portion of annual consumption is typically spent by American households on shelter?

a) one-third

b) one-fourth

c) one-half

d) one-quarter

Chapter 6 maximizing utility


As a general rule, utility-maximizing choices between consumption goods occur where the:

a) rise in income has created the greatest utility.

b) price ratio and marginal utilities ratio of two goods is equal.

c) constraints on budget expenditures has fallen substantially.

d) higher-income households have the greatest satisfaction.


Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found?

a) the marginal utility per dollar is controlled by trade-offs

b) the quantities demanded change so total utility rises

c) the demand curves are flatter reducing quantity

d) the marginal utility per dollar is the same for both goods


The most common pattern for marginal utility is ____________________.

a) a long-term perspective theoretical model

b) a budget constraint model

c) diminishing marginal utility

d) substitute consumption

Chapter 6 utility-maximizing point


Kim has $24 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $8 while each yoga class costs $3. The total utility from each of these activities is set out in the table below. What is Kim's total utility maximizing point?

Movies Total Utility Yoga Classes Total Utility

0 0 0 0

1 40 1 30

2 75 2 55

3 105 3 76

4 130 4 92

5 160 5 106

6 114

7 116

8 117

a) 1 movie, 5 yoga classes

b) 2 movies, 2 yoga classes

c) 0 movies, 8 yoga classes

d) 3 movies, 0 yoga classes

Chapter 6 Utility_consumer choice


Saving money is a(n) ____________________, because it involves less consumption in the present, but the ability to consume more in the future.

a) risk premium

b) budget constraint

c) intertemporal choice

d) opportunity cost


Even with wage increases, the supply curve of labor is most often inelastic for which of the following?

a) part-time workers

b) lawyers

c) full-time workers

d) massage therapists


The _________________ budget constraint shows the tradeoff between present and future consumption.

a) inflation

b) time-value of money

c) utility-maximizing

d) intertemporal choice

Chapter 6 utility maximizing choice (table)


Troy has a part-time job in a book store to help pay for his college. He can work up to 30 hours each week at his job, which pays $9 per hour. The table below shows his utility from different

levels of leisure and income. Troy currently works 20 hours per week. If he decides to work 30 hours instead, his marginal utility gain from the additional income is ____.

Hours of Leisure Total Utility from Leisure Income Total Utility from Income

0 0 0 0

5 18 45 30

10 34 90 54

15 48 135 72

20 56 180 81

25 60 225 87

30 62 270 90

315 92

a) 6

b) 12

c) 3

d) 9

Chapter 7 industry_structure


________________________ arises where many firms are competing in a market to sell similar but differentiated products.

a) Monopolistic competition

b) Oligopolistic competition

c) Monogopolised competition

d) Perfect competition

Chapter 7 cost


A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.

a) variable costs; are constantly changing,

b) variable costs; do not change,

c) fixed costs; are consistently changing,

d) fixed costs; do not change,

Chapter 7 Diminishing variable returns


In order to determine the average variable cost, the firm's variable costs are divided by _______________________.

a) the quantity of output

b) its' average costs

c) diminishing marginal costs

d) its' fixed costs


In order to determine ____________, the firm's total costs must be divided by the quantity of its output.

a) fixed costs

b) diminishing marginal returns

c) variable cost

d) average cost

Chapter 7 economies of scale


The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.

a) diseconomies of scale

b) economies of scale

c) diminishing marginal returns

d) marginal cost output


In microeconomics, the term _____________________ is synonymous with economies of scale.

a) increasing returns to scale

b) constant returns to scale

c) diminishing marginal returns

d) decreasing returns to scale

Chapter 7 total revenue


_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.

a) Average profit margin

b) Total profits

c) Total cost

d) Total revenue

Chapter 7 Problems with tables


The table below sets out cost information for the production of volley balls. Some values are missing. Which of the following statements is correct?

Quantity Variable Cost Fixed Cost Total Cost Average Variable Cost ($ per unit) Marginal Cost ($ per unit)

0 0 30 30 0 -

1 12 B 12 E

2 25 C D F

3 A 72 14 G

a) A = 42; E = 40

b) A = 70; E = 12

c) A = 70; E = 40

d) A = 42, E = 12


Refer to the table below.

Quantity Cost

(in dollars) Fixed Costs

(in dollars) Total Costs

(in dollars) Average Total Costs

(in dollars per unit) Average Variable Costs (in dollars per unit) Marginal Costs

(in dollars per unit)

0 0 40 40 - - - - - -

1 1 40 55 15 55 15

2 35 40 75 17.5 37.5 20

3 60 40 100 20 33.3 25

4 90 40 130 22.5 32.5 30

5 125 40 155 25 31 35

6 160 40 200 26.6 33.3 40

If this information were used to create a total cost graph, the curve should

a) begin at 40 on the vertical axis and slope upward.

b) become steeper as quantity increases.

c) become steeper due to diminishing returns.

d) reflect all of the above.

Chapter 7 costs of production


The _____________________ curve will always lie below the curve for average cost because average cost includes _____________ in the numerator of the calculation.

a) average variable cost; total costs

b) marginal cost; total costs

c) marginal cost; fixed costs

d) average variable cost; fixed costs


_____________________ help to explain why every economy, as it develops, has an increasing proportion of its population living in urban areas.

a) Constant returns to scale

b) Economies of scale

c) Diseconomies of scale

d) Agglomeration factors


A situation where the level of output, scale and average costs are all rising is called

a) decreasing returns to scale

b) diseconomies of scale

c) diminishing returns to scale

d) both a and b are correct


If a comparison between average cost and price reveals whether a firm is earning profits, then a comparison between average variable cost and price reveals

a) that if the market price is below average cost, then profits will be negative.

b) total revenues are the quantity produced multiplied by the price.

c) whether the firm is earning profit if fixed costs are left out of the calculation.

d) that if the market price exceeds average cost, profits will be positive.

Chapter 7 questions with graph


The graph above illustrates the electricity market. Consider market competition between firms where price is based on AR and select the most appropriate answer.

a) this market is perfectly competitive with negative profits possible in the long-run

b) this market is imperfectly competitive with excess profits possible in the short-run

c) this market is imperfectly competitive with excess profits possible in the long-run

d) this market is perfectly competitive with excess profits possible in the short-run

homework 4


Chapter 8 definitions


The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.

a) trend setter

b) business entity

c) price setter

d) price taker


Economic profit can be derived from calculating total revenues minus all of the firm’s costs,

a) including its marginal revenue.

b) including its opportunity costs.

c) excluding its marginal revenue.

d) excluding its opportunity costs.


An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________________ .

a) accounting profit; including opportunity cost

b) economic profit; excluding opportunity cost

c) accounting profit; excluding opportunity cost

d) opportunity cost; including economic profit


A perfectly competitive industry is a

a) realistic extreme.

b) hypothetical extreme.

c) realistic assumption.

d) hypothetical assumption.

Chapter 8 perfect_competition


Idaho farmers can sell as large a quantity of their potato crop as they wish,

a) if they set their own price in the short run, but in the long run, the market sets the price.

b) if they set their own price in the long run, but in the short run, the market sets the price.

c) provided each is willing to accept the prevailing market price.

d) provided quality is perceptible and determines the market price.


Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products.

a) perfect competition

b) a perfect monopoly

c) an oligopoly

d) a free-market

Chapter 8 total revenue and total cost


If marginal cost is rising in a competitive firm's short-run production process and its average variable cost is falling as output is increased, then

a) marginal cost is below average variable cost

b) marginal cost is below average fixed cost.

c) average fixed cost is constant.

d) marginal cost is above average variable cost.


In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect ________________ and ________________ .

a) total revenue; marginal cost

b) marginal revenue; marginal cost

c) total revenue; total cost

d) marginal revenue; total cost


What happens in a perfectly competitive industry when economic profit is

greater than zero?

a) existing firms may expand their operations

b) firms may move along their LRAC curves to new outputs

c) there may be pressure on the market price to fall

d) new firms may enter the industry and all of the above

Chapter 8 marginal product


In a perfectly competitive market setting, which of the following would be a true statement?

a) Wage rates trend toward marginal revenue product levels.

b) Market price automatically sets itself exactly at equilibrium.

c) Market price rarely trends toward the equilibrium value.

d) Wage rates mirror marginal revenue product levels exactly.

Chapter 8 Problems with graphs


Refer to the diagram above. Which of the following explains the slope of the total revenue curve illustrated in this graph?

a) total revenue shown as a straight line sloping up indicates a perfectly competitive firm

b) the slope of the total revenue curve is determined by the price of the goods produced

c) at higher levels of output, diminishing returns will cause total cost to slope downward steeply

d) the slope of the total revenue curve is explained by both a and b above.

chapter 8 Problems with table


Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals

Q P TC TR MR MC Profit

0 $5 $9

1 $5 $10

2 $5 $12

3 $5 $15

4 $5 $19

5 $5 $24

6 $5 $30

7 $5 $45

a) $15.00

b) $20.00

c) zero

d) $1.00

Chapter 8 Problems


Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should

a) raise her prices above the perfectly competitive level set by the market.

b) lay-off her staff, break her lease, and close the business down immediately.

c) keep the business open in the short-run, but plan to go out of business in the long-run.

d) keep the business open in the short-run, and plan to expand the business in the long-run.

Chapter 9 definitions


Government ______________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for ______________ .

a) trade secret; an unlimited time

b) trademark; an unlimited time

c) patent; a limited time

d) copyright; a limited time


Which of the following is most unlikely to present a barrier to entry into a market?

a) market forces

b) deregulation

c) patent laws

d) technological advantages


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UMUC ECON 203 Full Course-Latest 2015 November