ECON 202 –Quiz 2 KEY
An increase in the demand for tacos is represented by the movement from
D1 to D2.
A decrease in the quantity of tacos demanded is represented by the movement from
point b to point a.
The ability of one person or nation to produce a good at a lower opportunity cost than another is called a(n)
comparative advantage.
Suppose that the quantity supplied of a certain model of car exceeds the quantity of the cars demanded. We
would expect that
the price of the cars will decrease.
The law of supply indicates that
producers will offer more of a product at high prices than they will at low prices.
According to the law of increasing opportunity costs
the slope of the supply curve is positive.
Which of the following will most likely occur under a system of clearly defined and enforced private
property rights?
Resource owners will gain by discovering and employing their resources in ways that are highly
valued by others.
In a market economy, what encourages firms to develop new products and production processes?
patents
While intuitively it makes sense that a demand curve is downward sloping, the technical rationale for the
consumer’s inverse relationship between price and quantity demand is
the law of decreasing marginal benefits.
In order to achieve a high economic freedom rating, a country must
protect property rights, enforce contracts even-handedly, and rely extensively on markets to
allocate goods and services.
Compared to a barter economy, money of stable and predictable value will
reduce the cost of transactions and increase the volume of trade.
The law of demand implies that when people are asked to conserve water during a drought,
they will be more likely to cooperate if the rates charged for water rise.
A response to a price change would be described as a:
movement along an existing demand curve.
Income per capita is generally _____________ in countries with greater economic freedom
higher
From the above, consider two individuals, Celia and Sondra, who produce bracelets and pendants. Celia's
opportunity cost of one pendant is
5 bracelets.
If Celia and Sondra choose to specialize and trade, then
Celia will specialize in bracelets and trade bracelets for pendants.
A demand curve is defined as the relationship between
the price of a good and the quantity of that good that consumers are willing to buy.
Suppose that both the price of gasoline and the amount of gasoline sold decline. Which of the following
would account for this?
A shift left of the demand curve, but no change in the supply curve
Why is private ownership an important source of economic prosperity?
It provides owners with a strong incentive to develop and use assets in ways that others value
highly.