Select the phrase that correctly completes the following statement. “An increase in input prices caused a decrease in the supply of baseballs. As a result ________.”

1) Select the phrase that correctly completes the following statement. “An increase in input prices caused a decrease in the supply of baseballs. As a result ________.”

a. the price of baseballs increased and the demand for baseballs decreased b. the equilibrium quantity of baseballs increased c. the price of baseballs increased and the quantity demanded of baseballs decreased d. the price of baseballs increased. The higher price caused the supply of baseballs to increase

2)In a competitive market, the demand curve shows the ________ received by consumers and the supply curve shows the ________.

a. utility; average cost. b. marginal benefit; marginal cost c. economic surplus; opportunity cost d. net benefit; net cost

3)Suppose a drought increased the price of corn by 25 percent while it decreased the quantity by 50 percent. The price elasticity of demand equals

a. 20.0 b. 2.0 c. 0.5 d. Zero

4)An outward shift of a nation’s production possibilities frontier represents

a. economic growth. b. rising prices of the two goods on the production possibilities frontier model. c. an impossible situation. d. a situation in which a country produces more of one good and less of another.

5)If a doctor knows that an insurance company will pay for most of a patient’s bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of

a. moral hazard. b. the principal-agent problem. c. asymmetric information. d. adverse selection.

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