Econ Ch.1 & 3 – Flashcards
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In economics, scarcity means that: a. A shortage of a particular good will cause the price to fall. b. A production-possibilities curve cannot accurately represent the tradeoff between two goods. c. Society's desires exceed the want-satisfying capability of the resources available to satisfy those desires. d. The market mechanism has failed.
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C
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A consequence of the economic problem of scarcity is that: a. Choices have to be made about how resources are used. b. There is never too much of any good or service produced. c. The production of goods and services must be controlled by the government. d. The production-possibilities curve is bowed outward.
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A
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With respect to factors of production, which of the following statements is not true? a. Factors of production are also known as resources. b. In order to produce any good or service, it is necessary to have factors of production. c. Factors of production include land, labor, capital, and entrepreneurship. d. Only those resources that are privately owned are counted as factors of production.
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D
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Capital, as economists use the term, refers to: a. The money needed to start a new business. b. The costs of operating a business. c. Shares of stock issued by businesses. d. Final goods that are used to produce other goods and services.
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D
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The role of the entrepreneur in an economy is to: a. Bring the factors of production together and assume the risk of production. b. Work with government planners to determine what goods are produced. c. Arrange bank financing for the owners of new businesses. d. Ensure full employment of labor.
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A
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Opportunity cost is: a. Only measured in dollars and cents. b. The dollar cost to society of producing the goods. c. The difficulty associated with using one good in place of another. d. The alternative that must be given up in order to get something else.
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D
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The opportunity cost of studying for an economics test is: a. Negative, since it may improve your grade. b. Zero, because you knew when you registered for the class that studying would be required. c. The money you spent on tuition for the class. d. The best alternative use of your time.
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D
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A production-possibilities curve indicates the: a. Combinations of goods and services an economy is actually producing. b. Maximum combinations of goods and services an economy can produce given its available resources and technology. c. Maximum combinations of goods and services an economy can produce given unlimited resources. d. Average combinations of goods and services an economy can produce given its available resources and technology.
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B
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A point on a nation's production-possibilities curve represents: a. An undesirable combination of goods and services. b. Combinations of production that are unattainable, given current technology and resources. c. Levels of production that will cause both unemployment and inflation. d. The full employment of resources to achieve a particular combination of goods and services.
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D
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According to the law of increasing opportunity costs: a. Greater production leads to greater inefficiency. b. Greater production means factor prices rise. c. Greater production of one good requires increasingly larger sacrifices of other goods. d. Higher opportunity costs induce higher output per unit of input.
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C
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If the United States decides to convert automobile factories to tank production, as it did during World War II, but finds that some auto manufacturing facilities are not well suited to tank production, then: a. The production-possibilities curve between tanks and automobiles will appear as a straight line. b. The production-possibilities curve between tanks and automobiles will shift outward. c. Decreasing opportunity costs will occur with greater automobile production. d. Increasing opportunity costs will occur with greater tank production.
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D
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When an economy is producing efficiently it is: a. Producing a combination of goods and services beyond the production-possibilities curve. b. Getting the most goods and services from the available resources. c. Experiencing decreasing opportunity costs. d. Producing equal amounts of all goods.
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B
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The points on a production-possibilities curve show: a. Desired output. b. Actual output. c. Potential output. d. All of the above.
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C
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If an economy is producing inside the production-possibilities curve, then: a. There is full employment of resources. b. It is operating efficiently. c. It can produce more of one good without giving up some of another good. d. There are not enough resources available to produce more output.
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C
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Which of the following events would allow the production-possibilities curve to shift outward? a. The economy's capital stock declines b. More teenagers enter the labor force c. Technology is lost d. People begin to retire at earlier ages
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B
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Which of the following will cause the production-possibilities curve to shift inward? a. An increase in population b. A decrease in the size of the labor force c. A technological advance d. An increase in knowledge
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B
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In a market economy, the people who receive the goods and services that are produced are those who: a. Need the goods and services the most. b. Have the most political power. c. Want the goods and services the most. d. Are willing to pay the highest price.
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D
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The market mechanism: a. Is not a very efficient means of communicating consumer demand to the producers of goods and services. b. Works through central planning by government. c. Eliminates market failures created by government. d. Works because prices serve as a means of communication between consumers and producers.
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D
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A mixed economy: a. Is justified by the superiority of laissez faire over government intervention. b. Utilizes both market and nonmarket signals to allocate goods and services. c. Relies on the use of central planning by private firms rather than the government. d. Is one that allows trade with other countries.
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B
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If market signals result in pollution beyond the optimal level then: a. The economy experiences government failure. b. A laissez-faire approach will reduce the level of pollution. c. The market mechanism has failed to achieve social efficiency. d. The government is allocating resources inefficiently.
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C
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Which of the following is an example of government failure? a. Bureaucratic delays b. Required use of pollution-control technology that is obsolete c. Inefficient incentives d. Bureaucratic delays, required use of pollution-control technologies that are obsolete, and inefficient incentives
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D
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Which of the following is not a macroeconomic statement? a. The unemployment rate for the United States rose to 5 percent in the last quarter. b. The Federal Reserve lowered interest rates at their last meeting. c. Congress increased the minimum wage rate in January. d. Jenny's wage rate rose and, in response, she decided to work more hours.
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D
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Microeconomics is concerned with issues such as: a. The demand for bottled water by individuals. b. The level of inflation in the economy. c. Maintaining a strong level of economic growth. d. All of the choices.
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A
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The Latin phrase "ceteris paribus" means: a. The production-possibilities curve never shifts. b. Laissez faire. c. Other things remain equal. d. The invisible hand.
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C
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The slope of a curve at any point is given by the formula, the: a. Change in y coordinates between two points divided by the change in their x coordinates. b. Change in x coordinates between two points divided by the change in their y coordinates. c. Percentage change in y coordinates between two points divided by the percentage change in their x coordinates. d. Percentage change in x coordinates between two points divided by the percentage change in their y coordinates.
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A
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A linear function can be distinguished by: a. The continuous change in its slope. b. The same slope throughout the line. c. The changing relationship between the two variables. d. A shift in the function.
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B
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The fact that there are too few resources to satisfy all our wants is attributed to: a. Scarcity. b. Greed. c. Shortages. d. Lack of money.
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A
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Greater regulation to correct the imbalances in the economy, as well government intervention to maintain full employment was associated primarily with the work of: a. John Maynard Keynes. b. Adam Smith. c. Karl Marx. d. Ronald Reagan.
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A
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The goal of the consumer in a market economy is to use his/her limited income to buy: a. The greatest number of goods and services possible. b. The goods and services that maximize profits for businesses. c. Those goods and services with the lowest prices. d. The set of goods and services that maximizes their utility.
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D
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People benefit by participating in the market because: a. Resources are no longer limited. b. There are always participants in the market that are more efficient than you are in production. c. Market participation allows individuals to specialize and, ultimately, consume more. d. Participants in the market do not have to make choices.
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C
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A factor market is any place where: a. Finished goods are bought and sold. b. Land, labor, or capital is bought and sold. c. Finished services are bought and sold. d. Factories are bought and sold.
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B
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Individual consumers supply ____ and purchase ____. a. Factors of production; final goods and services b. Intermediate goods; final goods and services c. Final goods and services; factors of production d. National goods and services; factors of production
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A
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A market in which final goods and services are exchanged is a: a. Public-goods market. b. Product market. c. Factor market. d. Labor market.
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B
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Jessie's demand schedule for candy bars indicates: a. Her opportunity cost of buying candy bars. b. How much she likes candy bars. c. How many candy bars she will actually buy. d. Why she likes candy bars.
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A
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According to the law of demand, during a given period of time, the quantity of a good demanded: a. Increases as its price rises, ceteris paribus. b. Increases as its price falls, ceteris paribus. c. Decreases as its price falls, ceteris paribus. d. Does not change when price changes.
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D
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A lower quantity demanded of a good reflects, ceteris paribus: a. Lower income. b. A downward shift of the supply curve. c. A higher price of the good. d. Fewer units actually purchased.
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C
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Ceteris paribus, which of the following is most likely to cause an increase in the quantity demanded of perfume? a. A decrease in the price of perfume b. A decrease in tastes for perfume c. An increase in income d. An increase in the price of electricity
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A
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Ceteris paribus, if buyers expect the price of airline tickets to fall in the future, then right now there should be: a. An increase in the demand for airline tickets. b. A decrease in the supply of airline tickets. c. A decrease in the demand for airline tickets. d. No change in the supply of or demand for airline tickets because the price is not changing right now.
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C
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Assume that pencils and pens are substitutes. If the price of pencils rises, then we will see: a. An increase in the demand for pens. b. A decrease in the demand for pens. c. An increase in the supply of pens. d. A decrease in the supply of pens
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A
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If there are only two airlines that fly between Dallas and New Orleans, what will happen in the market for one airline if the other one goes out of business? a. The demand curve will shift to the right b. The demand curve will shift to the left c. There will be a movement to the right along the initial demand curve d. There will be a movement to the left along the initial demand curve
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A
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A change in demand means there has been a shift in the demand curve, and a change in quantity demanded: a. Results from a change in price of other goods. b. Means a shortage or surplus will result from holding prices constant. c. Also means demand has shifted. d. Means that price has changed and there is movement along the demand curve.
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D
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To calculate market demand we: a. Add the quantities demanded for each individual demand schedule horizontally. b. Add the quantities demanded for each individual demand schedule vertically. c. Find the average quantity demanded at each price. d. Find the difference between the quantity demanded and the quantity supplied at each price.
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A
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Which of the following is a determinant of supply? a. Consumer tastes or preferences b. The prices of the factors of production c. Income d. Number of buyers
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B
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A shift in supply is defined as a change in: a. Price. b. Quantity supplied because of a change in price. c. Equilibrium quantity. d. Supply because of a change in a non-price determinant
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D
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The law of supply implies that: a. Supply curves are flat. b. Supply curves are upward-sloping to the right. c. Supply curves are downward-sloping to the right. d. A change in a determinant of demand shifts the supply curve.
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B
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Ceteris paribus, if the subsidies given to corn syrup producer decrease, then we can expect: a. A decrease in the demand for corn syrup. b. A decrease in the supply of corn syrup. c. An increase in the demand for corn syrup. d. An increase in the supply of corn syrup.
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B
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Assume that steel is used to produce monkey wrenches. Ceteris paribus, if the price of steel rises, then: a. The supply curve for monkey wrenches will shift to the left. b. The supply curve for monkey wrenches will shift to the right. c. There will be a leftward movement along the initial supply curve for monkey wrenches. d. There will be a rightward movement along the initial supply curve for monkey wrenches.
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A
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Ceteris paribus, which of the following is most likely to shift both the demand and the supply curve? a. Technology b. Expectations c. The price of the good itself d. Income
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B
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The equilibrium price in a market is found where: a. The market supply curve intersects the market demand curve. b. The market supply curve intersects the y-axis. c. The market demand curve intersects the y-axis. d. The market supply curve intersects the x-axis.
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A
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In most markets, the equilibrium price is achieved: a. Through detailed databases. b. Using an equilibrium price formula. c. Through government mandate. d. Through trial and error.
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D
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When a surplus exists for a product: a. Producers increase supply. b. Consumers increase demand. c. Government purchases decrease. d. Producers reduce the level of output and reduce price.
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D
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If the quantity demanded of a good is greater than the quantity supplied of the good at the current price, then: a. Price will increase until it reaches the equilibrium price. b. The demand curve will shift to the left to create equilibrium. c. The supply curve will shift to the right to create equilibrium. d. There is a surplus of the good.
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A
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A rightward shift in a demand curve and a rightward shift in a supply curve both result in a: a. Lower equilibrium price. b. Lower equilibrium quantity. c. Higher equilibrium price. d. Higher equilibrium quantity.
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D
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A leftward shift of the market demand curve for HDTVs, ceteris paribus, causes equilibrium price to: a. Increase and quantity to decrease. b. Decrease and quantity to decrease. c. Increase and quantity to increase. d. Decrease and quantity to increase.
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B
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Assume peanut butter and jelly are complements. Ceteris paribus, an increase in the price of peanut butter will cause the equilibrium price for jelly to: a. Increase and the equilibrium quantity of jelly to decrease. b. Increase and the equilibrium quantity of jelly to increase. c. Decrease and the equilibrium quantity of jelly to decrease. d. Decrease and the equilibrium quantity of jelly to increase.
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C
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Assume milk is used to produce ice cream. Ceteris paribus, a decrease in the price of milk will cause the equilibrium price of ice cream to: a. Increase and the equilibrium quantity of ice cream to increase. b. Increase and the equilibrium quantity of ice cream to decrease. c. Decrease and the equilibrium quantity of ice cream to increase. d. Decrease and the equilibrium quantity of ice cream to decrease.
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C
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In 2007 a company sold 35,000 MP3 players at $150 each. In 2008 the same company sold 40,000 MP3 players at $170 each. This information suggests that: a. The supply of MP3 players increased from 2007 to 2008. b. The demand for MP3 players increased from 2007 to 2008. c. The price of MP3 players increased because the costs of production increased from 2007 to 2008. d. From 2007 to 2008 the demand curve for MP3 players was upward sloping because of improved technology.
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B
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Suppose both the demand and supply of salsa increase (although not necessarily by the same amount). What can we conclude about changes in the price and quantity of salsa? a. Both the price and quantity increase b. The price increases but the change in the quantity cannot be determined c. The quantity increases but the change in the price cannot be determined d. Both the price and quantity decrease
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C
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When the market mechanism is allowed to operate freely, prices will determine: a. The mix of output to be produced and the resources to be used in the production process. b. The resources to be used in the production process and for whom the output is produced. c. The mix of output to be produced, the resources to be used in the production process, and for whom the output is produced. d. For whom the output is produced and the mix of output to be produced.
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C
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In a market economy, which of the following is an incentive for producers to produce efficiently? a. Government laws and regulations b. Profits c. The production-possibilities curve d. The public's welfare
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B
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When economists talk about "optimal outcomes" in the marketplace, they mean that: a. The allocation of resources by the market is perfect. b. All the consumer desires are satisfied and business profits are maximized. c. The allocation of resources by the market is likely to be the best possible, given scarce resources and income constraints. d. Everyone who wants a good or service can have it.
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C
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If the government places a binding price ceiling on cancer-treating drugs, then: a. Fewer people will die from cancer. b. More people will die from cancer. c. There will be no change in the number of people who die from cancer. d. The supply of cancer-treating curves will increase.
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B
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Suppose a hurricane hits Florida causing widespread damage to houses and businesses. The governor of Florida places a price ceiling on all building materials to keep the prices reasonable. Which of the following is the most likely result? a. A faster recovery from the storm b. More people will be able to purchase building materials c. Shortages of building materials and a slower recovery from the storm d. The supply of building materials to Florida will increase
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C
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Which of the following statements about markets is not true? a. Markets necessarily have a physical location. b. Markets have to have both a demand side and a supply side. c. The two types of markets include the factor and product markets. d. Every market transaction involves an exchange of dollars for goods or resources.
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A
