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Quantity Supply means

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amount of good person is willing and able to sell at each price

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Supply Curve

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The curve that show the relationship between the

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law of supply

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ceteris paribus. there is a positive relation between democracy and quantity supplied

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Market clearing price

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a price there the quantity demand and the quantity supplied are equals

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Market Clearing Quantity

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Number of exchanges that will occur at a market clearing price

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Range of Indeterminacy

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The range of potential price that buyer and seller could agree on

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Diminishing marginal utility

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As a person acquires more units of a good the satisfaction they derive from from each new unit is lower than than previous

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Increasing marginal opportunity

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holds that a person gives up more units of good the value goes up

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One major assumption of economics is that people

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act as if they systematically pursue self-interest. always pursue the interests of others.

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Self-interest relates to

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both monetary and nonmonetary objectives

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The threat of a large fine for failure to pay income taxes is an example of

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a negative incentive to get all people to pay taxes.

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"Wants" as an economic concept includes

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both material and nonmaterial desires.

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In a market-based economy, the government

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enforces property rights

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If real salaries increase but nominal salaries do not, this means that:

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prices have fallen

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A mixed economic system is best described an economy with a mix of

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free markets and government control

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The real value of money

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reflects the purchasing power of money

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Economists assume that individuals

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are rational and respond to incentives.

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"If the United States enters a war in the Middle East, the economy will go into a recession" is an example of

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a positive statement

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In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, economist Adam Smith argued that individuals

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motivated by self interest

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In economic analysis, people's resources are

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limited and their wants are unlimited.

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Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?

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the government

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he law of supply implies that the supply curve is

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upward sloping

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The saying that "You cannot have your cake and eat it too" illustrates the economic concept of

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opportunity cost

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The concept of marginality is important in economics because

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individuals make decisions at the margin

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The law of diminishing marginal utility implies that the marginal utility for a particular product

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decreases as more of the product is consumed

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The extra benefit resulting from a small increase in an activity is called the

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marginal benefit

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According to the law of demand, other things being equal

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when the price a good goes up, then people buy less of that good

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Marginal utility can be thought of as

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the incremental change in a person's total satisfaction level from the buying of a good.

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Fred and Ann both decide to see the same movie when they are given free movie tickets. We know that

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both bear an opportunity cost since they could have done other things instead of see the movie.

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The marginal utility of the first cup of coffee that Tom drinks in the morning is worth $2.00. The marginal utility of the 9th cup of coffee he drinks is positive while the marginal utility of the 10th cup of coffee he drinks in the morning is worth $0. This implies that at a price of $0, Tom would drink

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at most 10 cups of coffee per morning

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Ceteris paribus, as the price of a good or service increases,

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people will buy less of it

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In economics, another term for satisfaction is

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utility

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The concept of marginality is important in economics because

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individuals make decisions at the margin

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Other things being equal, an increase in the price of a good leads to an increase in the amount produced. This is known as

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the law of supply

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Which of the following is an example of the law of supply?

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The price of gum has increased so producers are making more gum.

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The price system features

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voluntary exchange that makes both the consumer and producer better off

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the law of diminishing marginal utility implies that the marginal utility for a particular product

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decreases as more of the product is consumed

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Which of the following is the correct way to describe equilibrium in a market?

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At equilibrium, quantity demanded equals quantity supplied.

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Marginal utility is the ________ satisfaction gained by consuming ________ of a good.

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additional; one more unit

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The opportunity cost of attending college might best be described as

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the highest-valued alternative use of the student's time.

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Which of the following statements best describes the concept of consumer surplus

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"I was all ready to pay $300 for a new leather jacket that I had seen in Macy's but I ended up paying only $180 for the same jacket.

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Inelastic demand implies

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that a one percent increase in price results in a smaller than one percent decrease in quantity demanded

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The longer the time frame involved, the more likely it is that the demand will be relatively

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elastic

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Suppose that when the price of milk rises 20%, the quantity demanded of milk falls 10%. Based on this information, what is the approximate absolute price elasticity of demand for milk?

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0.5

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If more buyers came into the market for a good, we would expect to see the market demand curve

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shift outward and to the right.

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In economic terminology, a normal good is a good

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for which demand increases when income increases.

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Another term for the equilibrium price is

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market clearing price.

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An elastic response in the quantity of a good demanded would be caused by

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the availability of many substitutes

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Which of the following statements is FALSE about the demand curve

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An increase in demand shifts the demand curve to the left, closer to the price axis

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Which of the following will cause a movement along the demand curve instead of a shift of the demand curve?

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none of the above

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Arthur buys a new cell phone for $150. He receives consumer surplus of $150 from the purchase. How much does Arthur value his cell phone?

answer

$300

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The difference between the ________ and the ________ from the sale of a product is called producer surplus.

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lowest price a firm would have been willing to accept; price it actually receives

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The price elasticity of demand is a measure of

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the responsiveness of the quantity demanded of a good to a changes in the price of the good.

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Paul goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul's consumer surplus from the purchase is

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$75

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Which of the following is a determinant of the price elasticity of demand for an item?

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-The percentage of a consumers budget allocated to expenditures on the item -The availability of a close substitute for the item -The amount of time available to adjust to a change in the price of the item

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Which of the following is an effect of a minimum wage law that establishes a floor wage below the current market clearing wage?

answer

Nothing

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When the government sets a maximum price that can be charged for a good or service, it creates

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price ceiling

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If the government imposed a price ceiling on gasoline above this good's current market clearing price, there would be

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no change in the price of gasoline

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Which of the following is an example of a price ceiling?

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Rent controls

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Instituting a rent control program will most likely lead to

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a shortage of rental units.

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In the recent years, prices of basic food commodities such as corn, rice, and wheat have increased sharply. A recent article in the Wall Street Journal states that Chinese authorities are concerned that escalating prices will cause inflation and be followed by civil unrest

answer

create deadweight loss

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An effective rent control will

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keep rent below the competitive market level

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A price floor set above a market equilibrium price causes

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a surplus

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Which of the following is a price floor?

answer

minimum wage rates

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Absolute advantage is

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producing a good with very few imputs

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The principle of comparative advantage implies that

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every country can benefit from international trade

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Import restrictions

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can protect United States jobs in the protected industry but will also lead to job reductions in other export industries.

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In the long run, imports will most likely be paid for with

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exports.

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International trade between two nations increases the standard of living of both nations due to

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specialization and gains from comparative advantage.

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Why specialize?

answer

It usually increases productivity.

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Absolute advantage is

answer

producing a good using the fewest inputs.

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