question

A decrease in demand combined with no change in supply

answer

Lowers the equilibrium price

question

If macaroni and cheese is an inferior good, a decrease in income will

answer

Increase the demand for macaroni and cheese

question

The "law of demand" states that, other things remaining the same, the quantity demanded of any good is

answer

Inversely related to its price

question

Which of the following explains why demand curves slope downward?

answer

Law of diminishing marginal utility

question

When the demand for a good increases, its equilibrium price _____________ and quantity supplied _________.

answer

Rises; increases

question

You observe that the price of a good rises and the quantity decreases. These observations can be the result of the

answer

Supply curve shifting leftward.

question

If a technological advance takes place in the computer industry, then the equilibrium price of a computer will _______ and the quantity demanded will _____.

answer

Fall; increase

question

If, as people's incomes increase, the demand for a good increases, the good is called

answer

A normal good

question

The quantity of IPODS that consumers (buyers) plan to buy this month depends on all of the following except the

answer

The technology firms use to produce and IPOD

question

Coffee and sugar are complements. If the supply curve of coffee shifts leftward because of poor weather (i.e. price rises), then there will be

answer

A decrease in the demand for sugar and a decrease in the price of sugar

question

Assume that beef and pork are substitutes for consumers. There is a drought in the cattle grazing areas raising the price of beer to consumers. The drought will shift the

answer

Demand curve for pork rightward

question

If both the demand and supply decrease, the equilibrium quantity

answer

Decreases and the effect on the equilibrium price is indeterminate

question

If the quantity demanded exceeds the quantity supplied, then there is

answer

A shortage and the price is below the equilibrium

question

When the price is less than the equilibrium price

answer

Some consumers will be willing to pay a price higher than the prevailing price. There will be a shortage. The price will be forced higher. (All of the above)

question

Each point on a supply curve represents

answer

The lowest price for which a supplier can profitability sell another unit

question

The quantity supplied of a good is

answer

The amount that the producers are planning to sell at a particular price during a given time period

question

A change in which of the following alters buying plans for cars but does NOT shift the demand curve for cars?

answer

A 20% increase in the price of a car

question

Which of the following always raises the equilibrium price?

answer

An increase in demand combined with a decrease in supply

question

A change in which of the following shifts the demand curve?

answer

The tastes and preferences of consumers

question

An increase in the number of fast-food restaurants (suppliers)

answer

Increase the supply of fast-good meals lowering price and increasing quantity demanded.

question

When the competitive market is using its resources efficiently, the

answer

Sum of the total amount of consumer surplus plus the total amount of producer surplus is maximized

question

Most economists believe that

answer

Prices are the best way to ration goods and services

question

Economists believe that

answer

All resources are scarce All human activity has an opportunity cost consumer wants are unlimited

question

The optimum level of production/consumption occurs where:

answer

Marginal benefit = marginal cost

question

The principle of the law of increasing marginal (or opportunity) cost implies that the

answer

Additional cost of producing one more of a good or service increases as more is produced

question

T/F: Marginal cost (or supply price) is the minimum price that producers must receive to induce them to produce another unit of a good or service

answer

True

question

T/F: The producer surplus on a unit of output is the difference between the market price and the opportunity cost of producing it (supply price).

answer

True

question

Consumer surplus is the value of a good minus the cost of producing it, summed over the quantity bought

answer

False

question

Consumer surplus is defined as supply price minus demand price

answer

False

question

If demand rises, quantity supplied rises. If supply increases, quantity demand increases

answer

True

question

If Smack Raman is an inferior good, a decrease in consumer incomes will decrease demand, lower price, and decrease quantity supplied (ceteris paribus).

answer

True

question

If the price of gasoline rises; the demand for SUVs falls (a complement good), lowering the price of SUVs and decreasing their quantity demanded

answer

False

question

If demand and supply increase at the same time; we know that price falls and equilibrium quantity is indeterminate

answer

False

question

The BEST definition of a capital good is "forgone consumption"

answer

True

question

The production possibilities frontier

answer

Represents (the production of) all possible combinations of any two goods or services that are technically (productively) efficient.

question

If a country must decrease current consumption to increase the amount of capital goods it produces today, then it

answer

Must be producing along the production possibilities frontier today and will see a shift outward of the frontier in the future if produces more capital goods

question

Production efficiency is achieved when

answer

Producing one more unit of one good cannot occur without producing less of some other good

question

The principle of increasing opportunity cost occurs because

answer

Resources are not equally suited to all activities

question

Which of the following will shift the production possibilities rightward?

answer

An increase in technology An increase in the capital stock Increase in labor and other natural resources

question

An expansion of the production possibilities frontier is

answer

Called economic growth

question

A bowed outward production possibilities frontier occurs when

answer

As more of a good is produced, producing additional units of it require greater reductions in the other good

question

If the US can increase its production of automobiles without decreasing its production of any other good, the US must have been producing at a point

answer

Within its PPF

question

AS a person consumes more and more of a good, the

answer

Marginal benefit decreases

question

We measure the marginal _______ of a good by what a ______ for another unit of the good

answer

Benefit; person willing to pay

question

Economic growth can be pictured in a production possibilities frontier diagram by

answer

Shifting the production possibilities frontier outward

question

T/F: A straight line production possibilities curve has constant opportunity cost (constant cost technology)

answer

True

question

Which of the following causes the production possibilities frontier to have a bowed out, curvilinear shape?

answer

The assumption that resources are specialized and not perfect substitutes for one another

question

A shift rightward of the production possibilities frontier (curve) can be caused by

answer

An increase in human capital (education)

question

T/F: Allocative efficiency occurs ar a specific point (i.e. a specific mix of production) on the production possibilities curve (frontier) that is valued above all alternatives

answer

True

question

Productive or technical efficiency occurs anywhere on the production possibilities curve

answer

True

question

Opportunity cost can be measured by the slope of the PPC curve (frontier)

answer

True

question

Marginal cost is the opportunity cost

answer

That arises from producing one more unit of a good or service

question

In March 2002, a factory used new technology to produce its output. Then in August 2002, a fire destroys half the factory. The new technology shifted the factory's PPF _______ and the fire shifted it _______.

answer

Outward; inward

question

The principle of decreasing marginal benefit means that as the quantity of a good consumed

answer

Increases, its marginal benefit decreases

question

Resource use is allocatively efficient

answer

When marginal benefit equals marginal cost

question

Pure public goods are:

answer

Non-rival, non-divisible, and non-excludable

question

Classical economists believe the business cycle is _____ by government intervention from macroeconomic stabilization policies

answer

Made more unstable

question

The inability of the free market and capitalism to efficiently allocate resources is called

answer

Market failure

question

The inability of the government and government agencies to efficiently allocate resources is called:

answer

Government failure

question

The type of uncertainty that classical economists and conservatives believe is slowing the recovery from the current recession is:

answer

Government uncertainty

question

The economic school of thought that emphasizes the role of market failure in today's economic problems is called the ______ school.

answer

Keynesian

question

The political party that emphasizes the role of market failure in today's economic problems is called

answer

Democratic

question

The economic school of thought that emphasizes the role of government failure in today's economic problems is called the _____ school.

answer

Classical

question

The majority of economists in the US support which of following?

answer

Dropping most, if not all trade barriers Greater immigration to the US Reducing or eliminating most agricultural subsides

question

The classical school supports which function of government?

answer

The first function of government (i.e. providing competition and a system of laws, courts and justice)

question

A system of property rights

answer

Encourages economic growth by creating incentives to invest in capital and to be innovative

question

What are the four categories into which factors of production are grouped?

answer

Land, labor, capital and entrepreneurship

question

The _______ describes the mistake of reasong that even A causes event B just because event A occurs prior to event B.

answer

Post hoc fallacy

question

T/F: Free market economists (classical) are more likely to be allied with Republican tha are Keynesian economists who are more likely to be allied with the Democrats.

answer

True

question

T/F: Most economists believe that "exporting jobs" in the process of globalization is good for the US and world economy

answer

True

question

T/F: The best definition of a capital good is "foregone consumption"

answer

True

question

T/F: The more we have of a good or service, the smaller is its marginal benefit and teh less we are willing to pay for an additional unit of it.

answer

True

question

"The rich should pay higher income tax rates that the poor" is an example of a

answer

Normative statement

question

The birth of economists as an intellectual discipline can de dated fairly precisely in the eighteenth century with

answer

The publication of the book "The Wealth of Nations"

question

The marginal benefit from a good is the maximum amount a person is willing to pay for

answer

One or more unit of good

question

The term ceteris paribus means

answer

All other things remaining equal

question

The fallacy of composition is the false belief that

answer

What is true for each part is also true for the whole part

question

When an economist refers to choices made "at the margin" the economist is referring to

answer

Decisions based on the marginal benefits and marginal costs of small changes in a particular activity

question

On the issue of free trade, economists (on average):

answer

Strongly support

question

On the issue of immigration, economists (on average):

answer

Strongly support

question

On the issue of agriculture price supports and subsidies, economists (on average):

answer

Strongly oppose

question

Keynesian economists believe the economy is analogous to

answer

An old Idaho pickup

question

The US economy is currently on the __________ phase of the economy

answer

Expansion

question

Scarcity requires that people must

answer

Make choices

question

All economic questions arise becuase

answer

We want more than we can get

question

Scarcity arises from

answer

Limited resources and unlimited wants

question

Paul Krugman is considered to be a ______ economist

answer

Keynesian

question

According to your instructor (class discussion), the "bounce" theory of economics is supported by:

answer

Classical economists and many Republicans

question

As an economic concept, scarcity applies to

answer

Both money and time

question

Which of the following best defines the subject of economics?

answer

The study of choices that businesses make to maximize profit

question

The branch of economics that deals with the analysis of the whole economy is called

answer

Macroeconomics

question

Which of the following is a macroeconomic issue?

answer

How federal government budget deficits affect interest rates

question

Opportunity cost is defined as

answer

All the highest-valued alternative given up

question

Microeconomics focuses on all of the following EXCEPT the

answer

Effect on inflation of increasing the money supply

question

Human capital is

answer

The skill and knowledge of workers

question

The fact that people with higher incomes get to consume more goods and services addresses the _______ question

answer

"for whom"

question

When consumers decide to purchase mroe electric cars and fewer gas guzzlers, they are most directly answering the ____ question

answer

"what"

question

In the US economy, which of the following statements is true?

answer

More services are produced than goods

question

One economist says that raising taxes on gas would be in the social interest. What does this economist mean?

answer

Higher taxes on taxes on gas would benefit society as a whole.

question

When China builds a dam using few machines and a great deal of labor, it is answering the ________ question

answer

"how"

question

Factors of production include all of the following EXCEPT

answer

Money

question

During the summer you have made eh decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. The opportunity cost of attending summer school is

answer

$10,300 (you just add them all together)

question

In economics, the term "capital" refers to

answer

Buildings and equipment

question

The loss of the highest-valued alternative defines the concept of

answer

Opportunity cost

question

In a market economy, what people do in the pursuit of their self-interest

answer

Usually forwards the social interest

question

Marginal cost is the cost

answer

That arises from an increase in an activity

question

The benefit that arises from an increase in activity is called

answer

The marginal benefit

question

A positive statement is

answer

About what is

question

Suppose that for the past two months, you have studied economics one hour a day. You now decide to study economics two hours a day. For the past two months, ________.

answer

Your marginal benefit from studying economics an hour must have been greater than its marginal cost

question

Positive and normative statments differ in that

answer

Positive statements can be tested, whereas normative statements cannot

question

T/F: According to Adam Smith, individuals acting in their own self-interest in the market place are also unintentionally acting in the social interest

answer

True

question

T/F: The iron law of price is that it must rise before it can fall when a shortage occurs

answer

True

question

T/F: In economics, many resources have no scarcity value....that is they are available to everyone free of charge

answer

False

question

T/F: Because wants and desires are unlimited; in a well functioning economy there cannot be any substantial long-term involuntary unemployment (regardless of future productivity and technological increases)

answer

True

question

T/F: Most economists favor less restrictive immigration policies in teh US

answer

True

question

T/F: Many economists believe that occupational licenses are designed more to rise salaries in tose professions than protect the consumers

answer

True

question

T/F: The current price of gasoline is modest in real inflation adjusted terms by historical standards

answer

True

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