Econ 2301 Exam 1 Ch 1, 2, 3 & 24 – Flashcards
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The economizing problem is: a) the need to make choices because economic wants exceed economic means. b) how to distribute resources equally among all members of society. c) that people's means often exceed their wants. d) that people do not know how to rationally allocate resources.
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a) the need to make choices because economic wants exceed economic means.
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The basic difference between consumer goods and capital goods is that: a) consumer goods are produced in the private sector and capital goods are produced in the public sector. b) an economy that commits a relatively large proportion of its resources to capital goods must accept a lower growth rate. c) the production of capital goods is not subject to the law of increasing opportunity costs. d) consumer goods satisfy wants directly while capital goods satisfy wants indirectly.
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d) consumer goods satisfy wants directly while capital goods satisfy wants indirectly.
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Slopes of lines are especially important in economics because: a) they measure marginal changes. b) they always tell us something about profits. c) positive slopes are always preferred to negative slopes. d) they always relate to resource and output scarcity.
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a) they measure marginal changes.
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The construction of a production possibilities curve assumes: a) the quantities of all resources are unlimited. b) technology is fixed. c) some resources are unemployed. d) there is no inflation in the economy.
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b) technology is fixed.
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If two variables are inversely related, then as the value of one variable: a) increases, the value of the other may either increase or decrease. b) decreases, the value of the other decreases. c) increases, the value of the other decreases. d) increases, the value of the other increases.
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c) increases, the value of the other decreases.
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Which of the following will enable a nation to obtain a combination of consumer goods and capital goods outside its production possibilities curve? a) Full employment. b) International specialization and trade. c) Full production. d) Productive efficiency.
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b) International specialization and trade.
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A country can achieve some combination of goods outside its production possibilities curve by: a) idling some of its resources. b) specializing and engaging in international trade. c) buying the debt (bonds and stocks) of foreign nations. d) producing more capital goods and fewer consumer goods.
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b) specializing and engaging in international trade.
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Normative statements are concerned primarily with: a) facts and theories. b) what ought to be. c) what is. d) rational choice involving costs and benefits.
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b) what ought to be.
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Which of the following is a labor resource? a) A computer programmer. b) A computer. c) Silicon (sand) used to make computer chips. d) A piece of software used by a firm.
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a) A computer programmer.
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The optimal allocation of resources is found: a) where MB = MC. b) at every point along a production possibilities curve. c) where the marginal benefit is at its greatest. d) where the marginal cost is at its lowest.
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a) where MB = MC.
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Which of the following statements is true? a) Microeconomics focuses on specific decision-making units of the economy; macroeconomics examines the economy as a whole. b) Macroeconomics focuses on specific decision-making units of the economy; microeconomics examines the economy as a whole. c) Every topic in economics is either a microeconomic or a macroeconomic issue; a topic cannot be both. d) Topics in microeconomics have public policy implications; topics in macroeconomics do not.
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a) Microeconomics focuses on specific decision-making units of the economy; macroeconomics examines the economy as a whole.
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Any combination of goods lying outside of the budget line: a) implies that the consumer is not spending all his income. b) yields less utility than any point on the budget line. c) yields less utility than any point inside the budget line. d) is unattainable, given the consumer's income.
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d) is unattainable, given the consumer's income.
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Macroeconomics approaches the study of economics from the viewpoint of: a) the entire economy. b) governmental units. c) the operation of specific product and resource markets. d) individual firms.
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a) the entire economy.
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Which of the following is not one of the five fundamental questions? a) What prices will be charged for goods and services? b) Who will get the goods and services? c) What goods and services will be produced? d) How will the system promote progress?
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a) What prices will be charged for goods and services?
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Which of the following is one of the Five Fundamental Questions? a) Which products will be in scarce supply and which in excess supply? b) Who should appoint the head of the central bank? c) How much should society save? d) What goods and services will be produced?
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d) What goods and services will be produced?
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Refer to the diagram. Arrows (1) and (3) are associated with: a) the money market. b) the resource market. c) the product market. d) international trade.
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b) the resource market.
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Economic systems differ according to which two main characteristics? a) Who owns the factors of production and the methods used to coordinate economic activity. b) The technology used in production and the quantity and quality of natural resources. c) How goods are produced and who gets them. d) The political system in place and the degree of scarcity facing the economy.
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a) Who owns the factors of production and the methods used to coordinate economic activity.
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The simple circular flow model shows that: a) households are on the buying side of both product and resource markets. b) businesses are on the selling side of both product and resource markets. c) households are on the selling side of the resource market and on the buying side of the product market. d) businesses are on the buying side of the product market and on the selling side of the resource market.
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c) households are on the selling side of the resource market and on the buying side of the product market.
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The French term "laissez-faire" means: a) "there is no free lunch." b) "let it be." c) "circular flow." d) "public ownership."
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b) "let it be."
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In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market. a) product; financial b) resource; product c) product; resource d) capital; product
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c) product; resource
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Which of the following best describes the invisible-hand concept? a) The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest. b) The nonsubstitutability of resources creates a conflict between private and public interests and calls for government intervention. c) The market system is the best system for overcoming the scarce resources-unlimited wants problem. d) Central direction by the government will improve resource allocation in a capitalistic economy.
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a) The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.
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Households and businesses are: a) both buyers in the resource market. b) both sellers in the product market. c) sellers in the resource and product markets respectively. d) sellers in the product and resource markets respectively.
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c) sellers in the resource and product markets respectively.
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Command systems are also known as: a) market systems. b) pure capitalism. c) laissez-faire capitalism. d) communism.
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d) communism.
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Barter: a) is the major means of exchange in centrally planned economies. b) accounts for over 30 percent of the dollar volume of all exchange in the U.S. economy. c) entails the exchange of goods for goods. d) is used to circumvent the problem of a lack of coincidence of wants among potential buyers and sellers.
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c) entails the exchange of goods for goods.
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The division of labor means that: a) labor markets are geographically segmented. b) unskilled workers outnumber skilled workers. c) workers specialize in various production tasks. d) each worker performs a large number of tasks.
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c) workers specialize in various production tasks.
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A market: a) reflects upsloping demand and downsloping supply curves. b) entails the exchange of goods, but not services. c) is an institution that brings together buyers and sellers. d) always requires face-to-face contact between buyer and seller.
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c) is an institution that brings together buyers and sellers.
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Allocative efficiency involves determining: a) which output mix will result in the most rapid rate of economic growth. b) which production possibilities curve reflects the lowest opportunity costs. c) the mix of output that will maximize society's satisfaction. d) the optimal rate of technological progress.
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c) the mix of output that will maximize society's satisfaction.
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When the price of a product rises, consumers with a given money income shift their purchases to other products whose prices are now relatively lower. This statement describes: a) an inferior good. b) the rationing function of prices. c) the substitution effect. d) the income effect.
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c) the substitution effect.
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The rationing function of prices refers to the: a) tendency of supply and demand to shift in opposite directions. b) fact that ration coupons are needed to alleviate wartime shortages of goods. c) capacity of a competitive market to equalize quantity demanded and quantity supplied. d) ability of the market system to generate an equitable distribution of income.
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c) capacity of a competitive market to equalize quantity demanded and quantity supplied.
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In moving along a demand curve, which of the following is not held constant? a) The price of the product for which the demand curve is relevant. b) Price expectations. c) Consumer incomes. d) Prices of complementary goods.
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a) The price of the product for which the demand curve is relevant.
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An inferior good is: a) one whose demand curve will shift rightward as incomes rise. b) one whose price and quantity demanded vary directly. c) one that has not been approved by the Federal Food and Drug Administration. d) not accurately defined by any of these statements.
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d) not accurately defined by any of these statements.
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A normal good is one: a) whose amount demanded will increase as its price decreases. b) whose amount demanded will increase as its price increases. c) whose demand curve will shift leftward as incomes rise. d) for which the consumption varies directly with income.
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d) for which the consumption varies directly with income.
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Markets, viewed from the perspective of the supply and demand model: a) assume many buyers and many sellers of a standardized product. b) assume market power so that buyers and sellers bargain with one another. c) do not exist in the real-world economy. d) are approximated by markets in which a single seller determines price.
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a) assume many buyers and many sellers of a standardized product.
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Graphically, the market demand curve is: a) steeper than any individual demand curve that is part of it. b) greater than the sum of the individual demand curves. c) the horizontal sum of individual demand curves. d) the vertical sum of individual demand curves.
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c) the horizontal sum of individual demand curves.
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In this market, economists would call a government-set maximum price of $40 a: a) price ceiling. b) price floor. c) equilibrium price. d) fair price.
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a) price ceiling.
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(Consider This) Ticket scalping refers to: a) the surplus of tickets that occurs when price is set below equilibrium. b) the shortage of tickets that occurs when price is set above equilibrium. c) pricing tickets so high that an athletic or artistic event will not be sold out. d) reselling a ticket at a price above its original purchase price.
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d) reselling a ticket at a price above its original purchase price.
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If two goods are complements: a) they are consumed independently. b) an increase in the price of one will increase the demand for the other. c) a decrease in the price of one will increase the demand for the other. d) they are necessarily inferior goods.
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c) a decrease in the price of one will increase the demand for the other.
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Real GDP measures the: a) total dollar value of all goods and services produced within the borders of a country using current prices. b) value of final goods and services produced within the borders of a country, corrected for price changes. c) total dollar value of all goods and services consumed within the borders of a country, adjusted for price changes. d) value of all goods and services produced in the world, using current prices.
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b) value of final goods and services produced within the borders of a country, corrected for price changes.
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Higher rates of unemployment are linked with: a) greater political stability because the employed tend to be more politically active. b) higher crime rates as the unemployed seek to replace lost income. c) lower rates of heart disease as the unemployed have eliminated job stress. d) improvements in overall health as the unemployed have more leisure time to be physically active.
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b) higher crime rates as the unemployed seek to replace lost income.
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The average number of months between price changes for gasoline is: a) 0.2. b) 0.6. c) 1.0. d) 1.8.
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b) 0.6.
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Macroeconomics is mostly focused on: a) the individual markets within an economy. b) only the largest industries in the economy. c) the economy as a whole. d) why specific businesses fail.
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c) the economy as a whole.
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(Consider This) In 2008 and 2009, the United States experienced what has come to be known as the: a) Great Depression. b) Great Recession. c) Great Expansion. d) Great Stagnation.
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b) Great Recession.
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Shocks to the economy occur: a) when expectations are unmet. b) whenever the price level changes. c) whenever government implements fiscal or monetary policy. d) because most economic behavior is unpredictable.
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a) when expectations are unmet.
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(Last Word) Which of the following explanations argues that the Great Recession resulted from asset-price bubbles caused by euphoria and debt-fueled speculation? a) Minsky explanation. b) Austrian explanation. c) Stimulus explanation. d) Structural explanation.
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a) Minsky explanation.
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For which of the following goods and services are prices most sticky? a) Taxi fares. b) Beer. c) Coin-operated laundry machines. d) Airline tickets.
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c) Coin-operated laundry machines.
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The business cycle depicts: a) fluctuations in the general price level. b) the phases a business goes through from when it first opens to when it finally closes. c) the evolution of technology over time. d) short-run fluctuations in output and employment.
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d) short-run fluctuations in output and employment.
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The term "recession" describes a situation where: a) inflation rates exceed normal levels. b) output and living standards decline. c) an economy's ability to produce is destroyed. d) government takes a less active role in economic matters.
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b) output and living standards decline.
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Shocks to the economy occur when: a) stock prices rise by more than 10 percent per year. b) government takes a more active role in the economy. c) prices are flexible. d) actual economic events do not match what people expected.
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d) actual economic events do not match what people expected.
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Unemployment describes the condition where: a) equipment and machinery are going unused. b) a person cannot get a job but is willing to work and is actively seeking work. c) a person does not have a job, regardless of whether or not he or she wants one. d) any resource sits idle.
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b) a person cannot get a job but is willing to work and is actively seeking work.
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Modern economic growth refers to countries that have experienced an increase in: a) real GDP over time. b) nominal GDP over time. c) real output spread evenly across all sectors of the economy. d) real output per person.
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d) real output per person.
