question

Which of the following is not held constant in a demand schedule? a. income b. tastes c. price d. expectations

answer

c. price

question

Each of the following is a determinant of demand except a. tastes. b. production technology. c. expectations. d. the prices of related goods

answer

b. production technology

question

9. Which of the following is correct concerning opportunity cost? a. Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway. b. To compute opportunity costs, you should subtract benefits from costs. c. Opportunity costs and the idea of trade-offs are not closely related. d. Rational people should compare various options without considering opportunity costs.

answer

a. Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway.

question

If Max experiences a decrease in his income, then we would expect Max's demand for a. each good he purchases to remain unchanged. b. normal goods to decrease. c. luxury goods to increase. d. inferior goods to decrease.

answer

b. normal goods to decrease

question

Economic models are built with a. recommendations concerning public policies. b. facts about the legal system. c. assumptions. d. statistical forecasts.

answer

c. assumptions

question

The production possibilities frontier illustrates a. the combinations of output that an economy should produce. b. the combinations of output that an economy should consume. c. the combinations of output that an economy can produce. d. All of the above are correct.

answer

c. the combinations of output that an economy can produce

question

Which of the following is a correct statement about production possibilities frontiers? a. An economy can produce only on the production possibilities frontier. b. An economy can produce at any point inside or outside a production possibilities frontier. c. An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier. d. An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.

answer

c. An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier

question

Which of the following statements is (are) correct? a. Relative to some other scientists, economists find it more difficult to conduct experiments. b. Theory and observation are important in economics as well as in other sciences. c. To obtain data, economists often rely upon the natural experiments offered by history. d. All of the above are correct.

answer

d. All of the above are correct

question

Which of the following statements about trade is false? a. Trade increases competition. b. With trade, one country wins and one country loses. c. Bulgaria can benefit, potentially, from trade with any other country. d. Trade allows people to buy a greater variety of goods and services at lower cost.

answer

b. With trade, one country wins and one country loses.

question

Tom Brady should probably not mow his own lawn because a. his opportunity cost of mowing his lawn is higher than the cost of paying someone to mow it for him. b. he has a comparative advantage in mowing his lawn relative to a landscaping service. c. he has an absolute advantage in mowing his lawn relative to a landscaping service. d. he might sprain his ankle.

answer

a. his opportunity cost of mowing his lawn is higher than the cost of paying someone to mow it for him

question

Economists view normative statements as a. prescriptive, making a claim about how the world ought to be. b. descriptive, making a claim about how the world is. c. statements about the normal condition of the world. d. pessimistic, putting the worst possible interpretation on things.

answer

a. prescriptive, making a claim about how the world ought to be. b. descriptive, making a claim about how the world is

question

In competitive markets, a. firms produce identical products. b. no individual buyer can influence the market price. c. no individual seller can influence the market price. d. All of the above are correct.

answer

d. All of the above are correct

question

Which of the following changes would not shift the demand curve for a good or service? a. a change in income b. a change in the price of the good or service c. a change in expectations about the future price of the good or service d. a change in the price of a related good or service

answer

b. a change in the price of the good or service

question

The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the a. amount of the other good that must be given up. b. market price of the additional amount produced. c. amount of resources that must be devoted to its production. d. number of dollars that must be spent to produce it.

answer

a. amount of the other good that must be given up

question

Which of the following is a determinant of the market supply curve but not a determinant of an individual seller's supply? a. production technology b. expectations c. input prices d. the number of sellers

answer

d. the number of sellers

question

One way to characterize the difference between positive statements and normative statements is as follows: a. Positive statements tend to reflect optimism about the economy and its future, whereas normative statements tend to reflect pessimism about the economy and its future. b. Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be. c. Positive statements involve advice on policy matters, whereas normative statements are supported by scientific theory and observation. d. Economists outside of government tend to make normative statements, whereas government-employed economists tend to make positive statements.

answer

b. Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be

question

When the government redistributes income from the wealthy to the poor, a. efficiency is improved, but equality is not. b. equality is improved, but efficiency is not. c. both efficiency and equality are improved. d. neither efficiency nor equality are improved.

answer

b. equality is improved, but efficiency is not

question

44. During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that a. the United Kingdom has a better education system than Turkey. b. the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey. c. workers in Turkey are more productive than workers in the United Kingdom. d. there are more instances of market power in Turkey than in the United Kingdom.

answer

b. the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey

question

Microeconomics is the study of a. how money affects the economy. b. how individual households and firms make decisions. c. how government affects the economy. d. how the economy as a whole works.

answer

b. how individual households and firms make decisions

question

A microeconomist — as opposed to a macroeconomist — might study a. the effect of a national healthcare program on the nation's unemployment rate. b. the effect of new regulations on production in the pulp and paper industry. c. the effect of changes in interest rates on gross domestic product. d. the growth rate of production in the economy.

answer

b. the effect of new regulations on production in the pulp and paper industry

question

Normative statements are not a. descriptive. b. prescriptive. c. claims about how the world should be. d. made by economists speaking as policy advisers

answer

a. descriptive

question

Which of the following is one of the basic reasons why economists often appear to give conflicting advice to policymakers? a. similar opinions about the validity of economic theories b. significant differences in education c. differences in personal values d. a reliance on normative statement for research theories

answer

c. differences in personal values

question

51. Economists face an obstacle that many other scientists do not face. What is that obstacle? a. It is often difficult to formulate theories in economics. b. It is often impractical to perform experiments in economics. c. Economics cannot be addressed objectively; it must be addressed subjectively. d. The scientific method cannot be applied to the study of economics.

answer

b. It is often impractical to perform experiments in economics

question

An increase in quantity supplied a. results in a movement downward and to the left along a fixed supply curve. b. results in a movement upward and to the right along a fixed supply curve. c. shifts the supply curve to the left. d. shifts the supply curve to the right.

answer

b. results in a movement upward and to the right along a fixed supply curve

question

If something happens to alter the quantity demanded at any given price, then a. the demand curve becomes steeper. b. the demand curve becomes flatter. c. the demand curve shifts. d. we move along the demand curve.

answer

c. the demand curve shifts

question

60. If a firm is a price taker, it operates in a a. competitive market. b. monopoly market. c. oligopoly market. d. monopolistically competitive market.

answer

a. competitive market

question

A market demand curve shows how the total quantity demanded of a good varies as a. income varies. b. price varies. c. price of the nearest substitute good varies. d. supply varies.

answer

b. price varies.

question

economy

answer

"one who manages a household"

question

economics

answer

how people/society manage scarce resources; the study of decisions, trends, interactions and prices

question

Principle #1

answer

people face trade offs

question

trade off

answer

to get something we like or want, we usually have to give up something else

question

efficiency trade off

answer

society getting the maximum benefits from its scarce resources (economic pie as a whole)

question

equality trade off

answer

distributing economic prosperity uniformly among the members of society (how the pie is sliced)

question

Principle #2

answer

the cost of something is what you give up to get it

question

opportunity cost

answer

the cost of what you give up and its value

question

Principle #3

answer

rational people think at the margin; people systematically and purposefully do the best they can to achieve their objective

question

marginal changes

answer

small incremental adjustments to a plan of action

question

marginal cost

answer

how much would one more item/unit (you sell) cost you

question

Principle #4

answer

people respond to incentives

question

incentive

answer

something that induces a person to act

question

Principle #5

answer

trade can make everyone better off; without trade we would have to do everything for ourselves; we can enjoy a variety of goods and services at lower costs through trade

question

Principle #6

answer

markets are usually a good way to organize economic activity

question

Principle #7

answer

governments can sometimes improve market outcomes

question

Principle #8

answer

a country's standard of living depends on its ability to produce goods and services

question

Principle #9

answer

prices rise when the government prints too much

question

inflation

answer

an increase in the overall level of prices in the economy

question

Principle #10

answer

society faces a short run trade off between unemployment and inflation

question

PPF

answer

production possibility frontier; only way to produce more of one good, is to produce less of another good

question

recession

answer

in recession, curve of ppt does not shift, rather we produce at an inefficient line/spot.

question

positive statements

answer

describes reality, descriptive, discusses variables, confirms or refutes by examine evidence

question

normative statements

answer

attempt to prescribe how the world should be, prescriptive, often contains the words should or ought.

question

absolute advantage

answer

ability to produce a good using fewer inputs than another producer

question

comparative advantage

answer

who can produce the good at a lower opportunity cost; an individual cannot have comparative advantage in both

question

market

answer

a group of buyers or sellers of a particular good or service

question

buyers

answer

determine the demand for a product

question

sellers

answer

determine the supply of the product

question

competitive market

answer

market in which many buyers and sellers each have a negligible impact on market price; price and quantity are determine by all buyers and sellers.

question

perfectly competitive market

answer

-goods marketed for sale are all alike -buyers and sellers are numerous; no single individual affects market price -at the mark price, buyers buy all they want; sellers sell all they want -no incentive to change/lower price because you can sell all you want

question

monopoly

answer

only one seller; sets the price other markets lie in between

question

quantity demanded

answer

amount of goods buyers are willing and able to purchase

question

law of demand

answer

other things equal.... when the price of a good rises, the quantity demanded of the good falls & when the price falls, the quantity demanded rises

question

demand

answer

relationship between price and quantity demanded

question

market demand

answer

sum of all individual demands for a good or service at given prices.

question

variables that can shift demand curve

answer

income, prices of related goods, taste, expectations, # of buyers

question

normal goods

answer

other things constant, increase in income leads to an increase in demand

question

inferior goods

answer

other things constant, higher income leads to less demand

question

related goods

answer

substitutes and complements

question

substitutes role

answer

an increase in the price of one, leads to an increase in demand of the other

question

complements role

answer

increase of price in one leads to a decrease in demand for the other

question

substitute

answer

an item you consume in place of an other; oranges vs. apples

question

complement

answer

things you consume together; sugar & tea

question

quantity supplied

answer

amount of a good sellers are willing and able to sell

question

law of supply

answer

other things equal when the price of a good rises, the quantity supplied of the good also rises, when the price falls, the supply falls as well.

question

market supply

answer

sum of all individual supply curves

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