Econ review – Flashcards
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Economics is a social science concerned with
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the best use of scarce resources to achieve the maximum satisfaction of economic wants
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Economics may best be defined as the
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social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity
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The study of economics is primarily concerned with
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choices that are made in seeking the best use of resources
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The assertion that "there is no free lunch" means that
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all production involves the use of scarce resources and thus the sacrifice of alternative goods
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In economics, the pleasure, happiness, or satisfaction received from a product is called
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Utility
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Alex sees that his neighbors lawns all need mowing. For $20 per hour, Economics would describe Alex's behavior as:
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Rational self-interest, because he's attempting to increase his own income by identifying and satisfying someone else's wants
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Economics involves marginal analysis because
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most decisions involve changes from the present situation
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A person should consume more of something when its marginal:
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benefit exceeds its marginal costs
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Kara was out jogging and despite being tired, decided to one more mile. Based on her actions, economists would conclude:
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decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile
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The process by which economists test hypotheses against facts to develop theories, principles, and models is called:
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scientific method
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An economic hypothesis
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possible explanation of cause and effect
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A well-tested economic theory is often called
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principle/law
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Which is an illustration of a microeconomics question?
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Will a new type of television set increase the number of buyers?
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Microeconomics is concerned with
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a detailed examinations of specific economic units that make up the economic system
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Microeconomics
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concerned with individual economic units and specific markets
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The problems of aggregate inflation and employment are
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major topics of macroeconomics
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Which of the following is a microeconomics statement?
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The price of personal computers declined last year
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A normative statement is one that
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is based on value judgements
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Ben says that "increase in the tax on beer will raise its price." Holly argues "taxes should be increased on beer because college students drink too much"
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Holly's statement is normative, but Ben's is positive
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In deciding whether to study for an economics quiz or go to a movie, one is confronted by the ideas of
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scarcity and opportunity costs
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Which of the following most closely relates to the idea of opportunity costs?
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tradeoffs
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The budget line shows
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all possible combinations of two goods that can be purchased, given money income and the prices of the goods
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Which of the following is not a main function of the entrepreneur?
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make routine pricing decisions
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Which of the following is real capital?
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a savings account
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Which of the following are an economic resources?
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A bulldozer for a construction company and a new factory building for making ice cream, A collage English professor
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A point on the PPC indicates that all resources are put to full use in the economy
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True
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On a production possibilities curve, the single optimal or best combination of output for any society:
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Depends upon the preferences of society
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The production possibilities curve
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is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced
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Any point inside the production possibilities curve indicates
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that more output could be produced with available resources
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Unemployment
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is illustrated by a point inside the production possibilities curve
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If we say that two variables are directly related, this means that
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an increase in one variable is associated with an increase in other variable
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Economists
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are somewhat arbitrary in assigning independent and dependent variables to the horizontal and vertical axes
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Which of the following statements is correct?
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The value of the dependent variable is determined by the value of the independent variable
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The lope of a line parallel to the horizontal axis is
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Zero
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If we say that two variables are inversely related, this means that
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an increase in one variable is associated with a decrease with the other
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The slope of a line parallel to the vertical axis is
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infinite
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If two variables are inversely related, then as the value of one variable
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increases, the other value decreases
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Slopes of lines are especially important in economics because
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the measure marginal changes
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The slope of a straight line can be determined by
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comparing the absolute vertical change of the absolute horizontal change between two points on the line
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The movement from line A to line A' represents change in
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intercept only
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Economic systems differ according to which two main characteristics?
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Who owns the factors of production, and the methods used to coordinate economic activity.
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Command systems are also known as:
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Communism
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Which statement best describes a command economy?
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The production and allocation of goods and services is determined primarily through government.
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Which of the following is a distinguishing feature of a command system?
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Central planning.
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Examples of command economies are
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Cuba and North Korea
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Which statement is correct?
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Freedom of choice and enterprise are essential elements of the market system
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In a competitive economy, prices:
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Influence consumers in their purchases of goods and services, businesses in their purchases of economic resources, and workers in making occupational choices
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Which of the following is a distinguishing feature of a market system?
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Wide-spread private ownership of capital
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The competitive market system:
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encourages innovation because successful innovators are rewarded with economic profits
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The term laissez-faire suggests that
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government should not interfere with the operation of the economy
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The use of money contributes to economic efficiency because
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it promotes specialization by overcoming the problems with barter
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Economic profits in an industry suggests the industry
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should be larger to do better satisfy consumers' desire for the product
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Private property
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encourages owners to maintain or improve their property, so as to preserve or enhance value
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The regulatory mechanism of the market system is:
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competition
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The idea that firms and resource suppliers in seeking to further their own self-interest in a competitive market economy also simultaneously promotes the public or social interest is a description of
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the invisible hand
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Broadly defined, competition involves
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independently acting buyers and sellers and freedom to enter or leave markets
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Which of the following best describes the invisible-hand concept?
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The desires of resources suppliers and producers to further their own self-interest will automatically further the public interest.
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The invisible hand refers to the:
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notion that, under competition, decisions motivated by self-interest promote the social interest
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The indivisible hand concept suggests that
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assuming competition, private, and public interest will coincide
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The influential book written by Adam Smith was:
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The wealth of nations
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Money functions as medium of exchange by eliminating the need for a coincidence of wants.
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True
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The circular flow model:
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Illustrates the interdependence of businesses and consumers.
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The law of demand is illustrated by a demand curve that is:
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Downward sloping
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Which would cause a decrease in the quantity of computers?
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A decrease in the demand for computers
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A schedule which shows the various amounts of a product producers are willing and able to produce at each price in a series of possible prices during a specified period of time is called:
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Supply
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If the quantity supplied of a product is less than the quantity demanded, then
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There is a shortage of the product
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If the market price is above the equilibrium price
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A surplus will occur and producers will produce less and lower prices
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A competitive market will
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achieve an equilibrium price
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A product market is in equilibrium
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where the demand and supply curves intersect
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Government-set price floors and price ceilings
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Interfere with the rationing function of price in a free market
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A market place or market
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is an institution that brings together buyers and sellers
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The law of demand states that, other things equal
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price and quantity demand are inversely related
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Graphically, the market demand curve is
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the horizontal sum of individual demand curves
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The demand curve shows the relationship between
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price and quantity demanded
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Economists use the term "demand" to refer to
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a schedule of various combinations of markets prices and amounts demanded
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When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the
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income effect
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In presenting the idea of a demand curve, economists presume the most important variable in determining the quantity demanded is
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the price of the product itself
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When the price of Nike soccer balls fell, Ronaldo purchased more Nike than Adidas soccer balls. Which explains his decision to buy the other soccer balls?
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The substitution effect
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An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that:
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bicycles are normal goods
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If two goods are complements:
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a decrease in the price of the complementary good will increase the demand for this/main/our good
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DVD players and DVDs are
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Complementary goods
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If the price of product L increases, the demand curve for close-substitute product J will
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shift to the right
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Which of the following is most likely to be an inferior good?
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Used clothing
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Which of the following will cause the demand curve for Product A to shift to the left?
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an increase in money income if Product A is an inferior good
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Tennis rackets and ballpoint pens are
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independent goods
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Digital cameras and memory cards are
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complementary goods
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An increase in the price of product A will:
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increase the demand for substitute product B
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An increase in the quantity demanded means that
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Price has declined and consumers therefor want to purchase more of the product.
