Econ Test 1 Questions And Answers – Flashcards

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choices made by people faced with scarcity
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Economics is best defined as the study of:
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how society uses limited resources
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Economics is the study of:
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the resources we use to produce goods and services are limited
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Scarcity can best be defined as a situation in which:
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a market
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An arrangement that allows buyers and sellers to exchange things is called:
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people must make choices
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Because resources are limited:
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answers the question "What ought to be?"
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Normative economics:
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Should the government provide free prescription drugs to senior citizens?
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Which of the following is an example of a normative question?
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If the college increased tuition, will class sizes decline?
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Which of the following is a question with positive economic analysis?
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simplified representation of an economic environment
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An economic model is a:
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use assumptions
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To make things simpler and focus attention on what really matters, economists would:
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something that can take on different values
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A variable measures:
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all other variables are held fixed
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The Latin phrase ceteris paribus means that when a relationship between two variables is being studied:
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how a small change in one variable is allowed to change
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To think at the margin means to consider:
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a marginal change
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A small change in a variable is:
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people act in their own self-interest
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When economists assume that people are rational and respond to incentives, they mean
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the nations economy as a whole
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Macroeconomics is best described as the study of:
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Should we have a constitutional amendment to balance the federal budget?
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Which of the following is a macroeconomic question?
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microeconomics
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The study of the choices made by individual households, firms, and government is called:
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Should the government prevent the merger of two large firms?
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Which of the following is a microeconomic question?
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they move in the same direction
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There is a positive relationship between two variable if:
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they move in opposite directions
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There is a negative relationship between two variables if
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the change in one variable in response to the change in the other variable
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The slope of a curve measures:
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change in the vertical variable divided by the change in the horizontal variable
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Slope is calculated as the:
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8
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If the vertical variable increases by 6 and the horizontal variable increases by 2, the slope of the line is:
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what you sacrifice to get it
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The opportunity cost of something is:
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is applicable to all decision making
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The principle of opportunity cost:
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principle of opportunity cost
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The principle that the cost of something is equal to what is sacrificed to get it is known as the:
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produces less of another product
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If an economy is fully utilizing its resources, it can produce more of one product only if it:
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marginal benefit
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The extra benefit resulting from a small increase in an activity is called the:
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marginal cost
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The additional cost resulting from a small increase in some activity is called the:
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marginal principle
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The principle that individuals and firms pick the activity level where the incremental benefit of that activity equals the incremental cost of that activity is known as the:
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marginal benefit equals marginal cost
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The marginal principle implies that an individual will do best by producing or consuming where:
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principle of voluntary exchange
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When people act in their own self interest, it is described as the:
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rational self-interest
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The principle of voluntary exchange is based of the idea of:
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increases at a decreasing rate
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The principle of diminishing returns implies that as one input increases while the other inputs are held fixed, output:
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what matters to people is the purchasing power of money or income
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The real-nominal principle states that:
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real-nominal principle
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The principle that what matters to people is the real value or purchasing power of money is the:
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nominal
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The face value of money or income is called its _______ value:
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real value
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The value of money or income in terms of the quantity of goods the money can buy is called its:
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reflects the purchasing power of the sum of money
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The real value of money:
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principle of diminishing returns
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The principle that "as one input increases while the other inputs are held fixed, output increases at a decreasing rate" is known as the:
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less than double
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According to the principle of diminishing returns, if all factors of production but one are held constant and if that one factor is doubled, then eventually output will most likely:
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so people can buy and sell things
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Markets exist:
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absolute advantage
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The ability of one person or nation to produce a good at a lower absolute cost that another is called:
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comparative advantage
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The ability of one person to produce a good at a lower opportunity cost than another is called:
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repetition
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The more times a worker performs a particular task, the more proficient the worker becomes at that task. This is called:
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continuity
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A specialized worker doesn't spent time switching from one task to another is called:
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innovation
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When a specialized worker gains insights into a particular task that leads to better production methods, it is called:
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make everyone better off
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Specialization and trade exploit differences in productivity across workers and:
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comparative advantage
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Specialization and exchange result from differences in productivity that lead to:
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produced in a foreign country and purchased by the residents of the home country
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An import is a product:
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produced in the home country and sold in another country
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An export is a product:
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poor nation has the absolute advantage in all products
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A rich nation will trade with a poor nation because the:
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market economy
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An economy in which people exchange goods and services in a market is called a:
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contracts
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In a market economy, what specifies the terms of exchange, facilitating exchange between strangers?
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patents
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In a market economy, what encourages firms to develop new products and production processes?
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market systems
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In which system are decisions made by thousands of people who have information about resources, production technology and consumer desires?
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provide products for other people
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In a market system, self-interest motivates most people to:
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centrally planned economy
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An economy in which government bureaucracy decides how much of a good to produce, how to produce the good, and who gets the good is known as a:
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market economy
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Entrepreneurs play a key role in which type of economy?
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by helping reduce economic uncertainty
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How can government intervene in trade?
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enforces property rights
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In a market based economy, the government:
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market failure
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The phenomenon which occurs when markets fail to produce the most efficient outcome on their own is known as:
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pollution
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One common source of market failure is:
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reduce economic uncertainty
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Providing unemployment insurance is one way a government can:
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the laws of supply and demand
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If a competitive market operates perfectly, it relies on
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the price of a good and the quantity that producers are willing to sell
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A supply curve is defined as the relationship between:
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the price of the product
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A change in quantity supplied of a product is the result of a change in:
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there is a positive relationship between price and quantity supplied, ceteris paribus
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The Law of Supply states that:
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the price of a product
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A change in the quantity demanded of a product is the result of a change in:
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the price of a good and the quantity of that good that consumers are willing to buy
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A demand curve is defined as the relationship between:
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the price of the product falls
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The quantity demanded of a product increases as:
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the higher the price, the smaller the quantity demanded
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The Law of Demand can be explained as:
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there will be an excess demand for the product
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What happens if the price of a product is below the equilibrium price?
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the price of coffee will increase
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In the event of excess demand in the coffee market:
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there is excess demand for the product in the market
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When consumers are willing to buy more than producers are willing to sell:
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