question

T/F Scarcity means that there is less of a good or resource available than people with to have.

answer

True

question

T/F Economics is the study of how evenly goods and services are distributed within society.

answer

False- Economics focuses more on efficiency than equality.

question

T/F With careful planning, we can usually get something that we like without having to give up something else that we like.

answer

False- We face trade offs normally, rarely do we get something for nothing.

question

T/F Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

answer

True

question

T/F Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

answer

False- Efficiency does not mean equality.

question

T/F Government policies that improve equality usually increase efficiency at the same time.

answer

False- Usually decreases efficiency through trade-offs that must be made.

question

T/F A marginal change is a small incremental adjustment to an existing plan of action.

answer

True

question

T/F An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity.

answer

False- Depends on the marginal benefit; if the benefit exceeds cost, even after cost increase, people will still engage in the activity.

question

T/F The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior.

answer

Fales- Is rational, based on the scarcity principle.

question

T/F A rational decision maker takes an action if and only if the marginal cost exceeds the marginal benefit

answer

False- Its the other way around.

question

T/F Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity.

answer

True

question

T/F Trade can make everyone better off except in the case where one person is better at doing everything.

answer

False- No one is better at doing EVERYTHING

question

T/F The invisible hand ensures that economic prosperity is distributed equally.

answer

False

question

T/F The government can potentially improve market outcomes if market inequalities or market faliure exists.

answer

True

question

T/F One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarace resources.

answer

True

question

T/F Productivity is defined as the quantity of goods and services produced from each unit of labor input.

answer

True

question

T/F Inflation is the primary determinant of a country's living standards.

answer

False

question

T/F Inflation increases the value of money.

answer

False- it decreases the value

question

T/F In the long run primary effect of increasing the quantity of money is higher prices.

answer

True

question

T/F The business cycle refers to fluctuations in economic activity such as employment and production.

answer

True

question

T/F Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.

answer

True

question

T/F While the scientific method is applicable to studying natural sciences, it is not applicable to studying a nation's economy.

answer

False

question

T/F Since economists cannot use natural experiments offered by history, they must use carefully constructed laboratory experiments instead.

answer

False

question

T/F Good assumptions simplify a problem without substantially affecting the answer.

answer

True

question

T/F Economists often find it worthwhile to make assumptions that do not necessarily describe the real world.

answer

True

question

T/F Economic models can help us understand reality only when they include all details of the economy.

answer

False

question

T/F An economic model can accurately explain how the economy is organized because it is designed to include, to the extent possible, all features of the real world.

answer

False

question

T/F In the circular-flow diagram, factors of production include land, labor, and capital.

answer

True

question

T/F In the circular-flow diagram, firms own the factors of production and use them to produce goods and services.

answer

False

question

T/F In the markets for the factors of production in the circular-flow diagram, households are buyers and firms are sellers.

answer

False

question

T/F The production possibilities frontier is a graph that shows the various combinations of outputs that the economy can possibly produce given the available factors of production and the available production technology.

answer

True

question

T/F The production possibilities frontier shows the opportunity cost of one good as measured in terms of the other good.

answer

True

question

T/F When a production possibilities frontier is bowed outward, the opportunity cost of one good in terms of the other is constant.

answer

False

question

T/F Economists believe that production possibilities frontiers rarely have a bowed shape.

answer

False

question

T/F A production possibilities frontier will be bowed outward if some of the economy's resources are better suited to producing one good than another.

answer

True

question

T/F While the production possibilities frontier is a useful model, it cannot be used to illustrate economic growth.

answer

False

question

T/F Economic growth causes a production possibilities frontier to shift outward.

answer

True

question

T/F The effects of borrowing by the federal government would be studied by a micro economist rather than a macroeconomist.

answer

False

question

T/F Microeconomics and macroeconomics are closely intertwined.

answer

True

question

T/F Economists acting as scientists make positive statements, while economists acting as policy advisers make normative statements.

answer

True

question

T/F Normative statements describe how the world is, while positive statements prescribe how the world should be.

answer

False

question

T/F Positive statements are descriptive, while normative statements are prescriptive.

answer

True

question

T/F There is only one explanation for why economists give conflicting advice on policy issues, and it is that they have different values about what policy should try to accomplish.

answer

False

question

T/F Economists may disagree about the validity of alternative positive theories about how the world works.

answer

True

question

T/F In economics, graphs serve two purposes: they offer a way to visually express ideas, and they provide a way of finding and interpreting patterns when analyzing economic data.

answer

True

question

T/F Examples of graphs of a single variable include pie charts, bar graphs, and time-series graphs.

answer

True

question

T/F In most countries today, many goods and services consumed are imported from abroad, and many goods and services produced are exported to foreign customers.

answer

True

question

T/F Interdependence among individuals and interdependence among nations are both based on the gains from trade.

answer

True

question

T/F If a person chooses self-sufficiency, then she can only consume what she produces.

answer

True

question

T/F A production possibilities frontier is a graph that shows the combination of outputs that an economy should produce.

answer

False

question

T/F Production possibilities frontiers cannot be used to illustrate tradeoffs.

answer

False

question

T/F An economy can produce at any point on or inside its production possibilities frontier, but it cannot produce at points outside its production possibilities frontier.

answer

True

question

T/F Opportunity cost refers to how many inputs a producer requires to produce a good.

answer

False

question

T/F Opportunity cost measures the trade-off between two goods that each producer faces.

answer

True

question

T/F If one producer has the absolute advantage in the production of all goods, then that same producer will have the comparative advantage in the production of all goods as well.

answer

False

question

T/F If a country has the comparative advantage in producing a product, then that country must also have the absolute advantage in producing that product.

answer

False

question

T/F In an economy consisting of two people producing two goods, it is possible for one person to have the absolute advantage and the comparative advantage in both goods.

answer

False

question

T/F If one producer is able to produce a good at a lower opportunity cost than some other producer, then the producer with the lower opportunity cost is said to have an absolute advantage in the production of that good.

answer

False

question

T/F Unless two people who are producing two goods have exactly the same opportunity costs, then one person will have a comparative advantage in one good, and the other person will have a comparative advantage in the other good.

answer

True

question

T/F The gains from specialization and trade are based on absolute advantage.

answer

False

question

T/F Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

answer

True

question

T/F Two countries can achieve gains from trade even if one country has an absolute advantage in the production of both goods.

answer

True

question

T/F Differences in opportunity cost allow for gains from trade.

answer

True

question

T/F Goods produced abroad and sold domestically are called exports and goods produced domestically and sold abroad are called imports.

answer

False

question

T/F Trade can make some individuals worse off, even as it makes the country as a whole better off.

answer

True

question

T/F Trade allows all countries to achieve greater prosperity.

answer

True

question

T/F Prices allocate a market economy's scarce resources.

answer

True

question

T/F In a market economy, supply and demand determine both the quantity of each good produced and the price at which it is sold.

answer

True

question

T/F A yard sale is an example of a market.

answer

True

question

T/F In a competitive market, there are so few buyers and so few sellers that each has a significant impact on the market price.

answer

False

question

T/F All goods and services are sold in perfectly competitive markets.

answer

False

question

T/F The law of demand states that, other things equal, when the price of a good rises, the quantity demanded of the good rises, and when the price falls, the quantity demanded falls.

answer

False

question

T/F The demand curve is the upward-sloping line relating price and quantity demanded.

answer

False

question

T/F Individual demand curves are summed horizontally to obtain the market demand curve.

answer

True

question

T/F An increase in demand shifts the demand curve to the left.

answer

False

question

T/F Whenever a determinant of demand other than price changes, the demand curve shifts.

answer

True

question

T/F The quantity supplied of a good or service is the amount that sellers are willing and able to sell at a particular price.

answer

True

question

T/F The law of supply states that, other things equal, when the price of a good rises, the quantity supplied of the good falls.

answer

False

question

T/F If a higher price means a greater quantity supplied, then the supply curve slopes upward.

answer

True

question

T/F A movement along a supply curve is called a change in supply while a shift of the supply curve is called a change in quantity supplied.

answer

False

question

T/F A decrease in supply shifts the supply curve to the left.

answer

True

question

T/F A reduction in an input price will cause a change in quantity supplied, but not a change in supply.

answer

False

question

T/F If there is an improvement in the technology used to produce a good, then the supply curve for that good will shift to the left.

answer

False

question

T/F An increase in the price of a product and an increase in the number of sellers in the market affect the supply curve in the same general way.

answer

False

question

T/F Whenever a determinant of supply other than price changes, the supply curve shifts.

answer

True

question

T/F Supply and demand together determine the price and quantity of a good sold in a market.

answer

True

question

T/F A market's equilibrium is the point at which the supply and demand curves intersect.

answer

True

question

T/F At the equilibrium price, buyers have bought all they want to buy, but sellers have not sold all they want to sell.

answer

False

question

T/F The actions of buyers and sellers naturally move markets toward equilibrium.

answer

True

question

T/F A surplus is the same as an excess demand.

answer

False

question

T/F When the market price is below the equilibrium price, suppliers are unable to sell all they want to sell.

answer

False

question

T/F When quantity demanded exceeds quantity supplied at the current market price, the market has a shortage and market price will likely rise in the future to eliminate the shortage.

answer

True

question

T/F In a market, the price of any good adjusts until quantity demanded equals quantity supplied.

answer

True

question

T/F When a supply curve or a demand curve shifts, the equilibrium price and equilibrium quantity change.

answer

True

question

T/F An increase in demand will cause an increase in price, which will cause an increase in quantity supplied.

answer

True

question

T/F A decrease in supply will cause an increase in price, which will cause a decrease in quantity demanded.

answer

True

question

T/F Elasticity measures how responsive quantity is to changes in price.

answer

True

question

T/F The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

answer

False

question

T/F Necessities tend to have inelastic demands, whereas luxuries have elastic demands.

answer

True

question

T/F Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

answer

True

question

T/F Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

answer

True

question

T/F The price elasticity of demand is defined as the percentage change in price divided by the percentage change in quantity demanded.

answer

False

question

T/F Suppose that when the price rises by 20% for a particular good, the quantity demanded of that good falls by 10%. The price elasticity of demand for this good is equal to 2.0.

answer

False

question

T/F Demand is inelastic if the price elasticity of demand is greater than 1.

answer

False

question

T/F If the price elasticity of demand is equal to 0, then demand is unit elastic.

answer

False

question

T/F The flatter the demand curve that passes through a given point, the more inelastic the demand.

answer

False

question

T/F The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

answer

True

question

T/F The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

answer

False

question

T/F Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

answer

True

question

T/F Cross-price elasticity is used to determine whether goods are inferior or normal goods.

answer

False

question

T/F Along the elastic portion of a linear demand curve, total revenue rises as price rises.

answer

False

question

T/F When demand is inelastic, a decrease in price increases total revenue.

answer

False

question

T/F Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

answer

True

question

T/F Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

answer

True

question

T/F Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price, and elastic if the quantity supplied responds only slightly to price.

answer

False

question

T/F If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

answer

True

Econ Test 1 T/F – Flashcards

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