ECONOMICS 2301: Exam 1 – Flashcards
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Other things being equal, the law of demand suggests that as:
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The price of iPads decreases, the quantity demanded will increase
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Which statement is true about supply?
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To entice producers to offer more of a good on the market for sale, price must rise
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If the market price is above the equilibrium price:
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A surplus will result and consumers will bid prices up
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An increase in demand for oil along with a simultaneous increase in supply of oil will:
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Increase quantity, but whether it increases price depends on how much each curve shifts
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The economizing problem is:
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A need to make choices because economic wants exceed economic means
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Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rathe than spend $1 million to expand parking for students. This example illustrates:
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Opportunity costs
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Which of the following is associated with macroeconomics?
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An empirical investigation of the general price level and unemployment rates since 1990.
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Ben says that "an increase in the tax on beer will raise its price." Holly argues that "taxes should be increased on beer because college students drink too much." We can conclude that:
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Holly's statement is normative, but Ben's is positive.
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Increasing the share of your income that you save is good for you. Therefore it would be good for the whole economy if everyone saved more. This exemplifies the:
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Fallacy of Composition
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In constructing models, economists:
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make simplifying assumptions
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Suppose an economist says that "other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:
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all factors other than the price of bananas(for example, consumer tastes and income) are assumed to be constant
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Which of the following lists includes only capital resources (and therefore no labor or land resources)?
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Autos owned by car rental firm; computers at the car rental agency;the vans that shuttle rental customers to and from the airport.
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A production possibilities curve shows:
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the maximum amounts of two goods that can be produced, assuming the full use of available resources.
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Which of the following will not produce an outward shift of the production possibilities curve?
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The reduction of unemployment
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A fundamental difference between the command system and laissez-faire capitalism is that, in command systems:
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the division of output is decided by central planning rather than by individuals operating freely through markets.
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Examples of command economies are:
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Cuba and North Korea
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Which of the following is not a typical characteristic of a market system?
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Government ownership of most property resources
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Competition means that:
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there are independently acting buyers and sellers in each market
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In a competitive market economy, firms selects the least-cost production technique because:
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to do so will maximize the firms profits
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Two major virtues of the market system are that it:
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allocates resources efficiently and allows economic freedom
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The invisible hand promotes society's interests because:
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individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase
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Which of the following best illustrates the circular flow model in action?
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All of these answers illustrates the workings of the circular flow model.
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Which of the following statements is true about risk management in market systems versus command systems?
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Market systems manage risk better because entrepreneurs taking risks bear the costs of poor decisions, where in command systems government decision makers don't bear those costs.
