Economics Flashcard Questions And Answers
Unlock all answers in this set
Unlock answersquestion
economics
answer
the study of how best to allocate scarce resources among competing uses
question
opportunity cost
answer
the sacrifice of a next-best alternative
question
for a larger economy, _____ and ______ are limited.
answer
time and resources
question
factors of production
answer
resources that are the basic ingredients of production-- land, labor, capital, and entrepreneurship.
question
the more ______ of _____ we have, the _______ we can produce in a given period of time.
answer
factors; production; more
question
scarcity
answer
a situation where our desires for goods and services exceed our capacity to produce them.
question
production possibilities
answer
alternative combinations of goods and services that could be produced in a given time period with all available resources and technology
question
Karl Marx's vision of utopia
answer
"from each according to his ability, to each according to his need" no direct link between work and consumption
question
time to paint a room: 6 hrs; time to sand a floor: 3 hrs; if 24 hours were spent painting a. how many rooms could be painted? b. if 2 floors are sanded, how many rooms would have to be given up?
answer
a. 4 rooms b. 1 room
question
Ben says that "an increase in the tax on beer will raise its price." Holly argues that "taxes should be increased because college kids drink too much." Whose stmt is normative and whose is positive?
answer
Holly's is normative, Ben's is positive
question
the primary concern of economics is the study of:
answer
how best to allocate scarce resources among competing uses.
question
Ceteris paribus, if North Korea increases the size of its military, then its production of consumer goods will:
answer
decrease
question
in economics, capital refers to:
answer
goods that can be used to produce other goods
question
the economy of the US is best characterized as what kind of economy?
answer
a mixed economy
question
the equilibrium price on a graph is what point?
answer
where the supply and demand curves intersect
question
shortage
answer
excess of quantity demanded over quantity supplied
question
surplus
answer
quantity supplied exceeds quantity demanded
question
in the domestic car market, which curve shifts which direction when US auto workers go on strike?
answer
supply to the left
question
why do economists make a distinction between changes in quantity demanded and changes in demand?
answer
to distinguish a movement along the demand curve from a shift of the demand curve
question
why does output of goods and services increase with specialization?
answer
the world's resources are used more efficiently
question
a market exists for the sale and purchase of:
answer
illegal drugs, computer services, and nuclear warheads
question
according to the law of demand, price and quantity are _________ related
answer
inversely
question
according to law of demand, a change in ______ causes a movement along the demand curve.
answer
price of the good
question
according to law of demand, if the price of a computer game increases from $25 to $30, the quantity ______ of computer games will ________.
answer
demanded; decrease
question
if parents decide soccer is a better sport for their children than basketball, what curve for basketballs will shift in which direction?
answer
demand; to the left
question
if a subsidy is paid to plasma TV producers, which curve will shift in what direction?
answer
supply; to the right
question
determinants of market demand
answer
tastes (desire for this & other goods) income of consumer other goods (prices & availability) expectations (for income, prices, tastes) number of buyers
question
determinants of market supply
answer
technology factor costs other goods taxes & subsidies expectations number of sellers
question
an increase in the price of lumber will cause the supply of paper to increase or decrease?
answer
decrease
question
if a market surplus exists, producers will
answer
compete for customers by reducing prices
question
if the student population on a college campus increases and one parking lot has been destroyed to build a new building, which curve shifts which direction?
answer
supply to the left, demand to the right
question
which curve shifts which direction in the pecan market if many pecan trees are destroyed by webworms?
answer
supply shifts to the left
question
market demand
answer
the sum of all individual consumer demands
question
utility
answer
the pleasure or satisfaction obtained from a good or service
question
total utility
answer
amount of satisfaction obtained from entire consumption of a product
question
marginal utility
answer
satisfaction obtained by consuming one additional (marginal) unit of a good or service
question
law of diminishing marginal utility
answer
marginal utility of a good declines as more of it it consumed in a given time period
question
so long as marginal utility is _______, total utility must be increasing.
answer
positive
question
determinants of price elasticity
answer
necessities vs luxuries, availability of substitutes, price relative to income
question
purpose of production function
answer
to tell how much output we can produce with varying amounts of factor inputs
question
marginal physical product (MPP)
answer
the change in total output associated with one additional unit of input
question
law of diminishing returns
answer
the marginal physical product of a variable input declines as more of it is employed with a given quantity of other (fixed) inputs
question
cause of diminishing returns
answer
limited availability of space or equipment
question
short run
answer
period in which the quantity (and quality) of some inputs cannot be changed
question
long run
answer
period of time long enough for all inputs to be varied (no fixed costs).
question
a firm's goal is to maximize what?
answer
profit, not production
question
profit
answer
difference between total revenue and total cost
question
total cost
answer
the market value of all resources used to produce a good or service
question
fixed costs
answer
costs of production that do not change when the rate of output is altered, such as the cost of basic plant and equipment
question
if E= % change in QD/% change in P= 0.5, how much would popcorn sales fall is the price increased by 20%? 15%?
answer
10%; 7.5 %
question
suppose the price elasticity of demand for tacos is 0.80. if the price of tacos increases by 10%, then the quantity demanded of tacos should _________ by 8%.
answer
decrease
question
if demand is elastic then quantity demanded is or is not very responsive to changes in price?
answer
is very responsive
question
If the gov decides to reduce traffic by imposing a toll, the toll will be most effective if the price elasticity of demand for the bridge is:
answer
elastic
question
which is most likely to be elastic with respect to demand? cigs, shoes, gas in the short run, or airline travel in the long run.
answer
airline travel in the long run
question
which is most likely to be inelastic with respect to demand? illegal drugs, airline travel in the long run, new cars, or HDTV sets.
answer
illegal drugs
question
in economic theory, utility refers to the:
answer
satisfaction obtained from a good or service
question
if marginal utility is negative, the total utility will ______ with additional consumption.
answer
decrease
question
the main difference to an economist between short run and long run is that:
answer
in long run all resources are variable where as in the short run at least one resource is fixed.
question
if price is greater than marginal cost but not average total cost then:
answer
eventually the firm will go out of business
question
if the PPC is linear what does it mean in terms of trade-offs?
answer
no trade-off
question
if the PPC is curved what does it mean in terms of trade-offs?
answer
there is an uneven trade-off
question
capital
answer
physical machines and infrastructure used to produce goods and services
question
investment
answer
expenditures on new capital
question
3 predicted effects of price floors
answer
1. increase in quantity supplied 2. decrease in quantity demanded 3. create a market surplus
question
predicted effects of price ceilings
answer
decrease in quantity supplied, increase in quantity demanded
question
why can minimum wage cause unemployment?
answer
if minimum wage exceeds equilibrium wage there is a surplus of workers
question
In the US are imports or exports greater?
answer
imports > exports
question
normal good
answer
demand increases as income increases
question
inferior good
answer
demand decreases as income increases (usually less expensive)
question
substitutes
answer
can be used for the same purpose
question
complements
answer
goods that can be used together
question
if E>1
answer
elastic
question
if E<1
answer
inelastic
question
if E=1
answer
unit-elastic
question
what does the curve look like when it is more elastic?
answer
flatter
question
what does the curve look like when it is less elastic
answer
steeper
question
more luxurious goods are more or less elastic?
answer
more
question
the more substitutes the more or less elastic?
answer
more
question
substitutes over a longer period of time are more or less elastic?
answer
more
question
Piii
answer
price increase total revenue increase inelastic
question
Pide
answer
price increase total revenue decrease elastic
question
TR=
answer
PxQ
question
if price decreases and total revenue increase what is the elasticity?
answer
elastic
question
if price decreases and total revenue decrease what is the elasticity?
answer
inelastic
question
how does advertising affect the demand curve?
answer
shift to the right, make it more inelastic by creating brand loyalty
question
comparative advantage
answer
refers to a country's ability to produce a specific good at a lower opportunity cost than another country
question
causes of the shift in production possibilities curve
answer
advances in technology changes in resources more education or training changes in the labor force
