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Economics Flashcard Questions And Answers

Marta Browning

11 June 2020

question

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

question

the more substitutes the more or less elastic?

answer

question

substitutes over a longer period of time are more or less elastic?

answer

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

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question

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

question

the more substitutes the more or less elastic?

answer

question

substitutes over a longer period of time are more or less elastic?

answer

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

Economics Flashcard Questions And Answers

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