Flashcards on Economics Midterm Review
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Macroeconomics deals with....
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the working of the entire economy or large sectors of it
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Scarcity in economics means...
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We do not have sufficient resources to produce all the goods and services we want.
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Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:
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whatever should would have purchased with the $10,000 and whatever should would have earned had she not been in college.
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The opportunity cost of something is
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what is given up to get it
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gains from trade arise because of
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specialization in production
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Suppose small business owners decided to spend less. How will this affect an economy?
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It will decrease the level of income of other people, since one person's spending is another person's income.
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Too little spending in an economy often leads to
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a recession
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The circular flow diagram illustrates how households _____ goods and services and _____factors of production.
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buy; sell
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Which are the two markets represented in the circular flow diagram?
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the market for goods and services and the market for factors
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The fact that a society's production possibility frontier is bowed out or concave to the origin of a graph demonstrates the concept of
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increasing opportunity cost
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The effect of a tremendous natural disaster can be shown by
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an inward shift of the production possibility frontier.
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As long as people have different _____, everyone has a comparative advantage in something.
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opportunity costs
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In one year, Brazil can produce 40 units of coffee or salmon, and Alaska can produce 20 units of coffee or 20 salmon. The opportunity cost of producing 1 unit of coffee for Brazil is
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1/2 salmon
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The market equilibrium is found at the
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price where quantity demanded equals quantity supplied
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suppose consumers learn that yogurt boosts immune systems. Other things the same, this would likely result in a(n)
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increased equilibrium price and quantity
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a negative relationship between the quantity demanded and price is called the law of
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demand
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when the price of lamps increases, the
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quantity supplied increases
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an increase in supply of a good is caused by
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an increase in the number of sellers
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What would not cause the supply curve to shift?
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a change in the price of a good
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A good is inferior if
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when income increases, the demand decreases
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the market equilibrium is found at the
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price where quantity demanded equals quantity supplied
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An increase in the price of sugar (an ingredient for soft drinks) and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following in the soft drink market?
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Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.
