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"Economics is concerned with the allocation of scarce resources." This statement is:

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Positive and correct.

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"Customer Sovereignty" refers to the:

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Idea that the decisions of producers must ultimately conform to consumer demands.

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A market system is also known as:

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Capitalism.

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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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A society is limited to consuming only those combinations of outputs within its production possibilities. But this will not hold true anymore if there is:

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International trade.

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An economic system:

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Is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.

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Broadly defined, competition involves:

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Independently acting buyers and sellers and freedom to enter or leave markets.

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Cuba is a command economy that suffered a decline in economic growth because of a cut in support from the former Soviet Union when it collapsed. As a consequence, Cuba:

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Experienced an inward shift of its production possibilities curve.

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Economic growth may be represented by a (an):

answer

Outward shift of the production possibilities curve.

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Households and businesses are:

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Sellers in the resource and product markets respectively.

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How is the economic perspective reflected in lines for fast food?

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Customers select the shortest line because they believe it will reduce their time cost of obtaining food

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If consumer desire for product X rises, all of the following will occur except:

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A decrease in the quantity of resources employed in industry X.

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If the production possibilities curve is a straight line:

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The opportunity cost of producing one more unit of goods is constant.

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In terms of the circular flow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____ market.

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A product;resource.

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Joe says that "An increase in personal income tax lowers households' after-tax income." Tim argues that "Taxes on cigarettes should be increased because smoking causes health issues." We can conclude that:

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Tim's statement is normative, but Joe's statement is positive.

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Macroeconomics approaches the study of economics from the viewpoint of:

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The aggregate economy.

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Microeconomics:

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Shifts her budget line rightward because she can now purchase more of both products.

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Private Property:

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Encourages owners to maintain or improve their property, so as to preserve or enhance value.

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The "coincidence of wants" problem associated with barter refers to the fact that:

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For exchange to occur each seller must have a product desired by the other.

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The invisible hand refers to the:

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Notion that, under competition, decisions motivated by self-interest promote the social interest.

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The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially:

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"Using the least-cost production techniques."

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The market system's answer to the fundamental question "How will the system accommodate change?" is essentially:

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"Through the guiding function of prices and the incentive function of profits."

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The presence of market failures implies that:

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There is an active role for government, even in a market system.

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The two basic markets shown by the simple circular flow model are:

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Input market and output market.

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The possible combinations of two goods which a consumer can purchase with a given money income is shown by:

answer

A budget line.

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What best illustrates the circular flow model in action?

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All of these examples: - Bobbie goes to work and builds cars, and uses the income she receives to buy food at the grocery store. - Evan buys a new couch; the owner of the furniture store uses some of the money from the sale to pay her supplier, and uses the rest to take her family out to dinner. - Boeing experiences a surge in orders for new airplanes, prompting the company to hire more workers.

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What is a distinguishing feature of a market system?

answer

Wide-spread private ownership of capital.

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Which is NOT one of the five fundamental questions?

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**A. What prices will be charged for goods and services? B. Who will get the goods and services? C. What goods and services will be produced? D. How will the system promote progress?

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Which of the following most closely relates to the idea of opportunity costs?

answer

Tradeoffs.

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Which of the following will result in an outward shift of the production possibilities curve?

answer

An improvement in technology that benefits the entire economy.

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You should decide to go to a movie if:

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The marginal benefit of the movie exceeds the marginal cost.

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An increase in the price of digital cameras will do what for memory cards:

answer

Shift the supply curve to the right.

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An improvement in production technology will:

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Shift the supply curve to the right.

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A reduction in the business tax will:

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A rightward shift of the supply curve.

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A market is in equilibrium:

answer

If the amount producers want to sell is equal to the amount customers want to buy.

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.College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:

answer

Inferior goods.

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During the last few decades in the United States, health officials have argued that eating too much beef might be harmful to human health. As a result, there has been a significant decrease in the amount of beef produced. Which of the following best explains the decrease in production?

answer

Individual consumers, concerned about their own health, decreased their demand for beef, which lowered the relative price of beef, making it less attractive to produce.

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Each of the following is a determinant to supply except:

answer

Tastes.

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Ford Motor Company announces that it will offer $3,000 rebates on new Mustangs starting next month. As a result of this information, today's demand curve for Mustangs:

answer

Shifts to the left.

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If X is an inferior good, a reduction in money income will shift the:

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Demand curve for X to the right.

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If a shortage exists in a market we know that the actual price is:

answer

Below equilibrium price and quantity demanded is greater than quantity supplied.

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In constructing a demand curve for product X:

answer

The prices for other goods are assumed constant.

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In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are:

answer

Substitute goods and the higher price for oil increased the demand for natural gas.

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Harry's Pepperoni Pizza Parlor produced 8,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni pizzas, but sold them for $8 each. Based on this information we can conclude that Harry's production of large pepperoni pizzas this year:

answer

Increased real GDP but kept nominal GDP the same.

question

The term "quantity demanded" refers to:

answer

The amount of a product that will be purchased at some specific price.

question

The supply curve shows the relationship between:

answer

Price and quantity supplied.

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Suppose the number of buyers in a market declines and a technological advancement occurs at the same time. What would we expect to happen in the market?

answer

The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.

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Two goods are complements if a decrease in the price of one good:

answer

Increases the demand for the other good.

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The negative relationship between price and quantity demanded:

answer

-Applies to most of the goods in economy. -Is represented by a downward-sloping demand curve. -Is referred to as the Law of Demand.

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Which of the following events would result in an increase in equilibrium quantity and an ambiguous change in equilibrium price?

answer

An increase in supply and an increase in demand.

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The law of supply indicates that, other things equal:

answer

Producers will offer more of a product at high prices than at low prices.

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Other things equal, if the price of a key resource used to produce product X falls, the:

answer

Product supply curve of X will shift to the right.

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If an economy wants to increase its current level of investment, it must:

answer

Sacrifice current consumption.

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Demand shocks:

answer

Refer to unexpected changes in the desires of households and businesses to buy goods and services.

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Inflation is:

answer

An increase in the overall level of prices.

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In situations of sticky prices and negative demand shocks we would expect firms to:

answer

Build up inventories before reducing production.

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The business cycle depicts:

answer

Short-run fluctuations in output and employment.

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The two topics of primary concern in macroeconomics are:

answer

Short-run fluctuations in output and employment, and long-run economic growth.

question

When economists refer to "investment," they are describing a situation where:

answer

Resources are devoted to increasing future output.

question

Which of the following is an example of a supply shock?

answer

A dramatic increase in energy prices increases production costs for firms in the economy.

question

Which of the following is used to measure directly the average standard of living across countries?

answer

Real GDP per person.

Macroeconomics Chapter 1, 2, 3, 6 – Flashcards

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