Macroeconomics Quiz 1-4 – Flashcards
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Economic analysis is used
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in all decision making
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how individuals allocate scarce resources to satisfy unlimited human wants
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Economics deals with
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in economics, all the items that people would consume is they had unlimited income are known as
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wants
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a mixed economic system is best described as an economy with a mix of
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free markets and government control
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the issues that an economic system attempts to solve include
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how to produce items, what to produce, for whom items are produced
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a mechanism to allocate scarce resources
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an economic system
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under a pure price system, the decision of resource allocation is made by
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individuals who own the resources
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the assumption that people do not intentionally make decisions that would leave them worse off is known as
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the rationality assumption
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when people donate money to charity, they behave
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rationally if the act gives them satisfaction
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high gasoline prices give people all of the following incentives EXCEPT
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to take vacations that require driving more miles
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if people act as if they systematically pursue their own self-interest, then they will most likely
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respond predictably to a given incentive
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an analysis of how price changes affect how much of a good people will purchase when all other factors are held constant
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ceteris paribus assumption
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the fact that our wants are unlimited but our resources are limited implies that
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we have to make choices
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the usefulness of an economic theory/model is determined by
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whether it helps to explain or predict real world phenomena
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"All Americans should have access to health care" is an example of
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a normative statement
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"If the United States enters a war in the MIddle East, the economy will go into a recession" is an example of
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a positive statement
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the accumulated training and education that you have is
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human capital
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The opportunity cost of going to college for a student receiving a scholarship is
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the income that she would have earned if she did not go to college
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always the value of the next best forgone opportunity
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opportunity cost
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As an economist, you're thinking this is an example of how objectively undefinable needs are. Many would argue that this friend could get along just fine with a reliable used car
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"I really, really need a new car"
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a country operated inside its production possibilities curve; this may be caused by
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unemployed resources
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a technological improvement can cause the production possibilities curve to shift outward because
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maximum feasible outputs of both goods increase
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efficiency
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producing the maximum output with given technology and resources
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the fact that resources are not perfectly adaptable for alternative uses
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law of increasing additional costs is due to
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the ability to produce more units of an item with a given amount of resources
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concept of absolute advantage relies on
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Tiger Woods, a professional golfer, pays a garage mechanic to change the motor oil of his car even though he can do the work himself. Which of the following best explains why Tiger Woods does not change the oil himself?
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The opportunity cost of changing oil is higher for Tiger Woods than for the garage mechanic
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the production possibilities curve can shift inward when
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a country experiences a natural disaster
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other things being equal, an increase in wages paid to workers in the steel industry will cause
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the supply of steel to decrease
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when consumers would have been willing to pay higher prices at various quantities consumer than the market clearing price, the differences are called
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consumer surplus
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which of the following is a non-price determinant of supply?
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technological advances in production
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Suppose we observe the following two simultaneous events in the market for cigarettes. First, there is a decrease in the demand for cigarettes due to changes in consumer tastes. And second, there is a reduction in supply due to tobacco farmers selling their land to real estate developers. We know with certainty that these two simultaneous events will cause which of the following?
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a decrease in the equilibrium quantity and an indeterminate change in the equilibrium price
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in order to be effective, a price floor
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must be set above equilibrium price
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price ceilings are adopted in most cases because
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the government views the current equilibrium price as too high for consumers
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a method that breaks down the production of a product into a series of specific tasks, each performed by a different worker
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division of labor
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when each person can work on one specific task repetitiously, they are able to become more efficient
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specialization
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an individual (firm, etc.) is said to have this i production if they produce a good at a lower relative opportunity cost compared to their rivals
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comparative advantage
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individual (firm, etc.) can produce the most in absolute terms
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absolute advantage
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time, effort, and other resources needed to search out, negotiate and complete an exchange
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transaction costs
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used to show the trade-off required in decisions
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production possibilities curve
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acquire more inputs that are already in use; this can be undesirable in long run because its exhausts resources; outward shift of PPC
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extensive growth
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making better use of resources currently available; most desirable; inward shift of PPC
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intensive growth
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certain resources are better suited for producing some goods than they are for other goods
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law of increasing relative cost
