question

Which of the following involve a trade-off? A) Going to college B) Taking a nap C) Buying a car D) Watching a football game on saturday afternoon E) All of these

answer

E) All of the above involve trade-offs

question

Trade-offs are required because wants are unlimited and resources are:

answer

Scarce

question

Economics is the study of how

answer

Society manages its scarce resources

question

A rational person does not act unless:

answer

The action produces marginal benefits that exceed marginal cost

question

Raising taxes and increasing welfare payments:

answer

Improves equality at all the expense of efficiency

question

Suppose you find $20. if you choose to use the $20 to go the football game, your opportunity cost of going to the game is:

answer

$20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game

question

Foreign Trade:

answer

Allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home

question

Because people respond to incentives, we would expect that if the average salary of accountants increases by 50 percent while the average salary of teachers increases by 20 percent:

answer

Students will shift majors from educating to accounting

question

Workers in the US enjoy a high standard of living because:

answer

Workers in the United States are highly productive

question

High and persistent inflation is caused by:

answer

Governments increasing the quantity of money too much.

question

In the short run:

answer

A decrease in inflation temporarily increases unemployment

question

Productivity can be increased by:

answer

Improving the education of workers

question

Economic models are:

answer

Built with assumptions

question

Which of the following is not a factor of production? A) land B) labor C) capital D) money E) All of these answers are factors of production

answer

D) Money

question

Points on the production possibilities frontier are:

answer

Efficient

question

Which of the following will not shift a country's production possibilities frontier outward? A) an increase in the capital stock B) an advance in technology C) a reduction in unemployment D) an increase in the labor force

answer

C) A reduction in unemployment

question

Economic growth is depicted by:

answer

A shift in the production possibility frontier outward

question

Positive statements are:

answer

Statements of descriptive that can be tested

question

If a nation has an absolute advantage in the production of a good:

answer

It can produce that good using fewer resources than its trading partner

question

If a nation has a comparative advantage in the production of a good:

answer

It can produce that good at a lower opportunity cost than its trading partner

question

Which of the following statements about trade is true? A) Unrestricted international trade benefits every person in a country equally B) People that are skilled at all activities cannot benefit from trade C) Trade can benefit everyone in society because it allows people to specialize in activities in which they have an absolute advantage D) Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

answer

D) Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

question

According to the principle of comparative advantage:

answer

Countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.

question

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. if there is no trade: A) Domestic price of 1 ring is 3 watches B) 1 ring is 1/3 watches C) 1 ring is 4 watches D) 1 ring is 1/4 watches E) 1 ring is 12 watches

answer

B) 1 ring is 1/3 watches

question

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. if there is no trade:

answer

A) Opportunity cost of 1 watch is 3 rings

question

Economics is the study of how

answer

society manages its scarce resources

question

A rational person does not act unless the action

answer

produces marginal benefits that exceed marginal costs

question

Raising taxes and increasing welfare payments

answer

improves equity at the expense of efficiency

question

Foreign trade

answer

allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home

question

Economic growth is depicted by

answer

a shift in the production possibilities frontier outward

question

A perfectly competitive market has

answer

many buyers and sellers

question

If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are

answer

substitutes

question

The law of demand states that an increase in the price of a good

answer

decreases the quantity demanded for that good

question

The law of supply states that an increase in the price of a good

answer

increases the quantity supplied of that good

question

If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is

answer

an inferior good

question

A monopolistic market has

answer

only one seller

question

If the price of a good is above the equilibrium price,

answer

there is a surplus and the price will fall

question

If the price of a good is below the equilibrium price,

answer

there is a shortage and the price will rise

question

If the price of a good is equal to the equilibrium price,

answer

the quantity demanded is equal to the quantity supplied and the price remains unchanged

question

An increase (rightward shift) in the demand for a good will tend to cause

answer

an increase in the equilibrium price and quantity

question

A decrease ( leftward shift) in the supply for a good will tend to cause

answer

an increase in the equilibrium price and a decrease in the equilibrium quantity

question

Inflation

answer

an increase in the overall level of prices in the economy

question

Externality

answer

the impact of one person's actions on the well-being of a bystander

question

Market failure

answer

a situation in which a market left on its own fails to allocate resources efficiently

question

Incentive

answer

something that induces a person to act

question

Scarcity

answer

the limited nature of societies resources. Wants are insatiable and resources are scarce. You have to make choices

question

Opportunity Cost

answer

The value of the next best alternative given up in order to enjoy a particular good or service. Includes an objective as well as a subjective component

question

Efficiency

answer

The property of society getting the most it can from its scarce resources

question

Marginal Cost

answer

is the change in the total cost that arises when the quantity produced is incremented by one unit. Additional cost or benefit associated with a small amount extra of some action

question

Diamond- Water Paradox

answer

practical things that we use everyday often have little or no value in exchange versus things that often have the greatest value in the market have little or no practical use

question

Rule of Assumptions

answer

can simplify the complex world and make it easier to understand

question

Circular Flow Diagram

answer

a visual model of the economy that shows how dollars flow through markets among households and firms

question

Slope of the Frontier measures

answer

opportunity cost

question

outward shift of frontier shows

answer

economic growth

question

Shape of the PPF

answer

If opportunity cost remains constant, PPF is a straight line. If opportunity cost of a good rises as the economy produces more of the good, PPF is a bow shape

question

Positive

answer

claims that attempt to describe the world as it is

question

Normative

answer

claims that attempt to prescribe how the world should be

question

Comparative advantage

answer

the ability to produce a good at a lower opportunity cost than another producer

question

Law of Demand

answer

other things equal. when the price of the good rises- quantity demanded of a good falls

question

Division of Labor

answer

important source of economic growth. 1. teamwork fosters productivity 2. people develop expertise

question

Competitive Market

answer

one with many buyers and sellers of a particular good or service- price taker

question

Shifts in Demand curve

answer

Income- normal v. inferior good prices of related goods- substitutes v. complements tastes- if you it, you buy more expectations- future prices

question

Normal good

answer

an INCREASE in income leads to an INCREASE in demand

question

Inferior good

answer

an INCREASE in income leads to a DECREASE in demand

question

Substitutes

answer

an INCREASE in the price of one leads to an INCREASE in the demand for the other

question

Complements

answer

an INCREASE in the price of one leads to a DECREASE in the demand for the other

Micro Economics Chapters 1-3

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards