Flashcards with Answers on Microeconomics

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"Steel tariffs will prevent job losses in the steel industry" is a positive statement
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True
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"The unemployment rate should be higher" is a normative statement
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True
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Opportunity cost means that if the United States spends $87 billion in the rebuilding of Iraq, it would have to forgo the opportunity to spend $87 billion on some other program
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True
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The current rate of unemployment is 9%. The statement:
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is positive
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Which statement is a normative statement?
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The best way to encourage growth in the economy is through government spending
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Economists may disagree about policies because
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they may use different economic models
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Microeconomics deals with
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Individual decision makers in the economy
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Because the United States is a rich nation, free health care can be provided for all citizens without considering the issue of scarcity
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false
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The primary emphasis in macroeconomics is on
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the national economy
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Whenever a choice is made
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the cost of that choice could be referred to as opportunity cost
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Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is
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whatever Khalil would have done had he not gone to the opera
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Which option can best be considered the resources used in the production of computers?
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computer engineers
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The opportunity cost of something is
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what is given up to acquire it
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The problem of scarcity is confronted by
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all societies
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Scarcity in economics means
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people do not have sufficient resources to produce all of the goods and services they want
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Manny is attending college and majoring in economics. By doing so, Manny is primarily improving his
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human capital
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You can spend $100 on either a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is:
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your enjoyment of the new CD player? because $100 is being spent either way
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If the state government allocates additional spending on education, the opportunity cost is:
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measured in terms of the best alternative use for that money. i think. it isn't 'the dollar amount of the additional spending'
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The current rate of unemployment of 9% is too high. This is a _____ statement.
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normative
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Economists disagree more over normative economics than positive economics.
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true
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Opportunity cost is:
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the value of the best alternative forgone in making any choice
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The basic concern of microeconomics is:
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to study the choices people make
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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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When people are forced to make choices, they are facing the concept of
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scarcity
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A high-school graduate who gets a college degree is adding to the economy's stock of
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human capital
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Which is not an example of a resource?
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production
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Which statements is a positive statement? Which is a normative statement? X. The federal minimum wage is increasing to $7.50 an hour. Y. The minimum wage should be high enough that families will not live in poverty.
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X is positive; Y is normative
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Economists who are asked to choose between two different government policies may disagree because
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they base their conclusions on models that make different assumptions
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If resources are "scarce", it means that they
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cannot provide enough goods or services to satisfy all human material wants and needs
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Although fresh water is very abundant in most places, it is scarce because
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there is not enough of it to meet all needs
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"Teachers in northern New Hampshire should earn more money" is a normative statement
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True
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Economists disagree more over normative economics than positive economics
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False
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In 2003, Congress passed a tax cut. Because taxes were reduced, the country did not incur any opportunity cost from this decision.
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False
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The study of economics arises because of the necessity for choice, and the necessity for choice arises because of the fundamental problem of scarcity of resources
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True
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The best measure of the opportunity cost of any choice is
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whatever you have given up to make that choice, even if no monetary costs are involved
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The study of a single firm and how it determines prices would fall under the study of
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microeconomics
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Which subject would be studied in macroeconomics?
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recessions
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The latin phrase ceteris paribus means
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other things equal
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The importance of an economic model is that it allows us to
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focus on the effects of only one change at a time
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A simplified representation that is used to study a real situation is called
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a model
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An economic model
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is a simplified version of reality used to understand real-world economic conditions
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The circular-flow diagram illustrates how household how households ___ goods and service and ___ factors of production
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buy; sell
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In building model, economists avoid making any assumptions that might leave out any aspect of reality
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False
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If one group in the economy spends more, the incomes of other groups will increase
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True
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In the product market, households spend money to buy goods and services
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True
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Buying vegetables produced by local farmers' market benefits the local community because
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one person's local spending will increase another local person's income
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A local grocery store benefits when a new furniture factory moves to town and hires workers because
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the new jobs at the new factory will increase local incomes, some of which will be spent at the local grocery store
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In building models, economists avoid making any assumptions that might leave out any aspect of reality
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True
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The basic principle of the circular-flow diagram is that the money flowing into each sector or market is greater than the money that flows out
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False
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In the circular-flow diagram, an individual or a group of people (usually a family) who share their income would be called a
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household
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The basic principle of the circular-flow diagram is that
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the flow of money into each market or sector is equal to the flow of money coming out of that market or sector
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Within the circular-flow diagram, the factor market is the place where
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firms buy the resources they need for the production of goods and services
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When a local factory closes, why does it spell bad news for the local restaurants?
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Unemployed factory workers have lower incomes and are less likely to dine out
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If the value of homes in University City increases, and as a result, the people of University City spend more, incomes, in university City will
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increase
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One person's spending is another person's
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income
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Economic models are
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often useful in forming economic policy
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The models that economists construct
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usually make simplifying assumptions
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Economists create __ by applying specific assumptions to set of basic principles
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models
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An economic model
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is a simplified version of reality used to understand real-world economic conditions
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The simplest circular-flow model shows the interaction between households and firms. In this model:
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firms supply goods and services to households, which in turn supply factors of production to firms
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In the simplest circular-flow model, households supply__ and demand __
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factors of production; goods and services
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In the circular-flow diagram, the product market is where
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households buy goods and services
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Within the circular-flow diagram, the market for goods and services is the place where
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households buy the products they want
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Because one person's spending is another person's income
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if one group in the economy spends more, the incomes of other groups will increase
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"I know when I shop at the local grocery store, I am helping my community." This statement best represents this economic concept:
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One person's spending is another person's income
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In building models, economists often assume that opportunity costs don't matter
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false
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If one group in the economy spends more, this increases their share of income and the incomes of other groups will decrease
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false
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Labor and capital are the only two factors of production
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false
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All points inside the production possibility frontier represent
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I put efficient production points... but it is not....it should be inefficient points
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If an economy is producing a level of output that is on its production possibility frontier, the economy has
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I put no idle resources but is using resources inefficiently........ also it isn't ' it is idle resources but is using resources efficiently'... should be 'no idle resources but is using resources efficiently'
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Suppose the student completes a speed reading course that allows him to do the same amount of studying in half as many hours. Which statement is now true of his opportunity costs?
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NOT the opportunity cost of studying has increased.......the opportunity cost of leisure has increased?
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Point Z lies outside of the PPF. Point Z:
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is unattainable, all other things unchanged (it is not on the curve!* if it was then it could be attainable through growth of economy i think)
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The effect of an increase in productive inputs such as labor and capital can be shown by
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NOT a point inside of the production possibility frontier. I think it is an outward shift of the PPF
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The PPF will shift outward for which reason?
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NOT an upgrade of capital to the best available technology..... it possibly is a decrease in the unemployment rate... because with an increase in employment rate u have an increase in factors of production
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On any given production PF, the minimum quantity of one good that can be produced for any given production of the other can be seen
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False
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Suppose residents of Montana operate on their PPF and want to see increased wheat production as well as an increase in the production of flying-fish rods. According to the PPF, this cannot happen without new resources or technological improvement
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true
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A typical, bowed-out PPF between two goods--guns and butter--shows that the opportunity cost of butter in terms of guns increases as more butter is produced. This implies that the opportunity cost of guns in terms of butter decreases as more guns are produced.
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false
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The PPF that is a line sloping down from left to right would suggest that
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the opportunity costs of the goods are constant
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If an economy has to sacrifice increasing amounts of good X for each additional unit of good Y produced, then its PPF is
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bowed out from the origin
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An increase in efficiency means that an economy has
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made more people better off without making others worse off
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Economists say an economy is efficient when
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all opportunities to make some people better off without making other people worse off have been taken
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Assume an economy is operating on its PPF, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods
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must decrease
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Suppose Oklahoma decides to produce only two goods: oil and football helmets. If they are currently operating on their PPF, as oil production increases, the production of football helmets will
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decrease
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The PPF illustrates
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the maximum quantity of one good that can be produced given the quantity of the other good produced
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The __ illustrates the trade-offs facing an economy that produces only two goods
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PPF
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An economy is efficient in product if it is
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I put ' possible to produce more of one good without producing less of another..... ' it is probably 'not possible to produce more of one good without producing less of another..... '
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if an economy is producing at a point on its PPF
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NOT it is efficient in production and allocation....and it isn't 'it is not necessarily efficient in production or allocation' should maybe be efficient in production but not necessarily allocation?????
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If an economy has to sacrifice only one unit of good X for each unit of good Y produced, regardless of the output mix, then its production possibility frontier has:
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NOT a decreasing neg slope... zero slope?
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Examine the table Trade-off of Study Time and Leisure Time. A student sleeps 8 hours per day and divides the remaining time between study and leisure time. The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day. Suppose this student is studying 4 hours and spending 10 hours doing leisure activities. What is true about this allocation of his scarce resources?
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NOT This point is both efficient and feasible. Maybe....inside? because he has 2 extra hours, not using all of his resources
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The effect of a tremendous natural disaster can be shown by:
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NOT a point inside the PPF...... either inside or out... probably outside
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A typical, bowed-out production possibility frontier between two goods—guns and butter—shows that the opportunity cost of butter in terms of guns increases as more butter is produced. This implies that the opportunity cost of guns in terms of butter decreases as more guns are produced.
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false
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Technological improvements will
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shift the PPF outward
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SHifting a curve to the right implies
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economic growth
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The economy's factors of production are not equally suitable for producing different types of goods. This notion generates
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the law of increasing opportunity cost
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A PPF illustrates the __ facing an economy that __ only two goods
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trade-offs; produces
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Consider a production PF for Iraq. If in 2014 Iraq's resources are not fully utilized, Iraq will be somewhere ___ of its production PF.
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inside
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The production PF illustrates that
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if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced
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An economy is efficient in production if it is
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not possible to produce more of one good without producing less of another
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If a student decides to consume one additional hour of leisure time how many hrs of study must he give up
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1
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The law of demand states that other things equal
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as the price increases, the QUANTITY demanded will decrease
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which statement best describes the law of demand?
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As the price of a DVD rises, fewer DVDs are rented
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If goods A and Z are complements, an increase in the price of good Z will
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decrease demand for A
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Assuming that ice cream is a normal good, which statement could cause an increase in the demand for ice-cream
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AN increase in the price of substitutes for ice cream such as frozen yogurt (if thats gonna be more expensive hellll naw u want ice-cream!!!!!!)
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Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of Raclette cheese decreased, there should be:
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It is not an increase in demand for Raclette cheese and for new potatoes...... just an increase demand for cheese i think
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If coconuts are a normal good and consumers believe that the price of coconuts will rise significantly in the near future, it will be represented in the figure as a movement from:
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not C to A not B to E E to B?
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An increase in demand for good X could be caused by a decrease in the price of X.
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False means that the demand curve shifted. Not that the quantity demanded rose or fell because of a change in price!!!
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__ illustrates an inverse relationship between price and quantity
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a demand curve
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when the demand curve slopes downward, it means that
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higher prices are associated with lower quantities demanded
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a demand schedule is
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a table showing how much of a good consumers will buy at different prices
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Which example illustrates the law of demand?
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consumers buy more computers because prices have fallen
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A decrease in the price of a good will result in
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an increase in the quantity demanded
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Which factor will result solely in a movement along the demand curve for a particular good?
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a change in the price of that good
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The demand curve for season tickets for the Miami Dolphins is the graphical representation of how many season tickets consumers want to buy at any given price
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true
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If coconuts are a normal good and the price of coconuts increases, it would be represented in the figure as a movement from
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B to A, meaning it goes from lower to higher on the demand curve. there is no shift
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If goods A and B are substitutes, a decrease in the price of good B will
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decrease demand for good A
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According to the law of demand, if the price of steak increases in Rhode Island, the demand for steak will decrease in Rhode Island.
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false ?!?!
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An increase in income will always shift the demand curve to the right.
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false
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a negative relationship between the quantity demanded of a good and its price is called the law of
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demand
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a demand schedule is
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a table showing how much of a good consumers will buy at different prices
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What is the different between quantity demand and demand
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A change in quantity demanded is a movement along the demand curve, and a change in demand is a SHIFT of the demand curve
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A leftward shift of the demand curve shows that
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something has happened to cause a lower quantity demanded at every given price
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If there is an increase in preference for coconuts, it will be represented as a movement from
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shift right
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If there is a widely held expectation that prices of cotton will be higher next year, then
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the demand for cotton will increase TODAY
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If community income increases, demand for taxis increase, and bus services decrease. Therefore
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taxi service is a normal good; bus service is an inferior good
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A decrease in the price of a good will result in
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an increase in the quantity demanded
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A rightward shift on the demand curve shows that
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something has happened to cause a higher quantity demanded at every given price
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If coconuts are a normal good and the income level of consumers falls, it will be represented in the figure as a movement from
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shift to the left
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Bangladesh produces much of the clothing worn in the United States because it can produce more clothes than the United States.
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false
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The opportunity cost of producing 1 box of cell phones for Sweden is: (Sweden produces 100k herring and 10k cell phones; finland produces 50k herring and 10k cell phones)
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NOT 5 boxes of herring 0.1 becus 1/10? no it is either 10 or 0.2. i think 10, 100k/10k is 10...
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Free trade between countries
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NOT will shift the domestic production possibility frontier to the right. Looking at figures 4-1, the points lie outside of the line
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An economy is said to have a comparative advantage in the production of one good if it
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has the lowest opportunity cost for producing a particular good
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Sweden has an absolute advantage in producing: (Sweden produces 100k herring and 10k cell phones; finland produces 50k herring and 10k cell phones)
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herring only
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Nations can gain from trade with other nations even if they are less productive in all industries than the nations they trade with
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true
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If the US is more productive than Mexico in all lines of production, then the US cannot benefit from trade with Mexico
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false
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Which statement is true
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It is possible to have an absolute disadvantage in doing something but still have a comparative advantage in the same thing
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An economy that has the lowest opportunity cost for producing a particular good is said to have:
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a comparative advantage in production of that good
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Because of trade, a country may:
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consume outside its production possibility frontier
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Gains from trade exist for:
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individuals, states, and countries
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Individuals gain from trade because
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of specialization in production
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Which book illustrates the advantages of specialization using an eighteenth-century pin factory?
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The Wealth of Nations, by Adam Smith
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Examine the table Coffee and Salmon Production Possibilities II. This table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. Brazil has a comparative advantage in producing:
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coffee only
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Examine the table Coffee and Salmon Production Possibilities II. This table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. Alaska has an absolute advantage in producing:
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neither coffee nor salmon
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Finland has a comparative advantage in producing: (Sweden produces 100k herring and 10k cell phones; finland produces 50k herring and 10k cell phones)
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cell phones
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The concept of comparative advantage is based upon:
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relative opportunity costs
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Examine the table Comparative Advantage I. Sweden has a comparative advantage in producing:
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herring only
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Finland has a comparative advantage in producing:
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cell phones only....
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Finland has an absolute advantage in producing:
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neither cell phones nor herring
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The table shows the maximum amount of fish and coconuts that Tom and Hank can produce if they produce only one good. Tom produces and consumes 9 fish and 2 coconuts, and Hank produces and consumes 3 fish and 2 coconuts. Now they decide to engage in trade. Which statement is incorrect?
answer
NOT After trade it is possible for Tom to consume 9 fish and 2.5 coconuts and for Hank to consume 3 fish and 2.5 coconuts. I think it is 'For both to become better off, each should specialize in the production of some good. However, because Hank is equally productive in both goods, it doesn't matter which good each specializes in.'
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In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one hour, Japan can produce 30 tons of steel or 275 automobiles. This information implies that:
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United States has a comparative advantage in the production of automobiles. because 25/250 is 0.1, which is lower than 30/275
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This table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. Brazil has an absolute advantage in producing: (Brazil produces 40 coffee, 20 salmon; Alaska produces 20 for both)
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coffee only
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Sweden has a comparative advantage in producing:
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herring only
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In the local market for coffee, what would happen if Joyce's Java and Everyday Joe's coffee shops go out of business?
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The supply curve shifts to the left.
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Over the past few years, the technology associated with producing flat-panel televisions has improved. This has led to a(n) _____ in the _____ flat-panel televisions.
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increase; supply of
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Consider the supply curve for cotton shirts. An increase in the price of cotton will
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decrease the supply of cotton shirts
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An improvement in the technology used to harvest coconuts (e.g., a faster, less expensive coconut picker) would be represented in the figure as a movement from:
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shift to right
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Examine the figure Supply of Coconuts. If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts increased, it would be represented in the figure as a movement from:
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shift left (if it decreases, shift to the right)
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If the market for buffalo meat is in equilibrium, the price of buffalo meat will probably _____ in the near future.
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not change
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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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Excess supply occurs when:
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price is above eq price
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If the supply and demand curves intersect at a price of $14, then any price below that would result in:
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shortage
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Given the initial equilibrium of S1 and D, any price lower than _____ will create pressure for the price to _____.
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2.50, rise
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*** _____ illustrates a direct relationship between price and quantity.
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not ppf *** eq? supply curve?
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A technological advance in the production of automobiles will:
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increase in supply of automobiles
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An increase in supply of a good can result from:
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NOT a fall in the price of the good.
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When the price of lamps increases, the:
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not quantity supplies decreases maybe just supply decreases
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If the price of coconuts decreased, it would be represented in the figure as a movement from:
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NOT shift to the right perhaps moves from higher to lower on same line
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Suppose the equilibrium price of good Y is $5 and the equilibrium quantity is 150 units. If the price of good Y is $12:
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excess supply of Y
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Market equilibrium occurs when:
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there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.
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If the quantity supplied in a market exceeds the quantity demanded in a market, prices would be expected to:
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fall
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Suppose the equilibrium price of good X is $25 and the equilibrium quantity is 124 units. If the price of good X is $2:
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excess demand of X
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Examine the figure Demand and Supply of Gasoline. A factor that may have changed supply from S1 to S2 is:
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better technology in the production of gasoline
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***If peanut butter is an inferior good, what would happen to the price and quantity sold of peanut butter as incomes fall during an economic recession?
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The price and quantity would both increase.
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A decrease in demand, with no change in supply, will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price.
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decrease, decrease
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Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will most likely result in
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increase in price and quantity
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A newspaper story recently reported that the price of new cars, a normal good, has decreased and the quantity of new cars sold has dropped. The new price and quantity could have been caused by:
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decrease in buyers income
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The market price of airline flights increased recently. Some economists suggest that the price increased because there has been an increase in the number of business travelers. They believe that in the market for flights:
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demand increased
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The market for corn is in equilibrium. Which statement is most likely to increase the equilibrium price of corn?
answer
increasing production of corn-based ethanol
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When the price of DVD players falls, the quantity of DVD players sold increases. This set of observations can be the result of the:
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NOT demand shift to right NOT supplyshift to left
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The price of microchips used to produce computers falls. As a result, the equilibrium price of computers _____ and the equilibrium quantity ______.
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NOT fall and decrease fall, increase?
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The market for lemonade is in equilibrium, and the price of lemons rises. How will this affect the lemonade market?
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a) Supply will decrease, increasing the price and decreasing the quantity.
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A decrease in supply, with no change in demand, will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price.
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NOT decrease increase
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Consider the market for corn. What happens if there is an increased demand for corn tortillas and at the same time a new corn seed becomes available that dramatically increases the per-acre yield?
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NOT indeterminate; quant decrease indeterminate; quant increase
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Suppose the local real estate market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a large subdivision of new homes has just been completed. Given these two changes and assuming that real estate is a normal good, one can predict the price of real estate will _____ and the quantity of real estate bought and sold will _____.
answer
fal; rise or fall
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When the supply curve shifts from S1 to S2, the new intersection of supply and demand has a price of _____ and quantity of 400. This supply shift could have resulted from _____.
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$1.50; an improvement in refining technology
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Given the resulting equilibrium after a change in supply from S1 to S2:
answer
at the old price of $2.50, there will be pressure for the price to fall.
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"In 2008, air travel decreased substantially despite significant reductions in ticket prices." If this information is correct, it indicates that the law of demand did not apply to air travel in 2008.
answer
f
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If demand decreases and supply increases, the direction of change in the equilibrium quantity is unpredictable unless the relative magnitudes of the demand and supply changes are known.
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true
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Which statement ALWAYS results in an increase in price and quantity?
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NOT an increase in supply and a decrease in demand inc dem and no change in supply
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An increase in demand with no change in supply will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price.
answer
increase increase
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If tortilla chips are a normal good, what happens to equilibrium price and quantity when there is an increase in income?
answer
increase increase????
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n the market for tacos, you observe that the equilibrium price and quantity have increased. This can be caused only by:
answer
NOT increase in price of beef inc income of ppl who eat taco
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If the United States increases tariffs on imports of lumber from Canada (which causes the price of lumber to increase in the United States), the equilibrium price of new homes in the United States will _____ and the equilibrium quantity of new homes in the United States will _____.
answer
increase decrease
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An increase in supply, with no change in demand, will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price.
answer
inc dec
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In the market for corn tortilla chips, what would cause a price increase?
answer
fungus kills corn
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In the market for local coffee, a normal good, the price will _____ and the quantity will _____ if new coffee shops open and consumers' incomes decrease due to a recession.
answer
dec; indet
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The market for milk is initially in equilibrium. Milk producers engage in an advertising program to encourage milk drinking, which succeeds in shifting consumer tastes toward drinking milk. At the same time, more milk producers enter the market. Standard demand and supply analysis states that:
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the equilibrium quantity of milk will rise, but one cannot determine how the equilibrium price will be affected.
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If consumer tastes for electric cars increase over the next 10 years, there will be an increase in the demand for electric cars, higher electric car prices, and an increase in the equilibrium quantity of electric cars.
answer
t
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If D1 or S1 is the original curve and D2 or S2 is the new curve, which of the graphs shows what may happen in the market for DVDs if the cost of producing DVD players increases?
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NO: D1 doesn't shift up and to the right to D2
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If D1 or S1 is the original curve and D2 or S2 is the new curve, which of the graphs illustrates what may happen in the market for DVDs if there is an increase in the cost of a movie ticket at the local theater?
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NOT: demand shifts to left/down
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If D1 or S1 is the original curve and D2 or S2 is the new curve, which of the graphs shows what may happen if some of the stores that rent DVDs close?
answer
supply shift up and left
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question
"Steel tariffs will prevent job losses in the steel industry" is a positive statement
answer
True
question
"The unemployment rate should be higher" is a normative statement
answer
True
question
Opportunity cost means that if the United States spends $87 billion in the rebuilding of Iraq, it would have to forgo the opportunity to spend $87 billion on some other program
answer
True
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The current rate of unemployment is 9%. The statement:
answer
is positive
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Which statement is a normative statement?
answer
The best way to encourage growth in the economy is through government spending
question
Economists may disagree about policies because
answer
they may use different economic models
question
Microeconomics deals with
answer
Individual decision makers in the economy
question
Because the United States is a rich nation, free health care can be provided for all citizens without considering the issue of scarcity
answer
false
question
The primary emphasis in macroeconomics is on
answer
the national economy
question
Whenever a choice is made
answer
the cost of that choice could be referred to as opportunity cost
question
Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is
answer
whatever Khalil would have done had he not gone to the opera
question
Which option can best be considered the resources used in the production of computers?
answer
computer engineers
question
The opportunity cost of something is
answer
what is given up to acquire it
question
The problem of scarcity is confronted by
answer
all societies
question
Scarcity in economics means
answer
people do not have sufficient resources to produce all of the goods and services they want
question
Manny is attending college and majoring in economics. By doing so, Manny is primarily improving his
answer
human capital
question
You can spend $100 on either a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is:
answer
your enjoyment of the new CD player? because $100 is being spent either way
question
If the state government allocates additional spending on education, the opportunity cost is:
answer
measured in terms of the best alternative use for that money. i think. it isn't 'the dollar amount of the additional spending'
question
The current rate of unemployment of 9% is too high. This is a _____ statement.
answer
normative
question
Economists disagree more over normative economics than positive economics.
answer
true
question
Opportunity cost is:
answer
the value of the best alternative forgone in making any choice
question
The basic concern of microeconomics is:
answer
to study the choices people make
question
Macroeconomics deals with:
answer
the working of the entire economy or large sectors of it
question
When people are forced to make choices, they are facing the concept of
answer
scarcity
question
A high-school graduate who gets a college degree is adding to the economy's stock of
answer
human capital
question
Which is not an example of a resource?
answer
production
question
Which statements is a positive statement? Which is a normative statement? X. The federal minimum wage is increasing to $7.50 an hour. Y. The minimum wage should be high enough that families will not live in poverty.
answer
X is positive; Y is normative
question
Economists who are asked to choose between two different government policies may disagree because
answer
they base their conclusions on models that make different assumptions
question
If resources are "scarce", it means that they
answer
cannot provide enough goods or services to satisfy all human material wants and needs
question
Although fresh water is very abundant in most places, it is scarce because
answer
there is not enough of it to meet all needs
question
"Teachers in northern New Hampshire should earn more money" is a normative statement
answer
True
question
Economists disagree more over normative economics than positive economics
answer
False
question
In 2003, Congress passed a tax cut. Because taxes were reduced, the country did not incur any opportunity cost from this decision.
answer
False
question
The study of economics arises because of the necessity for choice, and the necessity for choice arises because of the fundamental problem of scarcity of resources
answer
True
question
The best measure of the opportunity cost of any choice is
answer
whatever you have given up to make that choice, even if no monetary costs are involved
question
The study of a single firm and how it determines prices would fall under the study of
answer
microeconomics
question
Which subject would be studied in macroeconomics?
answer
recessions
question
The latin phrase ceteris paribus means
answer
other things equal
question
The importance of an economic model is that it allows us to
answer
focus on the effects of only one change at a time
question
A simplified representation that is used to study a real situation is called
answer
a model
question
An economic model
answer
is a simplified version of reality used to understand real-world economic conditions
question
The circular-flow diagram illustrates how household how households ___ goods and service and ___ factors of production
answer
buy; sell
question
In building model, economists avoid making any assumptions that might leave out any aspect of reality
answer
False
question
If one group in the economy spends more, the incomes of other groups will increase
answer
True
question
In the product market, households spend money to buy goods and services
answer
True
question
Buying vegetables produced by local farmers' market benefits the local community because
answer
one person's local spending will increase another local person's income
question
A local grocery store benefits when a new furniture factory moves to town and hires workers because
answer
the new jobs at the new factory will increase local incomes, some of which will be spent at the local grocery store
question
In building models, economists avoid making any assumptions that might leave out any aspect of reality
answer
True
question
The basic principle of the circular-flow diagram is that the money flowing into each sector or market is greater than the money that flows out
answer
False
question
In the circular-flow diagram, an individual or a group of people (usually a family) who share their income would be called a
answer
household
question
The basic principle of the circular-flow diagram is that
answer
the flow of money into each market or sector is equal to the flow of money coming out of that market or sector
question
Within the circular-flow diagram, the factor market is the place where
answer
firms buy the resources they need for the production of goods and services
question
When a local factory closes, why does it spell bad news for the local restaurants?
answer
Unemployed factory workers have lower incomes and are less likely to dine out
question
If the value of homes in University City increases, and as a result, the people of University City spend more, incomes, in university City will
answer
increase
question
One person's spending is another person's
answer
income
question
Economic models are
answer
often useful in forming economic policy
question
The models that economists construct
answer
usually make simplifying assumptions
question
Economists create __ by applying specific assumptions to set of basic principles
answer
models
question
An economic model
answer
is a simplified version of reality used to understand real-world economic conditions
question
The simplest circular-flow model shows the interaction between households and firms. In this model:
answer
firms supply goods and services to households, which in turn supply factors of production to firms
question
In the simplest circular-flow model, households supply__ and demand __
answer
factors of production; goods and services
question
In the circular-flow diagram, the product market is where
answer
households buy goods and services
question
Within the circular-flow diagram, the market for goods and services is the place where
answer
households buy the products they want
question
Because one person's spending is another person's income
answer
if one group in the economy spends more, the incomes of other groups will increase
question
"I know when I shop at the local grocery store, I am helping my community." This statement best represents this economic concept:
answer
One person's spending is another person's income
question
In building models, economists often assume that opportunity costs don't matter
answer
false
question
If one group in the economy spends more, this increases their share of income and the incomes of other groups will decrease
answer
false
question
Labor and capital are the only two factors of production
answer
false
question
All points inside the production possibility frontier represent
answer
I put efficient production points... but it is not....it should be inefficient points
question
If an economy is producing a level of output that is on its production possibility frontier, the economy has
answer
I put no idle resources but is using resources inefficiently........ also it isn't ' it is idle resources but is using resources efficiently'... should be 'no idle resources but is using resources efficiently'
question
Suppose the student completes a speed reading course that allows him to do the same amount of studying in half as many hours. Which statement is now true of his opportunity costs?
answer
NOT the opportunity cost of studying has increased.......the opportunity cost of leisure has increased?
question
Point Z lies outside of the PPF. Point Z:
answer
is unattainable, all other things unchanged (it is not on the curve!* if it was then it could be attainable through growth of economy i think)
question
The effect of an increase in productive inputs such as labor and capital can be shown by
answer
NOT a point inside of the production possibility frontier. I think it is an outward shift of the PPF
question
The PPF will shift outward for which reason?
answer
NOT an upgrade of capital to the best available technology..... it possibly is a decrease in the unemployment rate... because with an increase in employment rate u have an increase in factors of production
question
On any given production PF, the minimum quantity of one good that can be produced for any given production of the other can be seen
answer
False
question
Suppose residents of Montana operate on their PPF and want to see increased wheat production as well as an increase in the production of flying-fish rods. According to the PPF, this cannot happen without new resources or technological improvement
answer
true
question
A typical, bowed-out PPF between two goods--guns and butter--shows that the opportunity cost of butter in terms of guns increases as more butter is produced. This implies that the opportunity cost of guns in terms of butter decreases as more guns are produced.
answer
false
question
The PPF that is a line sloping down from left to right would suggest that
answer
the opportunity costs of the goods are constant
question
If an economy has to sacrifice increasing amounts of good X for each additional unit of good Y produced, then its PPF is
answer
bowed out from the origin
question
An increase in efficiency means that an economy has
answer
made more people better off without making others worse off
question
Economists say an economy is efficient when
answer
all opportunities to make some people better off without making other people worse off have been taken
question
Assume an economy is operating on its PPF, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods
answer
must decrease
question
Suppose Oklahoma decides to produce only two goods: oil and football helmets. If they are currently operating on their PPF, as oil production increases, the production of football helmets will
answer
decrease
question
The PPF illustrates
answer
the maximum quantity of one good that can be produced given the quantity of the other good produced
question
The __ illustrates the trade-offs facing an economy that produces only two goods
answer
PPF
question
An economy is efficient in product if it is
answer
I put ' possible to produce more of one good without producing less of another..... ' it is probably 'not possible to produce more of one good without producing less of another..... '
question
if an economy is producing at a point on its PPF
answer
NOT it is efficient in production and allocation....and it isn't 'it is not necessarily efficient in production or allocation' should maybe be efficient in production but not necessarily allocation?????
question
If an economy has to sacrifice only one unit of good X for each unit of good Y produced, regardless of the output mix, then its production possibility frontier has:
answer
NOT a decreasing neg slope... zero slope?
question
Examine the table Trade-off of Study Time and Leisure Time. A student sleeps 8 hours per day and divides the remaining time between study and leisure time. The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day. Suppose this student is studying 4 hours and spending 10 hours doing leisure activities. What is true about this allocation of his scarce resources?
answer
NOT This point is both efficient and feasible. Maybe....inside? because he has 2 extra hours, not using all of his resources
question
The effect of a tremendous natural disaster can be shown by:
answer
NOT a point inside the PPF...... either inside or out... probably outside
question
A typical, bowed-out production possibility frontier between two goods—guns and butter—shows that the opportunity cost of butter in terms of guns increases as more butter is produced. This implies that the opportunity cost of guns in terms of butter decreases as more guns are produced.
answer
false
question
Technological improvements will
answer
shift the PPF outward
question
SHifting a curve to the right implies
answer
economic growth
question
The economy's factors of production are not equally suitable for producing different types of goods. This notion generates
answer
the law of increasing opportunity cost
question
A PPF illustrates the __ facing an economy that __ only two goods
answer
trade-offs; produces
question
Consider a production PF for Iraq. If in 2014 Iraq's resources are not fully utilized, Iraq will be somewhere ___ of its production PF.
answer
inside
question
The production PF illustrates that
answer
if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced
question
An economy is efficient in production if it is
answer
not possible to produce more of one good without producing less of another
question
If a student decides to consume one additional hour of leisure time how many hrs of study must he give up
answer
1
question
The law of demand states that other things equal
answer
as the price increases, the QUANTITY demanded will decrease
question
which statement best describes the law of demand?
answer
As the price of a DVD rises, fewer DVDs are rented
question
If goods A and Z are complements, an increase in the price of good Z will
answer
decrease demand for A
question
Assuming that ice cream is a normal good, which statement could cause an increase in the demand for ice-cream
answer
AN increase in the price of substitutes for ice cream such as frozen yogurt (if thats gonna be more expensive hellll naw u want ice-cream!!!!!!)
question
Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of Raclette cheese decreased, there should be:
answer
It is not an increase in demand for Raclette cheese and for new potatoes...... just an increase demand for cheese i think
question
If coconuts are a normal good and consumers believe that the price of coconuts will rise significantly in the near future, it will be represented in the figure as a movement from:
answer
not C to A not B to E E to B?
question
An increase in demand for good X could be caused by a decrease in the price of X.
answer
False means that the demand curve shifted. Not that the quantity demanded rose or fell because of a change in price!!!
question
__ illustrates an inverse relationship between price and quantity
answer
a demand curve
question
when the demand curve slopes downward, it means that
answer
higher prices are associated with lower quantities demanded
question
a demand schedule is
answer
a table showing how much of a good consumers will buy at different prices
question
Which example illustrates the law of demand?
answer
consumers buy more computers because prices have fallen
question
A decrease in the price of a good will result in
answer
an increase in the quantity demanded
question
Which factor will result solely in a movement along the demand curve for a particular good?
answer
a change in the price of that good
question
The demand curve for season tickets for the Miami Dolphins is the graphical representation of how many season tickets consumers want to buy at any given price
answer
true
question
If coconuts are a normal good and the price of coconuts increases, it would be represented in the figure as a movement from
answer
B to A, meaning it goes from lower to higher on the demand curve. there is no shift
question
If goods A and B are substitutes, a decrease in the price of good B will
answer
decrease demand for good A
question
According to the law of demand, if the price of steak increases in Rhode Island, the demand for steak will decrease in Rhode Island.
answer
false ?!?!
question
An increase in income will always shift the demand curve to the right.
answer
false
question
a negative relationship between the quantity demanded of a good and its price is called the law of
answer
demand
question
a demand schedule is
answer
a table showing how much of a good consumers will buy at different prices
question
What is the different between quantity demand and demand
answer
A change in quantity demanded is a movement along the demand curve, and a change in demand is a SHIFT of the demand curve
question
A leftward shift of the demand curve shows that
answer
something has happened to cause a lower quantity demanded at every given price
question
If there is an increase in preference for coconuts, it will be represented as a movement from
answer
shift right
question
If there is a widely held expectation that prices of cotton will be higher next year, then
answer
the demand for cotton will increase TODAY
question
If community income increases, demand for taxis increase, and bus services decrease. Therefore
answer
taxi service is a normal good; bus service is an inferior good
question
A decrease in the price of a good will result in
answer
an increase in the quantity demanded
question
A rightward shift on the demand curve shows that
answer
something has happened to cause a higher quantity demanded at every given price
question
If coconuts are a normal good and the income level of consumers falls, it will be represented in the figure as a movement from
answer
shift to the left
question
Bangladesh produces much of the clothing worn in the United States because it can produce more clothes than the United States.
answer
false
question
The opportunity cost of producing 1 box of cell phones for Sweden is: (Sweden produces 100k herring and 10k cell phones; finland produces 50k herring and 10k cell phones)
answer
NOT 5 boxes of herring 0.1 becus 1/10? no it is either 10 or 0.2. i think 10, 100k/10k is 10...
question
Free trade between countries
answer
NOT will shift the domestic production possibility frontier to the right. Looking at figures 4-1, the points lie outside of the line
question
An economy is said to have a comparative advantage in the production of one good if it
answer
has the lowest opportunity cost for producing a particular good
question
Sweden has an absolute advantage in producing: (Sweden produces 100k herring and 10k cell phones; finland produces 50k herring and 10k cell phones)
answer
herring only
question
Nations can gain from trade with other nations even if they are less productive in all industries than the nations they trade with
answer
true
question
If the US is more productive than Mexico in all lines of production, then the US cannot benefit from trade with Mexico
answer
false
question
Which statement is true
answer
It is possible to have an absolute disadvantage in doing something but still have a comparative advantage in the same thing
question
An economy that has the lowest opportunity cost for producing a particular good is said to have:
answer
a comparative advantage in production of that good
question
Because of trade, a country may:
answer
consume outside its production possibility frontier
question
Gains from trade exist for:
answer
individuals, states, and countries
question
Individuals gain from trade because
answer
of specialization in production
question
Which book illustrates the advantages of specialization using an eighteenth-century pin factory?
answer
The Wealth of Nations, by Adam Smith
question
Examine the table Coffee and Salmon Production Possibilities II. This table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. Brazil has a comparative advantage in producing:
answer
coffee only
question
Examine the table Coffee and Salmon Production Possibilities II. This table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. Alaska has an absolute advantage in producing:
answer
neither coffee nor salmon
question
Finland has a comparative advantage in producing: (Sweden produces 100k herring and 10k cell phones; finland produces 50k herring and 10k cell phones)
answer
cell phones
question
The concept of comparative advantage is based upon:
answer
relative opportunity costs
question
Examine the table Comparative Advantage I. Sweden has a comparative advantage in producing:
answer
herring only
question
Finland has a comparative advantage in producing:
answer
cell phones only....
question
Finland has an absolute advantage in producing:
answer
neither cell phones nor herring
question
The table shows the maximum amount of fish and coconuts that Tom and Hank can produce if they produce only one good. Tom produces and consumes 9 fish and 2 coconuts, and Hank produces and consumes 3 fish and 2 coconuts. Now they decide to engage in trade. Which statement is incorrect?
answer
NOT After trade it is possible for Tom to consume 9 fish and 2.5 coconuts and for Hank to consume 3 fish and 2.5 coconuts. I think it is 'For both to become better off, each should specialize in the production of some good. However, because Hank is equally productive in both goods, it doesn't matter which good each specializes in.'
question
In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one hour, Japan can produce 30 tons of steel or 275 automobiles. This information implies that:
answer
United States has a comparative advantage in the production of automobiles. because 25/250 is 0.1, which is lower than 30/275
question
This table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. Brazil has an absolute advantage in producing: (Brazil produces 40 coffee, 20 salmon; Alaska produces 20 for both)
answer
coffee only
question
Sweden has a comparative advantage in producing:
answer
herring only
question
In the local market for coffee, what would happen if Joyce's Java and Everyday Joe's coffee shops go out of business?
answer
The supply curve shifts to the left.
question
Over the past few years, the technology associated with producing flat-panel televisions has improved. This has led to a(n) _____ in the _____ flat-panel televisions.
answer
increase; supply of
question
Consider the supply curve for cotton shirts. An increase in the price of cotton will
answer
decrease the supply of cotton shirts
question
An improvement in the technology used to harvest coconuts (e.g., a faster, less expensive coconut picker) would be represented in the figure as a movement from:
answer
shift to right
question
Examine the figure Supply of Coconuts. If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts increased, it would be represented in the figure as a movement from:
answer
shift left (if it decreases, shift to the right)
question
If the market for buffalo meat is in equilibrium, the price of buffalo meat will probably _____ in the near future.
answer
not change
question
The market equilibrium is found at the:
answer
price where quantity demanded equals quantity supplied.
question
Excess supply occurs when:
answer
price is above eq price
question
If the supply and demand curves intersect at a price of $14, then any price below that would result in:
answer
shortage
question
Given the initial equilibrium of S1 and D, any price lower than _____ will create pressure for the price to _____.
answer
2.50, rise
question
*** _____ illustrates a direct relationship between price and quantity.
answer
not ppf *** eq? supply curve?
question
A technological advance in the production of automobiles will:
answer
increase in supply of automobiles
question
An increase in supply of a good can result from:
answer
NOT a fall in the price of the good.
question
When the price of lamps increases, the:
answer
not quantity supplies decreases maybe just supply decreases
question
If the price of coconuts decreased, it would be represented in the figure as a movement from:
answer
NOT shift to the right perhaps moves from higher to lower on same line
question
Suppose the equilibrium price of good Y is $5 and the equilibrium quantity is 150 units. If the price of good Y is $12:
answer
excess supply of Y
question
Market equilibrium occurs when:
answer
there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.
question
If the quantity supplied in a market exceeds the quantity demanded in a market, prices would be expected to:
answer
fall
question
Suppose the equilibrium price of good X is $25 and the equilibrium quantity is 124 units. If the price of good X is $2:
answer
excess demand of X
question
Examine the figure Demand and Supply of Gasoline. A factor that may have changed supply from S1 to S2 is:
answer
better technology in the production of gasoline
question
***If peanut butter is an inferior good, what would happen to the price and quantity sold of peanut butter as incomes fall during an economic recession?
answer
The price and quantity would both increase.
question
A decrease in demand, with no change in supply, will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price.
answer
decrease, decrease
question
Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will most likely result in
answer
increase in price and quantity
question
A newspaper story recently reported that the price of new cars, a normal good, has decreased and the quantity of new cars sold has dropped. The new price and quantity could have been caused by:
answer
decrease in buyers income
question
The market price of airline flights increased recently. Some economists suggest that the price increased because there has been an increase in the number of business travelers. They believe that in the market for flights:
answer
demand increased
question
The market for corn is in equilibrium. Which statement is most likely to increase the equilibrium price of corn?
answer
increasing production of corn-based ethanol
question
When the price of DVD players falls, the quantity of DVD players sold increases. This set of observations can be the result of the:
answer
NOT demand shift to right NOT supplyshift to left
question
The price of microchips used to produce computers falls. As a result, the equilibrium price of computers _____ and the equilibrium quantity ______.
answer
NOT fall and decrease fall, increase?
question
The market for lemonade is in equilibrium, and the price of lemons rises. How will this affect the lemonade market?
answer
a) Supply will decrease, increasing the price and decreasing the quantity.
question
A decrease in supply, with no change in demand, will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price.
answer
NOT decrease increase
question
Consider the market for corn. What happens if there is an increased demand for corn tortillas and at the same time a new corn seed becomes available that dramatically increases the per-acre yield?
answer
NOT indeterminate; quant decrease indeterminate; quant increase
question
Suppose the local real estate market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a large subdivision of new homes has just been completed. Given these two changes and assuming that real estate is a normal good, one can predict the price of real estate will _____ and the quantity of real estate bought and sold will _____.
answer
fal; rise or fall
question
When the supply curve shifts from S1 to S2, the new intersection of supply and demand has a price of _____ and quantity of 400. This supply shift could have resulted from _____.
answer
$1.50; an improvement in refining technology
question
Given the resulting equilibrium after a change in supply from S1 to S2:
answer
at the old price of $2.50, there will be pressure for the price to fall.
question
"In 2008, air travel decreased substantially despite significant reductions in ticket prices." If this information is correct, it indicates that the law of demand did not apply to air travel in 2008.
answer
f
question
If demand decreases and supply increases, the direction of change in the equilibrium quantity is unpredictable unless the relative magnitudes of the demand and supply changes are known.
answer
true
question
Which statement ALWAYS results in an increase in price and quantity?
answer
NOT an increase in supply and a decrease in demand inc dem and no change in supply
question
An increase in demand with no change in supply will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price.
answer
increase increase
question
If tortilla chips are a normal good, what happens to equilibrium price and quantity when there is an increase in income?
answer
increase increase????
question
n the market for tacos, you observe that the equilibrium price and quantity have increased. This can be caused only by:
answer
NOT increase in price of beef inc income of ppl who eat taco
question
If the United States increases tariffs on imports of lumber from Canada (which causes the price of lumber to increase in the United States), the equilibrium price of new homes in the United States will _____ and the equilibrium quantity of new homes in the United States will _____.
answer
increase decrease
question
An increase in supply, with no change in demand, will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price.
answer
inc dec
question
In the market for corn tortilla chips, what would cause a price increase?
answer
fungus kills corn
question
In the market for local coffee, a normal good, the price will _____ and the quantity will _____ if new coffee shops open and consumers' incomes decrease due to a recession.
answer
dec; indet
question
The market for milk is initially in equilibrium. Milk producers engage in an advertising program to encourage milk drinking, which succeeds in shifting consumer tastes toward drinking milk. At the same time, more milk producers enter the market. Standard demand and supply analysis states that:
answer
the equilibrium quantity of milk will rise, but one cannot determine how the equilibrium price will be affected.
question
If consumer tastes for electric cars increase over the next 10 years, there will be an increase in the demand for electric cars, higher electric car prices, and an increase in the equilibrium quantity of electric cars.
answer
t
question
If D1 or S1 is the original curve and D2 or S2 is the new curve, which of the graphs shows what may happen in the market for DVDs if the cost of producing DVD players increases?
answer
NO: D1 doesn't shift up and to the right to D2
question
If D1 or S1 is the original curve and D2 or S2 is the new curve, which of the graphs illustrates what may happen in the market for DVDs if there is an increase in the cost of a movie ticket at the local theater?
answer
NOT: demand shifts to left/down
question
If D1 or S1 is the original curve and D2 or S2 is the new curve, which of the graphs shows what may happen if some of the stores that rent DVDs close?
answer
supply shift up and left
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