Calhoun Micro Exam 1 Review

Private property rights involve _____?

1. Legal protection against those who would seek to use or abuse the property without the owner's permission. 2. The right to exclusive use of the property. 3. The right to transfer, sell, exchange, or mortgage of the property.

If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is _____, indicating the demand is _____.

2; elastic

People are more likely to purchase a consumer ratings magazine that reviews new automobiles before buying a new car than they are to purchase a consumer ratings magazine that reviews pens and pencils before buying a new pen or pencil. Which of the following best explains this behavior?

Because the value of the information in terms of avoiding a mistake on the purchase, is much higher for an automobile than for a pen or pencil, it is more worthwhile to gather this information.

Which of the following is true?

Changes is personal costs and benefits will exert a predictable impact on the choices of human decision makers.

Which of the following is a normative economic statement?

Companies should be concerned with more than just their profits.

Which of the following is a normative economic statement?

Congress should increase the legal minimum wage.

In which of the following cases will the total spending on a good decrease?

Demand is elastic, and price increases.

The opportunity cost of an activity _____.

Depends on the individual's subjective values and opinion.

Which of the following is most consistent with economic behavior?

Even if you know how to paint, hiring someone to do the job is consistent with economizing behavior, if your opportunity cost is high enough.

Which of the following is most consistent with economizing behavior?

Even if you know how to paint, hiring someone to do the job is consistent with economizing behavior, if your opportunity cost is high enough.

Which one of the following is correct?

Government programs can be implemented with good intentions but can lead to undesirable outcomes because of unintended consequences.

Which one of the following statements is correct?

Government programs can be implemented with good intentions but can lead to undesirable outcomes because of unintended consequences.

Which of the following is a positive economic statement?

If taxes are over 50 percent of national income, job creation falls.

Which of the following is often referred to as the basic postulate of economics?

Incentives matter - individuals respond in predictable ways to changes in personal costs and benefits.

The statement, "John buys more of good X as his income increases, ceteris paribus," means _____?

John's income is the only influence that is being allowed to change.

Which of the following is the best example of an investment in human capital?

On-the-job training received by an apprentice electrician.

Senator DuMonde favors a government program that he believes will help save endangered species. Economic analysis indicates that _____?

Senator DuMonde's new program could have unintended consequences that might result in an outcome different from what was intended.

Which of the following is an example of a normative economic statement?

The minimum wage should be increased so that low income workers can afford to keep up with the cost of living.

Which of the following is a correct statement about the labor market?

Workers determine the supply of labor, and firms determine the demand for labor.

Assuming that the bus travel is an inferior good, a decrease in consumer income, other things being equal, will cause _____?

a rightward shift in the demand curve for bus travel.

If a decision maker uses marginal analysis, then the relevant costs are the _____?

additional costs of a particular activity or product.

Marginal revenue product is the _____?

additional revenue from one additional unit of input.

The marginal revenue product of a resource is best described as the _____?

change in total revenue resulting from employing an additional unit of the resource.

Rational choice requires that opportunity cost be _____?

considered as part of making a decision.

The price of an airline tickets rises as the amount of time between purchase and flight departure gets smaller. The airlines base the policy on the assumption that _____?

consumer demand becomes more inelastic as departure time approaches.

The process by which new products and methods of production are continuously replacing old ones is known as _____?

creative destruction.

If Mr. Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should _____?

decrease his spending on cola.

If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10 percent, _____?

demand is elastic.

The value of a good _____?

depends on many factors, including who uses it and under what circumstances.

Physical and human capital investments are _____?

different in that the opportunity for economic profit is present for physical capital but not for human capital investments.

If a Pizza Hut resturaunt near campus reduces its pizza prices by 15 percent, and as a result, its total revenue from pizza sales increases, this indicates that the price elasticity of demand was ____?

elastic

If the price of tickets to Disney World increases 10 percent, and as a result, attendance falls by 15 percent, the demand for the tickets is ______?

elastic

Rebel Records announces it is cutting the prices of its bluegrass album titles by 25 percent. If rebel is seeking to increase revenues, it must believe that the elasticity of demand for bluegrass album is _____?

elastic.

The marginal revenue product of a resource _____?

equals the extra output produced by an additional unit of the resource multiplied by the marginal revenue per unit of that output.

A student noted that the football team won by a larger margin when the third-string played more minutes. Therefore, he recommended that the third-stringers become the first team. His conclusion was probably erroneous because he _____?

failed to recognize that association is not causation

"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This statement _____?

fails to recognize that association is not causation.

If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that _____?

fewer students will attempt to cheat.

The economic way of thinking stresses that _____?

incentives matter - individuals respond in predictable ways to changes in personal costs and benefits.

A point inside the production possibilities curve represents a combination of goods that is _____?

inefficient

The demand for salt is _____?

inelastic because there are many substitutes for salt and it represents a large percentage of a consumers budget.

According to Adam Smith, individual self-interest _____?

is a powerful force for economic progress when it is directed by competitive markets.

Which of the following is the best definition of "physical capital"?

man-made resources used to produce other goods.

Creative destruction refers to the process where _____?

new products and methods of production are continuously replacing old ones.

According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study _____?

outweighs the extra cost.

Entrepreneurs are _____?

profit-seeking decision makers who decide which business projects to undertake.

When price is the rationing criterion , individuals have a strong incentive to_____

provide services to others in exchange for income

The market where firms purchase factors of production is referred to as the _____?

resource market.

The basic ingredients in any economic decision are _____?

scarcity and choice

Criteria for rationing goods and resources must be established because of _____?

scarcity imposed by nature.

When economist say an individual displays economizing behavior, they simply mean that she is _____?

seeking the lowest cost method to accomplish her objectives.

A middleman is a person who _____?

specializes in arranging trades and selling, guaranteeing, and serving items traded.

When the price of a resource goes up and firms seek other suitable resources, this is called the _____?

substitution in production effect..

The opportunity cost of an action is _____?

the highest valued alternative forgone as the result of choosing an option.

The notion that specialization in goods that one can produce at a low opportunity cost will make it possible for trading partners to produce a larger joint output called _____?

the law of comparative advantage.

People are willing to pay more for a diamond than for a water bottle because _____?

the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra water bottle.

Along the inelastic portion of a demand curve, _____?

the percentage change in price will be more than the percentage change in quantity demanded.

The expression "There's no such thing as free lunch" means _____?

the use of resources to produce a good has an opportunity cost because of scarcity.