ECO: Final Exam

Which of the following best characterizes the circular flow of income?

Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

in a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of

Buyers and sellers

Philosophers draw a distinction between positive statements, which describe the world as it is, and _______, which describe how the would should be?

Normative statements

If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers?

Price of competing products

The term _____ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.

Price taker

A _____ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price

Prisoner's dilemma

Poverty is measured by the number of people who fall below

all the above are correct

The term "ceteris paribus" means that

all variables except those specified are constant

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to :

Rise and the equilibrium quantity to stay the same.

The The greater inequality of wages can be viewed as a sign that

demand for skilled labor is increasing faster than supply.

The law of _______ explains why people and societies rarely make all-or-nothing choices.

diminishing marginal utility

A ______ is a direct payment form a firm to its shareholders

dividend

Marginal thinking is best demonstrated by:

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

Negotiations between unions and a firm or firms is called

collective bargaining

Which of the following has become a common condition for allowing a merger of large firms?

commitment to sell off certain parts of the firms

The four-firm ______ measures the percentage share of the total sales in the industry that is accounted for by the largest four firms

concentration ratio

When demand is elastic:

consumers are not very responsive to changes in price.

In a command economy, the ______ either makes most economic decisions itself or at least strongly influences how the decisions are made

government

A perfectly elastic supply curve is

horizontal

Of all the available policies to reduce discrimination by race and gender, the costliest is likely to be

improved educational opportunites

Which of the following industries is the least likely to employ a unionized labor force?

finance, insurance, and real estate

The _____ of an investment is determined by how easy it is to sell an asset at any given time.

liquidity

When is it costly or impossible to exclude someone who hasnt paid to use a particular good from using it, then that good is classified as being

non-excludable

In many cases, it is reasonable to refer to the _______ as the price

opportunity cost

Which of the following will provide an investor with a legally valid claim of partial ownership of a firm?

ownership of a stock

If a perfectly competitive firm is a price taker, then

pressure from competing firms will force acceptance of the prevailing market price

An individual whose income level is just above the poverty line would most likely be classified as being a member of the

near-poor

If a firm's revenues do not cover its average variable costs, then that firm has reached its

shutdown point

A highly innovative firm operating in a competitive market will usually have

sometime before competitors catch up to its innovations

If an industry is perfectly competitive or monopolistically competitive, then the government has relatively little reason for concern about

the extent of competition

If a rise in incomes is the same proportion for both low-income and high-income workers

then poverty will fall and inequality will remain unchanged

According to the law of supply,

there is a direct relationship between price and the quantity supplied

Many states do have ___________, which impose an upper limit on the interest rate that lenders can charge.

usury laws

Firms operating in a market situation that creates ______, sell their product in a market with other firms who produce identical or extremely similar products.

Perfect Competition

As the ______ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.

Technology

Idaho farmers can sell a large quantity of their potato crop as they wish,

provided each is willing to accept the prevailing market price

The imposition of a price ceiling on a market often results in

a shortage

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect....

Andy's demand for beer to increase

The demand curve as perceived by a perfectly competitive firm is:

flat

_______ occur when the marginal gain in output diminishes as each additional unit of input is added.

Diminishing Marginal Returns

Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call

A monopolistic competition

_______ arises when firms act together to reduce output and keep prices high

A cartel

Which of the following would most likely shift the production possibilities curve inward?

A decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

A business __________ occurs when, for practical purposes, one firm purchases another.

Acquisition

___________ involves active efforts to improve the job opportunities or outcomes of minority groups or women

Affirmative action

Which of the following will not result in a leftward shift of the market demand curve for labor?

An increase in wage rate

__________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry

An oligopoly

_________ give government the power to block certain mergers, and in some cases, to break up large firms into smaller ones

Antitrust laws

_______ tells a firm whether it can earn profits given the price in the market

Average cost

Why is there scarcity?

Because our unlimited wants exceed our limited resources

In countries like_______ the command economy predominates

Cuba and North Korea

Which of the following is most unlikely to present a barrier to entry into a market?

Deregulation

The term ______ describes a situation where the quantity of output rises, but the average cost of production falls.

Economies of scale

a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.

Economies of scale

A price cut will increase the total revenue a firm receives if the demand for its product is:

Elastic

The _____ is the quantity where the quantity demanded and the quantity supplied are equal at a certain price.

Equilibrium quantity

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

Goods X and Y are complement goods.

Improvements in the productivity of labor will tend to:

Increase wages

Taxes on goods with ____ demand curves will tend to raise more tax revenue for the government than taxes on goods with ____ demand curves

Inelastic; elastic

Which of the following best describes a monetary policy tool?

Interest rates

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?

International trade

A ________ is an organization of workers that negotiates with employers as a group over wages and working conditions

Labor union

Since Baltimore passed the first ______ in 1994, several dozen cities enacted similar laws in the late 1990's and into the 2000s.

Living wage law

Which of the following is most likely to be a monopoly?

Local electricity distributor

The term ________ is used to describe the additional cost of producing one more unit.

Marginal cost

________ refers to the additional revenue gained from selling one more unit

Marginal revenue

___________ arises where many firms are competing in a market to sell similar but differentiated products

Monopolistic Competition

Many economists believe that the trend toward greater wage inequality across the U.S economy was primarily caused by:

New technologies

Are markets always in equilibrium?

No, but if there is no outside interference, they tend to move toward equilibrium.

A public good is a good that is _________ and _________, and thus is difficult for market producers to sell to individual consumers.

Non-excludable and non-rivalrous

In order for a good to be classified as ________. when one person uses the good, others are also able to use it.

Nonrivalrous

Attending college is a case where the _____________ _______ exceeds the monetary cost.

Opportunity cost

Roughly speaking, the patent law covers ______ and _____ law protects an author's original books.

Original inventive creations; copyright

In contrast to goods and services markets, _______ are rare in labor markets, because rules that prevent people form earning income are not politically popular

Price ceilings

_________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling

Price floors

In circumstances dealing with poverty, the term ______ means taking income from those with higher incomes and providing income to those with lower incomes

Redistribution

Which of the following should typically be ignored because spending has already been made and cannot be changed?

Sunk costs

Tom decides to spend an hour playing basketball rather than studying. His opportunity cost is:

The benefit to his grades from studying for an hour.

Price elasticity of demand is defined as:

The percentage change in quantity demanded divided by the percentage change in price

Which of the following would most likely be identified as being the ultimate goal of public policies that pertain to technology?

To encourage a stream of invention that benefits the whole of society

_________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price

Total revenue

Treasury bonds are issued by the federal government through the

U.S Department of Treasury

But nearly all supply curves share a basic similarity: they slope....

Up from left to right

The general pattern that consumption of the first few units of any good tends to bring a higher level of ____ to a person than consumption of later units is a common pattern.

Utility

If a paper mill shuts down its operations for three months so that it produces nothing, its _____ will be reduced to zero

Variable costs

______ include all of the costs of production that increase with the quantity produced.

Variable costs

In economics, a firm that faces no competitors is referred as

a monopoly

Antipoverty programs that are set up so that the amount of government benefits will decline substantially as poor people earn more income typically create

a poverty trap

A firm that holds a monopoly position in the market place is

a price maker

If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, the result will be:

abnormally high sustained profits

By 2007, US market deregulation has proven to be most toxic to the overall health of the US economy in the ______

banking sector

During the recent U.S. recession, some large automakers required bailouts from the federal government to avoid being forced into bankruptcy by their

bondholders

The nature of demand indicates as the price of a good increases

buyers desire to purchase less of it

Oligopoly firms acting individually may seek to gain profits

by expanding levels of output and cutting prices

Specialization

can lead to an increase in overall production

A financial gain earned by purchasing stock in a publicly traded company and subsequently selling the investment at higher price is commonly referred to as a

capital gain

The form of legal protection intended to prevent reproduction of original works is referred to as _____ law

copyright

If the supply curve for a product is vertical, then the elasticity of supply is

equal to zero

If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to

fall and the equilibrium quantity to stay the same

An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred as a _______

free rider

Which of the following best describes a fiscal policy tool?

government spending

The application of current US antitrust law

includes a wide arrange of anticompetitive practices

Economic profit can be derived from calculating total revenues minus all of the firm's costs

including its opportunity costs

The longer the time period considered, the more the elasticity of supply tends to:

increase

The demand schedule for a good:

indicates the quantities that will be purchased at alternative market prices.

The evidence on the supply curve of financial capital is controversial, but at least in the short run, the elasticity of savings with respect to the interest rate appears to be

inelastic

A situation of _______ arises when one group receives a higher share of total income or wealth than others.

inequality

Venture capitalists typically create wealth by investing in a start up firm when its stock is less valuable, then subsequently selling that stock for a higher price during the firm's

initial public offering

Macroeconomics

is concerned with the expansion and contraction of the overall economy.

Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _____, which involves comparing the benefits and costs of choosing a little more or a little less of a good

marginal analysis

The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to

match price cuts, but not price increases

When reference is made to the _______, it means the specific amount of income needed fro a basic standard of living.

poverty line

The "law of supply" functions in labor markets; that is, a higher _____ for labor leads to a higher quantity of labor supplied

price

In order to be classified as a _______, a firm must be owned by the people who run it on a day-to-day basis.

private company

In the United States, worker membership in labor unions has been

steadily decline for 50 years.

If large numbers of individuals choose to behave as free riders,

the public good may never be provided

The main challenge for antitrust regulators is

to determine when a merger may hinder competition.

In economics, the demand for a good refers to the amount of the good that people

will buy at various prices

If a monopoly or a monopolistic competitor raises their prices, the quantity demanded

will decline