Econ 201
The fact that people with higher incomes get to consume more goods and services addresses the _______ question
"for whom"
When China builds a dam using few machines and a great deal of labor, it is answering the ________ question
"how"
When consumers decide to purchase mroe electric cars and fewer gas guzzlers, they are most directly answering the ____ question
"what"
During the summer you have made eh decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. The opportunity cost of attending summer school is
$10,300 (you just add them all together)
A change in which of the following alters buying plans for cars but does NOT shift the demand curve for cars?
A 20% increase in the price of a car
Coffee and sugar are complements. If the supply curve of coffee shifts leftward because of poor weather (i.e. price rises), then there will be
A decrease in the demand for sugar and a decrease in the price of sugar
If, as people's incomes increase, the demand for a good increases, the good is called
A normal good
If the quantity demanded exceeds the quantity supplied, then there is
A shortage and the price is below the equilibrium
A positive statement is
About what is
The principle of the law of increasing marginal (or opportunity) cost implies that the
Additional cost of producing one more of a good or service increases as more is produced
The term ceteris paribus means
All other things remaining equal
Economists believe that
All resources are scarce All human activity has an opportunity cost consumer wants are unlimited
Opportunity cost is defined as
All the highest-valued alternative given up
Which of the following always raises the equilibrium price?
An increase in demand combined with a decrease in supply
A shift rightward of the production possibilities frontier (curve) can be caused by
An increase in human capital (education)
Which of the following will shift the production possibilities rightward?
An increase in technology An increase in the capital stock Increase in labor and other natural resources
Keynesian economists believe the economy is analogous to
An old Idaho pickup
A bowed outward production possibilities frontier occurs when
As more of a good is produced, producing additional units of it require greater reductions in the other good
We measure the marginal _______ of a good by what a ______ for another unit of the good
Benefit; person willing to pay
As an economic concept, scarcity applies to
Both money and time
In economics, the term "capital" refers to
Buildings and equipment
An expansion of the production possibilities frontier is
Called economic growth
The economic school of thought that emphasizes the role of government failure in today's economic problems is called the _____ school.
Classical
According to your instructor (class discussion), the "bounce" theory of economics is supported by:
Classical economists and many Republicans
When an economist refers to choices made "at the margin" the economist is referring to
Decisions based on the marginal benefits and marginal costs of small changes in a particular activity
If both the demand and supply decrease, the equilibrium quantity
Decreases and the effect on the equilibrium price is indeterminate
Assume that beef and pork are substitutes for consumers. There is a drought in the cattle grazing areas raising the price of beer to consumers. The drought will shift the
Demand curve for pork rightward
The political party that emphasizes the role of market failure in today's economic problems is called
Democratic
The majority of economists in the US support which of following?
Dropping most, if not all trade barriers Greater immigration to the US Reducing or eliminating most agricultural subsides
Microeconomics focuses on all of the following EXCEPT the
Effect on inflation of increasing the money supply
A system of property rights
Encourages economic growth by creating incentives to invest in capital and to be innovative
The US economy is currently on the __________ phase of the economy
Expansion
If a technological advance takes place in the computer industry, then the equilibrium price of a computer will _______ and the quantity demanded will _____.
Fall; increase
Consumer surplus is defined as supply price minus demand price
False
Consumer surplus is the value of a good minus the cost of producing it, summed over the quantity bought
False
If demand and supply increase at the same time; we know that price falls and equilibrium quantity is indeterminate
False
If the price of gasoline rises; the demand for SUVs falls (a complement good), lowering the price of SUVs and decreasing their quantity demanded
False
T/F: In economics, many resources have no scarcity value....that is they are available to everyone free of charge
False
The inability of the government and government agencies to efficiently allocate resources is called:
Government failure
The type of uncertainty that classical economists and conservatives believe is slowing the recovery from the current recession is:
Government uncertainty
One economist says that raising taxes on gas would be in the social interest. What does this economist mean?
Higher taxes on taxes on gas would benefit society as a whole.
Which of the following is a macroeconomic issue?
How federal government budget deficits affect interest rates
If macaroni and cheese is an inferior good, a decrease in income will
Increase the demand for macaroni and cheese
An increase in the number of fast-food restaurants (suppliers)
Increase the supply of fast-good meals lowering price and increasing quantity demanded.
The principle of decreasing marginal benefit means that as the quantity of a good consumed
Increases, its marginal benefit decreases
The "law of demand" states that, other things remaining the same, the quantity demanded of any good is
Inversely related to its price
Paul Krugman is considered to be a ______ economist
Keynesian
The economic school of thought that emphasizes the role of market failure in today's economic problems is called the ______ school.
Keynesian
What are the four categories into which factors of production are grouped?
Land, labor, capital and entrepreneurship
Which of the following explains why demand curves slope downward?
Law of diminishing marginal utility
Scarcity arises from
Limited resources and unlimited wants
A decrease in demand combined with no change in supply
Lowers the equilibrium price
The branch of economics that deals with the analysis of the whole economy is called
Macroeconomics
Classical economists believe the business cycle is _____ by government intervention from macroeconomic stabilization policies
Made more unstable
Scarcity requires that people must
Make choices
The optimum level of production/consumption occurs where:
Marginal benefit = marginal cost
AS a person consumes more and more of a good, the
Marginal benefit decreases
The inability of the free market and capitalism to efficiently allocate resources is called
Market failure
Factors of production include all of the following EXCEPT
Money
In the US economy, which of the following statements is true?
More services are produced than goods
If a country must decrease current consumption to increase the amount of capital goods it produces today, then it
Must be producing along the production possibilities frontier today and will see a shift outward of the frontier in the future if produces more capital goods
Pure public goods are:
Non-rival, non-divisible, and non-excludable
"The rich should pay higher income tax rates that the poor" is an example of a
Normative statement
The marginal benefit from a good is the maximum amount a person is willing to pay for
One or more unit of good
The loss of the highest-valued alternative defines the concept of
Opportunity cost
In March 2002, a factory used new technology to produce its output. Then in August 2002, a fire destroys half the factory. The new technology shifted the factory's PPF _______ and the fire shifted it _______.
Outward; inward
Positive and normative statments differ in that
Positive statements can be tested, whereas normative statements cannot
The _______ describes the mistake of reasong that even A causes event B just because event A occurs prior to event B.
Post hoc fallacy
Most economists believe that
Prices are the best way to ration goods and services
Production efficiency is achieved when
Producing one more unit of one good cannot occur without producing less of some other good
The production possibilities frontier
Represents (the production of) all possible combinations of any two goods or services that are technically (productively) efficient.
The principle of increasing opportunity cost occurs because
Resources are not equally suited to all activities
When the demand for a good increases, its equilibrium price _____________ and quantity supplied _________.
Rises; increases
Economic growth can be pictured in a production possibilities frontier diagram by
Shifting the production possibilities frontier outward
When the price is less than the equilibrium price
Some consumers will be willing to pay a price higher than the prevailing price. There will be a shortage. The price will be forced higher. (All of the above)
On the issue of agriculture price supports and subsidies, economists (on average):
Strongly oppose
On the issue of free trade, economists (on average):
Strongly support
On the issue of immigration, economists (on average):
Strongly support
When the competitive market is using its resources efficiently, the
Sum of the total amount of consumer surplus plus the total amount of producer surplus is maximized
You observe that the price of a good rises and the quantity decreases. These observations can be the result of the
Supply curve shifting leftward.
Marginal cost is the cost
That arises from an increase in an activity
Marginal cost is the opportunity cost
That arises from producing one more unit of a good or service
The quantity supplied of a good is
The amount that the producers are planning to sell at a particular price during a given time period
Which of the following causes the production possibilities frontier to have a bowed out, curvilinear shape?
The assumption that resources are specialized and not perfect substitutes for one another
The classical school supports which function of government?
The first function of government (i.e. providing competition and a system of laws, courts and justice)
Each point on a supply curve represents
The lowest price for which a supplier can profitability sell another unit
The benefit that arises from an increase in activity is called
The marginal benefit
The birth of economists as an intellectual discipline can de dated fairly precisely in the eighteenth century with
The publication of the book "The Wealth of Nations"
Human capital is
The skill and knowledge of workers
Which of the following best defines the subject of economics?
The study of choices that businesses make to maximize profit
A change in which of the following shifts the demand curve?
The tastes and preferences of consumers
The quantity of IPODS that consumers (buyers) plan to buy this month depends on all of the following except the
The technology firms use to produce and IPOD
If Smack Raman is an inferior good, a decrease in consumer incomes will decrease demand, lower price, and decrease quantity supplied (ceteris paribus).
True
If demand rises, quantity supplied rises. If supply increases, quantity demand increases
True
Opportunity cost can be measured by the slope of the PPC curve (frontier)
True
Productive or technical efficiency occurs anywhere on the production possibilities curve
True
T/F: A straight line production possibilities curve has constant opportunity cost (constant cost technology)
True
T/F: According to Adam Smith, individuals acting in their own self-interest in the market place are also unintentionally acting in the social interest
True
T/F: Allocative efficiency occurs ar a specific point (i.e. a specific mix of production) on the production possibilities curve (frontier) that is valued above all alternatives
True
T/F: Because wants and desires are unlimited; in a well functioning economy there cannot be any substantial long-term involuntary unemployment (regardless of future productivity and technological increases)
True
T/F: Free market economists (classical) are more likely to be allied with Republican tha are Keynesian economists who are more likely to be allied with the Democrats.
True
T/F: Many economists believe that occupational licenses are designed more to rise salaries in tose professions than protect the consumers
True
T/F: Marginal cost (or supply price) is the minimum price that producers must receive to induce them to produce another unit of a good or service
True
T/F: Most economists believe that "exporting jobs" in the process of globalization is good for the US and world economy
True
T/F: Most economists favor less restrictive immigration policies in teh US
True
T/F: The best definition of a capital good is "foregone consumption"
True
T/F: The current price of gasoline is modest in real inflation adjusted terms by historical standards
True
T/F: The iron law of price is that it must rise before it can fall when a shortage occurs
True
T/F: The more we have of a good or service, the smaller is its marginal benefit and teh less we are willing to pay for an additional unit of it.
True
T/F: The producer surplus on a unit of output is the difference between the market price and the opportunity cost of producing it (supply price).
True
The BEST definition of a capital good is "forgone consumption"
True
In a market economy, what people do in the pursuit of their self-interest
Usually forwards the social interest
All economic questions arise becuase
We want more than we can get
The fallacy of composition is the false belief that
What is true for each part is also true for the whole part
Resource use is allocatively efficient
When marginal benefit equals marginal cost
If the US can increase its production of automobiles without decreasing its production of any other good, the US must have been producing at a point
Within its PPF
Suppose that for the past two months, you have studied economics one hour a day. You now decide to study economics two hours a day. For the past two months, ________.
Your marginal benefit from studying economics an hour must have been greater than its marginal cost