Econ Midterm 1

The current rate of unemployment of 5 percent is too high. This is a ___ statement

normative

The efficiency condition requires:

prices in the marketplace confront decision makers with the marginal benefits and marginal costs of their decisions.

When we are forced to make choices we are facing the concept of

scarcity

Economics is a

social science concerned chiefly with how people choose among alternatives

Factors of production are

the resources the economy has available to produce goods and services.

Any point inside of production possibilities curve indicates

unemployment and/or inefficiency

The scientific method is more difficult for economist then, say, chemists because

All of the above

When we judge the performance of the economy we must consider

All of the above

If countries do not engage in international trade:

All the above are true -They give up the ability to specialize in production, worldwide levels of production are lower & the world will be operating inside its production possibilities curve.

Exhibit: the demand for Macintosh computers The seller's total revenue at point S equals the

Area OPSM

Which of the following most correctly states the law of demand

As the price falls, all other things unchanged, the quantity demanded will increase

The price elasticity of demand for milk has been estimated to be somewhere between -0.49 and -0.63. If a new system of feeding and milking cows you would add a 15% increase in the production of milk throughout the country, how will that affect total expenditures on milk, all other things unchanged

Total expenditures will fall

The cost of the great depression between 1929 in 1942 was a loss of

More than the United States ultimately spent on World War II

If the production possibilities curve were straight line sloping down from left to right this with suggest that

No factor of production has any particular comparative advantage over other resources

Most economists' disagreements are a result of

Normative considerations

When making a choice to do more of one activity, the highest valued other choice society does not make is called _____, and it is measured _____.

Opportunity cost; by the slope of the production possibilities curve at that level

Exhibit: the demand for Macintosh computers The change in the firm's total revenue resulting from a change in price from P to T suggests that demand is

Price elastic

If a good that involves external cost is priced to take these costs into account, then its

Price would raise and output would fall

The law of increasing opportunity cost is associated with the slope of the

Production possibilities curve

The difference between a firm's total revenue and it's total economic cost is

Profit

If the price of a commodity increases, all and other things unchanged, you would expect the

Quantity demanded to decrease

A supermarket initially exhibits a shortage. Assuming that both prices and quantities are flexible, which of the following will be true after the market adjusts to equilibrium

Quantity supplied is more

Exhibit: the market for chocolate covered peanuts If the price of chocolate covered peanuts is $.60 the price will

Remain unchanged

If steak and potatoes are complements, when the price of state goes up, the demand curve for potatoes

Shifts to the left

According to the textbook, economics is a

Social science

Two friends one in engineer and the other an accountant decide to form a partnership. If the accountant takes care of the books and the engineer runs the factory, they are likely to enhance the economies productivity through

Specialization of labor

Property rights are defined as a set of rules that

Specify the ways in which an owner can use a resource

An example of a supply shifter is

Technology

Exhibit: Strawberries and Submarines Suppose the economy is now operating a point C. Achieving production at point F would require

That the economy improve its technology or increase the quantities of factors of production that it has

An important determinant of the price elasticity of demand is the

Time period

Exhibit: the market for chocolate covered peanuts Is the price of chocolate covered peanuts is $.80, there is

A surplus of 140 bags per month

The relationship between the price of a good and the quantity people are willing and able to purchase is

Demand

Exhibit: demand and supply curves The highest price per unit that buyers will be willing to pay for 250 units is

$10

Exhibit: demand and supply of gasoline The initial price and quantity (At intersection of S1 and D) in equilibrium are

$2.50 and 300 gallons

Exhibit: demand and supply schedules for a good The equilibrium price is _____ and the equilibrium quantity is ______

$3.00 ; 240 units

Exhibit: demand for shirts The price elasticity of demand for the segments FG is

0.09

Exhibit: demand and price elasticity 2 The price elasticity of demand between points B and A is

1, Since total revenue is zero at the price of $8 and $12 at the price of $6

Exhibit: Production Possibilities Schedule 1) If the economy produces 10 units of capital goods per period, it also can produce at most _______ unit(s) of consumer goods per period.

4

The primary difference between a change in demand and a change in the quantity demanded is

A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.

And example of capital is

A factory building

An industry with external cost produces

A larger quantity of output then the socially ideal quantity

The difference between iron or deposit and the steel produced from these deposits that is later used to make factory equipment illustrate the difference between

A natural resource and capital

In our society a good for which exclusion is not possible is

Military defense

A good for which no exclusive property rights exist is a

Common property resource

An increase in the price of football tickets because the _____ for (of) basketball tickets (a substitute) to ______.

Demand; increase

If a cold powered electrical generator discharges smoke into the air and causes uncompensated cost and discomfort to the residents of a town this situation is an example of an

External cost

The incorrect presumption that because two events tend to occur together, one must cost the other is the

Fallacy of false cause

Economy is said to have a comparative advantage in producing a particular good if it

Has the lowest cost for producing that good

An answer to the question "how are goods produced?" Determines

How resources are combined in the production of goods

An allocation of resources that does not achieve the maximum net benefit from one or more activities is

Inefficient

Although water is very abundant in most places, it is scarce because:

It has two or more alternative uses.

The problem of determining how goods and services should be produced is a problem of deciding

The best combinations of resources to be used for producing goods and services

The answer to "what goods are to be produced?" deals with

The kinds and quantities of goods and services produced

Based on the type of analysis described in the case in point on preventing oil spills and economist might reasonably argue that too few people die in airplane crashes if

The marginal benefit of preventing airplane crashes with less than the marginal cost of preventing them

Whenever MB equals MC the decision maker should do ________ of the activity

The same amount

The price elasticity of demand for ground beef has been estimated to be negative one. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on Hamburger, all of her things and changed.

Total expenditures will remain unchanged

A product that has good substitutes is likely to have a higher price elasticity of demand then one that does not

True

If people purchase less of a good when they have an increase in income, the good in question is an inferior good.

True

Which would not cause the supply curve to shift

a change in the price of the good

An increase in supply is caused by

a decrease in the price of a good using the same resources.

An example of a normative statement is

a high rate of economic growth is good for the county

Ceteris Paribus means

all other things unchanged

The demand curve for on demand videos has shifted to the right what could have caused it

an increase in the income of buyers

A shift to the left of a supply curve is caused by

an increase in the returns from other supply possibilities.

It is true that the equilibrium quantity will always go up if supply

and demand both increase

A public good is a good or service for which exclusion

cannot be applied and for which marginal cost of an additional user is zero.

The three broad types of factors of production are

capital, labor, and natural resources

Which of the following is a public good

clean air

A decrease in demand with no change in supply, will lead to ______ in equilibrium quantity and _____ in equilibrium price

decrease; decrease

The law of demand is illustrated by a demand curve that is

downward sloping

The best example of making a choice at margin is

drinking another cup of coffee

Many disagreements among economists result because:

economists sometimes make normative judgments

Which of the following is an example of capital

gravel truck

Income elasticity of demand measures

how the demand for a good changes in response to changes in income.