Econ test 1

markets are best defined as

arrangements where buyers and sellers get togehter to buy and sell

in order to unscramble cause and effect, economists use

ceteris paribus (holding everything else constant)

if a tv commerical that asserts "the last bite tastes just as good as the first" is correct then the marginal utility of the advertised product must be

constant

if the marginal cost of an activity exceeds the marginal benefit, then

the activity should decrease or a different action should be selected

opportunity cost is best defined as

the value of the next best alternative that is given up in making a choice

the stament "unemployment should be kept at or below a level of 6 percent"

a normative statement

the marginal benefit is the

additional gain from one more unit of an activity

opportunity cost is expressed in a ppf by a movement

along the ppf where to gain more of one good it is necessary to give some of another good

Joe likes to sleep late in the mornings and play tennis in the afternoons. The opportunity cost of Joe attending his morning class for one hour is

an hour of sleep given up

an inducement to take a particular action is called

an incentive

economic growth means

an outward shift of the ppf and an expansion of production

production efficiency can be defined as

being able to produce more of one good only if less of another is produced

positive economic statements

can be tested against the facts

the idea of comparative advantage implies that people or countries

can gain from trading; specialize in production of goods; can consume at a point outside their PPF

as the quantity of a good consumed increases, marginal utility (blank) and total utility (blank)

decreases;increases

an index fund

holds all the stocks in a given stock index in an attempt to mimic it

a president of the US promites to produce more defense goods without any decreases in the production of other goods. this is possible only

if the Us is producing at a point inside its PPF

if property rights are not clearly defined and enforced, then

incentives for specialization are weakened; resources are devoted to protection possessions rather than production; potential gains from specialization and trade are lost

if the efficient market hypothesis is correct, then

index funds should typically beat managed funds, and usually do when factoring in the fees

the law of decreasing marginal benefit (utility) indicates that as a person consumes more magazines, that person

is willing to pay less for the next magazine because he values it a little less than the one before

the additional gain from increasing some activity is called the

marginal benefit

the study of the choices made by individuals is part of the definition of

microeconomics

which of the following is not consistent with the efficient market hypothesis

news has no effect on stock prices

economics is best defined as the science of choice and how people cope with

scarcity

scarcity can be eliminated through

scarcity cannot be eliminated

a PPF

shows combinations of two goods or services that are attainable with given resources

if an economy is operating at a point inside the PPF, then

society's resources are being inefficiently utilized

a country possesses a comparative advantage in the production of a good if

the opportunity cost in terms of forgone output of alt. goods is lower for this country than it is for trading partners

in a political marketplace, the consumers are the

voters

resource use is efficient

when marginal benefit equals marginal cost

macroeconomics is concerned with

economy-wide variables

the big tradeoff in economics is the common reference to a tradeoff between

efficiency and equity

scarcity is experienced by

everyone

Fundamental economic problems arise from

our wants exceeding our scarce resources

in the political marketplace, the entrepreneurs are the

politicians

if marginal utility is positive but diminishing, as more units of a good are consumed, then the total utility from the good must be

positive and rising at a decreasing rate

increasing opportunity cost implies that

producing additional units of one good results in increasing amounts of lost output of the other good

according to the efficient markets hypothesis, better than expected news about a corporation will

raise the price of the stock