Econ test 1
Which of the following is not an example of a market?
In the United States, a sick person cannot legally purchase a lung
Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?
New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy
Assume Ren buys coffee beans in a competitive market. It follows that
Ren cannot influence the price of coffee beans even if he buys a large quantity of them
Which of the following events would cause a movement upward and to the left along the demand curve for olives?
The price of olives rises
If a person chooses self-sufficiency, then she can only consume what she produces. (True or False)
True
Interdependence among individuals and interdependence among nations are both based on the gains from trade (True or False)
True
It is possible for the U.S. to gain from trade with Germany even if it takes U.S. workers fewer hours to produce every good than it takes German workers. (True or False)
True
The opportunity cost of an item is
What you give up to get that item
The term market failure refers to
a situation in which the market on its own fails to allocate resources efficiently
Productivity is defined as
amount of goods and services produced from each unit of labor input
Currently you purchase ten frozen pizza per month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase frozen pizzas in January. For you, frozen pizzas are
an inferior good
which of the following statements about models is correct
because economic models omit many details, they all us to see what is truly important
If a seller in a competitive market chooses to charge more than the going price, then
buyers will make purchases from other sellers
Making rational decisions at the margin means that people
compare the marginal costs and marginal benefits of each decision
Equilibrium price must decrease when
demand does not change and supply increases
Total output in an economy increases when each person specializes because
each person spends more time producing that product in which he or she has a comparative advantage
The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that
equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources
To improve living standards, policymakers should
formulate policies designed to increase productivity
The basic principles of economics suggest that
government should become involved in markets when those markets fail to produce efficient or fair outcomes
A circular-flow diagram is a model that
helps to explain how the economy is organized
A popular celebrity that is paid highly for her time should probably not mow her own lawn because
her opportunity cost of mowing her lawn is higher than the cost of paying someone to mow it for her
microeconomics is the study of
how individual households and firms make decisions
Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that
in order to consume beyond its PPF, the United States should produce more pork than what it requires and export some of it to Mexico
Trade between countries tends to
increase both competition and specialization
The business cycle is
irregular fluctuations in economic activity
The production possibilities frontier provides an illustration of the principle that
people face trade-offs
As a student, Jordyn spends 40 hours per week writing term papers and completing homework assignments. On one axis of her production possibilities frontier is measured the number of term papers written per week. On the other axis is measured the number of homework assignments completed per week. Jordyn's production possibilities frontier is a straight line if
she can switch between writing term papers and completing homework assignments at a constant rate
Economists make assumptions to
simplify the complex world and make it easier to understand
The production possibilities frontier illustrates
the combinations of output that an economy can produce
When a country has a comparative advantage in producing a certain good,
then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier
Economics is the study of how society mages its
unlimited wants and limited resources
