Economics 202 exam 1 UKY Dellachiesa

A market is a group of_______of a good or service and the institution or arrangement by which they come together to trade.

buyers and sellers

Societies organize their economies in two main ways to answer the three questions of​ what, how, and who. A society can have a_____ economy in which the government decides how economic resources will be allocated. Or a society can have a_____economy in which the decisions of households and firms interacting in markets allocate economic resources.

centrally planned, market

The basis for trade is____advantage

comparative

An _______is someone who operates a​ business, bringing together the factors of productionlong dash—​labor, ​capital, and natural resourceslong dash—to produce goods and services.

entrepreneur

In the United​ States, who receives the goods and services produced depends largely on_______

how income is distributed

International trade has always played a role in the U.S. economy. Is this role increasing or decreasing​ (in terms of exports and​ imports)? International trade is

increasing because government policies facilitate trade increasing because communication is less expensive

On the diagram to the​ right, movement along the curve from points A to B to C illustrates

increasing marginal opportunity costs.

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

marginal benefit equals marginal cost

A_____economy is an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.

mixed

Any model is based on making assumptions because

models have to be simplified to be useful and we cannot analyze an economic issue unless we reduce its complexity

The Scottish philosopher Adam Smith argued in 1776 that

prices would do a better job of coordinating the activities of buyers and sellers than guilds could.

The primary difference between product markets and factor markets is that

product markets are markets for​ goods, while factor markets are markets for factors of productionlong dash—​labor, ​capital, natural​ resources, and entrepreneurial ability.

If the government wants to protect import competing industries and its workers from foreign​ competition, it can impose a tax on imports called a_____

tariff

The production possibilities frontiers depicted in the diagram to the right illustrate

technological advances in the tank industry.

From the tables above it is clear that​ _____ has an absolute advantage in the production of both goods and that​ _____ has a comparative advantage in cell​ phones, while​ _____ has a comparative advantage in digital music players.

the United States​,the United States​,Japan

In a free​ market, the actions people take are largely determined by

the motivation of financial reward

When the federal government crafts environmental policies that make it less expensive for firms to follow green​ initiatives,

the policies are consistent with economic incentives.

Macroeconomics is

the study of the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Explain whether you agree or disagree with the following​ statement: ​Sometimes, however, governments use these requirements to shield domestic firms from foreign competition.

yes, sometimes governments impose stricter health and safety requirements on imported goods than on goods produced by domestic firms.

Economists often are interested in percentage change from one period to the next. The percentage rate of change of gross domestic product​ (GDP) is an important macroeconomic variable. If in 2010 GDP was​ $11,150 billion​ dollars, and GDP increased to ​$11,4121 billion in​ 2011, what is the growth rate of the U.S. economy in​ 2011?

(($ 2011-$ 2010)/$ 2010)x100

Find percentage change

((new-old)/old)x100

Gain by US Sugar Producers

A

As illustrated in the diagram to the​ right, when a nation moves from autarky to free​ trade, economic surplus increases by the areas represented by

C and D

Among the main sources of comparative advantage are the​ following:

Climate and natural resources, relative abundance of labor and capital, technology, external economies

Domestic sugar producers and their workers

G

Consumers

L

The World Trade Organization​ (WTO)

generally aids in negotiating trade agreements that include not only goods but also services and intellectual property. is an international organization that oversees international trade agreements. replaced the General Agreement on Tariffs and Trade​ (GATT) in January 1995.

Microeconomics is the study of

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

In the​ circular-flow diagram showing how a market system​ works,

income flows to firms through product markets.

Dumping

is selling a product for a price below its cost of production.

Comparative advantage

is the ability of an​ individual, a​ firm, or a country to produce a good or service at a lower opportunity cost than competitors.

Economics

is the study of the choices people make to attain their​ goals, given their scarce resources.

The United States is _____ in the world. International trade remains_______ to the United States than it is to most other countries.

one of the largest exporters, less important

Equity is

the fair distribution of economic benefits.

Opportunity cost is

the highest valued alternative that must be give up to engage in an activity.

Economics is a social science because

-it applies the scientific method to the study of the interactions among individuals. -it is based on studying the actions of individuals. -it considers human behaviorlong dash—particularly ​decision-making behavior.

In your economics​ class, you scored a 66 on the first​ quiz, a 82 on the second​ quiz, and an 80 on the third quiz. Your average quiz grade is

76, yes

A hypothesis in an economic model is

A statement that may be either correct or incorrect about an economic variable. An economic hypothesis is usually about a casual relationship.

Loss of Consumer Surplus

A+B+C+D

Which of the following describes the extent of international trade in the U.S.​ economy?

About 20 percent of U.S. manufacturing jobs depend directly or indirectly on exports About 66 percent of U.S. manufacturing industries depend on exports for at least 10 percent of jobsAbout 66 percent of U.S. manufacturing industries depend on exports for at least 10 percent of jobs.

Which of the following is not a​ non-tariff barrier to​ trade?

Ad valorem tax on imports

Gain to Foreign Sugar Producers

B

The concept of comparative advantage better explains

Bolt's performance because he specialized in an event and had the fastest time.

The production possibilities frontiers depicted in the diagram to the right illustrate

Both the labor force and capital stock increasing.

The diagram on the right represents a tariff imposed on an individual market. The total deadweight loss​ (loss in economic​ surplus) from this tariff is illustrated by areas

C and D

Deadweight Loss

C+D

______decide(s) what goods and services will be produced.

Consumers, firms, and government

Industries that use sugar and their workers

L

The U.S. economy

L

Which of the following covers the study of topics such as inflation or​ unemployment?

Macroeconomics

Firms choose how to produce the goods and services they sell. In many​ cases, firms face a​ trade-off between using more workers or using more machines. For​ example,

Many times in the past several decades, firms may have chosen betweeen a producion method in the US that uses fewer workers and more machines and a production method china that uses more workers and fewer machines

_____is concerned with what is​, and_____is concerned with what ought to be. Economics is about_____,which measures the costs and benefits of different courses of action.

Neutral analysis, normative analysis, positive analysis

When we graph the relationship between two​ variables, we often want to draw conclusions about whether changes in one variable are causing changes in the other variable. Doing​ so, however, can lead to incorrect conclusions. Reasons for drawing incorrect conclusions about cause and effect include

Omitted variable and reverse causality

_____occurs when a good or service is produced at the lowest possible cost._____occurs when production is in accordance with consumer preferences.

Productive Efficiency, Allocative Efficiency

Another restriction with a similar outcome would be to impose a limit on the amount of a specific good that can be imported. This restriction is called a _____

Quota

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls

Scarcity

One of the great benefits of trade is

That it makes it possible for society to become better off by increasing both its production and its consumption.

Property rights are

The rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it.

Although international trade leads to substantial net​ benefits, not everyone gains from international trade. Which of the following groups is most likely to lose from​ trade?

The workers and companies in the industries that compete with the imports

Based on their performance at the 2012 Olympic​ Games, who was the better​ athlete?

This cannot be determined because this is a normative question.

​Trade-offs force society to make​ choices, particularly when answering the following three fundamental​ questions:

What goods and services will be produced How will the goods and services be produced Who will recieve the goods and services produced

Microsoft charges a price of​ $599 for a copy of Windows 7. Is this pricing decision​ rational?

When we assume the managers at Microsoft have used all available information and weighed all known benefits and costs, we are assuming rationality.