economics
In general, the term "ceteris paribus" means
. all else equal
Allocative efficiency means that
. every good or service is produced up to the point where marginal benefit is equal to marginal cost.
If country ABC can produce a unit of good 1 by sacrificing fewer units of good 2 by sacrificing fewer units of good 2 than can country XYZ, it is correct to say that country ABC
. has a comparative a comparative advantage in producing good 1
According to the law of demand
. there is an inverse relationship between price and quantity demanded
A perfectly competitive market is a market that meets the conditions of
1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market
According to the law of supply
A and C only as the price of a product increases, firms will supply more of it to the market there is a positive relationship between price and quantity supplied
Which of the following would cause a shift in the demand curve LOADING... from point A to point B?
A decrease in income (inferior good). B. An increase in income (normal good). C. An increase in the price of a substitute good
What is the role of an entrepreneur?
All of the above to take risks B. to bring together the factors of production long dash —labor, capital, and natural resources C. to operate a business that produces a good or service
Which of the following illustrates the law of supply?
An increase in price causes an increase in the quantity supplied, and a decrease in price causes a decrease in the quantity supplied
Consider the market for Hewlett-Packard (HP) printers, depicted in the figure to the right, where the supply of HP printers has increased from Upper S 1 S1 to Upper S 2 S2. What would cause the supply curve for HP printers to shift to the right?
Both a and b positive technological change
In a simple circular-flow model, there are flows of _________ and flows of _________.
Both (a) and (b) are correct
According to the law of demand LOADING... , there is an inverse relationship between price and quantity demanded. That is, the demand curve for goods and services slopes downward. Why?
C. When the price of a good increases, consumers' purchasing power falls, and they cannot buy as much of the good as they did prior to the price change
How do market economies ultimately determine what goods and services are produced, how the goods and services will be produced, and who will receive the goods and services?
Consumers determine what goods and services are produced, firms determine how to produce them, and markets determine who will receive them
According to Adam Smith, which of the following is necessary for the proper functioning of the market system?
For markets to work, people must be free to pursue their self-interest
Suppose Dell Dell is currently selling 3 comma 000 comma 000 3,000,000 computers computers per year. However, managers at Dell Dell are considering whether to increase production by 300 comma 000 300,000 computers computers. One manager explains that after increasing production by this amount, total profit would be $100 million. Given this information, should Dell Dell increase production by 300 comma 000 300,000 computers computers?
Information about the additional revenue earned and the additional cost incurred from producing 300 comma 000 300,000 additional computers computers is required to answer this question
Consider the market for Ping golf clubs. Suppose the price of memberships at local golf courses increases. Use the line drawing tool to show how this affects the demand for Ping golf clubs by drawing a new demand curve. Assume memberships at local golf courses and Ping golf clubs are complements. Properly label this line. Carefully follow the instructions above, and only draw the required objects
Instead, suppose the price of tennis rackets decreases decreases. If tennis rackets and golf clubs are substitutes, then the demand for Ping golf clubs will decrease .
What happens if a country produces a combination of goods that efficiently uses all of the resources available in the economy
The country is operating on its production possibilities frontier.
________ is used to describe how changes in price affect a consumer's purchasing power, and ________ is used to describe how a change in price affects the quantity demanded of a good by making it more or less expensive than substitute goods
The income effect; the substitution effect
Which of the following best describes scarcity?
Unlimited wants exceed the limited resources available
Which of the following events would cause the supply curve to increase increase from Upper S 1 S1 to Upper S 3 S3?
Upper A decrease A decrease in the price of inputs
The three economic questions that every society must answer are
What goods will be produced, how will they be produced, and who will receive the goods?
According to the law of demand LOADING... , there is an inverse relationship between price and quantity demanded. That is, the demand curve for goods and services slopes downward. Why?
When the price of a good increases, consumers' purchasing power decreases, and they cannot buy as much of the good as they did prior to the price change.
A production possibilities frontier (PPF) is
a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology
An unexpected frost in the orange groves of California would cause
a decrease in the supply of orange juice, increasing the equilibrium price
Price (dollars per player) Quantity (millions of players per month) $300 30 250 35 200 40 150 45 100 50 The diagram in panel a a is an example of
a demand schedule
Productive efficiency means that
a good or service is produced at the lowest possible cost.
Suppose the economy whose PPF is shown on the right experiences economic growth. 1.) Use the 3-point curved line drawing tool to show how growth affects the trade-offs the country faces between producing ships and food. 2.) Use the point drawing tool to draw and label a point on the new PPF that shows the economy producing more of both goods. Label this point 'B'. Carefully follow the instructions above and only draw the required objects.
a larger labor force advanced technology an increase in the capitol stock
A good for which demand increases as income rises is ________, and a good for which demand increases as income falls is ________.
a normal good; an inferior good
Price (dollars per player) Quantity (millions of players per month) $300 50 250 45 200 40 150 35 100 30 The diagram in panel a a is an example of
a supply schedule
If a surplus exists in a market, we know that the actual price is
above the equilibrium price, and the quantity supplied is greater than the quantity demanded.
The primary difference between absolute and comparative advantage is
absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost
What is the actual cost and also the opportunity cost of distributing the tickets this way?
all of the above
Which of the following events would create economic growth, that is, shift the production possibilities frontier outward
all the above An increase in the available labor. B. An increase in the available natural resources. C. An increase in technology that affects the production of both goods
If a market system functions well, which of the following is necessary for the enforcement of contracts and property rights?
an independent court system
Suppose the United States and Mexico both produce hamburgers and tacos. The combinations of the two goods that each country can produce in one day are presented in the table below. United States Mexico Hamburgers (in tons) Tacos (in tons) Hamburgers (in tons) Tacos (in tons) 0 162 162 0 90 90 60 60 108 108 6 6 60 60 120 120 54 54 12 12 30 30 180 180 0 18 18 0 Which country has an absolute advantage in producing tacos? The United States . Which country has a comparative advantage in producing tacos? Mexico . Suppose the United States is currently producing 120 120 tons of hamburgers and 54 54 tons of tacos and Mexico is currently producing 12 12 tons of hamburgers and 30 30 tons of tacos. If the United States and Mexico each specialize in producing only one good (the good for which each has a comparative advantage), then a total of 48 48 additional ton(s) of hamburgers can be produced for the two countries combined (enter a numeric response using an integer) and a total of 6 6 additional ton(s) of tacos can be produced.
answers
From the PPFs shown above it can be determined that the opportunity cost of oil is higher higher in country B . Given the comparative opportunity costs as revealed by the PPFs shown above, the comparative advantage for country Upper A A lies in oil . After these two countries specialize and trade with each other, country Upper B B will be importing oil . Question is complete. Tap on the red indicators to see incorrect answers.
answers within
Two key groups participate in markets. A household consists of all the individuals in a home. Firms are suppliers of goods and services. We can use a simple economic model called the circular-flow diagram to see how participants in markets are linked
answers within
If a shortage exists in a market, we know that the actual price is
below the equilibrium price, and the quantity demanded is greater than the quantity supplied.
Suppose that your local police department recovers 100 tickets to a big NASCAR race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 A.M. Monday morning at City Hall. Suppose that your college decides to give away 1,000 tickets to the football game against your school's biggest rival. The athletic department elects to distribute the tickets by giving them away to the first 1,000 students who show up at the department's office at 10 a.m. the following Monday. a. The groups of people that are most likely to get the tickets will be those for whom the expected marginal benefits of going to the department's office on Monday morning are greater than the expected marginal costs .
benifits and cost
Relative to a market economy, a centrally-planned economy would be expected to be
better at neither productive efficiency nor allocative efficiency because the absence of market-imposed competition negates the need of firms to satisfy consumer wants or produce using the lowest-cost methods
Which of the following are examples of intellectual property?
books and films software all non natural
What goods and services will be produced, how the goods and services will be produced, and who will receive the goods and services are determined:
both a and b in centrally planned economies by the government in market economies by the decisions of households and firms interacting in markets
The production possibilities frontiers depicted in the diagram to the right illustrate
both the labor force and capital stock increasing
A market is a group of buyers and sellers 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 centrally planned economy in which the government decides how economic resources will be allocated. Or a society can have a market economy in which the decisions of households and firms interacting in markets allocate economic resources
centerally planned market
Economists refer to the necessity of holding all variables other than price constant in constructing a demand curve as the
ceteris paribus condition
On the diagram to the right, a movement from Upper A to Upper B A to B represents a
change in quanitity demanded
On the diagram to the right, a movement from Upper A to Upper B A to B represents a two lines
change in quanity supplied
The basis for trade is advantage
comparative
Trade-offs force society to answer questions such as what goods and services will be produced, how will the goods and services be produced, and who will receive the goods and services produced. Which of the following countries has an economy where the government makes the government makes these decisions?
cuba
After World War II in 1945, the United States experienced a "baby boom" as birthrates rose and remained high through the early 1960s. In 2011, the first members of the baby boom generation became older than 65. What effect will this have on the market for medicine medicine? As the first baby boomers become older than 65, the
demand curve for medicine medicine will shift to the right
Tom's lawn service specializes in mowing lawns and trimming bushes. Tom has 4 hours to devote to lawn services. In 1 hour, he can mow 5 5 lawns or trim 10 10 bushes. Use the line drawing tool to graph Tom's production possibilities frontier given he has 4 hours to devote to lawn services. Properly label this line. Carefully follow the instructions above, and only draw the required objects. Tom's opportunity cost of mowing lawns in terms of trimming bushes is 2.00 2.00 trimmed bushes per mowed lawn. (Enter your response rounded to two decimal places.)
diagnol line
Suppose, in an effort to prevent the population from declining, Italy begins offering new mothers extended periods of paid family leave from work and, consequently, the birthrate per woman increases. If so, then this could best be characterized as an example of people responding to
economic incentives
is the study of the choices people make to attain their goals, given their scarce resources
economics
A(n) entrepreneur is someone who operates a business, bringing together the factors of production long dash —labor, capital, and natural resources long dash —to produce goods and services.
entrepreneur
Scarcity is central to the study of economics because it implies that
every choice involves an opportunity cost
What do economists mean by the word "marginal"?
extra or additional
In economic terminology, the inputs used to make goods and services make goods and services are referred to as
factors of production
In a competitive market, firms can dictate what the equilibrium price of a good or a service will be
false
A free market is a market with ________ government restrictions on how a good or service can be produced or sold and with ________ government restrictions on how a factor of production can be employed
few few
In economics, the term capital refers to
goods goods used to produce other goods
Centrally planned economies allocate resources based on decisions by government , while market economies answer these questions through decisions made by households and firms .
government and household and firms
If a country has a comparative advantage in the production of a good, then that country
has a lower opportunity cost in the production of that good
Suppose an increasing number of school districts across the country find themselves with too few teachers at a time of rising enrollments and calls for improved outcomes in terms of student performance. A market-based remedy for this emerging mismatch between the availability of teachers and school districts' needs would likely emphasize
higher compensation to elicit both a larger quantity of teacher services and a greater reliance by districts on non-traditional instruction methods
Consider the market for chicken, illustrated in the figure to the right. The market is initially in equilibrium at a price of Upper P 1 P1 and at a quantity of Upper Q 1 Q1. Suppose the supply curve shifts to the right from Upper S 1 S1 to Upper S 2 S2 and the demand curve shifts to the right from Upper D 1 D1 to Upper D 2 D2. Note that in the figure the shift in demand is larger than the shift in supply. As a result of these changes, the new equilibrium price will be higher , and the new equilibrium quantity will be higher .
higher higher
Which of the following are the two key groups of participants in the circular flow of income?
households and firms
Scarcity implies that every society and every individual face trade-offs because scarcity means that
human wants are greater than what available resources can produce
In the circular-flow diagram showing how a market system works,
income flows to firms firms through product markets product markets.
What is the outcome of enforcing contracts and property rights in a market system?
increased economic activity
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.
Efficiency means that goods are distributed in a way that maximizes benefits to society , while equity means that goods are distributed in a way that is fair .
maximized benefits to society and is fair
Productive efficiency occurs when a good or service (such as the distribution of tickets) is produced at the lowest possible cost. Is this an efficient way to distribute the tickets?
no
this is
not an equitable way to distribute the tickets because some students who really want them may be unable to go and get them
In the diagram to the right, when supply decreases decreases, a shortage develops at the original price. Equilibrium price will rise and equilibrium quantity will fall as a new equilibrium is established.
one decrease two increase lines
The government seeks to protect intellectual property rights by granting
patents copyrights
When economists develop models designed to explain the choices people make, they generally assume that
people are rational.
According to Adam Smith, which of the following is the instrument the invisible hand uses to direct economic activity?
prices
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
Absolute advantage is the ability of an individual, a firm, or a country to
produce more of a good or service than competitors using the same amount of resources
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 production long dash —labor, capital, natural resources, and entrepreneurial ability
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
The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the __________ the payoff to devoting additional resources to that activity
smaller
The people of a previously quiet and peaceful country have come to recognize the need to expand and improve their security forces after a wave of terroristic threats and acts. Considering their resource limitations, the extent to which security is enhanced will most likely be determined
society's willingness to forego other goods and services, both public and private
The distinction between substitutes and complements is
substitute goods are used for the same purposes while complementary goods are used together
Goods and services that can be used for the same purpose are ________, and goods and services that are used together are ________.
substitutes; complements
The production possibilities frontiers depicted in the diagram to the right illustrate
technological advances in the tank industry
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
Economists believe that an activity should be continued up to the point where
the marginal benefit from the activity is equal to the marginal cost
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
Property rights are
the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it
A number of political leaders have expressed concern about the nation's decline as a major steel producer. Many have advocated policies to restrict imports and promote domestic production
the substitution of domestic steel for foreign steel absorbs resources that would otherwise produce goods of greater value
Economists assume that people are rational in the sense that
they use all available information as they take actions intended to achieve their goals.
In the diagram to the right, when demand increases increases, a shortage develops at the original price. Equilibrium price will rise and equilibrium quantity will rise as a new equilibrium is established
two decrease one increase line
In the diagram to the right, point Upper G G indicates an diagnol line down with points FCG
unattainable result
Economics assumes people and firms
use all available information to achieve their goals use all available information to achieve their goals, respond to incentives, and make decisions by comparing marginal benefits with marginal costs
The distinction between a normal and an inferior good is
when income increases, demand for a normal good increases while demand for an inferior good falls.
A free market exists
when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed
Consider the following statement: "An increase in supply decreases the equilibrium price. The decrease in price increases demand." The statement is
false: decreases in price affect the quantity demanded, not demand
