Micro CH 1-4 True/False Diffine

Sole proprietorship produces more goods nd services than does any other form of business organization.

False

To serve the public interest, government promotes competition by breaking up natural monopolies.

False, Does not break up monopolies.

When the entire production possibilities curve shifts inward, the economy is growing.

False, Inward shift shows a declining economy.

The opportunity cost of a choice is defined as the value of all the alternative choices.

False, It is the value of the best alternative choice.

Microeconomics is a study of aggregates in the economy

False, Macroeconomics

The determinates of supply are closely related to the determinants of demand.

False, they are not

A free good is one that possesses a utility but has no price

True

Economic decisions are allocation decisions

True

Household production still exists because it often requires fewer specialized resources than market production does.

True

Personal income in the U.S. is primarily determined by selling labor services.

True

The law of supply states that as the price of a good increases, producers will offer more of it for sale.

True

Under a system of free enterprise it is assumed that prices will result in the production of goods that are most needed for the promotion of the general well-being of the people.

True

When a demand curve has been plotted and drawn, it usually slopes downward to the right.

True

Consumer demand indirectly determines incomes to the various factors of production.

True.

If suppliers expect an increase in price, they will reduce the current supply of a good.

True (to make more of it later)

Under competitive conditions, price is established at that point where demand and supply are in equilibrium.

True in the marketplace

A major disadvantage of the corporate form of business is limited liability

False

The personal income tax is based on the benefits received principle of taxation.

False, based on the ability to pay principle.

Movement along an existing demand curve indicates a "change in demand"

False, change in "quantity demanded"

An increase in professor's salaries increases the supply of college education.

False, decreases.

As the price of a ballpoint pen increases, the demand for a felt tip pen can be expected to decrease.

False, demand for the substitute will rise

If demand increases, then quantity supplied will increase.

False, equilibrium will make a lower quantity.

What is good for individual members of the economy must necessarily be good for the economy as a whole.

False, fallacy of composition

A rightward shift in a demand curve indicates a decrease in demand

False, increase

Other things held constant, an increase in births will cause a decrease in the equilibrium price of baby food.

False, increase of price

Anytime the market price moves away from the equilibrium position to a lower price, market action will tend to force it further away from its original equilibrium position.

False, market action will force it toward equilibrium.

Today's economists are in universal agreement that the study of economists should be limited to the realm of positive economists.

False, never do economists agree. duh.

An improvement in technology shifts the supply curve inward

False, outward

In order to be effective, a model must contain all the details of an economic situation or phenomenon.

False, should NOT contain all the details

Probably the main characteristic of demand curves is that they generally slope upward from left to right.

False, supply curves.

If the price of pork is above the equilibrium there will be a shortage of pork.

False, surplus

A diagram can serve as an economic model.

True

A free enterprise economy depends largely on the operation of markets to prevent the development of unbalanced production.

True

A leftward shift in a supply curve represents a decrease in supply

True

A nation's PPC can be shifted outward by technological development.

True

A production possibilities curve (PPC) will shift outward when additional resources are found.

True

A production possibilities curve shows the use of resources and the alternative combinations of goods that a society can produce.

True

A production-possibilities curve relates input factors to output choices.

True

A surplus in a competitive market indicates the prices are too high.

True

An economic good is one which is scarce, useful, transferable, and material.

True

An equilibrium price results in a "clearing of the market"

True

An exchange or market economy is distinguished by decentralization of most economic decisions.

True

An increase in demand will tend to increase both the price and the amount of the commodity exchanged.

True

As the real wage increases, the opportunity cost of not working outside the home increases.

True

At equilibrium price there are no shortages or surpluses in the market.

True

Economizing is the process of allocating limited means in an effort to satisfy unlimited wants.

True

Federal individual income taxes illustrate the ability-to-pay principle of taxation.

True

If a nation is producing a combination of goods inside its PPC, it is underutilizing it's resources.

True

If existing capital wears out faster than new capital is produced, the PPF (PPC?) will shift IN over time.

True

If supply increases and demand decreases, then equilibrium price will fall.

True

Import restrictions usually benefit domestic producers at the expense of domestic consumers.

True

In a competitive, free-enterprise economy consumer demand is the principle determinant to what and how much is produced.

True

In a market economy, buyers and sellers are considered rational when they attempt to maximize their own self-interest.

True

In competitive markets, prices cannot stay above or below the equilibrium point for a long period.

True

It is possible for a change in the price of one good to lead to a change in the demand for another good.

True

Microeconomics is the study of the problems and issues associated with the individual, the firm, the allocation of goods and services, and the markets for goods and services.

True

One important role of government in the economy is to safeguard private property and enforce contracts.

True

One of the functions of price in a capitalistic economy is the allocation of the factors of production.

True

Price is an expression of exchange values in terms of money

True

Prices help to determine incomes in the U.S. economy.

True

Scarcity is a key word in the study of economics.

True

The four factors of production are land, labor, capital, and entrepreneurship.

True

The partnership is the least common form of business organization in the U.S.

True

The price system serves as a rationing mechanism in a market economy.

True

The value of a country's imports cannot exceed the value of its exports.

True

To abandon prices as a method of directing production requires the substitution of political controls.

True

Whenever buyers will purchase more or less at a given price a shift in demand occurs.

True

With an increase in supply, the supply curve shifts to the right.

True

Without scarcity, there would be no economic problems

True

supply and demand constitute the most important set of factors determining the market price of a commodity.,

True

When externalities are present, marker prices do not reflect all the social costs or benefits of the activity.

True,

The process of specialization and exchange is limited by the size of the market in which a firm operates.

True, locally and globally true

The fastest growing component of U.S. personal consumption is services.

True. 90% of all new jobs are service.

In a free-enterprise system, capital goods are owned and used primarily by individuals and firms in the economy.

True. Capital goods can also be called producer, investment, or intermediate goods.

An increase in the price of a good will cause a decrease in the demand for its substitute.

False, It will increase the demand for the substitute.

If the price of labor increases, employers will hire more labor since its more valuable.

False, Less, because labor is a higher price

A decrease in the price of peanut butter will cause a leftward shift in the supply curve of peanut butter.

False, Movement, not shift.

Positive economics is concerned with value judgements regarding what economic policy ought to be.

False, Normative Economics

In a market economy, the government is the dominant mechanism for rationing goods and services.

False, Not government, market.

The quantity demanded of a good or service varies inversely and proportionately with he change in price.

False, Not proportional because demand curves can be more or less severe based on item (Ex. Cars have a wider line and milk would have a narrower line.)

If both supply and demand increase, then the change in equilibrium quantity is indeterminate.

False, Only price is indeterminate.

Since prosperity always follows depressions, it is evident that depressions cause prosperity.

False, Prosperity "usually" follows depression

If supply increases, then quantity demanded decreases.

False, Q demanded increases.

A demand curve shows the graphic relationship between the price of a good and a consumer's income.

False, Quantity and Price.

A price floor set below the equilibrium will result in a surplus.

False, Shortage

A change in demand occurs whenever the consumer will purchase more because of a decrease in price.

False, a change in "quantity" demanded will occur