Micro Test Review 1

Which is an example of a price floor?

Government-mandated minimum wage

The ___________ is the only price where quantity demanded is equal to quantity supplied.

equilibrium price

Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy:

is not using its resources efficiently.

The idea behind comparative advantage reflects the possibility that one party:

may be able to produce something at a lower opportunity cost than another party.

The basic difference between macroeconomics and microeconomics is:

microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in India is:

4 yards of textiles.

What is the difference between a change in demand and a change in quantity demanded?

A change in quantity demanded is caused by a change in the price of the product and is represented as a movement along a stationary demand curve. A change in demand is caused by a change in tastes, income, price of a related good, number of consumers or expectations and is illustrated as a horizontal shift of the entire demand curve.

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:

Andy's demand for beer to increase.

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be?

Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.

If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:

The USA specializes in potatoes because of its comparative advantage in producing potatoes.

Which of the following would most likely shift the production possibilities curve inward?

a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

The term "ceteris paribus" means that:

all variables except those specified are constant.

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.

allocative efficiency

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

budget constraint

Marginal thinking is best demonstrated by:

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

Refer to Figure 3-3. A change from Point A to Point E represents a(n):

decrease in supply.

The ____________ is the quantity where quantity demanded and quantity supplied are equal at a certain price

equilibrium quantity

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ___________________

excess demand

In the ______________, households receive goods and services and pay firms for them.

goods and services market

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.

government

Refer to Figure 3-3. A change from Point A to Point B represents a(n):

increase in quantity supplied.

If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________.

increases; fall

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?

international trade

Other things being equal, a __________ supply of workers tends to __________ real wages.

larger; decrease

Intra-industry trade between similar trading partners allows the gains from ______________________ that arise when firms and workers specialize in the production of a certain product.

learning and innovation

Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

marginal analysis

As a person receives more of a good, the _______________ from each additional unit of the good declines.

marginal utility

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

market-oriented economy

The basic difference between macroeconomics and microeconomics is that:

microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

The reasons that nations trade includes the fact that:

no one country produces all of what citizens within the country want.

The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of __________________.

opportunity cost

In contrast to goods and services markets, _____________ are rare in labor markets, because rules that prevent people from earning income are not politically popular.

price ceilings

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases.

price, quantity demanded

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________.

quantity supplied

Whenever there is a surplus at a particular price, the quantity sold at that price will equal:

the quantity demanded at that price.

If new manufacturers enter the computer industry, then (ceteris paribus):

the supply curve shifts to the right.

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:

the supply curve.

Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge.

usury laws

Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is:

All points on the production possibilities frontier are equally efficient.

Which factor drives the study of economics?

Scarcity