Microecon. Test 1

quantity demanded vs. demand

A change in demand is when the whole curve shifts and a change in quantity demanded is movement along the demand curve due to a change in price

production possibilities curve

A curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed.

Which of the following would be expected to cause an increase in the supply of fax machines? a. An increase in the number of business firms demanding fax machines. b. An increase in the price of fax machines. c. A decrease in the cost of manufacturing fax machines. d. Both B and C.

A decrease in the cost of manufacturing fax machines. d. Both B and C.

economic good vs economic bad

An economic bad is the opposite of an economic good. A "bad" is anything with a negative value to the consumer, or a negative price in the marketplace

An expectation of a lower price in the future will: a. increase current demand. b. decrease current demand. c. not change demand. d. cause demand to stay the same but increase the quantity demanded. e. cause demand to stay the same but decrease the quantity demanded.

Cause demand to stay the same but increase quantity demanded

Which of the following is an example of a normative statement? a. Household consumption is the largest component of spending. b. Government spending rose in the 1980s. c. The business sector is the primary source of jobs. d. Households should save more.

Households should save more.

factors that shift demand curves

Income, tastes and preferences, the composition or size of the population, the prices of related goods, and even expectations.

Something is an inferior good if the demand for the good: a. increases as the consumer's income increases. b. increases as the consumer's income decreases. c. decreases as the price of a complement increases. d. decreases as the price of a substitute increases. e. decreases as the consumer's income decreases.

Increases as the consumer's income decreases

Micro vs. Macro Economics

Microeconomics is the study of economics at an individual, group or company level. Macroeconomics, on the other hand, is the study of a national economy as a whole.

quantity supplied vs. supply

Quantity supplied refers to the amount of the good businesses provide at a specific price. So, quantity supplied is an actual number. Economists use the term supply to refer to the entire curve. The supply curve is an equation or line on a graph showing the different quantities provided at every possible price.

Suppose you've spent $200,000 obtaining your college degree, the marginal cost to finish is $100,000 and the marginal benefit is $150,000. Then definitely you: a. should complete your degree. b. should not complete your degree since the total cost will be $300,000 and the benefit $150,000. c. should complete your degree only if the marginal cost is equal to or less than $200,000. d. obtain more information before making a decision.

Should complete your degree.

An economy that produces cars and cakes is currently operating efficiently. What happens if the economy now experiences experiences high unemployment? a. The PPF will shift outward. b. The PPF will shift inward. c. The economy will move from a point on the PPF to a point outside the PPF. d. The economy will move from a point on the PPF to a point inside the PPF. e. The economy will move along the PPF curve . The direction of movement depends on whether primarily autoworkers or cake bakers become unemployed.

The economy will move along the PPF curve. The direction of movement depends on whether primarily autoworkers or cake bakers become unemployed.

How are changes in opportunity cost related to decision-making behavior? a. The lower the opportunity cost of doing an activity X, the more likely activity X will be done. b. The higher the opportunity cost of doing activity X, the more likely activity X will be done. c. Changes in the opportunity cost play no role in decision-making. d. The lower the opportunity cost of doing activity Y, the more likely activity X will be done. e. The higher the opportunity cost of doing activity Y, the less likely activity X will be done.

The lower the opportunity cost of doing an activity X, the more likely activity X will be done

The opportunity cost for Elijah of going to a water park is: a. the price of the admission pass. b. zero, if he can go with his parents who will pay. c. zero, if it is raining that day and the water park is closed. d. the price of the admission pass plus the highest valued alternative activity Elijah could have done instead. e. the highest valued alternative activity Elijah could have done instead.

The price of the admission pass plus the highest valued alternative activity Elijah could have done instead.

Which following change in the coffee market would shift the supply curve to the right? a. A study finds that drinking coffee leads to higher grades. b. The wage for employees in the coffee business decreases. c. The income in the economy increases. d. Firms expect the price of coffee to increase in the future. e. Fifty Starbucks coffee shops close down.

The wage for employees in the coffee business decreases.

trade-offs/opportunity cost

Trade off: exchanging one thing for the use of another Opportunity cost: what you cannot buy or do when you choose to do or buy one thing rather that another. The cost of that trade-off is known as an opportunity cost. In deciding on one thing over another, we lose the opportunity to have the next best alternative.

Which of the following is a macroeconomic question? a. How many textbooks should be published by a publisher? b. How much should English majors earn after college? c. How do members of a household decide whether to clean their own house or hire someone else to do it? d. What is the rate of unemployment? e. What is the price of a new 40-inch television?

What is the rate of unemployment?

Ceteris Paribus

all other things held constant

You observe that more education is associated with more income and conclude that more income leads to more education. This would be an example of: a. the rule of rational choice. b. opportunity cost. c. the fallacy of composition d. confusing correlation with causation e. ceteris paribus

confusing correlation with causation

law of demand

consumers buy more of a good when its price decreases and less when its price increases

law of increasing opportunity cost

each additional increment of one good requires the economy to give up successively larger increments of the other good

factors that shift supply curves

input prices, technology, expectations, number of sellers

A society that is producing its maximum combination of goods and using all available resources for production a. has minimized its opportunity cost. b. has maximized its opportunity cost. c. is operating on its production possibilities frontier (PPF). d. is operating outside its production possibilities frontier (PPF). e. has eliminated scarcity.

is operating on it's production possibilities frontier (PPF)

fallacy of composition

is when an individual infers that something is true of the whole because it is true of part of the whole

factors of production

land, labor, capital, entrepreneurship

law of supply

other factors held constant, an increase in price results in an increase in quantity supplied

marginal thinking

requires decision-makers to evaluate whether the benefit of one more unit of something is greater than its cost

economic models

simplified representations of complex economic activities, systems, or problems

incentives

something that motivates an individual to perform an action

Marginal benefit is the benefit a. that your activity provides to someone else. b. of an activity that exceeds its cost. c. that arises from the secondary effects of an activity. d. that arises from a small increase in an activity.

that arises from a small increase in an activity

Human capital is a. all capital owned by individuals, but not by corporations or governments. b. all capital owned by individuals or corporations, but not by governments. c. machinery that meets or exceeds federal safety standards. d. the accumulated skill and knowledge of workers.

the accumulated skill and knowledge of a worker

The opportunity cost of any action is a. all the possible alternatives forgone. b. the best alternative forgone. c. the time required but not the monetary cost. d. the monetary cost but not the time required.

the best alternative forgone

buyer's reservation price

the price at which the buyer is willing to purchase

seller's reservation price

the price at which the seller is willing to sell

Which of the following will cause a movement along a good's supply curve? a. an increase in the price of an input b. the price of the good increases c. the production process of the good becomes more efficient d. more firms enter the market e. the government places a subsidy on the producer of the good

the price of the good increases

When the price of an hour of tutoring increases, a. the demand for tutoring decreases. b. the demand for tutoring increases. c. the demand curve for tutoring shifts. d. the quantity demanded for tutoring increases. e. the quantity demanded for tutoring decreases.

the quantity demanded for tutoring decreases.

As a discipline, economics is best described by which of the following? a. the study of how to control the effects of government actions b. the study of how to control the preferences of consumers so that there will be enough resources to produce all the goods and services that consumers want c. the study of how to use scarce resources to satisfy unlimited wants and needs d. the study of how to dispose of excess goods and services that nobody wants e. the study of how to maximize profits for firms

the study of how to use scarce resources to satisfy unlimited wants and needs

confusing correlation with causation

two factors may be related, but that does not mean that one factor caused the other

scarcity

unlimited human wants and needs in a world of limited resources