Principles of Microeconomics

What is a deadweight loss?

The loss in net benefits resulting from a failure to carry out an activity at the most efficient level.

What is the percentage change in quantity demanded of a particular good or service divided by the percentage change in the price of that good or service, all other things unchanged?

The price elasticity of demand reflects the responsiveness of quantity demanded to changes in price.

Retained earnings

The profits kept by a company

Stock market

The set of institutions in which shares of stock are bought and sold.

What is net benefit?

The total benefit of an activity minus its opportunity cost.

What is a firm's output multiplied by the price at which it sells that output?

Total revenue is the price per unit times the number of units sold.

What is the situation in which the absolute value of the price elasticity of demand is equal to 1?

Unit price elastic

A maximum legal price is called:

a price ceiling

If the government sets out to help low-income people by establishing a maximum amount for rent:

a price ceiling has been set and a shortage of rental units may occur.

A decrease in supply means:

a shift to the left of the entire supply curve.

Price: 1.00 / 0.75 Quan: 150 / 175 What is the price elasticity of demand between $1.00 and $0.75? a. -0.54 b. -0.66 c. -0.75 d. -1.0

a. -0.54

At output level OE, the total costs to sellers is _______, the total revenues to sellers is _______, and the producer surplus is _______. (Reference Graph from Question 23 on Chapter 6 Quiz) a. OADE; OBDE; ABD b. OBDE; OADE; ABD c. OADE; OBDE; OAFE d. OBDE; OADE; OAFE

a. OADE; OBDE; ABD

External costs occur because: a. a good's costs are not fully reflected by its equilibrium price. b. a good's costs are fully reflected by its equilibrium price. c. the demand price reflects both private benefits to buyers and external benefits to nonbuyers. d. the market price reflects both private costs to sellers and external costs to nonsellers.

a. a good's costs are not fully reflected by its equilibrium price.

A price elastic demand exists if a 10 percent change in the price of a good results in a percentage change (in absolute value terms) in quantity demanded that is: a. less than 0 b. greater than 0 but less than 10 c. equal to 10 d. greater than 10

d. greater than 10

If income decreases and the consumption of a certain good increases, that good is considered a(n): a. substitute good. b. complementary good. c. normal good. d. inferior good.

d. inferior good

If your income increases and your consumption of bagels increases, bagels are considered a(n): a. negative good. b. positive good. c. inferior good. d. normal good.

d. normal good

In the exhibit, more time spent studying economics adds points to economics scores but subtracts points from accounting scores. At 4 hours of study the student will "maximize" because: a. MB = MC. b. MB = 20 and MC = 20. c. the difference between total benefits and total costs is maximized. d. of all of the above.

d. of all of the above (intersection point of MB and MC)

In the context of public goods and government efforts to correct market failure, economists may tend to be critical of the Endangered Species Act because: a. economists don't generally care about the environment. b. species have no economic value. c. the Act eliminates many activities that would contribute to the total output of the economy. d. the Act does not generally provide for a weighing of the costs and the benefits of species preservation.

d. the Act does not generally provide for a weighing of the costs and the benefits of species preservation.

The best example of a common property resource is: a. clothing. b. education. c. automobiles. d. tuna in the ocean.

d. tuna in the ocean.

A negative relationship between the quantity demanded and price is called the law of ______.

demand.

An increase in the price of football tickets will cause the ________ for (of) basketball tickets (a substitute) to ________.

demand; increase

A market shortage occurs if the quantity:

demanded is greater than the quantity supplied.

A market surplus occurs if the quantity:

demanded is less than the quantity supplied.

Specialization arises because:

differences in the costs of production give some producers a comparative advantage in the production of particular goods or services.

In economics, the function of theories, laws, and hypotheses is to:

discover relationships between events that are important to economic behavior.

Government's role of protecting property rights is considered:

enforcing a legal system.

A market surplus occurs if the:

equilibrium price is below the actual price.

A market price support policy attempts to assist the farm industry by:

establishing price floors in farm output markets.

The problem of determining what goods and services society should produce:

exists because there are not enough resources to provide all the goods and services that people want to purchase.

If the opportunity cost of manufacturing machinery is higher in the United States than in Britain and the opportunity cost of manufacturing sweaters is lower in the United States than in Britain, then the United States will:

export sweaters to Britain and import machinery from Britain

An increase in the wage rate paid to web site technical support employees would result in a change illustrated by the move from:

h to i in Figure (b).

A cost that farm subsidies and price floors imposes on the rest of the economy is:

higher consumer commodity prices

An answer to the question "How are goods produced?" determines:

how resources are combined in the production of goods.

In the market capitalist economy:

individual ownership and decision making are relied upon

Microeconomics deals with:

individual units in the economy.

Which of the following would be a part of macroeconomics? A study of:

inflation

Water is considered a scarce good rather than a free good because:

it has alternative uses.

A price ceiling will have no effect if:

it is set above the equilibrium price.

Making choices that are expected to achieve the highest possible value for some objective is termed:

maximizing.

The law of increasing opportunity cost means that:

opportunity cost increases when you produce more of one good while moving along a production possibilities curve.

The Case in Point on the Simpsons indicated that even fictional characters face:

opportunity costs

The exhibit shows how supply and demand might shift in response to specific events. Suppose a fall frost destroys one-third of the nation's orange crop. Which panel best describes how this will affect the market for oranges?

panel (b)

A key theme fundamental to all of economics is:

people have unlimited wants facing limited means to satisfy them

In the country depicted in this exhibit, the opportunity cost of an additional ton of radishes would be greater at:

point L.

One reason you go to college is to improve your employment opportunities and obtain a higher income in the future. In the context of production possibilities, this is most comparable to:

producing relatively more capital goods and relatively fewer consumer goods.

If demand and supply both decrease:

quantity will go down but the effect on price is indeterminate.

A competitive market with flexible prices and many buyers and sellers will:

reach an equilibrium where the market clears.

In a command socialist economy:

resources are government owned and government exercises broad power over their use.

In a competitive market, if there should be a surplus of a product at a given price:

sellers will drive the price down.

Increases in resources or improvements in technology will tend to cause a society's production possibilities curve to:

shift outward to the right

If rent controls are set at Rent 0

some renters would be willing to pay as high as rent 4 for Q 0 units.

Positive statements are:

statements that can be tested.

A supply curve that is upward sloping means that:

suppliers will want to sell more at higher prices

A curve that shows the relationship between the price and quantity supplied during a particular period, all other things unchanged, is the:

supply curve.

An example of a supply shifter is:

technology.

If external costs exist, the competitive free market: a. allocates resources inefficiently. b. allocates resources efficiently. c. automatically corrects an overallocation of resources. d. automatically corrects an underallocation of resources.

a. allocates resources inefficiently

According to the marginal decision rule, if marginal benefit: a. exceeds marginal cost, an activity should be increased. b. is less than marginal cost, an activity should be increased. c. is equal to marginal cost, an activity should be increased. d. exceeds marginal cost, net benefit is maximized.

a. exceeds marginal cost, an activity should be increased.

To be effective, property rights must be: a. exclusive and transferable. b. free and quasi-public. c. constrained and marginal. d. all of the above.

a. exclusive and transferable.

The cross price elasticity of demand for complements is: a. negative. b. positive. c. equal to 1. d. positive only for normal goods.

a. negative

Along the lower half of a linear demand curve, the price elasticity of demand will be: a. price inelastic. b. price elastic. c. unit price elastic. d. positive.

a. price inelastic

If a 20 percent increase in the price of one good leads to a 10 percent increase in the quantity demanded of another good at a specific price, the goods are: a. substitutes. b. normal. c. inferior. d. complements

a. substitutes

Suppose that the cross price elasticity of demand for Mountain Dew with respect to the price of Coke is 0.7. This implies that the two goods are: a. substitutes. b. complements. c. inferior. d. normal.

a. substitutes

Profit is the: a. difference between a firm's total revenue and its total economic cost. b. satisfaction consumers derive from their consumption of goods and services. c. highest price that buyers are willing to pay for a given quantity of a good. d. lowest price that sellers are willing to accept for a given quantity of a good.

a. the difference between a firm's total revenue and its total economic cost.

The free-rider problem is a direct result of: a. the inability to exclude nonpayers. b. marginal-cost pricing. c. full-cost pricing. d. horizontally summed supply curves.

a. the inability to exclude nonpayers.

An important determinant of the price elasticity of demand is the: a. time period. b. price of related goods. c. level of technology. d. quantity of the good supplied.

a. time period

The buffalo nearly became extinct because: a. buffalo hunters were evil and greedy. b. the buffalo was stupid and did not know how to defend itself. c. no one owned the buffalo. d. the Sierra Club did not exist in the 1800s.

c. no one owned the buffalo.

Going from point B to C (higher point of the demand curve), the demand curve is: a. price inelastic. b. unit price elastic. c. price elastic. d. both price elastic and price inelastic.

c. price elastic

If a university decreases the price of tickets to football games in order to collect more revenue, it is assuming that the demand for tickets is: a. unstable. b. price inelastic. c. price elastic. d. unit price elastic.

c. price elastic

Demand is price inelastic if: a.the price of the good responds slightly to a quantity change. b.the demand curve shifts very little when a demand shifter changes. c. the percentage change in quantity demanded is relatively small in response to a relatively large percentage change in price. d. all of the above are true.

c. the percentage change in quantity demanded is relatively small in response to a relatively large percentage change in price.

When the market price is established where demand and supply curves intersect:

the quantity demanded and the quantity supplied are equal.

Factors of production are:

the resources the economy has available to produce goods and services.

Human capital is:

the set of acquired skills and abilities that workers bring to the production of goods and services.

Any point inside a production possibilities curve indicates:

unemployment and/or inefficiency.

Any factor of production is capital if it:

was produced and can be used to produce other goods and services..

An answer to the question "For whom" determines:

who gets the goods and services produced

What is marginal cost?

The amount by which an additional unit of an activity increases its total cost.

A surplus of 210 bags of chocolate-covered peanuts exists if the price is ________ cents per bag.

90

What is a constraint?

A boundary that limits the range of choices that can be made.

The equilibrium price in a market is established subject to the all other things unchanged condition and, therefore, very well may change due to:

A change in the price of resources inputs used to produce the good

What is an external cost?

A cost imposed on others outside of any market exchange.

Sole Proprietorship

A firm owned by one individual

Partnership

A firm owned by several individuals

Corporation

A firm owned by shareholders who own stock in the firm (The bulk of the nation's total output (90%) is produced by corporations. Corporations also own most of the capital (machines, plants, buildings, and the like).

What is a private good?

A good for which exclusion is possible and for which the marginal cost of another user is positive.

What is a public good?

A good for which the cost of exclusion is prohibitive and for which the marginal cost of an additional user is zero.

Price floor

A minimum allowable price set above the equilibrium price.

What does a negative cross price elasticity tell us?

A negative cross price elasticity tells us they are complements.

What does a positive cross price elasticity tell us?

A positive cross price elasticity tells us that two goods are substitutes.

What is an exclusive property right?

A property right that allows its owner to prevent others from using the resource.

What is a transferable property right?

A property right that allows the owner of a resource to sell or lease it to someone else.

What are property rights?

A set of rules that specify the ways in which an owner can use a resource.

What is the efficiency condition?

A situation that requires a competitive market with well-defined and transferable property rights.

What is an external benefit?

An action taken by a person or firm that creates benefits for others in the absence of any market agreement.

Third-party payer

An agent other than the seller or the buyer who pays part of the price of a good or service.

What is a measure of elasticity based on percentage changes relative to the average value of each variable between two points?

Arc elasticity

What equals the percentage change in the quantity demanded of one good or service at a specific price divided by the percentage change in the price of a related good or service?

Cross price elasticity of demand.

If countries do not engage in international trade:

D. All the above are true - They give up the ability to specialize in production, worldwide levels of production are lower & the world will be operating inside its production possibilities curve.

What is the difference between total revenue and total cost?

Economic profit

What is the ratio of the percentage change in a dependent variable to a percentage change in an independent variable?

Elasticity is a measure of the degree.

Suppose you observe that the sun sets every evening after the six o'clock business report. If you conclude that the six o'clock business report makes the sun set, you are guilty of the fallacy of:

False cause.

In the 1960s the dominant maker of mainframe computers was:

IBM

What is the marginal decision rule?

If the marginal benefit of an additional unit of an activity exceeds the marginal cost, the quantity of the activity should be increased, and vice versa if the marginal benefit is less than the marginal cost.

What are two other elasticity measures commonly used in conjunction with demand?

Income elasticity and cross price elasticity

What is the percentage change in quantity demanded at a specific price divided by the percentage change in income that produced the demand change, all other things unchanged? (Delta meaning change)

Income elasticity of demand.

The sacrifice of an alternative is called:

Opportunity cost

Who are free riders?

People or firms that consume a public good without paying for it.

What is the situation in which the price elasticity of demand is infinite called?

Perfectly elastic

What is the situation in which the price elasticity of demand is zero called?

Perfectly inelastic

What is the situation in which the absolute value of the price elasticity of demand is greater than 1?

Price elastic

What is the ratio of the percentage change in quantity supplied of a good or service to the percentage change in its price, all other things unchanged? (Delta meaning change in)

Price elasticity of supply measures the responsiveness of quantity supplied to changes in price.

What is the situation in which the absolute value of the price of elasticity of demand is less than 1?

Price inelastic

Dividends

Profits distributed to shareholders

What is consumer surplus?

The amount by which the total benefits to consumers from consuming a good exceed their total expenditures on the good.

Whenever a choice is made:

The cost of that choice could be referred to as opportunity cost.

What is producer surplus?

The difference between the total revenue received by sellers and their total cost.

Researchers demonstrate conclusively that drinking 4-6 ounces of ginger ale each day increases life expectancy by 3 years. What happens in the market for ginger ale?

The equilibrium price and quantity rise.

The price of oranges rises. What happens in the market for apples, which are a substitute for oranges?

The equilibrium price and quantity rise.

What is market failure?

The failure of private decisions in the marketplace to achieve an efficient allocation of scarce resources.

What is an important determinant of the price elasticity of supply?

The length of time over which supply is being considered.

If a price floor at P 4 is set to help farmers in terms of income and government wants to assure farmers that their output will be purchased, the government would have to purchase an amount of output equal to:

Q3 - Q0.

Rent controls set a price ceiling below the equilibrium price and therefore:

Quantity demanded exceeds the quantity supplied.

A feature that distinguishes economists' approach to making choices is (are):

1. Assuming individuals make choices to maximize objectives. 2. Assigning opportunity costs a major role in their analyses of choices. 3. Emphasizing that choices are made at the margin.

Which of the following statements is (are) true?

1. In the last few decades, health-care spending has grown dramatically. 2. Health-care costs have grown relative to an increasing total output. 3. Health-care costs account for more than two and a half times the share of total output that they did in 1960.

The equilibrium price is often considered to be "just right" because:

1. It equates the amount supplied with the amount demanded. 2. It does not result in a shortage. 3. It does not result in a surplus.

According to the Case in Point on corn, which of the following is a criticism that has been raised of government spending in support of corn-based ethanol?

1. Limited reduction in dependence on foreign oil. 2. Detrimental effects on the environment. 3. Increased food prices and an increase in world hunger.

In addition to setting prices, the government has attempted to help farmers by:

1. Restricting output. 2. Essentially paying them not to produce. 3. Creating some surpluses, buying them, and also restricting output.

In the market for personal computers and in the stock market:

1. Supply and demand shifts change prices and quantities. 2. Persistent shortages and surpluses rarely exist. 3. In response to shifts in demand and supply, equilibrium is restored quickly.

An important reason for the rapid increase in output in the computer industry after 1980 was:

1. The invention of the microchip 2. A reduction in the size and cost of computers 3. A great increase in the number of computer producers.

Price ceilings which lead to shortages will impose costs on society because they:

1. Will lead to waiting lines 2. May result in black market prices, which are higher than the market-determined price would be. 3. Lead to a smaller quantity offered on the market.

Farm legislation has historically tried to increase farm income by:

1. guaranteeing a minimum price to farmers. 2. imposing limits on production. 3. insulating farmers from fluctuations in prices.

Without rent controls, the equilibrium rent is _______ and the equilibrium quantity is _______.

Rent 2; Q2

What are common property resources?

Resources for which no property rights have been defined.

What is the difference between a shortage and scarcity?

Scarcity will always exist because choices must be made, but a shortage will only exist if the price is kept below the equilibrium level.

Corporate stock

Shares in the ownership of a corporation.

Economics is a:

Social science that deals with making choices among alternatives

Most firms in the United States today are:

Sole proprietorships and partnerships

What does efficient mean?

The allocation of resources when the net benefits of all economic activities are maximized.

What is marginal benefit?

The amount by which an additional unit of an activity increases its total benefit

The primary difference between a change in supply and a change in the quantity supplied is:

a change in quantity supplied is a movement along the supply curve, and a change in supply is a shift of the supply curve.

The exhibit shows production possibilities curves for two countries that produce only radishes and bicycles. The axes of both graphs are measured in equivalent units. Country A is now operating at point M, and Country B is now operating at point N. Suppose Country B wants to be able to produce more radishes and more bicycles. To do this, it must:

acquire more capital, more labor, more natural resources, and/or better technology

The primary emphasis in macroeconomics is on:

aggregates in the economy.

Ceteris paribus means:

all other things unchanged.

The concept of scarcity indicates that:

almost all goods have alternative uses.

Two goods are substitutes if:

an increase in the price of one leads to an increase in demand for the other.

The law of demand is illustrated when:

an increase in the purchases of personal computers results from lower prices.

Economists in general agree that rent controls are:

an inefficient and ineffective way to help low-income families.

The demand curve for stocks shows that:

at lower prices, more people calculate that the expected value of the firm's future earnings justify the stock's purchase.

Assume that 2 dozen golf balls are purchased for $16 per dozen. Consumer surplus is (Price Point 1: {$20, 0Q} Price Point 2: {$16, 2Q}): a. $1. b. $4. c. $9. d. $16.

b. $4

There are several close substitutes for Bayer aspirin but fewer substitutes for a complete medical examination. Therefore, you would expect the demand for: a. medical exams to be more price elastic. b. Bayer aspirin to be more price elastic. c. Bayer aspirin to be more price inelastic. d. both to be equally price elastic.

b. Bayer aspirin to be more price elastic

The price elasticity of supply for a good is 3 if: a. a 1 percent increase in price leads to a 3 percent decrease in quantity supplied. b. a 1 percent decrease in price leads to a 3 percent decrease in quantity supplied. c. a 9 percent decrease in price leads to a 3 percent decrease in quantity supplied. d. None of the above are true

b. a 1 percent decrease in price leads to a 3 percent decrease in quantity supplied.

If the demand for a good is price elastic in comparison to one that is price inelastic, then: a. a higher per-unit sales tax will generate more tax revenue. b. a higher per-unit sales tax will generate less tax revenue. c. changes in total per-unit sales tax revenue brought about by a price change go in the same direction as the price change. d. none of the above is true.

b. a higher per-unit sales tax will generate less tax renevue

The market failure of external cost is most likely to result if Peanuts 'R' Us: a. keeps secret a discovery that excessive consumption of peanut butter causes nearsightedness. b. discards broken peanut shells onto an adjacent recreational area in its production of peanut butter. c. is subject to performance standard regulations by the PBRC (Peanut Butter Regulatory Commission). d. develops a new peanut butter processing machine that enhances competition.

b. discards broken peanut shells onto an adjacent recreational area in its production of peanut butter.

A men's tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie. Hence, the absolute value of the price elasticity of demand is: a. greater than zero but less than 1 b. equal to 1 c. greater than 1 but less than 3 d. greater than 3

b. equal to one

People or firms who consume a public good without paying for them are called _______ by economists. a. deadbeats b. free riders c. public consumers d. tax evaders

b. free riders

If the price of emergency visits to the doctor were to rise, we would expect: a. a significant decline in the number of emergency visits to the doctor. b. only a slight decline is the number of emergency visits to the doctor. c. the number of emergency visits to the doctor to stay the same. d. the total income of doctors to fall dramatically.

b. only a slight decline in the number of emergency visits to the doctor.

For a normal good, income elasticity of demand will be: a. negative. b. positive. c. zero. d. determined by the direction of the change in income.

b. positive

If the price elasticity of supply is less than 1, then supply is: a. unstable. b. price inelastic. c. price elastic. d. unit price elastic.

b. price inelastic

When a public transit system (such as a subway or bus line) raises its fares, it may experience an increase in total revenue. This suggests that demand is: a. unstable. b. price inelastic. c. price elastic. d. unit price elastic.

b. price inelastic

Assume the supply curve shifts to the right by a given amount at each price. Price in the market will decline the most if demand is more: a. price elastic and supply is more price inelastic. b. price inelastic and supply is more price inelastic. c. price elastic and supply is more price elastic. d. price inelastic and supply is more price elastic.

b. price inelastic and supply is more price inelastic

If a 5 percent reduction in the price of a commodity results in a 3 percent increase in the quantity demanded, demand is said to be: a. unstable. b. price inelastic. c. price elastic. d. unit price elastic.

b. price inelastic.

If a good that involves external costs is priced to take these costs into account, then its: a. price would fall and output would go up. b. price would rise and output would fall. c. price would not change but output would fall. d. price would rise but output would stay the same.

b. price would rise and output would fall.

A normal market supply curve reflects: a. private benefits to sellers. b. private costs to sellers. c. social benefits to buyers. d. external benefits to sellers.

b. private costs to sellers

Based on the type of analysis described in the Case in Point on Preventing Oil Spills, an economist might reasonably argue that too few people die in airplane crashes if: a. the marginal cost of preventing airplane crashes was less than the marginal benefit of preventing them. b.the marginal benefit of preventing airplane crashes was less than the marginal cost of preventing them. c. he or she were nuts; no reasonable economist would make such a statement because even though zero airplane crashes are an unlikely outcome, the efforts to prevent them to the greatest extent possible are justified because human lives are at stake. d. both A and B are true.

b. the marginal benefit of preventing crashes was less than the marginal cost of preventing them.

If two countries participate in free trade:

both countries as a whole may gain from the trade.

If an economy has to sacrifice increasing amounts of good X for each additional unit of good Y produced, then its production possibilities curve is:

bowed out from the origin

A market is a set of arrangements where:

buyers and sellers can get together and buy and sell.

The deadweight loss is: (also know what deadweight loss looks like on a graph) a. The point where consumers benefit more from price change. b. The point where producers benefit more from price change. c. The loss in net benefits resulting from a failure to carry out an activity at the efficient level d. The gain in net benefits resulting from the activity level being carried out efficiently.

c. The loss in net benefits resulting from a failure to carry out an activity at the efficient level.

The price elasticity of supply measures: a. the response of a supply shift to changes in technology. b. how much supply changes when the prices of inputs change. c. the responsiveness of quantity supplied to changes in prices. d. all of the above.

c. The responsiveness of quantity supplied to changes in prices.

In Panel (b) demand shifted from D 1 to D 2 reflecting a change in consumer preferences. The demand curve shifted from right (with equilibrium at $0.80) to left (with a new equilibrium of $0.70). Based upon that, which of the following statements is true? a. At the price of $.80, the quantity of apples demanded will now be greater than the quantity supplied. b. At the price of $.80, the quantity supplied of apples will now equal the quantity demanded. c. There is pressure for the price of apples to fall to $0.70 per pound. d. A shortage of apples will force the price up to the new price of $0.90.

c. There is pressure to for the price of apples to fall to $0.70 per pound.

When the net benefits of all economic activities are maximized, economists say the allocation of resources is _______. a. inefficient b. correct c. efficient d. well done

c. efficient

Activities that generate external costs will likely be carried out at levels that _______ those that would be efficient. a. equal to b. are less than c. exceed d. compete with

c. exceed

A shirt manufacturer sold 10 dozen shirts per day when the price was $4 per shirt but sold 15 dozen shirts per day when the price was $3 per shirt. Hence, the absolute value of the price elasticity of demand is: a. greater than zero but less than 3 b. equal to 1 c. greater than 1 but less than 3. d. greater than 3

c. greater than 1 but less than 3

If the market produces a quantity where supply is less than demand (shortage), then: a. marginal benefit is equal to marginal cost. b. marginal benefit is less than marginal cost. c. marginal benefit is greater than marginal cost. d. price is equal to marginal cost and greater than marginal benefit.

c. marginal benefit is greater than marginal cost.

The supply curve in the exhibit can be considered to be a ________ curve. a. marginal benefit b. total benefit c. marginal cost d. total cost

c. marginal cost

A characteristic of public goods is that: a. people pay for them in proportion to the benefits received. b. the costs of producing them are less than if they were private goods. c. their benefits cannot be withheld from anyone, regardless of whether the person pays for them. d. they are produced only by the public sector, not by the private sector.

c. their benefits cannot be withheld from anyone, regardless of whether the person pays for them.

A factor of production that is produced in order to produce something else is called:

capital

A movement along the production possibilities curve would be a result of:

changes in the combinations of the two goods produced.

The North Korean economy is currently classified as:

command socialism.

Countries import some goods and export other goods primarily because of:

comparative advantage

An example of a demand shifter is:

consumer preferences.

Improvements in technology provide benefits to:

consumers, through lower prices, workers, although some jobs may be eliminated, and firms, through lower production costs.

If pizzas are $4 each, your consumer surplus is (Price Points: {0,4} {0,10} {6,4} Graph it): a. $4. b. $6. c. $12. d. $18.

d. $18.

The cross price elasticity of demand for fuel with respect to the price of transport (e.g., automobile travel including insurance, etc.) has been estimated to be -0.48. If the price of transport increases by 5 percent in a period, how will that affect the demand for fuel in that period, all other things unchanged? a. The demand for fuel will increase by 2.4 percent. b. The demand for fuel will increase by 5 percent. c. The demand for fuel will not change because many people prefer to ride the subway. d. The demand for fuel will fall.

d. The demand for fuel will fall.

A ceiling price set in the policy of rent controls:

may result in some people who rent out units to leave the business because they cannot cover costs.

The study of a single firm and how it determines prices would fall under:

microeconomics

A simplified representation of a particular problem is a:

model.

The current rate of unemployment of 5 percent is too high. This is a _______ statement.

normative

Most economists' disagreements are a result of:

normative considerations

Economists are:

not always in agreement on the best way to implement policy decisions.

Scarcity in economics means:

not having sufficient resources to produce all the goods and services we want

Efficient production implies that it is:

not possible to produce more of one good without producing less of another good.

Rent controls:

often help high-income families.

An example of a natural resource is:

oil in the ground.

Inefficient production or unemployment exists when the economy is ________ the production possibilities curve.

operating inside