ECON MACRO Test 1

comparative advantage

Comparative advantage is the ability to do a task at a lower opportunity cost.

A dust storm destroys the majority of a farmer's peanut crop, causing him to raise the price of his peanut butter. What kind of shift does this create in the market for jelly?

Decrease in demand

A market is only perfectly competitive when many buyers are all trying to obtain the same product.

Expectations

Krishan goes to a local bank to make a deposit in his savings account. While there, he considers the principles of economics that he has been learning at the university. He concludes that in this situation he is a supplier of credit. How is this so?

He is supplying the bank with his savings, which the bank will in turn lend out to other borrowers.

Which of the following is NOT true of the opportunity cost principle?

It allows people to do a task in which they have an absolute advantage.

Globalization is one of the most important forces in your lifetime. What is NOT causing economic opportunities to extend across national borders?

Opportunity costs have risen.

A guitar manufacturer finds a cheaper source for wood in the production of their electric guitars. During this time, a sharp decrease occurs in the popularity of rock music in favor of electronic dance music created using computers. What effect will this have on price and quantity?

Price falls; the change in quantity is unknown

There is a decrease in supply followed by a decrease in demand. What effect will this have on price and quantity?

Quantity will decrease, but the change to price is unknown.

Priya is a student at Florida State University. She graduates soon and has started applying for jobs at various different companies. What role is Priya playing in the labor market?

Supplier

A clothing manufacturer finds a cheaper supplier of wool for their winter coats. During this time, an unexpected cold front moves across the country. What effect will this have on price and quantity?

The effect on price is unknown; quantity rises

What happens to imports after the government imposes a tariff?

The imports fall.

a change in price, which leads to...

a change in the quantity demanded.

Ally and Zoe are roommates that alternate their chores each month. Zoe compares her time spent on each chore to that of Ally and found that Ally has the best ability to do the chores in the least amount of time. She suggests that Ally should do all chores. The concept that Zoe used is called _____, which does not apply the costs like economists do.

absolute advantage

When you can complete a task at a low opportunity cost, it means that you have a _____.

comparative advantage

Americans gain economic surplus from exporting. This is because the amount that domestic producers _____ the amount that domestic consumers _____.

gain exceeds; lose

The _____ argument suggests that governments can help create new industries by shielding fledgling businesses from international competition.

helping infant industries

Each of us spends money to buy stuff made by skilled engineers who have a comparative advantage in making cars or dishwashers. This is an example of:

specialization

When you compare the price of an imported shirt with the price of a domestically produced shirt, you're effectively comparing the _____ of each.

opportunity costs

You are able to find many processed goods at incredibly low prices because they are made by people who:

produce them at the lowest opportunity costs.

Jamal is an engineer working at a large lithium-ion battery producer. He recently made a breakthrough causing the production cost of lithium-ion batteries to go down. In the market for smartphones, this innovation will cause the equilibrium quantity to _____ and the equilibrium price to _____.

rise; fall

gains from trade

the benefits that come from reallocating resources, goods, and services to better uses.

The import quota is different from the tariff in that:

the government does not gain tax revenue from the import quota.

High prices communicate to buyers that:

the marginal cost of producing more is high.

The knowledge problem refers to:

unobtainable information that a decision maker needs.

Markets assign people who have great leadership skills as managers. This explains the concept of _____, for which they hold a _____.

specialization; comparative advantage