Economics Midterm Question Bank

Total cost

$370 for producing 120 chairs.

Total cost

$380 for producing 100 chairs.

Equilibrium price and quantity

$46 and 65 units.

Total revenue

$480 from selling 120 chairs at $4 per unit.

Total revenue

$500 from selling 100 chairs at $5 per unit.

Excise tax

Applied to cigarettes and indoor tanning.

Business owners

Assume most of the business risk.

Other things equal

Assumption that relevant variables are constant.

Entrepreneurial opportunities

Quitting the job to start an organic soap company.

Increase in the excise tax on gasoline

Raises the price of gasoline by shifting the supply curve leftward.

Goods and services

Real flows in the circular flow diagram.

Goods and services flow

Real goods and services and a flow of money.

Lower resource prices

Reduce production costs and increase profits.

Budget line

Reflects the price ratio of two products.

Circular flow model

Resource markets exchange labor, product markets exchange goods.

Land, labor, capital, entrepreneurial activity

Resources in the circular flow diagram.

Choice of consumers and producers

Results in a wide variety of goods in the market.

Private property

Right to obtain, control, and dispose of property.

Creative destruction

Sacrificing quality for quantitative targets in the Soviet Union.

Businesses in circular flow model

Sell goods and buy labor.

Businesses

Sellers of goods and buyers of labor in the circular flow diagram.

Invisible hand

Setting prices correctly in the old Soviet Union.

Supply curves for agricultural products

Shift left due to the use of more costly big trucks.

Overfarming in sub-Saharan nations

Shifted inward the production possibilities curves of such nations.

Decrease in consumer incomes

Shifts the demand curve for an inferior good to the right.

Market system

Shops stock goods and pay sales tax for public services.

Complement goods

Smartphones and apps.

Consumer expenditures

Spending by households in the circular flow diagram.

Microeconomic statement

Statement about specific economic factors.

Responsibility for business loss

Ted and Fred, the owners of the gas station.

Equilibrium price

The market-clearing price.

Market-clearing price

The price at which quantity demanded equals quantity supplied.

Progress in market system

Through technological improvements and capital accumulation.

Mutually agreeable transactions

Transactions that benefit both the buyer and the seller.

Combination of candy

Two lollipops and two candy bars.

Scientific method

Used by economists and other scientists to formulate and test hypotheses.

Scientific method

Using observed data to form a hypothesis.

Dependent variable

Value determined by the independent variable.

Consumption

Varies directly with after-tax income.

Maximizing profits

Withholding current wheat harvest to reduce current wheat supply.

Division of labor

Workers specialize in tasks that utilize their abilities.

Surplus

21 units at a price of $50.

Command economy

Allocates scarce goods based on government planning.

Market system

Allocates scarce goods based on market prices.

Partnership

Business structure with shared profits and debts.

Independent goods

Butter and golf balls.

Households

Buyers of goods and sellers of labor in the circular flow diagram.

Rising demand for motor homes

Caused by an increase in the number of retirees.

Command system

Central government decides on allowing flower shops.

Complementary goods

College classes and textbooks.

Post hoc fallacy

Concluding causation based on temporal sequence.

Self-interest

Consumers and producers acting in their own self-interest.

Consumer-determined production

Consumers determine what is produced by buying or not buying goods.

Upward-sloping data sets

Data sets 1, 2, and 5.

Economizing problem

Deciding how to make the best use of limited resources to satisfy unlimited wants.

Decrease in the price of iron ore

Decreases the price of steel by shifting the supply curve rightward.

Decrease in consumer incomes

Decreases the quantity demanded of a normal good at each price.

Reduction in university subsidies

Decreases the supply of higher education.

Network effect

Driving on a crowded highway.

Variety of goods in market system

Due to diverse individual wants.

Leftward shift in demand curve for car washes

Due to fewer cars in town as more people use rideshare companies.

Decrease in demand for housing

Due to out-migration from small rural towns.

Normal good

Electronic equipment.

Creative destruction

Emergence of self-driving cars replacing traditional cars.

Specialization and trade

Enable individuals to obtain goods they don't specialize in.

Invisible hand

Expecting dinner from self-interest of the butcher, brewer, and baker.

Costs

Expenses incurred by businesses in the circular flow diagram.

Households selling finished products

False statement.

Substitute in production

Firms switch to producing alternative goods when prices increase.

Freedom of enterprise

Firms' freedom to obtain resources and produce goods.

Freedom of choice

Freedom to dispose of resources and spend incomes.

Economic laws

Generalizations that allow us to predict and adjust to events.

Inferior good

Generic beer.

Positive relationship between x and y

Graphs as an upward-sloping line.

Substitute goods

Haagen-Dazs ice cream and Ben & Jerry's ice cream.

Shielding employees and suppliers

Improves economic outcomes.

Capital in production

Improves efficiency, increases output, and provides growth.

Private property

Incentivizes maintenance and transfer of property ownership.

Revenue

Income received by businesses in the circular flow diagram.

Money income

Income received by households in the circular flow diagram.

Principle of increasing opportunity costs

Indicated by a steeper slope on the production possibilities curve.

Self-interest

Individuals and firms seeking what is best for themselves.

Resources

Inputs used in production in the circular flow diagram.

Market

Institution that brings buyers and sellers together.

Ceteris paribus

Latin term meaning 'other things equal.'

Marginal cost curve

Lines A and D in the diagram.

Negative relationship between x and y

Lines C and E in the diagram.

Pitfall to sound economic reasoning

Marginal analysis.

Invisible hand

Market prices coordinate the economy and provide incentives.

Opportunity cost

Move from point B to point C on the production possibilities curve.

Invisible hand

New entries in the list of powerful and profitable companies.

Input availability in market economies

Not a constant concern for firms.

Laissez-faire system

Only taxes for defense, law enforcement, and legal system.

Demand schedule

Option A in the graph.

Data set 3 equation

P = 90 - 0.5N.

Production possibilities curve

PP3 rather than PP2 would result from position A relative to PP1.

Competition

Presence of independent buyers and sellers in the market.

Entrepreneurial opportunities

Quitting the job to develop an Internet-based cable company competitor.