Macro Exam 2

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the price of a good will tend to rise when

a temporary shortage at the current price occurs (assuming no price controls are imposed).

In a circular flow diagram, goods and services flow in a ____________

counterclockwise direction

if incomes are rising, in the market for an inferior good,

demand will fall

law of demand

the quantity of a good or service demanded varies inversely (negatively) with its price, ceteris paribus

shifts in the demand curve

A change in one of the variables, other than the price of the good itself, that affects the willingness of consumers to buy.

Shifts in Supply ("SPENT")

Changes in seller's input prices (S) Changes in the prices of related goods and services (P) Changes in expectations (E) Changes in the number of sellers (N) Changes in technology (T)

Shifts in Demand ("PYNTE"):

Changes in the Prices of Related Goods and Services (P) Changes in Income (Y) Changes in the Number of Buyers (N) Changes in Tastes (T) Changes in Expectations (E)

What determines the position and shape of a society's production possibilities curve?

The physical resources of the society, the skills of the workforce, the level of technology of the society, and the number of factories available tot he society

Economic disputes over the distribution of income are generally associated with what economic question?

Who will get the goods and services?

change in quantity demanded

a change in a good's own price leads to a change in quantity demanded, a movement along a given demand curve

The degree of government involvement in the economy is greatest in __________

a command economy

What is an example of a market

a garage sale, a restaurant, the New York Stock Exchange, an eBay auction

market supply curve

a graphical representation of the amount of goods and services that sellers are willing and able to supply at various prices

individual demand curve

a graphical representation that shows the inverse relationship between price and quantity demanded

individual supply curve

a graphical representation that shows the positive relationship between the price and quantity supplied

The private ownership of property and the use of the market system to direct and coordinate economic activity are most characteristic of __________

a market economy

competitive market

a market where the many buyers and sellers have little market power—each buyer's or seller's effect on market price is negligible

individual demand schedule

a schedule that shows the relationship between price and quantity demanded

shortage

a situation where quantity demanded exceeds quantity supplied

surplus

a situation where quantity supplied exceeds quantity demanded

Which of the following is not a question that all societies must answer? a. How can scarcity be eliminated? b. What goods and services will be produced? c. Who will get the goods and services? d. How will the goods and services be produced? e. all of the above are questions that all societies must answer

a. How can scarcity be eliminated?

What is an accurate statement about a productions possibilities curve?

an economy can produce at any point on or inside its production possibilities curve, but not outside the curve

command economy

an economy in which the government uses central planning to coordinate most economic activities

market economy

an economy that allocates goods and services through the private decisions of consumers, input suppliers, and firms

mixed economy

an economy where government and the private sector determine the allocation of resources

simple circular flow model

an illustration of the continuous flow of goods, services, inputs, and payments between firms and households

what would likely cause an increase in the demand for jelly

an increase in income, jelly is a normal good

what would not likely cause a change in the demand for cheese

an increase in the price of cheese

a point beyond the boundary of an economy's production possibilities curve is __________

both attainable and efficient

_____________, as a group, determine the demand side of the market. _____________, as a group, determine the supply side of the market.

buyers, sellers

consumer sovereignty

consumers vote with their dollars in a market economy; this accounts for what is produced

when _________ is relatively scarce, _________ methods of production will be relatively less expensive

capital/labor intensive and/or labor/capital intensive

The simple _____________ model shows the continuous flow of goods, services, inputs, and payments through the _____________ and _____________ markets among households and _____________.

circular flow, product, factor, firms

A(n) _____________ market consists of many buyers and sellers, no single one of whom can influence the market price.

competitive

Whenever the price of Good A decreases, the demand for Good B increases. Goods A and B appear to be

complements

All of the following factors will effect the supply of shoes except one. Which will not affect the supply of shoes? a. higher wages for shoe factory workers b. higher prices for leather c. a technological improvement that reduces waste of leather and other raw materials in shoe production d. an increase in consumer income

d. an increase in consumer income

_____________ requires society to use its resources to the fullest extent—getting the _____________ we can out of our scarce resources.

efficiency, most

Market economies largely rely on a(n) _____________ decision-making process, where literally millions of individual producers and consumers of goods and services determine what will be produced.

decentralized

if the demand for milk is downward sloping, than an increase in the price of milk will result in a

decreasing in the quantity of milk demanded

A supply curve illustrates a __________ relationship between _________ and __________

direct, price, quantity supplied

To generate economic growth, a society must produce _____________ consumer goods and _____________ capital goods in the present.

fewer, more

Resources tend to be specialized, so we lose some of their productivity when we transfer those resources from what they are relatively _____________ at producing to something they are relatively _____________ at producing.

good, bad

inferior good (Inverse)

if income increases, the demand for a good decreases; if income decreases, the demand for a good increases

law of supply

if income increases, the demand for a good decreases; if income decreases, the demand for a good increases

normal good (Direct)

if income increases, the demand for a good increases; if income decreases, the demand for a good decreases

What is consistent with the implications of the production possibilities curve?

if the resources in an economy are being used efficiently, more of one good can be produced only if less of another good is produced

In a market economy, the amount of goods and services one is able to obtain depends on one's _____________, which depends on the quality and quantity of the scarce _____________ he or she controls.

income, resources

If the production possibilities curve is concave from below (that is, bowed outward from the origin), it reflects _____________ opportunity costs of producing additional amounts of a good.

increasing

On a bowed production possibilities curve (concave to the origin), the opportunity costs of producing additional units of a good rises as society produces more of that good. This relationship is called the law of _____________.

increasing opportunity cost

What is a determinate of supply?

input prices, technology, expectations, the prices of related goods

Antonio's make the greatest pizzas and deliver it hot to all the dorms around campus. Last week Antonio's supplier of pepperoni informed him of a 25 percent increase in price. What variable determining the position of the supply curve has changed, and what effect does it have on supply?

input prices; supply decreases

The markets where households sell the use of their _____________ (capital, land, labor, and entrepreneurship) to _____________ are called _____________ or _____________ markets.

inputs, firms, factor, input

If an economy is operating _____________ its production possibilities curve, it is not at full capacity and is operating _____________. Such an economy's actual output is less than _____________ output.

inside, inefficiently, potential

Methods of production used where capital is relatively scarce will be _____________, and methods of production used where labor is relatively scarce will be _____________.

labor intensive, capital intensive

The _____________ -cost method is the most appropriate method for producing a given product.

least

A(n) _____________ is the process of buyers and sellers _____________ goods and services.

market, exchanging

factors (or input) markets

markets where households sell the use of their inputs (capital, land, labor, and entrepreneurship) to firms

Most countries, including the United States, have _____________ economies, in which the government and private sector determine the allocation of resources.

mixed

Market

the process of buyers and sellers exchanging goods and services

On a straight-line production possibilities curve, the _____________ are constant.

opportunity costs

The markets where households are buyers and firms are sellers of goods and services are called _____________ markets.

product

A(n) _____________ curve represents the potential total output combinations of any two goods for an economy.

production possibility

capital intensive

production that uses a large amount of capital

product markets

production that uses a large amount of capital

labor intensive

production that uses a large amount of labor

According to the law of demand, other things being equal, when the price of a good or service falls, the _____________ increases.

quantity demanded

The difference between a change in quantity demanded and a change in demand is that a change in

quantity demanded is caused by a change in a goods own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations

Along a supply curve

quantity supplied changes as price changes

the difference between a change in quantity supplied and a change in supply is that a change in

quantity supplied is caused by a change in a good's own price, while a change in supply is caused by a change in some other variable, such as in put prices, prices of related goods, expectations, or taxes

In the circular flow model, firms demand ____________

resources and supply products

On a production possibilities curve, we assume that the economy has a given quantity and quality of _____________ and _____________ available to use for production.

resources, technology

The production possibilities curve can be used to illustrate the economic concepts of _____________ (resource combinations outside the production possibilities curve are unattainable), _____________ (selecting among the alternative bundles avail-able along the production possibilities curve), _____________ (how much of one good you give up to get another unit of the second good as you move along the production possibilities curve), _____________ (being on the production possibilities curve rather than inside it), and _____________ (shifting the production possibilities curve outward).

scarcity, choice, opportunity cost, efficiency, economic growth

Increases in a society's output do not make _____________ disappear. Even when output has grown more rapidly than population so that people are made better off, they still face _____________.

scarcity, trade-offs

An upward sloping curve shows that

sellers are willing to increase production of their goods if they receive higher prices for them

A leftward shift in supply could be caused by

some firms leaving the industry

These statements are true about the law of increasing opportunity cost

some resources and skills cannot be easily adapted from their current uses to alternative uses the more you produce of one good, the more you are forced to employ inputs that are relatively more suitable for producing other goods resources tend to be specialized so we lose some of their productivity when we transfer those resources from producing what they are relatively good at to producing something at which they are relatively bad

A _______ production possibilities curve illustrates _______ costs of production

straight-line; constant and bowed-outward; increasing

Whenever the price of Good A increases, the demand for Good B increases as well, Goods A and B appear to be

substitutes

A market will experience a _______ in a situation where quantity supplied exceeds quantity demanded and a _________ in a situation where quantity demanded exceeds quantity supplied.

surplus, shortage

Advancements in _____________, improvements in _____________, or new _____________ could all lead to outward shifts of the production possibilities curve.

technology, labor productivity, natural resource finds

diminishing marginal utility

the concept that in a given time period, an individual will receive less satisfaction from each successive unit of a good consumed

suppose CNN announces that bad weather in Central America has greatly reduced the number of cocoa bean plants and for this reason the price of chocolate is expected to rise soon. As a result,

the current market demand for chocolate will increase

market demand curve

the horizontal summation of individual demand curves

All of the following are true statements:

the intersection of the supply and demand curves show the equilibrium price and equilibrium quantity in a market A surplus is a situation where quantity supplied exceeds quantity demanded A shortage is a situation where quantity demanded exceeds quantity supplied Shortages and surpluses set in motions actions by many buyers and sellers that will move the market toward the equilibrium price and quantity unless otherwise prevented

These statements about demand are true:

the law of demand states that when the price of a good falls (rises), the quantity demanded rises (falls), ceteris paribus. An individual demand curve is a graphical representation of the relationship between the price and the quantity demanded

The following statements about a supply curve are true:

the law of supply states that the higher (lower) the price of a good, the greater (smaller) the quantity supplied. the relationship between price and quantity supplied is positive because profit opportunities are greater at higher prices and because the higher production costs of increased output mean that supplies will require higher prices the market supply curve is a graphical representation of the amount of goods and services that suppliers are willing and able to supply at various prices

the best method of production is

the lowest cost method

increasing opportunity cost

the opportunity cost of producing additional units of a good rises as society produces more of that good

market equilibrium

the point at which the market supply and market demand curves intersect

production possibility curve

the potential total output combinations of any two goods for an economy given the available factors of production and the available production technology that firms use to turn their inputs into outputs.

equilibrium

the price at the intersection of the market supply and demand curves; at this price, the quantity demanded equals the quantity supplied

Consider a production possibilities curve for an economy producing bicycles and video game players. It is possible to increase the production of bicycles without sacrificing video game players if _____________

the production possibilities curve shifts outward due to technological progress, the production possibilities curve shifts outward due to increased immigration (which enlarges the labor force), the economy moves from a point inside the production possibilities curve to on the curve

equilibrium quantity

the quantity at the intersection of the market supply and demand curves; at the equilibrium quantity, the quantity demanded equals the quantity supplied

These statements about prices and demand curves are true:

the relationship between price and quantity demanded is inverse or negative a change in a good's prices causes a movement along in its demand curve

The circular flow model

traces the flow of goods and services among firms and households traces the flow of payments among firms and households include both product markets and factor markets

The important point about a market is what it does—it facilitates _____________.

trade

substitutes

two good are substitutes if an increase (decrease) in the price of one good causes the demand curve for another good to shift to the right (left) If the price of Good A increases (decreases), the demand for Good B Increases (decreases) Ex. Coke and Pepsi, BMW and Mercedes, muffins and bagels

complements

two goods are complements if an increase (decrease) in the price of one good shifts the demand curve for another good to the left (right) and if a decrease (increase) in the price of one good increases (decrease) the demand for another good Ex. Goods used together - tennis balls and tennis rackets, DVD's and DVD players

By putting _____________ resources to work or by putting already employed resources to _____________ uses, we could expand output.

unemployed, better

Because of scarcity, certain economic questions must be answered regardless of the level of affluence of the society or its political structure. Three funda-mental questions that inevitably must be faced in a world of scarcity are (1) _____________ will be pro-duced? (2) _____________ the goods and services be produced? (3) _____________ the goods and services produced?

what goods and services; how will ; who will get


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