Micro Test

Increasing the share of your income that you save is good for you. Therefore it would be good for the whole economy if everyone saved more. This exemplifies the:

Fallacy of composition

The production possibilities curve illustrates the basic principle that:

If all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.

Unemployment:

Is illustrated by a point inside the production possibilities curve

The economizing problem is one of deciding how to make the best use of:

Limited resources to satisfy virtually unlimited wants

The problems of aggregate inflation and unemployment are:

Major topics of macroeconomics

The two general types of economic systems that exist today are:

Market systems and command systems

Which of the following is not a factor of production?

Money

In analyzing human decision and action, economists assume that:

People's behavior reflects rational self-interest

Nine characteristics of the American market system:

Private property, freedom of enterprise and choice, self interest, competition, markets and prices, technology and capital goods, specialization, use of money, and active but not limited government.

Which is the most important source of tax revenue for local governments?

Property taxes

When an economist says that the demand for a product has increased, this means that:

consumers are now willing to purchase more of this product at each possible price

If competitive industry Y is incurring substantial losses, output will:

contract as resources move away from industry Y

The advent of DVDs threatens to eventually demolish the market for videocassettes

creative destruction

The stabilization function of government involves government's efforts to:

deal with problems of substantial unemployment and rapid inflation

If Z is an inferior good, a decrease in money income will shift the:

demand curve for Z to the right

Which of the following might shift a nation's production possibilities curve inward?

devastation by war

An unusually large crop of coffee beans might:

increase the supply of coffee

In economics, a group of firms that produce identical or similar products is called a(n):

industry

Nonrivalry and nonexcludability are the main characteristics of:

public goods

The addition of government to the circular flow model illustrates that government

purchases resources in the resource market, provides services to businesses and households, purchases goods in the product market

The money payments made to owners of land, labor, capital, and entrepreneurial ability

rent, wages, interest, and profits respectively

Households sell in the ____ market and buy in the ___ market.

resource;product

A price ceiling will: (SPQ)

result in a product shortage

An effective price floor will: (SPQ)

result in product surplus

A production possibilities curve illustrates:

scarcity

In deciding whether or not to study for an economics quiz or go to a movie, on is confronted by the idea(s) of:

scarcity and opportunity costs.

An improvement in production technology will:

shift the supply curve to the right

A leftward shift of a product supply curve might be caused by:

some firms leaving the industry

When economists say that the demand for a resource is a derived demand, they mean that:

the demand for resources depends on the demand for the product that those resources produce

As it relates to corporations, the principal agent problem is that:

the goals of the corporate managers (the agents) may not match the goals of the corporate owners (the principals)

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? (SPQ)

An increase in supply

The most efficient combination of resources in producing any output is the combination that:

can be obtained for the smallest money outlay

Black markets are associated with:

ceiling prices and the resulting product shortages

A firm comprised of plants or units operating in different industries, say, beer and theme parks, best illustrates:

conglomerate

Households in the aggregate use the largest share of their total income to:

consume

A positive statement is one which is

objective and based on facts

The term "ceteris paribus" means:

other things equal

Negative externalities or spillover costs will

overallocate resources to the production of the good

Unlimited liability applies to:

partnerships and proprietorships

For economists, the word "utility" means:

pleasure and satisfaction

Rivalry and excludability are characteristics of

private goods

The law of supply indicates that:

producers will offer more of a product at high prices than they will at low prices

In terms of the circular flow diagram, business obtain revenue through the ____ market and make expenditures in the _____market

product:resource

Microeconomics is concerned with:

A detailed examination of specific economic units that make up the economic system.

A quasi public good is:

A good for which exclusion could take place but that has such large spillover benefits that government provides it to prevent an underallocation of resources.

Which of the following will shift the production possibilities curve to the right?

A technological advance that allows farmers to produce more output from given inputs.

Which of the following is a normative economic statement?

A trade surplus of 200 billion dollars should be our policy goal

Economics is a social science that studies how individuals, institutions, and society may:

Best use resources to maximize satisfaction of economic wants

Which of the following is the largest expenditure item of local governments?

Education

Economic models do not reflect the full complexity of reality, but instead are based on:

Simplifications

A tax is regressive if it:

Takes a smaller percentage of income as income increases

A tax structure is called progressive when:

The average tax rate decreases if income decreases

Other things equal, which of the following might shift the demand curve for gasoline to the left?

The development of a low-cost electric automobile

The production possibilities curve is a graph of:

The maximum combinations of products that can be produced

Allocative efficiency refers to:

The production of the product-mix most wanted by society

Productive efficiency refers to:

The use of the least-cost method production

The five fundamental question are:

What goods will be produced, how the goods and services will be produced, who will get the output, how will the system accommodate change, and how will the system promote progress

Which of the following exemplifies a microeconomic question?

Will a new type of electronic reader or tablet increase the number of buyers?

If two goods are complements:

a decrease in the price of one will decrease the demand for the other

Which of the following would not shift the demand curve for beef?

a reduction in the price of cattle feed

Limited liability applies to:

all corporations

Suppose an economist says that "other things equal the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:

all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.

If two goods are substitutions

an increase in the price of one will increase the demand of another

Unemployment and/or productive inefficiencies

are both illustrated by a point inside the production possibilities curve

Economic theories:

are generalizations based on a careful observation of facts

The relationship between quantity supplied and price is ___ and the relationship between quantity demanded and price is _____

direct , inverse

The functional distribution of income refers to the:

distribution of income to basic resource classes that is, wages, rents, interests, and profits

Barter:

entails the exchange of goods for goods

The safest way for an individual to leave a burning theater is to run for the nearest exit; it is therefore also the best means of escape for a large audience. This assertion illustrates the:

fallacy of composition

The coincidence of wants problem associated with barter refers to the fact that:

for exchange to occur each seller must have a product that some buyer wants.

Which of the following is a distinguishing feature of a command system?

government ownership of the major industries

Which of the following is not a characteristic of the market system?

government ownership of the major industries

which of the following is NOT a characteristic of the market system?

government ownership of the major industries.

The Sherman Act is

governmental action designed to enhance competition

The Pure Food and Drug Act is an illustration of:

governmental provision of a suitable legal framework for the market system

The simple circular flow model shows that:

households are on the selling side of the resource market and on the buying side of the product market

College students living off campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start their careers, their consumption of these goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:

inferior goods

If a product is in surplus supply, its price

is above the equilibrium level

A market:

is an institution that brings together buyers and sellers

Microeconomics

is concerned with individual economic units and specific markets

Assuming an economy has fixed quantities of resources, that economy:

is more efficient, the larger the amount of goods and services it produces.

The four factors of production are:

land, labor, capital, and entrepreneurial ability

The French term "laissez-faire: means:

let it be

The economizing problem is one of deciding how to make the best use of:

limited resources to satisfy virtually unlimited wants.

When economists say that people act rationally in their self interest, they mean that individuals

look for and pursue opportunities to increase their utility

The two general types of economic systems that exist today are:

market systems and command systems

As income increases people buy more steak, so steaks are:

normal goods

Which of the following is an economic explanation for why most college-aged movie stars do not attend college

the opportunity cost in terms of reduced income is too great

The demand curve for a product might shift as the result of a change in:

the prices of related goods, consumer tastes, consumer incomes

The economic policies and programs of government affect all of the following except:

the underlying motives of consumers, workers, and firms.

In a competitive market economy firms will select the least-cost production technique because

to do so will maximize the firms' profits

When externalities cause substantial positive benefits for third parties, a competitive market:

underallocates resources to the production of good

In economics, the pleasure, happiness, or satisfaction received from a product is called:

utility

A firm that operates several plants that consists of oil fields, refineries, and gas stations best illustrates a

vertically integrated firm

What is personal distribution of income?

way income is distributed among specific households or spending units

Which of the following is one of the five fundamental questions

what goods and services will be produced

(Last Word) The fallacy of composition states that:

what is true for the individual must necessarily be true for the group.

Normative statements are concerned with:

what ought to be

Which of the following is a distinguishing feature of a market system?

wide-spread private ownership of capital

The division of labor means that:

workers specialize in various production tasks