Microeconomics

______ advantage compares the actual cost of production of each producer

Absolute

Give two examples of negative externalities in the real world.

Collapse of financial markets and flooding.

A general PPF is _____ in shape.

Concave

_______ is an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services.

Market economy

_______ is a situation in which a market left on its own fails to allocate resources efficiently

Market failure

________ focuses on specific decision-making units of the economy; ______ examines the economy as a whole

Microeconomics - macroeconomics

_____ is a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

PPF

List the variables that influence buyers that shift the DEMAND curve:

Price of the good itself, income, prices of related goods, tastes, expectations, and the number of buyers

List the variables that influence SELLERS that shift the SUPPLY CURVE:

Price of the good itself, input prices, technology, expectations, and the number of sellers

Foreign trade a) Allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home b) Makes a country more equitable c) Increases the scarcity of resources

a) Allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home

When two countries produce efficiently and then make a mutually beneficial trade based on specialization/lower opportunity cost (comparative advantage) then a) Both of their final points of consumption are OUTSIDE the production possibility frontiers b) Both of their final points of consumption are INSIDE the production possibility frontiers

a) Both of their final points of consumption are OUTSIDE the production possibility frontiers

The reason that the production possibilities frontier bows outward from the origin is that: a) Opportunity costs are rising b) Opportunity costs are decreasing c) There are no opportunity costs d) Opportunity costs are constant

a) Opportunity costs are rising

When a country is involved in FAIR trade (based on lower opportunity cost/specialization) then a) The final point of consumption is OUTSIDE the production possibility frontiers b) The final point of consumption is INSIDE the production possibility frontiers

a) The final point of consumption is OUTSIDE the production possibility frontiers

Other things constant, the only way to move along a given demand curve for a product is for: a) The product's price to increase or decrease b) The price of resources used to produce the product to increase or decrease c) The number of sellers to increase or decrease d) Technological changes to occur

a) The product's price to increase or decrease

The producer who can produce the good with a smaller quantity of inputs is said to have an _______ advantage in producing that good

absolute

The basic assumption used in economics is ___ ____ ______ _______ ____ _____ (ceteris paribus)

all other things remain the same (ceteris paribus)

Any change in product price causes a movement ______ the demand curve.

along

Any change in product price causes a movement ______ the supply curve.

along

In the short run (Phillips Curve), a) An INCREASE in inflation temporarily increases unemployment b) A DECREASE in inflation temporarily increases unemployment

b) A DECREASE in inflation temporarily increases unemployment

The law of demand states that an increase in the price of the good a) Decreases the demand for that good b) Decreases the quantity demanded for that good c) Increases the supply of that good d) Increases the quantity supplied of that good e) Does none of the above

b) Decreases the quantity demanded for that good

When there is no trade (everything is domestic) then the best outcome for the final point of consumption to be a) Inside the PPF b) On the PPF

b) On the PPF

Technology improvement is represented by a: a) Shift inward in the production possibilities curve b) Shift outward in the production possibilities curve c) Movement up along the production possibilities curve d) Movement along the origin of the production possibility curve

b) Shift outward in the production possibilities curve

When a country is involved in UNFAIR trade (based on lower opportunity cost/specialization) then a) The final point of consumption is OUTSIDE the production possibility frontiers b) The final point of consumption is INSIDE the production possibility frontiers

b) The final point of consumption is INSIDE the production possibility frontiers

If the price of the good is ABOVE the equilibrium price, a) There will be a surplus and the price will rise b) There is a surplus and the price will fall c) There is a shortage and the price will rise d) There is a shortage and the price will fall

b) There is a surplus and the price will fall

A decrease (leftward shift) in the supply of the good will tend to cause. a) An increase in the equilibrium price and quantity b) A decrease in the equilibrium price and quantity c) An increase in the equilibrium price and a decrease in the equilibrium quantity d) A decrease in the equilibrium price and an increase in the equilibrium quantity e) none of the above

c) An increase in the equilibrium price and a decrease in the equilibrium quantity

If a producer has significant market power (can influence the price of the product in the market) then free market solutions a) Are equitable b) Are efficient c) Are inefficient d) None of the above

c) Are inefficient

If the production possibility curve was a straight line, this would suggest that: a) The two products are equally important to consumers b) The two products will sell at the same market prices c) Economic resources are perfectly shift-able between the productions of the two products d) Equal quantities of the two products will be sold at each possible point on the curve

c) Economic resources are perfectly shift-able between the productions of the two products

The production possibilities curve represents: a) The maximum amount of labor and capital available for production b) Combinations of goods and services among which consumers are indifferent c) Maximum combinations of products available with fixed resources and technology d) The maximum rate of growth of capital and labor in an economy

c) Maximum combinations of products available with fixed resources and technology

Trade-offs are required because wants are unlimited and resources are a) Efficient b) Economical c) Scarce d) Marginal

c) Scarce

The basic economic problem is the combined existence of a) Inflation and unemployment b) Economic freedom and income equality c) Scarce economic resources and unlimited material wants d) Growing populations and depletion of natural resources

c) Scarce economic resources and unlimited material wants

If the price of the good is BELOW the equilibrium price, a) There will be a surplus and the price will rise b) There is a surplus and the price will fall c) There is a shortage and the price will rise d) There is a shortage and the price will fall

c) There is a shortage and the price will rise

The law of supply states that an increase in the price of a good a) Decreases the demand for that good b) Decreases the quantity demanded for that good c) Increases the supply of that good d) Increases the quantity supplied of that good e) Does none of the above

d) Increases the quantity supplied of that good

A rational person does not act unless a) The action makes money for the person b) The action is ethical c) The action produces marginal costs that exceed marginal benefits d) The action produces marginal benefits that exceed marginal costs

d) The action produces marginal benefits that exceed marginal costs

A normative statement is one that: a) is based on the law of averages b) applies only to microeconomics c) applies only to macroeconomics d) is based on value judgments

d) is based on value judgments

A positive statement is one that is: a) derived by induction b) derived by deduction c) subjective and is based on a value judgment d) objective and is based on facts

d) objective and is based on facts

When the x and y intercept both increase or both decrease, they are _____ _____

directly related

If the price of the good is EQUAL the equilibrium price, a) There will be a surplus and the price will rise b) There is a surplus and the price will fall c) There is a shortage and the price will rise d) There is a shortage and the price will fall e) The quantity demanded is equal to the quantity supplied and the price remains unchanged

e) The quantity demanded is equal to the quantity supplied and the price remains unchanged

If the economy is operating on the production possibility frontier, it is operating ______ because it is producing a mix of output that is the maximum possible from the resources available.

efficiently

If a market generates a side effect or externality, then free market solutions are: e) Are equitable f) Are efficient g) Are inefficient h) None of the above

g) Are inefficient

Points inside the PPF curve are _______.

inefficient

When x is increasing while y is decreasing or vice versa, they are _____ ______.

inversely related

A decrease in demand is represented by shift of the demand curve to the ______.

left

A decrease in supply is represented by shift of the supply curve to the _____.

left

The producer with a _____ opportunity cost is said to have a comparative advantage

lower

Comparative advantage compares the _______ cost of production for each producer

opportunity

For both parties to gain from trade, the price at which they must trade must lie between the two ________ costs.

opportunity

Slope of the PPF is known as _______ cost.

opportunity

A technological advance in production shifts the production possibility frontier ______. This is a demonstration of ______ growth.

outward - economic

What does a surplus mean?

prices have to fall (supply > demand)

What does shortage mean?

prices have to rise (demand > supply)

An increase in demand is represented by shift of the demand curve to the ______.

right

An increase in supply is represented by shift of the supply curve to the ______.

right

Fair trade can benefit everyone in the society because it allows people to ________ in activities in which they have a comparative advantage.

specialize

PPF is drawn assuming that the economy produces only ____ goods.

two

Points outside the PPF curve are currently ______.

unattainable