Microeconomics Chapters 1-4
The opportunity cost of studying for an economics test is:
the best alternative use of your time.
The concept of equity focuses on
the issue of fairness
Having a comparative advantage in a particular task means that
you give up less to accomplish that task than do others
A technological advance would best be represented by:
A shift outward of the production-possibilities curve
The ability to produce a good with fewer resources than other producers (i.e., better than other people).
Absolute advantage
When individuals decide how much of an activity they should do,
All above
Specialization and trade are beneficial to two countries {calc}
All of the above
Which of the following events would allow the production-possibilities curve to shift outward?
All of the above
We have to make choices because:
B resources are scarce. C choices involve a trade-off. both b and c.
If an economy experiences increasing opportunity costs with respect to two goods, then the production-possibilities curve between the two goods will be:
Bowed outward
The ability to produce a good at a lower opportunity cost than others could
Comparative advantage
Which of the following statements is always true?
Comparative advantage does not require absolute advantage.
Goods produced domestically and sold abroad
Exports
All output combinations that lie outside a production-possibilities curve are attainable with available resources and technology.
False
By specializing according to their absolute advantage and then engaging in trade, individuals and countries are better off.
False
If an economy's resources are used efficiently, then it is guaranteed that the economy will also achieve equity. {calc} T or F
False
Positive economic analysis employs analysis to answer questions about how the economy should work.
False
Enables people to enjoy greater production, and higher living standards, than would be otherwise possible
Gains from trade
An example of an externality is the impact of
John's actions on Jane's well-being.
A method of production in which each person concentrates on a limited number of activities (i.e., the things they are relatively good at)
Specialization
Which one of the following statements is true of a market economy but not true of a command economy?
The allocation of scarce resources is determined by the decentralized decisions of individuals.
Most individuals choose careers in which they specialize in producing only one type of good or service, yet as consumers they have access to a wide variety of goods and services. What principle allows for this?
Trade
In making choices people find that
all are true
Opportunity cost may be defined as the:
goods or services that are forgone in order to obtain something else.
When markets don't achieve efficiency, then:
government may intervene to improve society's welfare.
Application of the Principle of Comparative Advantage leads to
greater specialization of labor and other factors of production.
Goods produced abroad and sold domestically
importa
People respond to incentives because
incentives act as rewards that encourage people to behave in certain ways.
Specialization in production and trade
increases the amount of goods and services available in an economy.
The focal point of economic inquiry is
individual choice.
According to the incentive principle...
people tend to do more of something when the benefits are greater.
The term "productivity"
refers to the quantity of goods and services produced from each hour of a worker's time.
When a market is not in equilibrium
there are opportunities available to people to make themselves better off.
Which of the following statements is true?
there is a tendency for markets to move toward equilibrium
Economists generally agree that people are most likely to change their behavior when ...
they are given incentives to do so.
When people interact in markets we know that
this interaction must increase economic efficiency
All output combinations that lie on the production-possibilities curve are characterized by efficient use of resources.
True
Goods are scarce because society's desire for them exceeds society's ability to produce them.
True
If the economy is inside the production-possibilities curve, then more output can be produced using existing resources.
True
Individuals or countries have a comparative advantage in producing a good when they produce that good with a lower opportunity cost than can another individual or country.
True
Macroeconomics addresses the economy as a whole.
True
Scarcity results when available resources cannot satisfy all desired uses of those resources.
True
The purpose of an economic system is to...
allocate scarce resources.
Inflation is defined as
an increase in the overall level of prices in the economy
Economic models
are a simplified representation of reality.
Larry has a comparative advantage in writing a term paper if he
has a low opportunity cost for writing a term paper.
To say that an individual possesses an absolute advantage in the production of software means that that individual
can produce more and/or higher quality software in a given amount of time.
The condition of scarcity means that
choices must be made in the allocation of productive resources.
Adam Smith used the idea of the invisible hand to refer to the ability of market economies to
harness the power of individual self-interest for the good of society as a whole
Economics is best defined as the study of
how people make choices under the conditions of scarcity and the results of the choices.
The best description of the focus of economics is:
how scarce resources are allocated to fulfill society's goals.
Rational decision making means that...
if the marginal benefit of the last unit of an activity exceeds its marginal cost, then more of that activity should be undertaken.
The business cycle is the
irregular fluctuations in economic activity.
The marginal benefit from consuming another unit of a good:
is the additional benefit above what you have already derived.
The marginal cost of consuming another unit of a good...
is the additional cost to you over and above any cost you have already incurred.
If production is efficient, then:
it is not possible to produce a given quantity of output at a lower cost.
When a single person (or small group) has the ability to influence market prices, there is
market power.
For an economist, the cost of something is...
what you gave up to get it
Economic theory asserts that people will behave in ways that...
will enhance their own overall well-being.