Study Guide

Which best represents the concept represented by the adage, "There is no such thing as a free lunch"?

Kendra must decide between going to Colorado or Cancun for spring break.

A rancher can produce only hamburgers, and a farmer can produce only french fries. The rancher and the farmer both like both foods. They

could gain from trade because each would enjoy a greater variety of food.

If the price of a substitute to good X increases, then the

demand for good X will increase.

Which of the following would definitely result in a higher price in the market for Snickers?

demand increases and supply decreases

GDP

excludes the value of intermediate goods because their value is already counted in the value of final goods.

One definition of equity would be

fairness.

If the government wanted to enact a policy to increase living standards in the country, it might

increase educational opportunities for workers.

A U.S. publisher purchases new computers. This purchase by itself makes

investment and GDP higher.

A temporary partnership set up for a specific purpose for a short period of time is known as a

joint venture.

The principle that states that the more you have of something, the less satisfaction you will get from an additional unit is the

law of diminishing marginal utility.

Benefits from trade would NOT include

less competition.

If goods A and B are complements, an increase in the price of A will result in

less of good B sold.

U.S. laws requiring that drivers wear seat belts have resulted in

little change in the number of driver deaths, but more accidents and more pedestrian deaths.

The largest single cost of going to college is usually

lost wages.

Unemployment compensation is

not part of GDP because it is a transfer payment.

What you give up to obtain an item is called your

opportunity cost.

When the government redistributes income from the rich to the poor,

people work less and produce fewer goods and services.

A direct or positive relationship exists between a country's

productivity and its standard of living.

Which of the following is included in the investment component of GDP?

purchases of capital equipment that were manufactured in a foreign country by a foreign firm

The invisible hand works to promote general well-being in the economy primarily through

self interest.

The country that has a comparative advantage in a product

should export that product.

In a free market, who determines how much of a good will be sold and the price at which it is sold?

suppliers and demanders together

A technological advancement will shift the

supply curve to the right.

Workers at a bicycle assembly plant currently make minimum wage. If the federal government increases the minimum wage by $1.00 an hour it is likely that the

supply of bicycles will shift to the left.

Which of the following non-market goods or services is included as an estimate in U.S. GDP?

the estimated rental value of owner-occupied homes

Unlimited liability means that

the owner of the business bears complete legal responsibility for all debts and damages arising from doing business.

Inflation causes

the value of money to fall.

The adage, "There is no such thing as a free lunch," is used to illustrate the concept of

tradeoffs.

Canada can benefit from trade

with any nation.

Suppose that demand decreases AND supply decreases. What would you expect to occur in the market for the good?

Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

Efficiency means that

society is getting the most it can from its scarce resources.

If buyers now wanted to purchase larger quantities of Vanilla Coke,

the demand curve for Vanilla Coke would shift to the right.

If a decrease in income increases the demand for a good, then the good is

an inferior good.

College-age athletes who drop out of college to play professional sports

are well aware that their opportunity cost of attending college is very high.

Trade can benefit a family

by allowing the family to buy a greater variety of goods and services at a lower cost.

M2 is

a broader definition of the money supply than M1.

Suppose that the incomes of buyers in a particular market for a normal good decline and there is also a reduction in input prices. What would we expect to occur in this market?

The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.

Which of the following is NOT correct?

Trade is based on absolute advantage.

A supply curve slopes upward because

an increase in price gives producers incentive to supply a larger quantity.