ECO 201 Week 1-3
At the equilibrium price, the quantity of the good that buyers are willing and able to buy
exactly equals the quantity that sellers are willing and able to sell
Inflation is defined as
an increase in the overall level of prices in the economy
A duty of economists at the Department of Labor is to
analyze data on workers
In competitive markets, buyers
and sellers are price takers
The business cycle is measured by the
both a and b are correct
A market includes
both buyers and sellers
Prices usually reflect
both the value of a good to society and the cost to society of making the good
Policymakers use taxes
both to raise revenue for public purposes and to influence market outcomes.
Irregular fluctuations in economic activity are known as the
business cycle
Economists have helped modify the debate over the environment
by focusing discussion on issues of resource allocation
A legal maximum on the price at which a good can be sold is called a price
ceiling
A model that shows how dollars flow through markets among households and firms is called the
circular-flow diagram
When describing the opportunity cost of two producers, economists use the term
comparative advantage
The line that relates the price of a good and the quantity supplied of that good is called the supply
curve
People who provide you with goods and services
do so because they get something in return
The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in
equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefit
The decisions of buyers and sellers that affect people who are not participants in the market create
externalities
Which of the following is correct? A tax burden
falls more heavily on the side of the market that is less elastic
The law of demand states that, other things equal, when the price of a good
falls, the quantity demanded of the good rises
In a market economy, who makes the decisions that guide most economic activity?
firms and households
A legal minimum on the price at which a good can be sold is called a price
floor
In the circular-flow diagram, in the markets for
goods and services, households are buyers and firms are sellers
By definition, imports are
goods produced abroad and sold domestically
Congress intended that
half the FICA tax be paid by workers, and half be paid by firms
In the simple circular-flow diagram, the participants in the economy are
households and firms
Microeconomics is the study of
how individual households and firms make decisions
An example of positive analysis is studying
how market forces produce equilibrium
Economics is the study of
how society manages its scarce resources
For a competitive market
if a seller charges more than the going price, buyers will go elsewhere to make their purchases
Goods produced abroad and sold domestically are called
imports
The business cycle is the
irregular fluctuations in economic activity
Consumer surplus
is the amount a consumer is willing to pay minus the amount the consumer actually pays
The tax incidence
is the manner in which the burden of a tax is shared among participants in a market
The French expression used by free-market advocates, which literally translates as "allow them to do," is
laissez-faire
A person can benefit from specialization and trade by obtaining a good at a price that is
lower than his or her opportunity cost of that good
group of buyers and sellers of a particular good or service is called a(n)
market
The decisions of firms and households are guided by prices and self-interest in a
market economy
Which markets are represented in the simple circular-flow diagram
markets for goods and services and markets for factors of production
A competitive market is a market in which
no individual buyer or seller has any significant impact on the market price
When policymakers set prices by legal decree, they
obscure the signals that normally guide the allocation of society's resources
What must be given up to obtain an item is called
opportunity cost
What you give up to obtain an item is called your
opportunity cost
In the circular-flow diagram, another name for goods and services produced by firms is
output
The Federal Insurance Contribution Act (FICA) tax is an example of a(n)
payroll tax
The adage, "There is no such thing as a free lunch," means
people face tradeoffs
Market power refers to the
power of a single person or small group to influence market prices
Normative statements are
prescriptive, whereas positive statements are descriptive
A supply schedule is a table that shows the relationship between
price and quantity supplied
When drawing a demand curve
price is measured along the vertical axis, and quantity demanded is measured along the horizontal axis
The signals that guide the allocation of resources in a market economy are
prices
A certain cowboy spends 10 hours per day mending fences and herding cattle. For the cowboy, a graph that shows his various possible mixes of output (fences mended per day and cattle herded per day) is called his
production possibilities frontier
The ability of an individual to own and exercise control over scarce resources is called
property rights
Economists at the Department of the Treasury
provide advice on tax policy to the President
In 1990, Congress passed a new luxury tax on items such as yachts, private airplanes, furs, jewelry, and expensive cars. The goal of the tax was to
raise revenue from the wealthy
When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all
rely upon one another for the goods and services we consume
When each person specializes in producing the good in which he or she has a comparative advantage, total production in the economy
rises
A marginal change is a
small, incremental adjustment
In a market economy,
supply and demand determine prices and prices, in turn, allocate the economy's scarce resources
In any economic system, scarce resources have to be allocated among competing uses. Market economies harness the forces of
supply and demand to allocate scarce resources
The minimum wage has its greatest impact on the market for
teenage labor
The President receives economic policy advice from economists at each of the following except
the Congressional Budget office
Producer surplus is
the amount a seller is paid minus the cost of production
If something happens to alter the quantity demanded at any given price, then
the demand curve shifts
The essence of science is
the scientific method
The demand for a good or service is determined by
those who buy the good or service
The minimum wage does not apply to
unpaid internships
The opportunity cost of an item is
what you give up to get that item
An example of normative analysis is studying
whether equilibrium outcomes are socially desirable
In a market, the marginal buyer is the buyer
who would be the first to leave the market if the price were any higher
The marginal seller is the seller
who would leave the market first if the price were any lower, and the marginal buyer is the buyer who would leave the market first if the price were any higher.
Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called
willingness to pay
The simple circular-flow diagram is a model that includes only some key players in the real economy. Which of the following key players are omitted from the simple circular-flow model?
Government
The nation's antitrust laws are enforced by economists at the Department of
Justice
Which of the following equations is valid?
Producer surplus = Total surplus - Consumer surplus
The federal government uses the revenue from the FICA (Federal Insurance Contribution Act) tax to pay for
Social Security and Medicare
A payroll tax is a
Tax on the wages that firms pay their workers
Which of the following is not a reason perfect competition is a useful simplification, despite the diversity of market types we find in the world?
There are many buyers and many sellers in all types of markets
Which of the following is not correct
The gains from specialization and trade are based not on comparative advantage but on absolute advantage
It once took 90 percent of our population to grow our food. It now takes only 3 percent of the population to grow our food. Which of the following statements is true?
This is progress because freed-up labor that is used to produce other goods
Consumer surplus is equal to the
Value to buyers - Amount paid by buyers
Productivity is defined as the
amount of goods and services produced from each unit of labor input
Producer surplus equals the
amount received by sellers minus the cost to sellers
An example of a price floor is
the minimum wage