Econ 1
D.
Does the shape of the market demand curve differ from the shape of an individual demand curve? A.Yes, individual demand curves tend to be upward-sloping, while market demand curves are horizontal. B.Yes, individual demand curves tend to be downward-sloping, while market demand curves are upward-sloping. C.No, they both tend to be upward-sloping curves. D.No, they both tend to be downward-sloping curves.
B.
Economics differs from these other social sciences because it also addresses these three key concepts: _________. A.Culture, optimization, and trade. B.Optimization, equilibrium, and empiricism. C.Equilibrium, government actions, and incentives. D.Empiricism, ideology, and social responsibility
Negative Correlation
implies that two variables tend to move in opposite directions.
Positive Correlation
implies that two variables (taxes and government services) tend to move in the same direction
market
A group of economic agents who are trading a good or service would define a
economic agent
An economic agent is any individual or group that makes choices. This means that any decision maker is considered an economic agent. This includes consumers, parents, students, firms, and universities as well as workers, senators, criminals, and sports teams
B.
A consumer's budget constraint refers to the collection of all possible bundles that ___________. A.give the consumer the same degree of satisfaction. B.exactly exhaust a consumer's entire budget. C.a consumer can purchase with her income. D.a consumer finds suitable for possible purchase.
B.
Economists mostly use optimization in differences, as opposed to optimization in levels, because ____________. A.calculating cost-benefit ratios is complicated. B.comparing different features of alternatives is simple. C.contrasting the total benefit of alternatives is intuitive. D.examining the net benefits of alternatives is counter intuitive.
C.
Empiricism is a principle in economics that _________. A.gathers data using surveys. B.collects data using the scientific method. C.uses data to test economic models. D.aggregates data to create graphs.
D.
Holding all else equal, if the price of a digital camera rises, then we can expect A. an increase in the demand for digital cameras. B. a decrease in the demand for digital cameras. C. an increase in the quantity demanded of digital cameras. D. a decrease in the quantity demanded of digital cameras.
D.
If opportunity cost were to suddenly increase, total cost would A.decrease and net benefit would increase. B.decrease and net benefit would decrease. C.increase and net benefit would increase. D.increase and net benefit would decrease.
positive; normative
Making a prediction today about the world's population in twenty years based on current growth trends is an example of economics. Advising the residents of a town to choose a toll road over a freeway extension due to a limited budget and high trucking usage is an example of economics.
C.
Marginal analysis is a cost-benefit calculation that A.analyzes the marginal costs at points on the demand curve. B.analyzes the marginal revenue at points on the demand curve. C.focuses on the differences between one feasonable alternative and the next feasible alternative. D.focuses on the similarities between one feasonable alternative and the next feasible alternative.
competitive market
Price takers exist throughout
B.
The competitive equilibrium price equates A.supply to demand. B.quantity supplied to quantity demanded. C.price to quantity demanded. D.price to quantity supplied
D.
The concept of diminishing marginal benefits states that A.the more you pay for a good, the greater the benefit you receive. B.the more you pay for a good, the less benefit you receive. C.the more you consume of a good, the less benefit you receive. D.the more you consume of a good, your willingness to pay for an additional unit declines.
We must first translate the mortality and morbidity data into dollars in order to compare it to the costs of the regulations.
The costs of many food safety regulations can be calculated in dollars, but the benefits often are in terms of lives saved (mortality) or decreases in the incidence of a particular illness (morbidity). What does this imply about the cost-benefit analysis of food safety regulations? A.We must first translate the mortality and morbidity data into dollars in order to compare it to the costs of the regulations. B.Since these are government regulations, a cost-benefit analysis is not needed because the government acts independent of such analysis. C.Since the benefits of these regulations are not in dollar terms, a cost-benefit analysis cannot be done. D.Since the costs are incurred by the government and the benefits are enjoyed by the consumer, such an analysis is meaningless.
D.
Utility measures ____________ A.a consumer's preference for good A compared to good B. B.how responsive a consumer is to changes in prices or income. C.the number of goods or services that consumers can buy with a given level of income. D.the happiness or satisfaction that comes from consuming a good.
positive economics
describes what people actually do. In this case, predictions are testable and, therefore, can be rejected or amended depending on the evidence available.
A.
hat is the difference between marginal values and average values? A.Marginal values show the additional benefit or cost from consuming an additional unit of a good, while average values are the benefit or cost per unit of a good. B.Marginal values show the total benefit or cost from consuming a good, while average values are the total benefit or cost from consuming a good divided by the amount of the good consumed. C.Marginal values show the benefit or cost from consuming one unit of a good, while average values are the benefit or cost from consuming all units of a good. D.Marginal values show the benefit from consuming an additional unit of a good, while average values are the cost from consuming an additional unit of a good. E.Marginal values show the ordinal benefit or cost from consuming an additional unit of a good, while average values are the cardinal benefit or cost from consuming an additional unit of a good.
C.
An indifference curve is the set of bundles that ___________. A.a consumer can purchase with his income. B.a consumer can purchase using all of his income. C.provide an equal level of satisfaction for the consumer. D.a consumer most prefers.
economic agent
An is an individual or a group that makes choices.They make decisions by solving choice problems. Each of the may play multiple roles in the economy for example households, may act as a consumer or worker according to their choice and has an effect on the economy. Economists simplify their analysis by treating these groups as a single decision maker, without worrying about the details of how the different individuals in the group contributed to the decision.
D.
A consumer's satisfaction is maximized when the marginal benefit from the last dollar she spent on one good is equal to the marginal benefit from the last dollar she spent on another good because ___________. A.any shift in consumption toward either good will violate her budget constraint. B.her preferences become distorted and therefore invalid when the marginal benefits per dollar are unequal. C.an inequality between these ratios implies that she has insufficient income to achieve maximum satisfaction. D.the reality of diminishing marginal benefits assures that any shift in consumption toward either good must necessarily make her worse off.
D.
Can two indifference curves intersect? Explain your answer. A.No, intersecting indifference curves violate the Law of Demand. B.Yes, intersecting indifference curves simply imply that a consumer changes her mind from time to time. C.Yes, intersecting indifference curves simply imply that a consumer has difficulty choosing between some bundles. D.No, intersecting indifference curves would imply that a consumer is indifferent between bundles that yield different total benefits
positive economics
Describing what has happened or predicting what will happen, such as predicting changes to the world's population, is referred to as
C. BOTH have policy decisions made by the government
Economics is divided into two broad fields of study: microeconomics and macroeconomics. Microeconomics studies _________, while macroeconomics studies _________. A.money; policy. B.economy-wide phenomena; decisions made by the government. C.a small piece of the overall economy; the economy as a whole. D.issues relating to businesses; choices made by individuals and consumers.
A.
For economists, the "buyer's problem" refers to __________. A.how consumers arrive at a choice as to what to purchase. B.the trouble consumers have in distinguishing high-quality products from low-quality products. C.the insatiable desire of consumers to continually want more. D.the difficulty consumers have in financing their purchases
A.
In a perfectly competitive market, if one seller chooses to charge a price for its good that is slightly higher than the market price, then it will _________. A.lose all or almost all of its customers. B.see no change in its number of customers. C.see a small decrease in its number of customers. D.All of the above are equally likely.
B.
In a perfectly competitive market, sellers _________ and buyers _________. A.cannot charge more than the market price; are able to pay less than the market price. B.cannot charge more than the market price; cannot pay less than the market price. C.are able to charge more than the market price; are able to pay less than the market price. D.are able to charge more than the market price; cannot pay less than the market price.
D.
In equilibrium, everyone ___________. A.benefits by changing his or her own behavior. B.maximizes his or her benefits, so that opportunity costs and trade-offs are eliminated. C.faces a trade-off, such that the individual must give up one thing to get something else. D.simultaneously optimizes, so that nobody benefits by changing his or her own behavior.
B.
Market demand is derived by __________. A.fixing the quantity and adding up the prices that each buyer pays. B.fixing the price and adding up the quantities that each buyer demands. .C.adding up both the prices each buyer pays and the quantities that each buyer demands. D.dividing each buyer's demand by the total number of consumers in the market.
B.
One reason free-riders exist could be that: A.the social cost ensures a strong, enforceable penalty. B.the private benefit exceeds the private cost. C.people often act in the best interest of others. D.the social cost exceeds the private benefit.
C.
Since optimization is used to analyze people's choices and help them improve the outcomes of their choices, its A.positive only. B.normative only. C.both normative and positive. D.neither because it doesn't show people who don't optimize how to improve their well minus being.
A.
The demand curve shows ___________. A.how the quantity demanded responds to changes in the price of the good. B.the possible bundles of goods that can be purchased with a consumer's income. C.how the quantity demanded responds to changes in consumers' income. D.what goods you like compared to other goods and services
C.
The supply curve represents ___________. A.the maximum price buyers are willing to pay to buy an extra unit of a good. B.the maximum price sellers are willing to accept to sell an extra unit of a good. C.the minimum price sellers are willing to accept to sell an extra unit of a good. D.the minimum price buyers are willing to pay to buy an extra unit of a good.
C.
This third principle of economics, supported by the scientific method, is: A.causation. B.optimization. C.empiricism. D.equilibrium.
B.
What is meant by comparative statics? Explain with an example. A.Changes in net benefits when a person switches from one alternative, such as consumption, to another, such as no consumption. B.A change in an outcome, such as consumption, that results from a change in a factor, such as the price. C.Equilibria across multiple markets, such as labor markets, financial markets, and service markets. D.The effect of the best feasible choice, such as consumption, on its marginal cost.
C.
What is meant by holding all else equal and how is this concept used when discussing movements along the demand curve? A.everything else in the economy is held constant, including the price of the good. B.All variables in the model are set to equal values. C.All variables that can affect the demand for the good are held constant. D.All of the above.
A.
When a cost-benefit analysis is done: A.all relevant options must be considered B.it is not considered the same thing as optimization because of the net benefit. C.the results are not useful for normative economic analysis. D.it can only be done with dollars.
prescriptive economic analysis
When economic analysis is used to help individual economic agents choose what is in their personal best interest, it is a type of normative economics and referred to as
A.
Which of the following criteria would most likely influence an optimizing buyer's purchasing decisions? A.highest marginal benefit per dollar spent B.lowest opportunity cost C.lowest price D.highest marginal benefi
A.
Which of the following is common between the supply schedule and the supply curve? A.They give information about the quantity supplied at different prices. B.They give information about the quantity supplied at different time periods. C.They give information about the quantity supplied in different parts of the world. D.They give information about the quantity supplied in a nation.
A.
Which of the following is not a characteristic of a market? A.Markets are physical locations where trading occurs B.Voluntary exchanges between economic agents C.Flexible prices D.There are rules and arrangements for trading
D.
Which of the following is not an important property of an economic model? A.It is based on a theoretical construct. B.It predicts what would happen on average. C.It makes predictions that can be tested with data. D.It predicts actual results over half the time.
B.
Which of the following statements is true if the supply curve is curve shaped (nondashlinear)? A.The price does not affect the quantity supplied. B.It is difficult to expand production the higher the quantity supplied. C.The price and the quantity supplied are negatively related. D.It is easier to expand production the higher the market price.
C.
Which of the following statements would imply positive correlation? A.Countries with lower tax rates have higher productivity. B.Countries with lower tax rates have superior government services. C.Countries with higher tax rates have more government services. D.Countries with higher tax rates have lower productivity.
C.
Why does a demand curve with a constant slope not have a constant elasticity? A.Slope is based on percentage change and elasticity is based on absolute change. B.Slope measures responsiveness and elasticity measures change. C.Slope is based on absolute change and elasticity is based on percentage change. D.Elasticity depends on more variables than does slope.
cost-benefit analysis
is a calculation that identifies the best alternative by summing benefits and subtracting costs, with both benefits and costs denominated in a common unit of measurement such as dollars. In essence, it is weighing the pros and cons of a decision in order to determine what to do, which is what normative economic analysis is all about.
normative economics
is analysis that recommends what an individual or society ought to do. In this case, the town residents may be better off financially, but it will be at the expense of another group, the trucking industry.
