Econ 2102 Exam 1

As of 2010, per capita GDP in the United States was approximately

$47,000.

On average, since 1900 U.S. output has grown by roughly ________ percent per year.

3%

Explain the difference between a "change in quantity supplied" and a "change in supply."

A 'change in quantity supplied' refers to a movement along the supply curve because of a change in the price of the good itself. A 'change in supply' refers to a shift of the supply curve. Factors that cause the supply curve to shift include a change in technology, factor costs, other goods, taxes and subsidies, expectations, and the number of sellers.

If a country does not engage in trade with other countries, it is known as

A closed economy.

The best definition of GDP is

A dollar measure of final output produced during a given time period.

Which of the following is a gain from trade?

A higher standard of living for all trading countries

Which of the following events would cause a rightward shift in the market supply curve for automobiles?

A technological improvement that reduces the cost of production

The book Wealth of Nations was written by

Adam Smith in 1776.

A U.S. firm that outsources jobs would be

All of the choices are correct.

Who participates in markets?

All of the choices are correct.

Ceteris paribus, which of the following would generally cause an increase in the demand curve for new automobiles?

An increase in consumers' income.

What is a market surplus, and how does the market attempt to resolve a surplus?

At a price higher than equilibrium, a surplus will occur. There will be pressure on sellers to lower prices to sell merchandise. For example, when a merchant must sell holiday gift wrap at a low price after the holiday, it means that the price was too high immediately after the holiday and this caused an after-holiday surplus. As the price falls, more consumers are willing to buy the item, and fewer sellers are willing to sell the item. The price keeps falling until quantity supplied equals quantity demanded.

Table 3.1 Individual Demand and Supply Schedules In Table 3.1, if the price is $4, the market will

Be in equilibrium.

Specialization in production and then trading with other countries

Change the mix of output for each country and increase total world output.

Based on the information in Table 35.1, assume China and the United States have the same amount of resources with which to produce soybeans and computers and they produce no other goods. The output of computers and soybeans would be greatest if

China specialized in producing soybeans, and the United States specialized in producing computers.

A consequence of the economic problem of scarcity is that

Choices have to be made about how resources are used.

What should happen to the equilibrium price and quantity in a market as a result of a quota on imports?

Equilibrium price should go up, and equilibrium quantity should go down

Table 3.1 Individual Demand and Supply Schedules In Table 3.1, if the price is $2, the market will

Experience a shortage of 22 units.

Per capita GDP is

GDP divided by total population

Comparative advantage in production is achieved by

Having a lower opportunity cost of producing a good relative to that of other countries.

Without trade, a country's consumption possibilities are

Limited to its domestic production possibilities.

People benefit by participating in the market because

Market participation allows individuals to specialize and, with trade, ultimately consume more.

A production possibilities curve indicates the

Maximum combinations of goods and services an economy can produce given its available resources and technology.

A ballet performance had many empty seats. This implies that the

Price of the tickets must have been above the equilibrium price.

The current U.S. economy is based primarily on the production of

Services.

In economics, scarcity means that

Society's desires exceed resources available.

The production possibilities curve illustrates

The limitations that exist because of scarce resources.

Market demand is determined by all of the following except

The number of potential sellers.

Tickets to a sporting event go on sale and sell out almost instantly. This suggests that

The price for the tickets is below the equilibrium price.

Which of the following is a determinant of supply?

The prices of the factors of production.

The fundamental problem of economics is

The scarcity of resources relative to human wants.

The goal of the consumer in a market economy is to use his or her limited income to buy

The set of goods and services that maximizes the consumer's total utility.

Describe the shape of the typical production possibilities curve and explain why it has this shape

The typical production possibilities curve bends or bows outward. It has this shape because opportunity costs increase as society produces more of a good. In order to get more of a particular good, increasing quantities of other goods must be given up. This is known as the law of increasing opportunity costs

The term market mechanism refers to

The use of market prices and sales to determine resource allocation

The United States is capable of producing many goods and services that it imports, but it does not because

We can import those goods at a lower opportunity cost than if we make them ourselves.

Opportunity cost is

What is given up in order to get something else