Econ (first 4 sets of quizzes)

A decrease in resource costs to firms in a market will result in

a decrease in equilibrium price and an increase in equilibrium quantity.

The gains from trade are

a result of more efficient resource allocation.

Markets move toward equilibrium of supply and demand because of

the actions of buyers and sellers.

If, at the current price, there is a shortage of a good,

the price is below the equilibrium price.

In a market economy, economic activity is guided by

there is less of a good or resource available than people wish to have.

The adage, "There is no such thing as a free lunch," means

to get something we like, we usually have to give up another thing we like.

Comparative statics involves

comparing the old equilibrium and the new equilibrium.

Suppose the government increases the tax on gasoline in order to raise revenue. Since raising the gasoline tax would increase the price of gasoline, the government must be assuming that the

demand for gasoline is price inelastic.

In any market, total revenue is price

multiplied by quantity.

Guns and butter are used to represent the classic societal tradeoff between spending on

national defense and consumer goods.

If Karl Malone (1997 NBA MVP) is a better basketball player and truck driver than Gregory Mankiw (the author of your economics text), which of the following is true?

Karl Malone and Gregory Mankiw may benefit from trade.

Suppose roses are currently selling for $40.00 per dozen. The equilibrium price of roses is $30.00 per dozen. We would expect a

surplus to exist and the market price of roses to decrease.

A worker in Bangladesh can earn $1 per day making cotton cloth on a hand loom. A worker in the United States can earn $100 per day making cotton cloth with a mechanical loom. What accounts for the difference in wages?

Labor is more productive making cotton cloth with a mechanical loom than with a hand loom.

When the local used bookstore prices economics books at $15.00 each, they generally sell 70 per month. If they lower the price to $7.00 each they sell 90. Given this, we know that the elasticity of demand for economics books is

0.34, so this store should raise price to raise total revenue.

figures illustrate the production possibilities available to Barney and Betty with 8 hours of labor in their bakery. According to the graphs shown, if Barney and Betty both specialize in the good in which they have a comparative advantage, total production of bread will be

20 and total production of pies will be 14.

If France is better than Belarus at producing wine, but Belarus is better than France at producing crysta

Belarus should sell crystal to France, and should buy French wine.

Mike has spent $500 purchasing and repairing an old fishing boat, which he expects to sell for $800 once the repairs are complete. He discovers that he needs an additional repair, which will cost $400, in order to complete the repairs. He can sell the boat as it is now for $300. What should he do?

He should complete the repairs and sell the boat.

If the United States decides to trade with Mexico, we know that

Mexico and the United States can both be better off.

The opportunity cost of going to college is

The opportunity cost of going to college is

If a surplus exists in a market we know that the actual price is

above equilibrium price and quantity supplied is greater than quantity demanded.

A minimum wage will

alter both the quantity demanded and quantity supplied of labor.

A supply curve slopes upward because

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

If an increase in income results in a decrease in the quantity demanded of a good, then the good is

an inferior good

Henry decides to spend two hours playing golf rather than working at his job which pays $8 per hour. Henry's tradeoff is

the $16 he could have earned working for two hours.

Regan grows flowers and makes ceramic vases. Jayson also grows flowers and makes vases, but Regan is better at producing both. In this case, trade coul

benefit both Jayson and Regan.

The difference between production possibilities frontiers that are bowed out and those that are linear is that

bowed out production possibilities frontiers show increasing opportunity cost where linear ones show constant opportunity cost.

The demand for salt is price inelastic and the supply of salt is price elastic. The demand for caviar is price elastic and the supply of caviar is price inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt and a tax of $1 per pound is levied on the buyers of caviar. We would expect that most of these taxes will be paid by the

buyers of salt and the sellers of caviar.

Making decisions "at the margin" means that people

compare the marginal costs and marginal benefits of each decision.

with trade a

country's consumption possibilities frontier can be outside its production possibilities frontier.

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

decrease the total revenue of wheat farmers.

The burden of a tax placed on a product

depends on the supply and demand of that product.

A primary function of prices in a market economy is to provide participants with

economic information

The word that comes from the Greek word for "one who manages a household" is

economy

The unique point at which the supply and demand curves intersect is called

equilibrium.

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the demand curve will be

flatter

The midpoint method is used to compute elasticity because it

gives the same answer regardless of the direction of change.

A market supply curve is determined by

horizontally summing individual supply curves.

Economists understand that people respond to

incentives

A price ceiling

is a legal maximum on the price at which a good can be sold.

A price floor

is a legal minimum on the price at which a good can be sold.

In general, a tax burden falls more heavily on the side of the market that is

less elastic

Demand is inelastic if elasticity is

less than 1

A donut shop sells fresh baked donuts from 5 a.m. until 3 p.m. every day but Sunday. The cost of making and selling a dozen glazed donuts is $1.00. Since this shop does not sell day-old donuts the next day, what should the manager do if he still has 10 dozen left at 2:30 p.m.?

lower the price of the remaining donuts even if the price falls below $1.00

Which of the following best defines efficiency?

minimum waste

Suppose that the country of Xenophobia chose to isolate itself from the rest of the world. Its ruler proclaimed that Xenophobia should become self-sufficient, and so would not engage in foreign trade. From an economic perspective, this idea would

not make sense as long as Xenophobia had a comparative advantage in any good.

Which of the following determines a market supply curve but not an individual supply curve?

number of sellers

What you give up to obtain an item is called your

opportunity cost

Chocolate Chip Cookie Dough ice cream would tend to have very elastic demand because

other flavors of ice cream are almost perfect substitutes.

The relationship between price and quantity supplied is

positive, or direct.

The supply of a good is negatively related to the

price of inputs used to make the good.

In a market economy, economic activity is guided by

prices

The signals that guide the allocation of resources in a market economy are

prices

Almost all variation in living standards is attributable to differences in countries'

productivity

Demand is said to be inelastic if the

quantity demanded changes proportionately less than price.

In the case of perfectly inelastic demand,

quantity demanded stays the same regardless of price changes.

Other things equal, when the price of a good rises, the

quantity supplied of the good rises.

A tax placed on the seller of a good

raises the price buyers pay and lowers the price sellers receive.

A marginal change is a

small incremental adjustment.

A minimum wage imposed above a market's equilibrium wage will result in the quantity

supplied of labor being greater than the quantity demanded of labor and unemployment will occur.

Suppose that a tax is placed on DVDs. If the seller ends up paying the majority of the tax we know that the

supply curve is more inelastic than the demand curve.

A tax of $0.10 per bar on the sellers of Snickers will cause the

supply curve of Snickers to shift up by $0.10.

If the number of sellers in a market increases, the

supply in that market will increase.

If sellers do not respond at all to a change in price,

supply must be perfectly inelastic.

If a price ceiling is not binding,

the equilibrium price is below the ceiling.

When evaluating differences or similarities between an increase in supply and an increase in quantity supplied we know that

the former is a shift of the curve and the latter is a movement along the curve.

In economics, the cost of something is

what you give up to get it

Whenever the price of a good changes, there

would be a movement along a supply curve and/or demand curve.