Econ Test 1 (FINAL REVIEW)

Production-possibilities curves demonstrate that:

Producing more of one good implies a reduction in the potential production of another good.

The fundamental problem of economics is:

The scarcity of resources relative to human wants.

which of the following will occur as the price of a good decreases?

the quantity demanded for that good will increase.

The price of a commodity in terms in another commodity is

the relative price

If an economy experiences increasing opportunity costs with respect to two goods, then the production-possibilities curve between the two goods will be:

Bowed outward

True or False, If the price of a good rises, quantity demanded of the good decreases and the demand curve shifts towards the origin as long as supply is static.

False

True or False, an increase in demand shifts the demand curve to the left, closer to the price axis.

False

true or false If two goods, J and K, are compliments when quantity demanded of J increases, the demand for K increases

False

Capital, as economists use the term, refers to:

Final goods that are used to produce other goods and services.

Determinants of Supply

Future expectations Production costs Advancement of technology Number of sellers Price of Similar Goods

If an economy is producing on its production possibilities curve, then producing:

More of one god implies producing less of another good.

which component of a market system conveys information about what is relatively scarce and what is relatively abundant?

Prices

Problems with Price Ceilings

Shortages

In economics, scarcity means that:

Society's desires exceed the wants-satisfying capability of the resources available to satisfy those desires.

Problems with Price Floors

Surpluses

Determinants of Demand

Taste and Preference Income Price of related goods Number of buyers Expectation of future

Opportunity cost is:

The alternative that must be given up in order to get something else.

A point on a nation's production-possibilities curve represents:

The full employment of resources to achieve a particular combination of goods and services.

To an Economist, scarcity means:

There are not enough resources available to satisfy all our desires.

True or False, a decrease in demand shifts the demand curve leftward towards the origin, while a decrease in quantity demanded involves a movement upward along a particular demand curve.

True

true or false if J and K are compliments an increase in the price of J causes, the demand for K to rise

True

Overtime we use scarce resources in one way:

We forgo the opportunity to use them in other ways.

Economics is the study of how:

best to use society's scarce resources.

what causes movement along a supply curve?

a change in the price

an increase in quality demanded is caused by

a decrease in the price of the good

Suppose that short skirts that were fashionable in the 1990s become unfashionable in the late 2000s. If other factors were held constant, then there would be

a leftward shift in the demand curve

any improvement in overall production technology that permits more output to be produced with the same level of inputs causes

a rightward shift of the supply curve so that more is offered at each price

an increase in demand is shown graphically by

a shift of the demand curve to the right

If the demand of a good is inversely related to income, it must be

an inferior good

The law of demand states that

at lower relative prices, a larger quantity of a good will be purchased than at higher relative prices.

Last year there were 6 pizza shops in town. This year there are only 4. other things equal, the decrease in the number of suppliers will

cause a decrease in the quantity supplied at each price

If price increases and the quantity purchased increases, we know that

demand increased

here's what we know about last year's weekly demand for 2-night DVD rentals in the village of harmony: When P=$3, Qd=100; at P=$5, Qd=75; and when P=$7, Qd=50. This year the village population has increased by 25%. What impact is this most likely to have?

each individuals demand curve for DVD rentals will shift to the left.

Price floors are designed to

establish a minimum allowable price

Sarah gets a salary increase of 20 percent. Before her raise, she purchased 5 pounds of hamburger and 1 pound of steak a month. after her raise, she consumes 2 pounds of hamburger and 3 pounds of steak a month. If everything else is held constant, we know that...

hamburger is an inferior good and steak is a normal good

The meaning of demand is

how badly someone wants a good

If there is a decline in the price of milk, an input in the production of ice-cream, then there will be an

increase in the supply of ice-cream and a rightward shift of supply curve.

A fundamental principle in demand analysis is that a change in price leads to

movement along the demand curve

The law of demand is based on the observation that

people buy more more of a product when the price falls.

If goods X and Y are substitute goods, then an increase in the price of Y, other things constant

results in a decrease in the quantity of Y consumed, but increases the demand for X.

The law of demand includes that statement "other things being equal." These other things include all of the following

the price of related goods, incomes, and tastes

If more buyers came into the market for a good, we would expect to see the market demand curve

shift outward to the right

price ceilings cause

shortages

a demand curve

slopes down because of the inverse relationship between price and quantity demanded.

Suppose that the equilibrium price of gasoline has increased, while the equilibrium quantity of gasoline has fallen. Also either demand changed or supply changed, but not both. Which has changed and how?

supply decreased

suppose that because of cold weather in brazil, a significant portion of the coffee crop has been lost. this statement means that

the amount of coffee beans at various prices will decline

an increase in price will lead to an increase in quantity supplied. This statement is

the law of supply

the direct relationship between changes in price and changes in quantity supplied is

the law of supply

Adding the quantities demanded by all consumers at every price will yield

the market demand curve

the only variable considered when we move along the demand curve is

the price of the good itself.

Suppose that the price of sugar, an input used to produce cereal, rises. as a result

the supply curve for cereal would shift to the left.

if the government imposes a per-unit tax on sales of an industry's product, then we would expect

the supply curve in that industry would shift to the left

an increase in demand and a decrease in supply will lead to an

unambiguous increase in price, but the effect on quantity is indeterminate