Econ Test 1

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When consumers face rising gasoline prices, they typically

. reduce their quantity demanded more in the long run than in the short run.

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

. the price is below the equilibrium price.

Which of the following is a correct statement about production possibilities frontiers?

An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.

Which of the following is an example of an externality?

Bonnie cannot catch the flu from Bobby because Bobby got a flu vaccine.

The phenomenon of scarcity stems from the fact

Resources are limited

When a society can't produce all the goods and services people wish to have, it is said that the economy is experiencing ...

Scarcity

Which of the following is an example of a positive, as opposed to normative, statement?

When the quantity of money grows rapidly, inflation is a predictable consequence.

Which of the following changes would not shift the demand curve for a good or service?

a change in the price of the good or service

A weaker demand together with a stronger supply would necessarily result in

a lower price.

An increase in supply is represented by

a rightward shift of a supply curve.

The term market failure refers to

a situation in which the market on its own fails to allocate resources efficiently.

The willingness of citizens to pay for vaccination does not include the benefits society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

an externality.

A rightward shift of a demand curve is called

an increase in demand.

If the price of visiting a doctor were fixed below the current price, then we would expect

an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.

An economic theory of international trade that is based on the assumption that there are only two countries trading two goods

can be useful in helping economists understand the complex world of international trade involving many countries and many goods.

The production possibilities frontier is a graph that shows the various combinations of output that an economy

can produce

Making the rational decision at the margin means that people

compare the marginal benefits of each decision

A decrease in the price of a good will

decrease quantity supplied.

Two goods are substitutes when a decrease in the price of one good

decreases the demand for the other good.

Which of the following events will definitely cause equilibrium price to rise?

demand increases and supply decreases

If a paper factory does not bear the entire cost of the pollution it emits, it will

emit too much pollution.

The terms equality and efficiency are similar in that they both refer to benefits to society: however they are different in that ...

equality refers to a uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources

In the simple circular-flow diagram, the participants in the economy are

households and firms.

In general, elasticity is a measure of

how much buyers and sellers respond to changes in market conditions.

Warrensburg is a small college town in Missouri. At the end of August each year, the market demands fast food in Warrensburg

increases

Two goods are complements when a decrease in the price of one good

increases the demand for the other good.

Factors of production are

inputs into the production process

Where can an economy not produce?

outside its production possibilities frontier

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

people face trade offs

When drawing a demand curve,

price is on the vertical axis and quantity demanded is on the horizontal axis.

A market demand curve shows how the total quantity demanded of a good varies as

price varies

The price elasticity of demand measures how much

quantity demanded responds to a change in price.

The market demands curve

represents the sum of the quantities demanded by all the buyers at each price of the good.

Production possibilities frontiers are usually bowed outward. This is because

resources are specialized; that is, some are better at producing particular goods rather than other goods.

A technological advance will shift the

supply curve to the right.

If something happens to alter the quantity demanded at any given price, then

the demand curves shifts.

Which of the following would likely be studied by a macroeconomist rather than a microeconomist?

the effect of an increase in the minimum wage on an economy's overall rate of unemployment

In the circular-flow diagram,

the factors of production are labor, land, and capital.

If an economy is producing efficiently, then

there is no way to produce more of one good without producing less of another good.

When an economy is operating at a point on its production possibilities frontier, then

there is no way to produce more of one good without producing less of the other.

The opportunity cost of an item is

what you give up to get that item

The law of demand states that other things equal,

when the price of a good falls, the quantity demanded of the good rises.


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