ECON2: Chapter 1 & 2
When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer?
"How do we produce the products?"
Example of positive economic statement
"If minimum wages rates rises, then unemployment will rise"
Think of an arrangement or institution that brings buyers and sellers of a good or service together - what are you thinking of?
A market
What is the name given to the development of a new good?
Invention
What is the name given to the highest-valued alternative that must be given up to engage in any activity?
Opportunity cost
In the circular flow model, which of the following refers to markets where goods such as computers or services such as medical treatment are offered?
Product markets
What are copyrights designed to accomplish?
Protect intellectual property rights
In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations", Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon.
The division of labor
Centrally planned economy
The government decide how economic resources will be allocated, for example like North Korea
According to the theory of comparative advantage, specialization and free trade will benefit:
all trading partners who specialize in goods where they have comparative advantage
Ms. Boulware is the best lawyer and the best secretary in town. She has:
an absolute advantage in both jobs.
A product produced in a foreign country and purchased by residents from the home country is called:
an import
In the United States, property rights:
are guaranteed by two amendments to the U.S. Constitution
One of the first steps in deciding whether to complete your education is to:
evaluate the marginal cost and marginal benefit of that decision
In the circular flow model of the economy, ________ are the suppliers of goods and services
firms
Economics:
is concerned with how people respond to incentives.
Absolute advantage is the ability of an individual, firm, or country to:
produce more of a good or service that competitors using the same amount of resources
Factor market
A market for the factors of production (labor, natural resources etc)
___________ goods and services are those bought by businesses to be used to increase efficiency or enhance production
Capital
According to the rationality assumption, people:
Do not intentionally make decisions that would leave them worse off.
Contracts, insurance, patents and accounting rules are:
Inventions that make a market work better
Jim declined to take part in a health study on a free basis but changed his mind after being offered $1000 to participate in the study. Jim's behavior best illustrated which economic principle?
People respond to economic incentives.
A market that meets the conditions of having (1) many buyers/sellers, (2) all firms selling identical products and (3) no barriers to new firms entering the market
Perfectly competitive market
Positive economic statement
Statements of fact that imply no value judgement
Tangible products, like cars and television, are referred to as
goods
If a country has a comparative advantage in the production of a good, then that country:
has a lower opportunity cost in the production of that good
Adam Smith observed that people pursuing their own self-interest in a free market will actually result in the best interest of society as if these actions were guided by a(n):
invisible hand
Economists believe that an individual/firm should continue any activity until
marginal benefit = marginal cost
The United States economy is best classified as a:
mixed economy.
The resources provided by nature and used to produce goods and services are also known as:
natural resources
When nations specialize in their comparative advantage and engage in trade:
overall standards of living increase
When nations specialize in their comparative advantage and engage in trade:
overall standards of living increase.
The stock of computers, factory buildings ang machine tools used to produce goods is knows as:
physical capital
Macroeconomics is concerned with all of the following except:
political party affiliation
The principle of opportunity cost evolves form the concept of:
scarcity
The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the _________ the payoff to devoting additional resources to that activity.
smallet
The role of the entrepreneur always involves:
taking risks
In what type of economy does the government decide how most economic resources will be allocated
Centrally planned economy
Which of the following is critical to the success of the market system?
To allow individuals or firms to have exclusive use of their property
Economics is the study of choice under conditions of:
scarcity