Economics
Which is the best example of specialization?
A high school math teacher who teaches only calculus.
Which of the following statements is FALSE about the demand curve?
An increase in demand shifts the demand curve to the left, closer to the price axis.
Which of the following statements is FALSE?
An increase in income causes the demand curve for an inferior good to shift to the right.
Which of the following is an example of the law of demand?
An increase in the price of gasoline is followed by a reduction in the amount of gasoline consumed.
Which of the following best summarizes the importance of business failure and the idea of "creative destruction in the market economy"?
Business failure allows the assets and resources from that business to move into other areas where they will be more productive.
Which of the following illustrates the law of demand?
College enrollment increases when federal tuition grants are readily available to students.
Which of the following is TRUE about comparative advantage?
Comparative advantage explains trade within nations and among nations.
Demand applies to which of the following?
Criminal activity Fast food Labor market All of the above
Which of the following is true of incentives?
Different people are motivated by different incentives.
Assume that Economy A and Economy B have the same resources, but that individuals in Economy A have specialized whereas individuals in Economy B have not. Given this information, you can determine that
Economy A will have a higher output than Economy B.
Which of the following is an example of a positive economic statement?
If payroll taxes are raised, then the Social Security crisis will be resolved.
Why specialize?
It usually increases productivity.
John has an economics test tomorrow. He must study and has planned the rest of his day so that he can fit some study time in. He has decided to go to the gym and then study for several hours. Which of the following statements is true?
John's decision on how to allocate his time is consistent with the rationality assumption since the decision is intended to make him better off.
Which of the following will cause a movement along the demand curve instead of a shift of the demand curve?
Tastes and preferences Expectations of the future price of a good Income none of the above
If bagels and croissants are substitute goods, which of the following is likely to occur if the price of bagels has decreased?
The demand curve for croissants shifts to the left.
Tiger Woods, a professional golfer, pays a garage mechanic to change the motor oil of his car even though he can do the work himself. Which of the following best explains why Tiger Woods does not change the oil himself?
The opportunity cost of changing oil is higher for Tiger Woods than for the garage mechanic.
Sara looks into her closet and discovers a pair of like-new shoes she no longer wears because they give her blisters. From the economist's perspective, was Sara behaving rationally when she bought those shoes?
Yes, as long as Sara didn't intentionally purchase blister-causing shoes.
Under a system of private property, could a 60-year-old owner of a tree farm benefit by planting and caring for a crop of Douglas firs, most of which will not be ready to harvest for 50 years?
Yes, the farmer will benefit from increased valuation of the land as the trees grow and the harvest moves closer.
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.
A fundamental principle in demand analysis is that a change in price leads to
a movement along the demand curve.
If an increase in the incomes of people who live in the Los Angeles area leads to an increase in the demand for season tickets for games played by the Los Angeles Lakers professional basketball team, then these season tickets are
a normal good.
Suppose an individual experiences a permanent increase in income. As a result of this increased income, further assume that the individual eats dinner at restaurants more frequently each month. This information suggests that dinners at restaurants for this individual are
a normal good.
The demand curve is downward sloping because
a reduction in the price of a good causes individuals to increase their purchase of that good.
If a person can make $70,000 as an accountant, $60,000 as a chef, $20,000 as a mechanic, and nothing as an opera singer, he or she has a comparative advantage in
accounting.
The term ceteris paribus means
all other things remaining constant or equal.
Division of labor increases the output of society by
allowing resources to specialize in the tasks for which they have a comparative advantage.
If the price of Pepsi increases, then there will be ________ of Pepsi.
an increase in the quantity supplied
According to the law of demand, an increase in the price of a good causes
an upward movement along the demand curve for that good.
The ability to produce a good at a lower opportunity cost that others is known as
comparative advantage.
When a country or a region of a country specializes in producing the product that has the lower opportunity cost compared to another country or region, it is practicing
comparative advantage.
If the price of personal computers were to rise, then the demand for printers would decrease because personal computers and printers are
complementary goods.
The pursuit of profit
creates the incentive to use resources efficiently.
The trade-off between current consumption and the production of capital goods is also a trade-off between
current consumption and future consumption.
Economic theory assumes people's actions generally follow
from an individual comparisons of expected marginal costs and benefits of the action.
Generally, specialization leads to
greater productivity.
Sarah gets a salary increase of 20 percent. Before her raise, she purchased 5 pounds of hamburger and 1 pound of beef stew a month. After her raise, she consumes 2 pounds of hamburger and 3 pounds of beef stew a month. If everything else is held constant, we know that
hamburger is an inferior good and beef stew is a normal good for Sarah.
Economists develop models to
help us understand economic phenomena in the real world.
Which of the following ways to recruit soldiers utilizes incentives?
higher salaries
Profit is a measure of
how well a seller has served her customers.
If two goods are substitutes, then
if the price of one good falls, the demand for the other good falls also.
An improvement in technology in the production of computers would
increase the supply of computers.
A per-unit government subsidy to producers of a good tends to
increase the supply of the good.
When individuals increase their personal wealth through production and exchange, they
increase the wealth of others.
Specialization and the division of labor typically result in
increased output.
Under a pure price system, the decision of resource allocation is made by
individuals who own the resources.
When a country specializes and trades with other countries, it is most likely that it specializes in goods for which
it has a comparative advantage.
In economic analysis, people's resources are
limited and their wants are unlimited.
Economics is an empirical science, which means that economists
look for evidence to determine whether the model is useful or not.
A simplified representation of the real world that is used to explain economic phenomena is a(n)
model.
Other things being equal, the relationship between price and quantity supplied is
positive.
Incentives are
potential rewards available if a particular activity is undertaken.
According to the law of supply,
producers provide less of a good when the price decreases.
In economics, the concept that individuals are motivated by self-interest and respond predictably to opportunities for gain is known as
rational self-interest.
When people donate money to a charity, they behave
rationally if the act gives them satisfaction.
In economics, items that are used to produce goods and services are known as
resources.
In a free market economy, consumption and investment decisions
shape the future course of the national economy.
If more buyers came into the market for a good, we would expect to see the market demand curve
shift outward and to the right.
Graphically, a market demand curve is found by
summing the quantities demanded by all individuals at each price.
If a CEO can type faster than her secretary, then
the CEO should still continue performing CEO duties since the CEO has a comparative advantage in management, and the secretary should continue typing.
Suppose that because of unseasonably cold weather in Florida, a significant portion of the orange crop has been lost to freezing temperatures. This statement means that
the amount of oranges available at various prices will decline.
When nations specialize in their areas of comparative advantage and then trade with the rest of the world, the result is that
the average standard of living in the world will go up.
If Apple's iTunes Music Store increases its "fee" for its music downloads, the law of demand predicts that
the number of iTunes music downloads would decrease.
The only variable that can affect a movement along the demand curve is
the price of the good itself.
A movement along a supply curve is induced by a change in
the product's own price.
In economics, "demand" refers to
the quantities of a good that people will buy at various prices.
Sugar is an input used to produce cereal. Suppose that the price of sugar rises. As a result,
the supply curve for cereal will shift to the left.
In the long run, the number of firms in an industry may change. If the number of firms increases, then
the supply curve will shift outward to the right.
Other things being equal, an increase in wages paid to workers in the steel industry will cause
the supply of steel to decrease.
A possible rational reason why older people, on average, show less interest in learning how to use new technologies is because
they have fewer years to gain a return from learning how to use new technologies.
Fashion trends are a nonprice determinant for demand because
they influence people's tastes and preferences in clothing.
Comparative advantage is
when a country can produce a good at a lower opportunity cost compared to other countries.
According to the law of demand, other things being equal,
when the price a good goes up, then people buy less of that good.