Graded Randomized Exam 1 (Ch. 1,2,3)
To say that economics is a way of thinking about how people make rational decisions means that people:
respond to incentives.
An increase in technology:
shifts the PPF curve outward.
Rational behavior:
requires people to consider the total costs and total benefits of their decisions.
If the supply curve shifts leftward, the:
price in the market will increase.
In the market economy, the primary channel through which buyers and sellers communicate with each other is:
price.
The market economy is often called the price system because:
prices provide information for both buyers and sellers.
When goods are produced at the lowest possible cost, an economy is said to have achieved:
production efficiency.
A market economy is also known as a _____ economy, and decisions are made by _____.
socialist; private individuals
Markets tend to be efficient because:
people respond to incentives.
A good is a normal good if:
the demand curve shifts out if income goes up.
Economists refer to the payment to labor as:
wages.
Because of scarcity:
we face tradeoffs in nearly every choice we make.
Markets differ in:
Markets differ in all of these. - Geographical Location - Products Offered - Size
___________________ costs include the time and money that could have been spent on another highly valued activity
Opportunity
Comparative advantage exists when one country can produce:
a good at a lower opportunity cost than can another country.
A demand schedule is:
a list of prices and the quantities demanded at those prices.
A production possibilities frontier with constant opportunity cost is considered:
a straight line.
It must be recognized that private markets:
can fail.
If a consumer buys a set of headphones at the same time as she buys an MP3 player, these two products are MOST likely:
complementary goods.
In the study of economics, the goals of efficiency and equity are often:
conflicting with one another.
Investment in human capital refers to:
education, on-the-job training, and professional training activities.
The law of supply states that if prices:
fall, producers will offer fewer products to the market.
An increase in demand causes the equilibrium price to __________ and the equilibrium quantity to ____________.
fall; rise
When consumers have no choice but to buy from one firm (local utility, etc.):
government regulation is usually used to protect consumers.
A shift to the right of the demand curve could be caused by a(n):
increase in income if the good is normal.
An item whose demand rises as people's incomes fall is known as a(n) ________ good.
inferior
The graph shows the PPF for goods A and B and X marks a combination that:
is unobtainable with current resources.
If an economy is producing at a point inside its PPF:
it is possible to produce more of one good without sacrificing some of the other good.
Economists generally define institutions as all of these, EXCEPT as a:
legal system that enforces contracts and laws.
Resources are:
limited but wants are unlimited.
In a ____ economy, individuals and firms own most resources, and in a _____ economy, the government controls most resources.
market; planned
Institutions that bring buyers and sellers together so they can interact and transact with each other are called:
markets.
Markets provide an incentive structure to:
maximize efficiency.
There is a(n) _____ relationship between price and quantity demanded.
negative
The conversion of resources to satisfy wants is described as:
production.
The theory of comparative advantage says that countries:
should export those goods they can produce at a lower opportunity cost than another country.
Supply is defined as:
the maximum amount of a product that sellers are willing and able to provide for sale over some time period at various prices, holding all other relevant factors constant.
When government policies are being designed:
there is usually a tradeoff between equity and efficiency.
Production levels to the right of the PPF are:
unattainable.
What are the three basic economic questions each society must answer?
what to produce; how to produce; for whom to produce