Macroeconomics 2301 Frank Granack chapter 1,2,3

Which of the following will cause the demand curve for product A to shift to the left?

An increase in money income if A is an inferior good.

Examples of command economies are

Cuba and North Korea.

Ben says that "an increase in the tax on beer will raise its price." Holly argues that "taxes should be increased on beer because college students drink too much." We can conclude that:

Holly's statement is normative, but Ben's is positive.

Other things equal, which of the following might shift the demand curve for gasoline to the left?

The development of a low-cost electric automobile.

Which of the following would most likely increase the demand for gasoline?

The expectation by consumers that gasoline prices will be higher in the future

Which of the following is most likely to be an inferior good?

Used clothing.

Economic systems differ according to which two main characteristics?

Who owns the factors of production and the methods used to coordinate economic activity.

The alternative combinations of two goods that a consumer can purchase with a specific money income is shown by:

a budget line

If two goods are complements:

a decrease in the price of one will increase the demand for the other.

Microeconomics is concerned with:

a detailed examination of specific economic units that make up the economic system.

Economists use the term "demand" to refer to:

a schedule of various combinations of market prices and amounts/quantities demanded.

A surplus of a product will arise when price is:

above equilibrium, with the result that quantity supplied exceeds quantity demanded.

Suppose that Scoobania, which has full employment, can obtain 1 unit of capital goods by sacrificing 2 units of consumer goods domestically but can obtain 1 unit of capital goods from another country by trading 1 unit of consumer goods for it. This reality illustrates:

achieving points beyond the production possibilities curve through international specialization and trade.

Suppose an economist says that "other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:

all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.

The assertion that "there is no free lunch" means that:

all production involves the use of scarce resources and thus the sacrifice of alternative goods.

Specialization—the division of labor—enhances productivity and efficiency by:

allowing workers to take advantage of existing differences in their abilities and skills. avoiding the time loss involved in shifting from one production task to another. allowing workers to develop skills by working on one, or a limited number, of tasks.

If we say that two variables are directly related, this means that:

an increase in one variable is associated with an increase in the other variable.

The invisible hand concept suggests that:

assuming competition, private and public interests will coincide.

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that:

bicycles are normal goods.

The study of economics is primarily concerned with:

choices that are made in seeking the best use of resources

Command systems are also known as:

communism

The slope of a straight line can be determined by:

comparing the absolute vertical change to the absolute horizontal change between two points on the line.

The regulatory mechanism of the market system is:

competition.

Blu-ray players and Blu-ray discs are:

complementary goods.

A shift to the right in the demand curve for product A can be most reasonably explained by saying that:

consumer preferences have changed in favor of A so that they now want to buy more at each possible price.

The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of:

consumer sovereignty.

There will be a surplus of a product when:

consumers want to buy less than producers offer for sale.

If competitive industry Y is incurring substantial losses, output will:

contract as resources move away from industry Y.

The advent of DVDs has virtually demolished the market for videocassettes. This is an example of:

creative destruction.

If X is a normal good, a rise in money income will shift the:

demand curve for X to the right.

he relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____.

direct; inverse

The competitive market system:

encourages innovation because successful innovators are rewarded with economic profits

Private property:

encourages owners to maintain or improve their property so as to preserve or enhance value.

If competitive industry Z is making substantial economic profit, output will:

expand in industry Z as more resources will move to that industry.

A price floor means that:

government is imposing a minimum legal price that is typically above the equilibrium price.

The term "laissez-faire" suggests that:

government should not interfere with the operation of the economy.

The simple circular flow model shows that:

households are on the selling side of the resource market and on the buying side of the product market.

A market is in equilibrium:

if the amount producers want to sell is equal to the amount consumers want to buy.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:

income effect.

A government subsidy to the producers of a product:

increases product supply.

Tennis rackets and ballpoint pens are:

independent goods.

Broadly defined, competition involves:

independently acting buyers and sellers and freedom to enter or leave markets.

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:

inferior goods.

Price floors and ceiling prices:

interfere with the rationing function of prices.

The process of producing and accumulating capital goods is called:

investment

According to economists, economic self-interest:

is a reality that underlies economic behavior.

A market

is an institution that brings together buyers and sellers.

The use of money contributes to economic efficiency because:

it promotes specialization by overcoming the problems with barter.

The French term "laissez-faire" means:

let it be

In constructing models, economists:

make simplifying assumptions.

Economics involves marginal analysis because:

most decisions involve changes from the present situation.

The invisible hand refers to the

notion that, under competition, decisions motivated by self-interest promote the social interest.

scarcity

occurs when the amount people desire exceeds the amount available

The Latin term "ceteris paribus" means:

other things equal.

For economists, the word "utility" means:

pleasure or satisfaction.

The demand curve shows the relationship between:

price and quantity demanded.

The law of supply indicates that, other things equal:

producers will offer more of a product at high prices than at low prices.

Allocative efficiency is concerned with:

producing the combination of goods most desired by society.

Other things equal, if the price of a key resource used to produce product X falls, the:

product supply curve of X will shift to the right.

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of:

purposeful behavior

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as:

rational self-interest because he is attempting to increase his own income by identifying and satisfying someone else's wants.

From society's point of view, the economic function of profits and losses is to:

reallocate resources from less desired to more desired uses.

When an economy is operating under conditions of full employment, the production of more of commodity A will mean the production of less of commodity B because:

resources are limited

An effective ceiling price will:

result in a product shortage.

An effective price floor will:

result in a product surplus.

An improvement in production technology will:

shift the supply curve to the right.

If the price of product L increases, the demand curve for close-substitute product J will:

shift to the right.

Economic profits in an industry suggest the industry:

should be larger to better satisfy consumers' desire for the product.

A leftward shift of a product supply curve might be caused by:

some firms leaving an industry.

The production possibilities curve tells us:

the combinations of two goods that can be produced with society's available resources.

Opportunity costs exist because:

the decision to engage in one activity means forgoing some other activity.

A nation's production possibilities curve might shift to the left (inward) as a result of:

the depletion of its soil fertility due to overplanting and overgrazing.

A fundamental difference between the command system and laissez-faire capitalism is that, in command systems:

the division of output is decided by central planning rather than by individuals operating freely through markets.

In presenting the idea of a demand curve, economists presume the most important variable in determining the quantity demanded is:

the price of the product itself.

If there is a shortage of product X, and the price is free to change:

the price of the product will rise.

In moving along a given budget line:

the prices of both products and money income are assumed to be constant

At the point where the demand and supply curves for a product intersect:

the quantity that consumers want to purchase and the amount producers choose to sell are the same.

economics

the study of the allocation of our limited resources to satisfy our unlimited wants.

When the price of a product rises, consumers with a given money income shift their purchases to other products whose prices are now relatively lower. This statement describes:

the substitution effect.

Productive efficiency refers to

the use of the least-cost method of production.

At the equilibrium price:

there are no pressures on price to either rise or fall.

In a competitive market economy, firms select the least-cost production technique because:

to do so will maximize the firms' profits.

The scientific method is:

used by economists and other social scientists, as well as by physical scientists and life scientists, to formulate and test hypotheses.

The incentive problem under communist central planning refers to the idea that:

workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.

If the demand curve for product B shifts to the right as the price of product A declines, then:

A and B are complementary goods.