Micro Exam 1

In the economic sense, almost everything is scarce. ____________ of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

A shortage

What is a market failure?

It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost.

Which of the following statements about scarcity is true?

Scarcity refers to the situation in which unlimited wants exceed limited resources

The three fundamental questions that any economy must address are:

What goods and services to produce; how will these goods and services be produced; and who receives them?

What is a black market?

When buyers and sellers come together to participate in illegal activity resulting from government controls.

If an increase in income leads to an increase in the demand for peanut butter, then peanut butter is

a normal good

Private costs

are borne by producers of a good while social costs are borne by society at large

Economists assume that individuals

are rational and respond to incentives

Comparative advantage means the ability to produce a good or services

at a lower opportunity cost than any other producer

When the federal government orders firms to use particular methods to reduce pollution, it is said to be using

command-and-control policies

The difference between the highest price a consumer is willing to pay for a good and the price the consumer pays is called

consumer surplus

Making "how much" decisions involves

determining the additional benefits and the additional costs of that activity

If the Apple Watch and the Samsung Gear S2 are considered substitutes, then, other things equal, and increase in the price of the Apple Watch will

increase the demand for the Gear S2

As women's wages have risen relative to men's wages, the opportunity cost to women of doing housework has __________ than has the opportunity cost to men

increased more

In economics, the term _________ means "additional" or "extra."

marginal

In economics, the term __________ refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.

market

The demand by all the consumers of a given good or service is the ____________ for the good or service

market demand

Pollution is an example of a

negative externality

In economics, choices must be made because we live in a world of

scarcity

Suppose that when the price of strawberries decreases, Simone increases her purchase of whipped cream. To Simone

strawberries and whipped cream are complements

When the price of a good falls, consumers buy a larger quantity because of the _____________ effect and the ____________ effect

substitution; income

A minimum wage law dictates

the lowest wage that firms may pay for labor

The term "property rights" refers to

the ability to exercise control over one's own resources within the confines of the law

Marginal cost is

the additional cost to a firm of producing one more unit of a good or service

By definition, economics is the study of

the choices people make to attain their goals, given their scarce resources

What are property rights?

the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it