micro test 1 review chap 1, 2, 19

the coffee nook , a small cafe near campus, sells cappucinos for 2.50 and russian tea cakes for 1.00. whats the opportunity cost of buying a cappucino?

2.5 russian tea cakes

An inward shift of a nation's production possibilities frontier can occur due to

a natural disaster like a hurricane

Economists assume that individuals

are rational and respond to incentives

Arlene quits her $125,000-a-year job to take care of her ailing parents. What is the opportunity cost of her decision?

at least 125,000

which of the follow is a positive economic statement? a) the standard of living in the united states should be higher b) the us government should not have bailed out US auto manufactures c) if the price of iphone falls, a larger quantity of iphones will be purchased d) the economic cost of using a factor of production is the alternative use of that factor that is given up

c

markets promote

competition and voluntary exchange

a PPF with a bowed outward shape indicated

increasing opportunity costs as more and more of one good is produced

in 18th century europe, governments gave guilds legal authority to limit production of goods. how did this authority either obstruct or improve the market mechanism?

it obstructed the market mechanism because the guilds actions prevented the forced of demand and supply from coordinatin the self interested decisions of producers and consumers

If the PPF is _____, then the opportunity cost of producing a good or service is constant

linear

the PPF shows the _________ combinations of two products that can be produced in a particular time period with available resources

maximum attainable

the slope of a PPF

measures the opportunity cost of producing one more unit of a good

the highest valued alternative that must be given up to engage in an activity is the definition of

opportunity cost

Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles. These consumers who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that

people respond to economic incentives

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do all of the following except

produce a combination of goods that lies outside its own PPF

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

scarcity

The principle of opportunity cost is that

the economic cost of using a factor of production is the alternative use of that factor that is given up.

Adam Smith's "invisible hand" refers to

the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole

The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of

trade off

a successful market economy requires

well-defined property rights and an independent court system to adjudicate disputes based on the law