microeconomics unit 1

Refer to the diagram. Which line(s) show(s) a positive relationship between x and y?

A, B, and D

Which of the following best illustrates the circular flow model in action?

All of these answers illustrate the workings of the circular flow model.

Which of the following is a correct statement?

Although they are generalizations, economic laws are useful because they allow us to predict and therefore influence or adjust to events.

Which of the following will not cause the demand for product K to change?

a change in the price of product K

Two major virtues of the market system are that it

allocates resources efficiently and allows economic freedom.

When an economist says that the demand for a product has increased, this means that

consumers are now willing to purchase more of this product at each possible price.

"Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfil the output quantities specified in the central plan caused a chain reaction of adverse repercussions on production." This quotation best identifies the

coordination problem under central planning.

An increase in the price of product A will

increase the demand for substitute product B.

Running shoes and staplers are

independent goods.

An economic system

is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.

An economic hypothesis

is a possible explanation of cause and effect.

A normative statement is one that

is based on value judgments.

Answer the question on the basis of the data given in the following production possibilities table. Production Possibilities (Alternatives) ABCDEFCapital Goods543210Consumer Goods059121415 Refer to the table. For these data, the law of increasing opportunity costs is reflected in the fact that

larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods.

The most efficient combination of resources in producing a given output is the combination that

minimizes the cost per unit of output.

If an economy is operating on its production possibilities curve for consumer goods and capital goods, this means that

more consumer goods can only be produced at the cost of fewer capital goods.

The demand for most products varies directly with changes in consumer incomes. Such products are known as

normal goods.

If an economy produces its most wanted goods but uses outdated production methods, it is

not achieving productive efficiency.

"Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is

positive and correct.

An increase in the quantity demanded means that

price has declined and consumers therefore want to purchase more of the product.

The law of supply indicates that, other things equal,

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

If products were in short or surplus supply in the Soviet Union,

producers would not react because no price or profit signals occurred.

n terms of the circular flow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____ market.

product; resource

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.

A production possibilities curve illustrates

scarcity

Graphically, the market demand curve is

the horizontal sum of individual demand curves.

Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived, he discovered that hamburgers were on sale for $1 each, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by

the income effect.

In moving along a supply curve, which of the following is not held constant?

the price of the product itself.

In moving along a given budget line,

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

If a positive relationship exists between x and y,

the relationship will graph as an upsloping line.

Increasing marginal cost of production explains

why the supply curve is upsloping.

Answer the question on the basis of the data given in the following production possibilities table. Production Possibilities (Alternatives) ABCDEFCapital Goods543210Consumer Goods059121415 Refer to the table. A total output of 3 units of capital goods and 4 units of consumer goods Multiple

would involve an inefficient use of the economy's scarce resources.

Answer the question on the basis of the data given in the following production possibilities table. Production Possibilities (Alternatives) ABCDEFCapital Goods543210Consumer Goods059121415 Refer to the table. If the economy is producing at production alternative C, the opportunity cost of the 10th unit of consumer goods will be

⅓ of a unit of capital goods.

The market system's answer to the fundamental question "What will be produced?" is essentially

"Goods and services that are profitable."

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially

"Those most willing and able to pay for them."

Answer the question using the following data, which show all available techniques for producing 20 units of a particular commodity ResourceResource pricesPossible production Techniques#1#2#3#4#5Land$424244Labor312413Capital352312Entrepreneurial Ability231141 In view of the indicated resource prices, the economically most efficient production technique(s) is (are) technique(s)

2 and 4.

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

Firms are better able to attract inputs, as these inputs do not have to share the risk.

Economists use the term "demand" to refer to

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

Refer to the production possibilities curve. At the onset of the Second World War, the United States had large amounts of idle human and property resources. Its economic adjustment from peacetime to wartime can best be described by the movement from point

a to point b.

Answer the question on the basis of the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3, respectively. Production Techniques:IIIIIIIVLabor4325Capital2351 If the price of product A is $0.50, the firm will realize

an economic profit of $2.

(1)Qd(2)Qd(3)Price(4)Qs(5)Qs5040$1070806050960708060850609070740501008063040 Refer to the table. In relation to column (3), a change from column (4) to column (5) would most likely be caused by

an improvement in production technology.

The "after this, therefore because of this" fallacy states that

because event A precedes event B, A is necessarily the cause of B.

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand?

diminishing marginal utility

If a competitive industry is neither expanding nor contracting, we would expect

economic profits to be zero.

If the production possibilities curve is a straight line,

economic resources are perfectly substitutable between the production of the two goods.

The market system

effectively harnesses the incentives of workers and entrepreneurs.

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

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

Economic systems differ from one another based on who owns the factors of production and

how economic activities are coordinated and directed.

"Consumer sovereignty" refers to the

idea that the decisions of producers must ultimately conform to consumer demands.

The production possibilities curve illustrates the basic principle that

if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.

Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the

incentive problem under communist central planning.