Chapter 1-2 Study Guide Economics

The country of Lauronia is currently at full production of sweatshirts and applesauce. What would it look like on the production possibilities frontier if production of one of those products dropped while the production level of the other product stayed the same?

A decrease in total production is represented by a movement inward from the curve.

Although iPhones are designed in California, they are assembled in China to take advantage of lower labor costs. This is an example of:

A person is trying to save money production efficiency occurs when goods are produced at lowest cost

As you move from left to right along a production possibilities frontier that is bowed out from the origin, the opportunity cost of producing the product on the horizontal axis:

A production possibilities frontier that is bowed out from the origin illustrates increasing opportunity cost.

Which types of economies must answer the three basic questions?

All economies have to answer the three basic economic questions. How that is done depends on who owns the factors of production (land, labor, capital, and entrepreneurship) and how decisions are made to coordinate production and distribution.

On July 8, 2010, LeBron James, a star in the National Basketball Association, announced that he was going to sign with the Miami Heat. The Heat was not the team that was willing to pay the most for LeBron's services, but they acquired him anyway. This is a violation of:

Allocative efficiency occurs when individuals who desire a product the most ( as measured by their willingness to pay) to get those goods and services You can also think about Antonio Brown signing with the patriots Think about people willing to pay

Which of the following is an example of a macroeconomic topic?

Always think about growth Increased economic growth causes the average income of workers to rise.

Assume that the population of Lauronia increased and so did its total production. What would this look like on a graph of the production possibilities frontier?

An increase in economic growth is represented by a new curve that is to the right of the original curve.

Hyundai's plant in Ulsan, South Korea, is thought to be the largest car factory in the world. It has an annual capacity of 1.86 million cars. The factory is an example of:

Capital think about manufactured cars or vehicles

What has happened to economic growth and the standard of living in the United States over the past 50 years?

Economic growth in the United States slowed over the second half of the 20th century, but the standard of living has nonetheless risen dramatically.

In the late 1800s, Cecil Rhodes took the money he made from renting water pumps to miners and used it to buy up the claims of small mining operations. In time, and with the help of funding from the Rothschild family, he formed De Beers, which would become the largest diamond mining company in the world. Which of the following best describes the role Cecil Rhodes played for De Beers?

Entrepreneurial ability describes a person's ability to combine land, labor, and capital to produce goods and services.

Tax cuts are a contentious political issue. Some politicians argue that tax cuts tend to benefit people with higher incomes more than those with lower incomes. An economist would say that these opponents to tax cuts are concerned with the ___ of the tax cuts.

Equity deals with not being mean you need to treat things fair

Positive questions are questions about how things ought to be.

False

Scarcity occurs when an individual's resources exceed his wants.

False

Economic growth occurs in Lauronia because of an increase in the amount of machines in the country. Having more equipment made the workers more productive. This is an example of which cause of economic growth?

Increased capital accumulation throughout the economy, usually brought about by investment, would lead to an increase in productivity.

In order to teach in the state of Colorado, Kendra needed a teaching certificate. This certification is an example of:

Labor includes the mental and physical talents of individuals that are used to produce products and services. Human capital is the training and education which improve workers' ability to produce.

Macroeconomics is the study of broader issues in the economy. Unemployment and recessions are broader issues that affect the entire economy.

Macroeconomics deals with fluctuation on the market and hard recessions

Markets are __________ because people make rational choices.

Markets are efficient because people make rational choices.

Which of the following production possibilities frontiers represents an improvement in the technology used to produce microcomputers?

N/A

Suppose you decide to go to a concert. It is on a day that you would not have worked anyway, but your daily earnings are usually $80. Your friend gave you the concert ticket, which would have cost you $40, and you can resell it for $40. You can expect to spend $40 on food and beverages. What is the opportunity cost of going to the concert?

Opportunity costs refer to what you give up to do something or purchase something. In this case, it is the food and what you could have sold the ticket for.

During World War II the production of synthetic rubber increased dramatically in response to high natural rubber prices and the unstable supply of natural rubber. The new substitute allowed industries that used rubber, such as the tire industry, to achieve what type of efficiency?

Production efficiency means that goods are produced at their lowest resource (opportunity) cost. Thus, industries that use rubber will now be able to produce goods at a lower opportunity (resource) cost.

If Canada has an absolute advantage in maple syrup production and hockey puck production over Saudi Arabia, then which of the following is true?

Saudi Arabia's production possibilities frontier for maple syrup and hockey pucks will be smaller than Canada's.

Mia is a little more efficient at mowing the lawn than Andrew. She is a lot more efficient than Andrew at doing laundry. Which task should Andrew specialize in completing on a regular basis?

Specialization leads to better outcomes when people (or countries) engage in the economic activity in which they have the greatest advantage over others. While Mia is better than Andrew at mowing, it is still the task he is most efficient at.

Which of the following can lead to gains for all parties as long as exchange is possible and those involved trade in a mutually beneficial manner?

Specialization occurs when people engage in the economic activity so basically all is well for others.

Suppose that the United States can produce five times more oil and 10 times as many microcomputer chips as Mexico. Would the United States trade with Mexico?

The United States would have the absolute advantage in both products, but (compared with Mexico) its advantage in producing microcomputer chips is greater than its advantage in producing oil. Therefore, the United States would have the comparative advantage in producing microcomputer chips and Mexico would have the comparative advantage in producing oil.

If a country chooses to produce fewer consumption goods and more capital goods, its future production possibilities frontier will:

The increased capital would provide for greater future production, which would shift the production possibilities frontier to the right.

Which statement is NOT a macroeconomic issue?

The production of automobiles decreased last year.

Tony just purchased a set of skis on craigslist. Several people contacted the seller, but Tony offered more money. This is an example of:

Think about people willing to pay

Many of the decorative items made in China are hand-painted. China has a large labor supply and workers earn relatively low wages. Which of the following basic economic questions does this illustrate?

This scenario illustrates how to produce, which in China's case is using its relatively cheap labor.

Normative questions involve societal beliefs on what should or should not be done.

True

A person buying a house will likely have it inspected. Which of the following key ideas of economics can explain this behavior?

We need to make information on what we are buying whether it's an house or a rational decision information is important to prevent market failure

private markets

While not perfect, the best mechanisms known today for efficiently providing goods and services are private markets.

Paying a salesperson more for increased sales is an example of:

an incentive.

Bolivia has about 50% of the world's reserves of lithium. It is also a major producer of zinc. Suppose that Bolivia produced only those two goods and that its linear production possibilities frontier had the following end points: 20,000 tons of lithium and zero zinc, or 10,000 tons of zinc and no lithium. A combination of 12,000 tons of lithium and 5,000 tons of zinc would be:

attainable, but not efficient

Government intervention in the market is helpful when:

consumers are forced to buy from just one firm.

The observation that highly productive countries have taller populations is an example of:

correlation

Economists use "stylized" models in their approach to many economic issues, which are models that are:

duh simple By stylized, we mean that economists boil down facts to their basic relevant elements and use assumptions to develop a stylized (simple) model to analyze the issue.

Markets are __________ because people make rational choices.

efficient

If we classify people by income level, which group or groups must deal with scarcity?

everybody do we not all deal with oil issues

Which of the following is an example of a microeconomic topic?

how a gas station changes pricing in response to a new competitor

Which of the following is an example of a microeconomic topic?

how a gas station changes pricing in response to a new competitor firms industries and business

A basketball player's height, quickness, strength, and shooting accuracy can be considered:

labor

A paper producer discharges waste into a nearby river, which is harmful to the environment. Government regulation might be used to deal with this problem. It is likely that the governmental action would result in:

less paper being produced

The field of economics that is concerned about the broader issues in the economy, such as inflation, unemployment, and national output of goods and services is called:

macroeconomics

Lindsay is an inventory planner at a local retailer. She is currently making a decision as to how many units she should stock in the store based on projected demands of consumers. She has determined that she should keep 200 units in the store because an additional unit would not sell. This is an example of:

marginal analysis deals with inventory

The field of economics that focuses on decision making by individuals, businesses, industries, and governments is called:

microeconomics

Professor Green teaches environmental economics at your university. You find out that the professor has also written books about labor markets. It is most likely that your professor is:

microeconomics deals with the environment grass, labor markets, and etc.

Opportunity cost can also be defined as the __________ cost of a decision.

opportunity cost definitely deals with total DO NOT PICK TIME on the test.

Because, in most cases, land, labor, and capital cannot be easily shifted from producing one good or service to another:

opportunity costs increase with the increased production of most goods and services.

Discounted matinee movie ticket prices demonstrate that:

people follow incentives.

Suppose that you knew that in the country of Worthland the productive resources are owned by the state and that most economic decisions are made by its central government. This country has a(n):

planned it's basically owned by the state

Tom is a purveyor of hot tubs. When a customer purchases a hot tub, Tom's employees deliver and install the hot tub at the buyer's home. Tom recently purchased new better-mileage trucks in order to bring down his cost of delivering hot tubs. What type of efficiency are the new trucks allowing Tom's business to achieve?

production efficiency

A nation's standard of living is primarily a function of:

productivity

When we have a warped/bowed outward production possibility frontier it is due to which of the following?

specialized resources

Scarcity is BEST defined as when:

unlimited wants exceed limited resources