ECN204 Chapters 1 - 3 Quizes

"Ceteris paribus" means

"other things constant"

Which of the following is not an economic good? A) A haircut B) Broccoli C) A Sunset D) Education

A sunset

What causes a decrease in demand for a normal good?

Increase of price

Pam graduates from law school and gets a position in a law firm. At the same time the price of hamburger falls while other food prices have stayed the same. She notices that she buys less hamburger than she did before. Is she violating the law of demand?

No, since other things are not held constant, including her income

A manufactured resource such as a building or a machine is an example of which resource?

Physical capital

A movement from one point on the supply curve to another point is

a change in quantity supplied

If a producer experiences an increase in the wage rate, it will lead to

a decrease in supply

The threat of a larger fine for failure to pay income taxes is an example of

a negative incentive to get all people to pay taxes

Production refers to

any activity that results in the conversion of resources into goods and services that can be consumed

Capital goods

are goods used to make consumer goods and services

Economics is a social science that involves the study of how individuals

choose among alternatives to satisfy their unlimited wants

A normal good is one for which

demand increases as income increases

A poll conducted by a national firm finds that most Americans say they care more about safety when buying a car than about fuel efficiency. As a result, a car maker produces a car with many safety features, but it doesn't sell well. This behavior

does not contradict economic theory because economists focus on what people do rather than on what they say

Scarcity

exists in all human societies

Resources are also known as

factors of production

Mary increases her consumption of good X after the price of good Y decrease. For Mary,

good X and good Y are complements

Economics is the study of

how people make choices to satisfy wants

The price of a gallon of gasoline increased from $1.00 to $1.25 while the price of a ride on the city bus increased from 50 cents to 75 cents. The relative price of riding the city bus

increased from 0.5 to 0.6

A person goes to college to become an engineer. This is an example of an

investment in human capital

The market clearing price

is the price which eliminates all excess supplies or excess demands

Wants

is the term used by economists instead of needs because needs are not objectively definable

An increase in quantity demanded of good A can be caused by

lower prices of good A

The study of decision making undertaken by individuals or firms is

microeconomics

An economic theory is also known as an economic

model

The absolute price of a good is its

money price

According to the law of demand

people buy more of a good when the price falls

Scarcity implies that

people must make choices

Economic models relate to

people's behavior

Equilibrium in a market occurs when

quantity supplied and quantity demanded are equal at the market price

Economists assume people behave

rationally

A point inside a production possibilities curve indicates

resources are not being used efficiently

Economists assume people are motivated by

self-interest

Economic growth can be pictured in a production possibilities curve diagram by

shifting the production possibilities curve out

A shift in demand occurs when

the amount demanded of that a good changes at every price

The division of labor refers to

the assignment of different workers to different tasks

If a country increased the production of its capital goods than

the less consumption we can have today, but we will have more in the future

The law of demand includes the statement "other things being equal." These other things include all of the following except

the price of the good itself

The meaning of demand is

the quantities of a good that people will buy at various prices

The "real" price of a good is known as

the relative price of the good

An increase in supply will occur when

the supply curve shifts downward to the right

Wants are

the things people would consume if they had unlimited incomes

Opportunity cost is

the value of the next best alternative which was given up

People always face trade-offs because

they always have more than one use for their time

Macroeconomics is concerned with

total economy of a country

Positive economic analysis is supposed to be

value free

Normative economic analysis involves

value judgments

A surplus exists

when quantity supplied is greater than quantity demanded