ECO: Final Exam
Which of the following best characterizes the circular flow of income?
Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.
in a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of
Buyers and sellers
Philosophers draw a distinction between positive statements, which describe the world as it is, and _______, which describe how the would should be?
Normative statements
If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers?
Price of competing products
The term _____ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.
Price taker
A _____ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price
Prisoner's dilemma
Poverty is measured by the number of people who fall below
all the above are correct
The term "ceteris paribus" means that
all variables except those specified are constant
If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to :
Rise and the equilibrium quantity to stay the same.
The The greater inequality of wages can be viewed as a sign that
demand for skilled labor is increasing faster than supply.
The law of _______ explains why people and societies rarely make all-or-nothing choices.
diminishing marginal utility
A ______ is a direct payment form a firm to its shareholders
dividend
Marginal thinking is best demonstrated by:
choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.
Negotiations between unions and a firm or firms is called
collective bargaining
Which of the following has become a common condition for allowing a merger of large firms?
commitment to sell off certain parts of the firms
The four-firm ______ measures the percentage share of the total sales in the industry that is accounted for by the largest four firms
concentration ratio
When demand is elastic:
consumers are not very responsive to changes in price.
In a command economy, the ______ either makes most economic decisions itself or at least strongly influences how the decisions are made
government
A perfectly elastic supply curve is
horizontal
Of all the available policies to reduce discrimination by race and gender, the costliest is likely to be
improved educational opportunites
Which of the following industries is the least likely to employ a unionized labor force?
finance, insurance, and real estate
The _____ of an investment is determined by how easy it is to sell an asset at any given time.
liquidity
When is it costly or impossible to exclude someone who hasnt paid to use a particular good from using it, then that good is classified as being
non-excludable
In many cases, it is reasonable to refer to the _______ as the price
opportunity cost
Which of the following will provide an investor with a legally valid claim of partial ownership of a firm?
ownership of a stock
If a perfectly competitive firm is a price taker, then
pressure from competing firms will force acceptance of the prevailing market price
An individual whose income level is just above the poverty line would most likely be classified as being a member of the
near-poor
If a firm's revenues do not cover its average variable costs, then that firm has reached its
shutdown point
A highly innovative firm operating in a competitive market will usually have
sometime before competitors catch up to its innovations
If an industry is perfectly competitive or monopolistically competitive, then the government has relatively little reason for concern about
the extent of competition
If a rise in incomes is the same proportion for both low-income and high-income workers
then poverty will fall and inequality will remain unchanged
According to the law of supply,
there is a direct relationship between price and the quantity supplied
Many states do have ___________, which impose an upper limit on the interest rate that lenders can charge.
usury laws
Firms operating in a market situation that creates ______, sell their product in a market with other firms who produce identical or extremely similar products.
Perfect Competition
As the ______ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.
Technology
Idaho farmers can sell a large quantity of their potato crop as they wish,
provided each is willing to accept the prevailing market price
The imposition of a price ceiling on a market often results in
a shortage
Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect....
Andy's demand for beer to increase
The demand curve as perceived by a perfectly competitive firm is:
flat
_______ occur when the marginal gain in output diminishes as each additional unit of input is added.
Diminishing Marginal Returns
Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call
A monopolistic competition
_______ arises when firms act together to reduce output and keep prices high
A cartel
Which of the following would most likely shift the production possibilities curve inward?
A decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time
A business __________ occurs when, for practical purposes, one firm purchases another.
Acquisition
___________ involves active efforts to improve the job opportunities or outcomes of minority groups or women
Affirmative action
Which of the following will not result in a leftward shift of the market demand curve for labor?
An increase in wage rate
__________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry
An oligopoly
_________ give government the power to block certain mergers, and in some cases, to break up large firms into smaller ones
Antitrust laws
_______ tells a firm whether it can earn profits given the price in the market
Average cost
Why is there scarcity?
Because our unlimited wants exceed our limited resources
In countries like_______ the command economy predominates
Cuba and North Korea
Which of the following is most unlikely to present a barrier to entry into a market?
Deregulation
The term ______ describes a situation where the quantity of output rises, but the average cost of production falls.
Economies of scale
a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.
Economies of scale
A price cut will increase the total revenue a firm receives if the demand for its product is:
Elastic
The _____ is the quantity where the quantity demanded and the quantity supplied are equal at a certain price.
Equilibrium quantity
If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
Goods X and Y are complement goods.
Improvements in the productivity of labor will tend to:
Increase wages
Taxes on goods with ____ demand curves will tend to raise more tax revenue for the government than taxes on goods with ____ demand curves
Inelastic; elastic
Which of the following best describes a monetary policy tool?
Interest rates
Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?
International trade
A ________ is an organization of workers that negotiates with employers as a group over wages and working conditions
Labor union
Since Baltimore passed the first ______ in 1994, several dozen cities enacted similar laws in the late 1990's and into the 2000s.
Living wage law
Which of the following is most likely to be a monopoly?
Local electricity distributor
The term ________ is used to describe the additional cost of producing one more unit.
Marginal cost
________ refers to the additional revenue gained from selling one more unit
Marginal revenue
___________ arises where many firms are competing in a market to sell similar but differentiated products
Monopolistic Competition
Many economists believe that the trend toward greater wage inequality across the U.S economy was primarily caused by:
New technologies
Are markets always in equilibrium?
No, but if there is no outside interference, they tend to move toward equilibrium.
A public good is a good that is _________ and _________, and thus is difficult for market producers to sell to individual consumers.
Non-excludable and non-rivalrous
In order for a good to be classified as ________. when one person uses the good, others are also able to use it.
Nonrivalrous
Attending college is a case where the _____________ _______ exceeds the monetary cost.
Opportunity cost
Roughly speaking, the patent law covers ______ and _____ law protects an author's original books.
Original inventive creations; copyright
In contrast to goods and services markets, _______ are rare in labor markets, because rules that prevent people form earning income are not politically popular
Price ceilings
_________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling
Price floors
In circumstances dealing with poverty, the term ______ means taking income from those with higher incomes and providing income to those with lower incomes
Redistribution
Which of the following should typically be ignored because spending has already been made and cannot be changed?
Sunk costs
Tom decides to spend an hour playing basketball rather than studying. His opportunity cost is:
The benefit to his grades from studying for an hour.
Price elasticity of demand is defined as:
The percentage change in quantity demanded divided by the percentage change in price
Which of the following would most likely be identified as being the ultimate goal of public policies that pertain to technology?
To encourage a stream of invention that benefits the whole of society
_________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price
Total revenue
Treasury bonds are issued by the federal government through the
U.S Department of Treasury
But nearly all supply curves share a basic similarity: they slope....
Up from left to right
The general pattern that consumption of the first few units of any good tends to bring a higher level of ____ to a person than consumption of later units is a common pattern.
Utility
If a paper mill shuts down its operations for three months so that it produces nothing, its _____ will be reduced to zero
Variable costs
______ include all of the costs of production that increase with the quantity produced.
Variable costs
In economics, a firm that faces no competitors is referred as
a monopoly
Antipoverty programs that are set up so that the amount of government benefits will decline substantially as poor people earn more income typically create
a poverty trap
A firm that holds a monopoly position in the market place is
a price maker
If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, the result will be:
abnormally high sustained profits
By 2007, US market deregulation has proven to be most toxic to the overall health of the US economy in the ______
banking sector
During the recent U.S. recession, some large automakers required bailouts from the federal government to avoid being forced into bankruptcy by their
bondholders
The nature of demand indicates as the price of a good increases
buyers desire to purchase less of it
Oligopoly firms acting individually may seek to gain profits
by expanding levels of output and cutting prices
Specialization
can lead to an increase in overall production
A financial gain earned by purchasing stock in a publicly traded company and subsequently selling the investment at higher price is commonly referred to as a
capital gain
The form of legal protection intended to prevent reproduction of original works is referred to as _____ law
copyright
If the supply curve for a product is vertical, then the elasticity of supply is
equal to zero
If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to
fall and the equilibrium quantity to stay the same
An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred as a _______
free rider
Which of the following best describes a fiscal policy tool?
government spending
The application of current US antitrust law
includes a wide arrange of anticompetitive practices
Economic profit can be derived from calculating total revenues minus all of the firm's costs
including its opportunity costs
The longer the time period considered, the more the elasticity of supply tends to:
increase
The demand schedule for a good:
indicates the quantities that will be purchased at alternative market prices.
The evidence on the supply curve of financial capital is controversial, but at least in the short run, the elasticity of savings with respect to the interest rate appears to be
inelastic
A situation of _______ arises when one group receives a higher share of total income or wealth than others.
inequality
Venture capitalists typically create wealth by investing in a start up firm when its stock is less valuable, then subsequently selling that stock for a higher price during the firm's
initial public offering
Macroeconomics
is concerned with the expansion and contraction of the overall economy.
Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _____, which involves comparing the benefits and costs of choosing a little more or a little less of a good
marginal analysis
The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to
match price cuts, but not price increases
When reference is made to the _______, it means the specific amount of income needed fro a basic standard of living.
poverty line
The "law of supply" functions in labor markets; that is, a higher _____ for labor leads to a higher quantity of labor supplied
price
In order to be classified as a _______, a firm must be owned by the people who run it on a day-to-day basis.
private company
In the United States, worker membership in labor unions has been
steadily decline for 50 years.
If large numbers of individuals choose to behave as free riders,
the public good may never be provided
The main challenge for antitrust regulators is
to determine when a merger may hinder competition.
In economics, the demand for a good refers to the amount of the good that people
will buy at various prices
If a monopoly or a monopolistic competitor raises their prices, the quantity demanded
will decline
