Econ chapter 1, 2, 3 and 22
perfect complements
"Left" gloves and "right gloves provide a good example of
scarce
"We" must make decisions or "trade-offs" because these goods and services are _____________
Production possibilities frontier
A graph or equation that shows the combinations of two (or more goods that the economy can produce given its resources
their opportunity cost of mowing their lawn is higher than the cost of paying someone to mow it for them
A popular celebrity that is paid highly for their time should probably not mow their own lawn because
true
A positive statement does not have to be _________
the rate of trade-off between the two goods being produced depends on how much of each good is being produced
A production possibilities frontier is bowed outward when
She can switch between writing term papers and completing homework assignments at a constant rate
As a student, Jordyn spends 40 hours per week writing term papers and completing homework assignments. On one axis of her production possibilities frontier is measured the number of term papers written per week. On the other axis is measured the number of homework assignments completed per week. Jordyn's production possibilities frontier is a straight line if
remains constant
As the consumer moves from A to B to C, the consumer's total utility
B
Assume that the consumer depicted in the figure has an income of $20. The price of Dots is $2 and the price of Junior Mints is $2. The consumer's optimal choice is point
MRSxy > Px/Py
Bundle B represents a point where
goods produced domestically and sold abroad
By definition, exports are
everything is constant
Ceteris Paribus
"natural" experiments
Conducting experiments in economics is often attention to the _____________ offered by history
the reciprocal of the slope of the production possibilities frontier, or 1.5 blender
Consider the production possibilities frontier for an economy that produces only microwaves and blenders. The opportunity cost of each microwave is
Households are sellers and firms are buyers
Describe the roles of households and firms in markets for factors of production
Household are buyers and Firms are sellers
Describe the roles of households and firms in markets for goods in services
models
Economist develop _________ to learn about the real world
assumptions, analysis
Economist utilize ________________________ to simplify the __________
B and C
Efficient production is represented by which point(s)?
The opportunity cost of an additional 200 socks increases as more socks are produced
Given Ecoville's production possibilities frontier, which of the following statements is correct?
C
Guven the budget constraint depicted in the graph, the consumer's optimal choice will be point
Iowa has a comparative advantage in the production of corn
If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then
20
If the customers has 600 in income what is the price of good Y
0 doors and 100 windows
If this economy devotes all of its resources to the production of windows, then it will produce
give up some of the other (opportunity cost)
In order to get more of one good, society must do what
positive
Is this a positive or normative statement: Unemployment is 10%
Kendra only
Kendra, Tara, and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days. Ice cream costs $5 per gallon, and paperback novels cost $8 each. Kendra has a budget of $80, Tara has a budget of $60, and Chelsea has a budget of $40 to spend on ice cream and paperback novels. Who can afford to purchase 8 gallons of ice cream and 5 paperback novels?
have different normative views about tax policy
Kevin and Laila are economists. Kevin thinks that the wealthiest 10 percent of the U.S. population should be taxed a rate higher than the rest of society because they can better afford it. Laila thinks that everyone should be taxed at the same rate because that is the fairest scenario and the wealthy should not be penalized for their success. In this example, Kevin and Laila
how individual households and firms make decisions
Microeconomics is the study of
the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water
People are willing to pay more for a diamond than for a bottle of water because
economics
Persons, households, companies or societies (however societies are defined) making many decisions regarding what goods (tangible) and service (intangible) are to be consumer
goods (tangible), service (intangible)
Persons, households, companies or societies (however societies are defined) must make many decisions regarding what _________________ and ______________ are to be consumer
inside
Points _________ the PPF are inefficient (not all resources are used or not used efficient)
outside
Points ___________ the PPF are unattainable
efficient
Points on the PPF are ________ (all resources used efficiently)
claims about how the world is
Positive statements are
the actions of government central planners
Prior to the collapse of communism, communist countries worked on the premise the economic well-being could be best attained by
possible but inefficient
Production at point Q is
when all resources are used and resources are allocated efficiently
Production efficiency is achieved when what two things happen
amount of goods and services produced from each unit of labor input
Productivity is defined as the
Senator Feldman's argument is primarily about efficiency, while Senator Ruiz's argument is primarily about equality
Senator Feldman argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Ruiz objects that this policy would benefit individuals in the top one percent of income at the expense of individuals in the lowest income category.
her income must have increased
Suppose Jamie can choose between consuming two goods. If we observe that Jamie's budget constraint has moved outward, then we know for certain that
The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.
Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1,000 units of food and 47 machines. This year, it experienced a technological advance in its machine-making industry. As a result, this year, the society wants to produce 1,050 units of food and 49 machines. Which of the following statements is correct?
right angles
Suppose that Madalyn likes to consume one glass of chocolate milk with every three sugar cookies. For Madalyn, an additional cookie has no value unless she can consume it with the appropriate proportion of chocolate milk. Madalyn's indifference curves for chocolate milk and cookies are
300
Suppose the price of peanuts is $1, the price of soda is $3, the value of B is 300, and the value of A is 100. How much income does the consumer have
they choose not to trade with one another
Suppose there are only two people in the world. Each person's production possibilities frontier also represents their consumption possibilities when
assumptions, analysis
The Scientific method utilizes _____________ simplify _____________
people face tradeoffs
The adage. "there ain't no such thing as a free lunch," means
deciding which assumption to make
The art in scientific thinking—whether in physics, economics, or engineering—is
a result of more efficient resource allocation than would be observed in the absence of trade
The gains from trade are
consume more goods than we otherwise would be able to consume
The most obvious benefit of specialization and trade is that they allow us to
opportunity cost
The negative relationship is a graphical representation of what
what you give up to get that item
The opportunity cost of an item is
the country's ability to produce goods and services
The primary determinant of a country's standard of living is
the combination of output that an economy produces
The production possibilities frontier illustrates
allows each to consume at a point outside its production possibilities frontier.
Trade between countries
True
True or False: a model is used to represent reality, but it is not reality
False
True or False: choosing between two points on a PPF does not involve tradeoffs
Economist
Utilize the scientific method to observe natural (and sometimes manmade) experiments in the world
circular flow diagram and production possibilities frontier
What are the 2 models economist use
the law of competitive advantage
What are the resources are allocated efficiently in accordance with
a straight line and bowed out
What are the two forms of the PPF
technology and resources
What certeris paribus includes what two things
the maximum possible combination of two goods produced, certeris paribus
What does the PPF show
markets for goods and services and markets for factors of production
What does the circular flow diagram represent
the development and testing of theories about how the world works
What does the scientific method utilizes (2 things)
-Produce computers and wheat -Our only resource is labor; this resources is measured in hours of work -We have 50,000 hours of labor -Producing 1 computers requires 100 hours of labors -Producing 1 bushel of wheat of wheat requires 10 hours of labor
What is an example of the production possibilities frontier
Ford F1-50's are expensive so you have to give up a car/capital in order to receive the scarce good which is the car
What is an example of tradeoffs due to scarce goods
technology and resources
What is held constant along a PPF (shift vs. slide)
Utilize the scientific method to observe natural (and sometimes manmade) experiments in the world
What is the job of an economist
resources becoming obsolete
What is the law of increasing opportunity cost due to
technology and resources
What is the maximum of the production possibilities frontier limited by
is indifferent between the two bundles
When comparing bundle E to bundle C, the consumer
claims about how the world should be.
When recommending specific policies to undertake, economists make
efficient
When society gets the most it can from its scarce resources, then the outcome is called
D to E
When the price of X is $80, the price of Y is $20, and the consumer's income is $160, the consumer's optimal choice is D. Then the price of X decreases to $20. We can derive the demand curve by determining the change in the quantity demanded illustrated by the movement from
to protect an industry from foeign competition
Which of the following do economists not generally regard as a legitimate reason for the government to intervene in a market
Universal healthcare would be good for U.S. citizens
Which of the following is an example of a normative, as opposed to a positive, statement?
The United States Department of Justice sued AT&T to block its merger with T-Mobile
Which of the following is an example of a positive, as opposed to a normative statement?
Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
Which of the following observations was made famous by Adam smith in his book the wealth of nations
With trade, one country must win and one country must lose
Which of the following statements about trade is false: A. Trade increases competition. B. With trade, one country must win, and one country must lose. C. Bulgaria can benefit, potentially, from trade with any other country. D. Trade allows people to buy a greater variety of goods and services at lower cost
the cost of something is what you give up to get it
Which of the following statements exemplifies a principle of individual decision making?
Bundle A provides the same utility as bundle C
Which of the following statements is correct
The indifference curves represented in graph (c) are neither perfect substitutes nor perfect complements
Which of the following statements is correct
the effect of a sales tax on the cigarette industry
Which of the following would likely be studied by a microeconomist rather than a macroeconomist?
Graph B
Which of the graphs in the figure reflects a decrease in the price of good X only
to explain economic realities
Why do economists develop economic models
goods (money or products) are scarce
Why do we face tradeoffs
compare the cost of staying one more semester to the benefits of staying one more semester
You are considering staying in college another semester so that you can complete a major in marketing, In deciding whether or not to stay you should
positive statement
a statement that can be refuted (or supported) by looking at the facts
normative statement
a statement that is one that reflects an opinion; cannot be refuted
Law of increasing opportunity cost
as production takes place closer and closer to each end pt. society must give up (opportunity cost) more and more (increasing) additional units of the other good
society is getting the most it can from its scarce resources.
efficiency means that
the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.
he bowed-outward shape of the production possibilities frontier can be explained by the fact that
services
intangible such as haircuts, banking, etc.
efficiency
refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society.
Straight line PPF
resources (land, labor, capital) are equally adaptable to both outputs (bread)
Bowed-out PPF
resources are not equally adaptable to both outputs
goods
tangible items such as food, gasoline etc.
the scientific method
utilizes the development and testing of theories about how the world works
