Econ Test 1B

Economics is best defined as the study of how people, businesses, governments, and societies ________.

make choices to cope with scarcity

During the next hour John can play basketball, watch television, or read a book. The opportunity cost of reading a book is ________.

the value of playing basketball if John prefers that to watching television

Which of the following is a normative statement? A) the price of a candy bar is $1.25 each B) you should eat less candy C) popcorn and candy are sold in movie theaters D) Candy bars are more expensive than newspapers

B

Suppose people buy more of good 1 when the price of good 2 falls. These goods are ________.

complements

An inferior good is a good for which demand ________.

decreases when income increases

You observe that the price of a good rises and the quantity decreases. These observations can be the result of the supply curve shifting leftward or rightward?

leftward

If OPEC cuts oil production to increase the total revenue, they know that the demand for oil in the global market is ________.

inelastic

If the price elasticity is between 0 and 1, demand is ________.

inelastic

In broad terms the difference between microeconomics and macroeconomics is that ________.

microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy

If the demand curve for a good is a downward sloping straight line, the demand for the good will be more price elastic the higher the ________.

price of the good

The production possibilities frontier illustrates ________.

the combination of goods and services that can be produced efficiently

Increasing opportunity cost is due to ________.

the fact that resources are not equally suited for different types of production

The income elasticity of demand is the percentage change in ________.

the quantity demanded divided by the percentage change in income

The price of a good will fall if ________.

the quantity demanded exceeds the quantity supplied