Exam 1 Review ECO 2023 - UTSA

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

. marginal benefit equals marginal cost

The table above indicates the demand schedules for four types of consumers: A, B, C, and D and the number of consumers in each group (top row). The quantity demanded by each type of consumer (QA, QB, QC, and QD) is shown for market prices ranging from $10 down to $4. What is the combined quantity demanded at a market price of $4?

10,400

Which of the following will cause an outward (rightward) shift in supply?

A technological improvement

On the diagram shown above, a movement from A to C represents ____

An increase in demand

Which of the following is consistent with the law of supply?

An increase in the market price of MP3 players causes an increase in the production of MP3 players

Market price is determined by _____

Both supply and demand

On the diagram shown above, a movement from A to B represents a:

Change in quantity supplied.

In a price system:

Relative prices change constantly to reflect changes in supply and demand

In the United States, property rights:

are guaranteed by two amendments to the U.S. Constitution

Productive efficiency

occurs when a good or service is produced at the lowest possible cost.

US economy is classified as what kind of economy?

Mixed economy

The graph above shows the market for laptop computers. Suppose the price of memory chips used in laptop computers decreases. How will this event impact on the equilibrium quantity and the market price?

The supply increases, causing the equilibrium quantity to rise and the market price to fall.

Which of the following is critical to the success of the market system?

To allow individuals or firms to have exclusive use of their property

Equity is

a fair distribution of economic benefits

According to the theory of comparative advantage, specialization and free trade will benefit:

all trading partners who specialize in goods where they have comparative advantage

Macroeconomics

covers the study of topics such as inflation or​ unemployment

When nations specialize in their comparative advantage and engage in trade:

overall standards of living increase

In the circular flow model, which of the following refers to markets where goods such as computers or services such as medical treatment are offered?

product markets

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the __________ the payoff to devoting additional resources to that activity.

smaller

The role of the entrepreneur always involves:

taking risks

opportunity cost

the highest valued alternative that must be give up to engage in an activity.

Economics is about positive analysis...

which measures the costs and benefits of different courses of action

Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then:

The equilibrium price and quantity both increase

Given linear demand curves, if demand and supply increase by identical amounts, then:

The equilibrium price stays the same and the equilibrium quantity rises

Washington state had a bumper apple crop this year, significantly increasing the supply of apples in the US. Given this information, choose the statement that correctly describes the effect on the US apple market.

The quantity of apples demanded will increase as the price of apples falls

In what type of economy does the government decide how economic resources will be allocated?

a centrally planned economy

a market is...

a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade.

When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?

a market

Other things remaining equal, the law of demand says that higher prices will lead to:

a smaller quantity demanded and lower prices to a larger quantity demanded

Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium:

after an adjustment period that varies

Microeconomics is the study of...

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices

In the United​ States, who receives the goods and services produced depends largely on...

how income is distributed

economic incentives

people respond to them

The principle of opportunity cost evolves from the concept of:

scarcity

Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer?

How do we produce the products?

Assume the cost of aluminum used by soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.

II and III

Consider the previous figure and assume that it is the market for health-care services. When the "baby boomer" generation retires, the number of people who require health care increases by 30%, and, as a result, the number of health-care providers also increases, but by only 25%. What is the effect on the price of health-care services over time?

It increases because demand increased by more than supply

Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority?

North Korea

Trade-offs force society to make​ choices, particularly when answering the following three fundamental​ questions...

One, what goods and services will be​ produced? Two, how will the goods and services be​ produced? Three, who will receive the goods and services​ produced?

CHAPTER THREE In the previous diagram, when supply decreases, a ______ develops at the original price. Equilibrium price will _____ and equilibrium quantity will _______ as a new equilibrium is established.

Shortage; rise; fall

Given linear demand curves, if demand increases and supply decreases, then _____

The equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous

All of the following scenarios depict the characteristics of complements except:

The price of coffee increases and the demand for cream increases

The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market?

The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information

Which of the following represents an inferior good?

When consumer income increases, the demand for bologna decreases

Microsoft charges a price of​ $599 for a copy of Windows 7. Is this pricing decision​ rational?

When we assume the managers at Microsoft have used all available information and have weighed all known benefits and​ costs, we are assuming rationality.

Ms. Boulware is the best lawyer and the best secretary in town. She has:

an absolute advantage in both jobs

A product produced in a foreign country and purchased by residents of the home country is called:

an import

__________ goods and services are those bought by businesses to be used to increase efficiency or enhance production.

capital

Consumers, firms, and government

decide(s) what goods and services will be produced

In the circular flow model of the economy, __________ are the suppliers of goods and services.

firms

Tangible products (cars & televisions) are referred to as?

goods

If a country has a comparative advantage in the production of a good, then that country:

has a lower opportunity cost in the production of that good

Positive analysis ​

is concerned with what is

normative analysis

is concerned with what ought to be.

ECONOMICS

is the study of the choices people make to attain their​ goals, given their scarce resources.

Economics is a social science because...

it is based on studying the actions of individuals. it considers human behavior long dash —particularly ​decision-making behavior. it applies the scientific method to the study of the interactions among individuals

Firms choose how to produce the goods and services they sell. In many​ cases, firms face a​ trade-off between using more workers or using more machines. For​ example...

many times in the past several​ decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines. Your answer is correct.

A society can have a centrally planned economy in which the government decides how economic resources will be allocated or a...

market economy in which the decisions of households and firms interacting in markets allocate economic resources.

Allocative efficiency

occurs when production is in accordance with consumer preferences.

In what type of economy does the government decide how economic resources will be allocated?

physical capital

Absolute advantage is the ability of an individual, firm, or country to:

produce more of a good or service than competitors using the same amount of resources

At the market equilibrium price:

quantity demanded equals quantity supplied

When we graph the relationship between two​ variables, we often want to draw conclusions about whether changes in one variable are causing changes in the other variable. Doing​ so, however, can lead to incorrect conclusions. Reasons for drawing incorrect conclusions about cause and effect include...

reverse causality an omitted variable

Economics is the study of choice under conditions of:

scarcity

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls...

scarcity

A hypothesis in an economic model is...

tested before it can be accepted​ (or not​ rejected). usually about a causal relationship. a statement that may be either correct or incorrect about an economic variable.

In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?

the division of labor

Adam Smith observed that people pursuing their own self-interest in a free market will actually result in the best interest of society as if these actions were guided by a(n):

the invisible hand

When the federal government crafts environmental policies that make it less expensive for firms to follow green​ initiatives,

the policies are consistent with economic incentives.

Macroeconomics is...

the study of the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth

Any model is based on making assumptions because...

we cannot analyze an economic issue unless we reduce its complexity. models have to be simplified to be useful.