macro midterm
Which will not cause supply to increase?
A decrease in resource prices
Which of the following best describes an inferior good?
A good for which income and quantity demanded are inversely related
Which best expresses the law of demand?
A lower price reduces demand
The unemployment rate in November 2010 was 9.8%. This statement is an example of a normative economic statement
False
Two rational individuals will always make the same choices when faced with the same circumstances.
False
"Through the guiding function of prices and the incentive function of profits" is the market system's answer to which question?
How will the system accommodate change?
Which of the following best exemplifies the "guiding function" of prices?
Milk production increases in response to an increase in consumer preferences for milk
In a market system, "those willing and able" answers which fundamental question?
Who will get the goods and services?
From society's perspective, in the presence of a supply-side market failure, the last unit of a good produced typically
costs more to produce than it provides in benefits.
Land, labor, capital, and entrepreneurial ability combined are called
factors of production
"Rational self-interest is the same as selfishness."
false
A command system promotes the efficient use of resources by guiding them into the production of the goods and services most wanted by society.
false
The government plays no role in the United States economy.
false
Competition is characterized by
freedom of buyers to enter or leave markets
In a market system, which of the following enables owners to employ or dispose of their property and money as they see fit?
freedom of choice
In a market system, which of the following ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services and to sell them in their chosen markets?
freedom of enterprise
Unlike a private good, a public good
has benefits available to all, including nonpayers.
Economic profits and losses
help determine which industries survive or fail
A partial explanation for the inverse relationship between price and quantity demanded is that a
higher price reduces the real incomes of buyers
A microeconomist would most likely study
how consumers respond to a change in gasoline prices
You should decide to study an extra hour tonight if
if the marginal benefit of studying an extra hour exceeds its marginal cost
An increase in consumer incomes will
increase the demand for a normal good but decrease the demand for an inferior good
Consider the market for good X. A simultaneous drop in the price of a production input and an increase in the price of substitute good Y will necessarily
increase the equilibrium quantity of X
Human specialization, or the division of labor
increases output by enabling workers to take advantage of differences in their skills
In the circular flow diagram, firms...
incur costs and demand resources in the resource market
the production possibilities curve
is bowed out from the origin
An efficiency loss (or deadweight loss)
is measured as the combined loss of consumer surplus and producer surplus.
Consumer surplus
is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.
Producer surplus
is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.
Barter
is the direct exchange of goods for goods
The scarce resource of capital in economics, refers to
manufactured aids like machinery, tools, equipment, and facilities.
If the quantity supplied of oranges exceeds the quantity demanded
market forces will cause the price to fall unless there is an effective price floor
The market system is characterized by
private property rights
In terms of the circular flow diagram, firms receive revenue in the _____ market and incur costs in the _____ market.
product; resource
According to economists, human wants will never be fulfilled completely because
productive resources are scarce
It is in a firm's best interest to utilize the least-cost production technique because
profitability requires that firms produce their output at minimum cost per unit
The competitive market system encourages innovation and technological advance, primarily through
profitable returns to innovative firms
The two major features of the economic perspective are
purposeful behavior and marginal analysis
A nation's production possibilities curve is "bowed out" from the origin because
resources are not perfectly adaptable to production of alternative goods
Consider the choice Marsha faces of how to allocate her weekly allowance between coffee and cheeseburgers. An increase in Marsha's income will
shift her budget line to the right
The "command system" is also known as
socialism or communism
Demand-side market failures occur when
the demand and supply curves don't reflect consumers' full willingness to pay for a good or service.
Supply-side market failures occur when
the demand and supply curves don't reflect the full cost of producing a good or service.
Goods X and Y are complements while goods X and Z are substitutes. If the price of good X increases
the demand for Y will increase while the demand for Z will decrease
macroeconomics mainly focuses upon
the economy as a whole
"The pursuit of self-interest automatically promotes the social interest." This concept is known as
the invisible hand
At the output level defining allocative efficiency
the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output.
According to the marginal-cost-marginal-benefit rule
the optimal project size is the one for which MB = MC.
Economics is primarily the study of
the problem of scarce resources relative to human wants
When movie ticket prices increase, families tend to spend less time watching movies and more time at home watching videos instead. This best reflects
the substitution effect
Nonexcludability describes a condition where
there is no effective way to keep people from using a good once it comes into being.
At the equilibrium price...
there will be neither a shortage nor a surplus
iPhones and headphones are substitute goods.
true
Suppose you can purchase milk for $3 a gallon or eggs for $1.50 per dozen. Your opportunity cost of a gallon of milk is
two dozen eggs
Graphically, if the supply and demand curves are linear, consumer surplus is measured as the triangle
under the demand curve and above the actual price.
The satisfaction obtained from consuming a good or service is
utility
The scarcity problem
will persist so long as productive resources are limited
If consumer incomes increase, the demand for product Y
will shift to the right if Y is a normal good
A market is characterized by
exchange between buyers and sellers
Which of the following is a capital good?
A steel fabrication facility
Private ownership of resources is best captured by which of the following concepts?
Property rights
What two conditions must hold for a competitive market to produce efficient outcomes?
Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay.
The trains of the Transcontinental Railway Company, when shipping goods, sometimes emit sparks that start fires along the tracks and damage the property of others. If Transcontinental does not pay for the damage it causes, what has occurred?
Supply-side market failure
Which of the following is NOT a determinant of demand?
Taxes and subsidies
Which of the following is NOT a determinant of supply?
Technology
For a market system, which of the following best answers the question, "What goods and services will be produced?"
The goods and services produced at a continuing profit
Suppose that the demand and supply for some product both increase. Then, in that market
equilibrium quantity will increase
A change in quantity demanded is
a movement along a stationary demand curve.
A change in quantity supplied is
a movement along a stationary supply curve.
Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences:
a producer surplus of $9 and Nathan experiences a consumer surplus of $3.
An increase in demand is shown as
a shift of the demand curve to the right.
Which of the following is an example of a public good?
a weather warning system
When constructing a typical production possibilities curve, economists assume
all available resources are fully employed
The negative slope of the production possibilities curve illustrates that
an economy can produce more of one thing only by producing less of something else
A leftward shift in the demand curve for product E might be caused by
an increase in the price of a product that is complementary to E
Purposeful behavior and marginal analysis
are part of the economic perspective
In the equation y = a + bx, where y is the dependent variable and x is the independent variable, the slope of line is given by
b
In studying economic principles, economists make use of
both the economic perspective and the scientific method
The "market system" is also known as
capitalism
The command systems of the Soviet Union and eastern Europe failed in part because
central planners found it increasingly difficult to coordinate the economic decisions of consumers, resource suppliers, and business
Cost-benefit analysis attempts to
compare the benefits and costs associated with any economic project or activity.
The term "consumer sovereignty" means
consumer choices ultimately determine which goods and services are produced
When an economist says that the demand for a product has decreased, this means that
consumers desire to purchase less of this product at each possible price
People enjoy outdoor holiday lighting displays, and would be willing to pay to see these displays, but can't be made to pay. Because those who put up lights are unable to charge others to view them, they don't put up as many lights as people would like. This is an example of a
demand-side market failure
Compared to a command system, economists typically favor a competitive market system because it promotes
efficiency
The two main characteristics of a public good are
nonrivalry and nonexcludability.
The unemployment rate in November 2010 should have been 2 percentage points lower. This statement is an example of
normative economics
Margaret decides to stay home and study for her exam rather than going out with her friends to a movie. Her dilemma is an example of
opportunity cost
When society forgoes the opportunity of getting the next best thing, that sacrifice is
opportunity cost
Which of the following will cause the demand curve for product A to shift to the right?
population growth that causes an expansion in the number of consumers for product A.
When drawing demand and supply curves, economists are assuming that the primary influence on production and purchasing decisions is
price
If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium
price must rise
A demand curve for a public good is determined by
summing vertically the individual demand curves for the public good.
Because of unusually warm weather, the supply of strawberries has substantially increased. This statement indicates that
the amount of strawberries that will be available at various prices has increased
A positive externality or spillover benefit occurs when
the benefits associated with a product exceed those accruing to people who consume