Micro Exam 1
Examples of complements:
Guitars & guitar strings, peanut butte & jelly
Substitute goods:
are viewed as replacements for other goods
The producer with the _______ relative opportunity cost has a comparative advantage and should specialize in the production of that good
lower
The producer with the ________ relative opportunity cost has a comparative advantage and should specialize in the production of that good.
lower
A potential risk of specialization is:
susceptibility to market fluctuations
The income effect and substitution effect, and diminishing marginal utility explain:
why the QD will fall when prices rise
Economist use the phrase __________ ________ _________ to refer to the positive gain enjoyed by both buyers and sellers when they trade
"trade creates wealth"
On a PPF with Good X on the horizontal axis and Good Y on the vertical axis, we can say that the slope of the PPF (in absolute value) equals the opportunity cost of producing Good X with respect to the production of Good Y. This is true because the slope
Describes the trade-off resulting from the production of Good X in terms of Good Y
An economy should continue producing a good or service so long as:
MB exceeds MC
The effect of an extension in unemployment benefits on the unemployment rate in the country
Macroeconomics
An economy is better off when it stops producing output at the point where:
Marginal benefit=marginal cost
When you decide after studying for three hours that another hour of sleep is more beneficial to you than a fourth hour of studying, you are engaging in:
Marginal decision making
Economics is the study of how individuals and societies allocate:
Scarce resources among many competing uses
___________ in trade causes individuals and nations to become interdependent
Specialization
What are some non-price determinants of demand?
Tastes and preference, number of buyers, consumer expectations
A PPF that illustrates a 1-for-1 trade off between goods is drawn as
a straight, downward-sloping line
Marginal Benefit:
additional benefit associated with one or more unit of each activity
Because the world is characterized by scarcity, people must ___________ the resources at their disposal to many competing uses
allocate
The more of a good or a service that is consumed in a given period of time, the lower the marginal ________ that is associated with each additional unit
benefit
In a market:
buyers and sellers interact to trade goods, services, or resources
As long as there are differences in opportunity costs, there are _____________ advantages, and there will be potential for trade to make both parties better off
comparative
specialization in a particular good is based on ____________ advantage on the good
comparative
Gains from trade can be measured by:
comparing the levels of consumption available before and after the trade
The simple model of production assumes that the opportunity cost of production is ___________
constant
The more of a good or service that is produced in a given period of time, the higher the marginal ___________ that is associated with each additional unit
cost
As the amount of an activity increases, its marginal benefit:
decreases
A change in ________ occurs when a non-price determinant of demand changes
demand
According to the Law of _______, price and quantity demanded are inversely related
demand
Without individuals and households that are willing and able to buy a good, the ________ side of the market cannot exist
demand
The ___________ __________ represents the relationship between the price of a good, service, or resource and the quantity that individuals and firms are willing and able to buy, all else held constant, in table form
demand schedule
The quality of an ___________ model can be measured by how well it reflects reality and whether it gives us insights that can be used in the real world
economic
The demand curve focuses entirely on the:
effect of a change in price on the quantity of the product consumed and holds everything else constant.
In the circular flow model, the two markets are :
factor market & product market
In the circular flow model, _______ must buy resources from _______ in order to produce the output they will sell to households
firms; households
Markets, such as the New York Stock exchange and your local retail store, are __________ markets
formal
The benefit, or wealth, that accrues to a buyer or seller as a result of trading one good, service, or resource for another is the
gains from trade
The horizontal summation of individual demand curves:
gives the market demand curve
A _______ is a tangible product that consumers, firms, or governments wish to purchase
good
According to the circular-flow diagram, which two groups interact in the resources market?
households and firms
The earliest two fundamental steps in learning the economic way of thinking are understanding
how people make choices & how resources and scarcity affect the costs & benefits of choices
____________ capital refers to the knowledge and skills that people acquire in order to increase productivity
human
the harm in specializing is that:
if the demand for the good or service you produce decreases, its price and your income will decrease too.
You are wasting resources that would be better spent elsewhere:
if you continue producing when marginal benefit is less than marginal cost
In the real world, the opportunity cost of production ____________ as production increases
increases
Specialization causes individuals and nations to rely on one another and:
increases the degree of interdependence among them
The law of __________ costs says that because some resources are better suited to producing one or good service than another, as the production of a good or a service increases, the _____ cost of each individual unit rise
increasing; opportunity
For _____ goods, an increase in income decreases demand, and a decrease in income increases demand.
inferior
Products such as generic, store-branded dried noodles are considered:
inferior goods, & normal goods
Examines the entire economy of a state, a country, or even the world, So it examines total output, the price level, and other aggregate measures of the economy
macroeconomics
The additional benefit associated with 1 more unit of an activity is ______________ benefit
marginal
The additional cost associated with 1 more unity of an activity is the ____________ cost
marginal
When someone compares marginal benefits associated with an activity to its marginal costs, that person is making a ______________ decision.
marginal
A _________ refers to a group of buyers and sellers who exchange one specific good, service, or resource, not to a specific place.
market
The effect of a tax credit for purchasing new energy-compliant appliances on the use of electricity
microeconomics
Diminishing marginal utility describes the:
negative relationship between the quantity of a good, service, or resource and the marginal utility obtained from each additional unit consumed in a given period of time.
a good for which there is a direct relationship between the demand for the good and income is a _________ good
normal
If the terms of trade are the same as your ______________ cost, you will receive no gains from the trade
opportunity
________ cost is most plainly visible when spending more money on one thing means that less money can be spent on another thing.
opportunity
______________ cost is most plainly visible when spending more money on one thing means that less money can be spent on another thing
opportunity
the value of the next-best, forgone alternative is the
opportunity cost
The terms of trade that are beneficial to both parties are prices that lie between both the parties
opportunity costs
Market demand is based on the:
overall preferences of everyone in the market
Labor as a resource is defined as all ____ and ____ activity devoted to producing goods and services
physical & mental
When a firm receives money for a good or service it sold to a household, the interaction occurs in the ________ market
product
When we talk about the demand for sunglasses, we are referring to the:
quantity that consumers are willing and able to buy at a variety of different prices all else held constant
Tomatoes represent a small subset of food, so tomatoes are
relatively more scarce than food in general
According to the circular-flow diagram, when a household receives a wage for supplying a firm with labor, the interaction occurs in the _________ market
resource
Any item, whether a gift of nature, the result of production, or the result of human effort, that is used to produce goods and services is a:
resource
Every person's and every economy's standard of living relies on the effective use of
resources
Households can obtain the income they need to purchase the products for consumption only by selling __________
resources
In the circular flow model, firms can produce the output they sell to households only by buying _________ from households
resources
Because resources are ______ they must be allocated between competing use
scarce
Economics is the study of how individuals and societies allocate __________ resources among many competing uses.
scarce
Due to the ____ of natural resources, we cannot have all the housing and all the forests we may want.
scarcity
An intangible product or action that consumers, firms, or governments wish to purchase is a
service
The law of demand says that lower prices lead to a higher quantity demanded. As a result, the demand curve:
should slope down
The _______ of the production possibilities frontier equals the trade-off of the production of one good or service in terms of the other
slope
For an entire economy, the PPF is going to be bowed out because:
some resources are better suited for producing some goods or services than others
Because of differences in opportunity costs, individuals and businesses
specialize in the production of the good for which they wield a comparative advatange
__________ is the result of low-cost producers focusing all their efforts on producing a single good or service
specilization
the perceived desirability of consuming a good, service, or resource is refers to the _______ and preference of the buyers
taste
Two different ways in which we usually express info about the demand for a good, service, or resources are:
the demand schedule & the demand curve
Increasing marginal cost describes
the direct relationship between the marginal cost associated with the use of a good or a service and the quantity produced
Decreasing marginal benefit describes:
the inverse relationship between the marginal benefit associated with the use of a good or a service and the quantity consumed
Terms of trade refers to
the price of one good or service in terms of another
The three main reasons why demand curves are downward sloping are:
the substitution effect, the income effect, & diminishing marginal utility
Comparative advantage is the foundation for establishing the benefits of
trade
Whether a good or a service will be traded depends largely on the terms of _________
trade
The term "scarcity" describes the fact that people's _______ wants cannot be completely satisfied with _______ resources
unlimited; limited
A society's ability to produce needed goods and services is permanently reduced if
uses resources too quickly
individuals and countries specialize because the opportunity cost of producing goods and services:
varies
the entire demand curve shifts to the right or left:
when there is a change in demand
