TEST 1 (MOUDLES 1-4)

Marginal cost is necessary to consider in a rational decision, and should be compared to

marginal benefit.

As life would have it, we all come to forks in our paths when we need to make a choice, knowing that...

the correct choice depends upon how much we need to give up.

The production possibilities model shows an inverse relationship between the amount of one thing that can be produced and the amount of something else because

production of different types will compete for limited resources.

Society gains advantages through trade because of its ability to

specialize resources to the uses where opportunity cost is minimized. refine tasks associated with production.

Scarcity is imposed on individual households in the form of

the prices of the goods that we may purchase. income (budget) limitations.

Scarcity is a condition that is everywhere and always, since it is based upon two assumptions that reflect permanent universal conditions. The assumptions are that

the world has limited productive resources more output satisfies more wants

A competitive market is one in which

there is a large number of buyers and sellers.

When quantity demanded increases in response to a change in price

there is a movement from one point to another along the demand curve.

According to the law of demand, assuming other factors are held constant

As the price of milk decreases, the quantity of milk demanded will increase.

If Pepsi goes on sale, what will happen to the demand for Coca-Cola?

Demand for Coca-Cola will decrease.

What will we never do in a world of scarcity?

Meet all of society's wants.

If an increase in the price of Nike shoes increases the demand for Adidas shoes, this means that

Nike shoes and Adidas shoes are substitutes.

Which of the following statements is/are reflecting decision-making on the margin?

One more day in this cottage will be nice, but how much will the cost of the rental rise? If we double the order to a dozen doughnuts, we will pay only twenty percent more.

Which of the following events can shift the level of demand (demand is the relationship between price and quantity demanded)?

Population grows in a particular market area.

If a model can predict outcomes (accurately), what can be assumed?

The assumptions of the model are generally accurate. The model is valuable.

Identify the macroeconomic issue among the following statements.

The average cost of producing electricity nationally is rising.

A restaurant chain sponsors a charity that provides for children with cancer to be treated with their parents present. How would the use of company funds for this purpose be justified by a business whose goal is to maximize profit?

The money spent is worth the boost it gives to corporate image.

Identify the microeconomic topic(s) among the following.

The price that a farmer asks for her watermelons.

A rock star intentionally sets her ticket prices below what would be necessary to sell out her shows. How might this be justified by a manager whose goal is to maximize long-term profit?

The revenue sacrificed is worth the boost it gives to her image as lines form for tickets.

The circular flow diagram demonstrates

a direct relationship between groups in an economy.

When economists talk about supply, they are referring to a relationship between the price in a market and the

amount that producers collectively make available for sale.

According to the law of supply, assuming other factors are held constant

as the price of milk decreases, the quantity of milk supplied will decrease.

Due to limits on our time, money, and effort, we are best off when we allocate those things...

by constantly assessing the opportunity costs of our choices.

Complete the following sentence: If people think that the price of televisions will decrease in the near future, that belief may cause a(n)

decrease in the demand for televisions today

Decreased competition due to fewer producers in a market will cause

higher prices due to an decrease in the quantity supplied at every price.

The theory of rational behavior

is an assumption that economists make to have a useful model for how decisions are made.

If an economist is trying to predict the outcome from particular causes and effects, what is the best tool(s) for her to use in order to test out her economic model?

mathematical functions

An Uber driver faces costs for driving that include sunk costs like insurance that contribute to the average cost per mile of $.50. Yet when a rider offers to pay less than that for a ride, the driver agrees because

sunk costs like auto insurance (in this case) do not increase as driving increases.

Suppose that there are only two types of output in North Korea: nuclear missiles and consumer goods. All else constant, as the nation produces more missiles

the greater is the opportunity cost of consumer wants satisfied. every additional missile will reduce consumer goods production by more and more.

The house that Jeanne inherited from her mother can rent for $1500/month, but Jeanne decides to allow her brother to stay there for only $500 per month. This decision carried with it a

zero monetary cost but a $1000 per month opportunity cost.