BEC 151 EXAM #1

normal goods

A good for which an increase in consumer income results in an increase in demand

scarcity

A situation in which there is not enough of a resource to meet all of everyone's wants

Spontaneous Order

A way of achieving coordination in which individuals adjust their actions in response to cues from their immediate environment

natural resouces

Anything that people can use as a productive input in its natural state, such as farmland, building sites, forests, and mineral deposits

conditional forecast

a prediction of future economic events in the form "If A, then B, other things being equal"

Two goods are _______ if an increase in the price of one good leads to a decrease in the demand for the other good. a)complements b)inferior c)normal d)substitutes

a) complements

Which of the following is NOT among the factors of production? a)Capital b)Natural Resources c)Labor d)Money

d) money

List the factors of production

labor, capital, natural resources

marginal benefit

the benefits of incremental changes

change in quantity demand

A change in the quantity of a good that buyers are willing and able to purchase that is caused by a change in the price of a good, other things being equal; shown by a movement from one point to another along a demand curve

change in supply

A change in the quantity of a good that suppliers are willing and able to sell that is caused by a change in some condition other than the good's price; shown by a shift in the supply curve

change in quantity supplied

A change in the quantity of a good that suppliers are willing and able to sell that is caused by a change in the good's price, other things being equal; shown by a movement along a supply curve

change in demand

A change in the quantity of a good that the buyers are willing and able to purchase that is caused by a change in some condition other than the price of that good; a shift in the demand curve

Equilibrium

A condition in which buyers' and sellers' plans exactly mesh in the marketplace, so that the quantity supplied exactly equals the quantity demanded at a given price

Excess quantity demanded (shortage)

A condition in which the quantity of a good demanded at a given price exceeds the quantity supplied

excess quantity supplied (surplus)

A condition in which the quantity of a good supplied at a given price exceeds the quantity demanded

inferior goods

A good for which an increase in consumer incomes results in a decrease in demand

demand curve

A graphical representation of the relationship between the price of a good and the quantity of that good that buyers demand

supply curve

A graphical representation of the relationship between the price of a good and the quantity of that good that sellers are willing to supply

complementary goods

A pair of goods for which an increase in the price of one causes a decrease in demand for the other

substitutes

A pair of goods for which an increase in the price of one causes an increase in demand for the other

theory

A representation of the relationships among facts

Efficiency in Distribution

A situation in which it is not possible, by redistributing existing supplies of goods, to satisfy one person's wants more fully without causing some other person's wants to be satisfied less fully

efficiency in production

A situation in which it is not possible, given available knowledge and productive resources, to produce more of one good without forgoing the opportunity to produce some of another good

economic efficiency

A state of affairs in which it is impossible to make any change that satisfies one person's wants more fully without causing some other person's wants to be satisfied less fully

inventory

A stock of a good awaiting sale or use

model

A synonym for theory; in economics, often applied to theories that take the form of graphs or equations

hierarchy

A way of achieving coordination in which individual actions are guided by instructions from a central authority

law of demand

The principle that an inverse relationship exists between the price of a good and the quantity of that good that buyers demand, other things being equal

Entrepreneurship

The process of looking for new possibilities, making use of new ways of doing things, being alert to new opportunities, and overcoming old limits

economics

The social science that seeks to understand the choices people make in using scarce resources to meet their wants

demand

The willingness and ability of buyers to purchase goods

what are the four fundamental questions?

What? How? Who? For Whom?

A shift in the demand curve should be referred to as: a)a change in demand. b)a change in demand price. c)a change in quantity demanded. d)a change in the elasticity of demand.

a) a change in demand

Movement downward along a fixed demand curve is called: a)an increase in quantity demanded. b)a decrease in quantity demanded. c)an increase in demand. d)a decrease in demand.

a) an increase in quantity demanded

Which of the following is NOT among the reasons why an economic forecast might end up being incorrect? a)Economists tend to perform only rudimentary statistical analysis b)The theory behind the forecast may not be correct c)The conditions on which the forecast is based may not hold d)Some variables, such as social attitudes, are very difficult to predict

a) economists tend to perform only rudimentary statistical analysis

when the economy is not in recession, for many community colleges students, the greatest cost of a college education is? a)forgone earnings b)textbooks c)room and board d)tuition

a) forgone earnings

What are the two broad approaches that an economy can take in trying to answer the four fundamental questions? a)Hierarchy or spontaneous order b)Normative or positive c)Market or laissez-faire d)Command or communism

a) hierarchy or spontaneous order

Supply curves have a positive slope because of the: a)law of supply. b)law of equilibrium. c)theory of comparative advantage. d)demand curve.

a) law of supply

_______ economics makes value judgments about whether economic policies are good or bad; _______ economics is more interested in economic facts and the relationships between them. a)Normative; positive b)Hierarchical; spontaneous c)Positive; normative d)Spontaneous; hierarchical

a) normative; positive

When the economy is in a recession and unemployment rates are very high for workers without college degrees: a)the opportunity cost of going to college is lower, so college enrollments tend to rise. b)the opportunity cost of going to college is higher, so college enrollments tend to fall. c)the opportunity cost of going to college is higher, so college enrollments tend to rise. d)the opportunity cost of going to college is lower, so college enrollments tend to fall.

a) the opportunity cost of going to college is lower, so college enrollments tend to rise

What is the opportunity cost of showing up to the next class meeting of the 8 a.m. class that you are enrolled in this semester? a)The sleep that you could get if you just slept in b)The cost of the books and other materials for the class c)All of these are the opportunity cost of showing up to the next class meeting. d)The tuition that you paid to enroll in the class

a) the sleep that you could get if you just slept in

Which of the following is true about demand curves for inferior goods? a)They will shift inward during an economic boom. b)They do not shift very much in response to changes in economic conditions. c)They become flatter during an economic recession. d)They will shift outward during an economic boom.

a) they will shift inward during an economic boom

What is the full meaning of the fundamental question "What?" a)what will be produced? b)what is an economy? c)what structure of government will we choose? d)what will the economy's goals be?

a) what will be produced?

Which of the following can cause a change in supply? a)A change in price b)A change in cost c)A change in income d)A change in demand

b) a change in cost

The additional benefits you would get if you had taken 1 more credit this semester is the: a)marginal cost of a college credit b)marginal benefit of a college credit c)total cost of college credits d)total benefit of college credits

b) marginal benefit of a college credit

Properly understood, "free markets" are: a)markets in which there are no prices. b)markets populated by free people. c)markets in which there are no rules. d)markets that are carefully regulated.

b) markets populated by free people

Demand and Supply are: a)theories. b)models. c)laws. d)lies.

b) models

Because people are purposeful and self-interested, voluntary exchanges: a)usually benefit one person and harm the other. b)must be mutually beneficial. c)should be viewed with suspicion. d)are basically random.

b) must be mutually beneficial

If it is possible to make a change that satisfies one person's wants more fully but without causing someone else's wants to be satisfied less fully then: a)the economy has not achieved productive efficiency. b)the economy has not achieved economic efficiency. c)the economy has achieved productive efficiency. d)the economy has achieved economic efficiency.

b) the economy has not achieved economic efficiency

There is NO opportunity cost associated with producing more automobiles when: a)the economy has not achieved economic efficiency. b)the economy has not achieved productive efficiency. c)the economy has achieved productive efficiency. d)the economy has achieved economic efficiency.

b) the economy has not achieved productive efficiency

Anything that decreases cost _______ supply, shifting the supply curve _______. a)increases supply; up and to the left b)increases supply; down and to the right c)decreases supply; up and to the left d)decreases supply; down and to the right

b)increases supply; down and to the right

Which of the following is exhibiting purposeful behavior? I. A squirrel burying nuts for the winter II. A computer calculating an interest payment III. A student deciding to skip class IV. A balloon floating in the wind a)II and IV only b)II only c)III only d)I and III only

c) III only

A mother who tries to make her children happy: a)is not behaving in a purely rational way. b)is not being self-interested since she is caring for someone else. c)must be motivated primarily by the threat of having her children taken from her. d)has decided to make her children's welfare part of her own self-interest.

d) has decided to make her children's welfare part of her own self-interest

What is the full meaning of the fundamental question "For whom?" a)Who will work in which jobs? b)Which production technology will be employed? c)What will the economy produce? d)How will goods be distributed?

d) how will be goods be distributed

Which branch of economics focuses on large-scale phenomena, such as inflation, unemployment, and economic growth? a)Normative economics b)Positive economics c)Microeconomics d)Macroeconomics

d) macroeconomics

Which branch of economics focuses on individual households, firms, and markets? a)Normative economics b)Positive economics c)Macroeconomics d)Microeconomics

d) microeconomics

The law of supply holds that price and quantity supplied are: a.)unrelated. b)negatively correlated. c.)inversely proportional. d)positively correlated.

d) positively correlated

When the demand for a good increases, the demand curve: a)becomes flatter. b)shifts to the left. c)becomes steeper. d)shifts to the right.

d) shifts to the right

The value of the next best choice that you give up when you make a decision is called: a)the marginal benefit. b)the incentives. c)he power of trade. d)the opportunity cost.

d) the opportunity cost

Which of the following is NOT one of the four fundamental questions? a)What? b)How? c)Whom? d)Why?

d) why

An inferior good is a good that: a)you would buy less of if the price of a substitute fell. b)you would buy less of if the price of a complement fell. c)you would buy more of if your income rose. d)you would buy more of if your income fell.

d) you would buy more of if your income fell

If furniture prices rise, which of the following would happen as a result? a)The supply curve for furniture will shift down and to the right. b)The supply of goods with inputs similar to furniture will increase. c)The supply curve for furniture will shift up and to the left. d)The supply of goods with inputs similar to furniture will decrease.

d)The supply of goods with inputs similar to furniture will decrease.

For Whom?

deciding for whom goods will be produced

How?

deciding how to produce; efficiency and entrepreneurship -productive efficiency using factors of production in such a way as to get the most cut of them (not being wasteful)

what?

deciding what to produce; opportunity cost

who?

deciding who will do which work; division of labor

margin

edge -is the dividing line between what you you do, and what you don't do, between the actions you take and the actions you don't take

net marginal benefit

marginal benefit minus marginal cost

marginal analysis

the comparing of costs and benefits of marginal changes in order to determine the best course of action

marginal cost

the cost of incremental changes ex. if you study for 1 more hour, how much more money will you have to give up

distinguish between microeconomics and macroeconomics

the main difference between microeconomics and macroeconomics is scale -macroeconomics ultimately rests on a microeconomic foundation

capital

All means of production that are created by people, including tools, industrial equipment, and structures

market

Any arrangement people have for trading with one another

comparative advantage

The ability to produce a good or service at a lower opportunity cost than someone else

positive economics

The area of economics that is concerned with facts and the relationships among them

normative economics

The area of economics that is devoted to judgments about whether economic policies or conditions are good or bad

Macroeconomics

The branch of economics that studies large-scale economic phenomena, particularly inflation, unemployment, and economic growth

Microeconomics

The branch of economics that studies the choices of individual units—including households, business firms, and government agencies

labor

The contributions to production made by people working with their minds and their hands

oppurtunity cost

The cost of a good or service measured in terms of the forgone opportunity to pursue the best possible alternative activity with the same time or resources

law of supply

The law of supply states there is a positive relationship between price and quantity supplied.

A firm produces volleyballs and soccer balls. What happens to the supply of soccer balls if the market price of volleyballs increases? a) The opportunity cost of producing soccer balls rises, so the supply of soccer balls increases. b) The opportunity cost of producing soccer balls falls, so the supply of soccer balls decreases. c)The opportunity cost of producing soccer balls rises, so the supply of soccer balls decreases. d) The opportunity cost of producing soccer balls falls, so the supply of soccer balls increases.

c) The opportunity cost of producing soccer balls rises, so the supply of soccer balls decreases.

Which of the following can cause a change in quantity supplied? a)A change in technology b)A change in opportunity costs c)A change in demand d)A change in quantity demanded

c) a change in demand

Economics is: a)a life science. b)a political ideology. c)a social science. d)a branch of mathematics.

c) a social science

Economists believe that observations of human behavior are meaningful because: a)when humans make decisions they do so in pursuit of a goal. b)they believe that humans tend to be purposeful in their decisions. c)All of these choices are correct. d)otherwise it would be very difficult to draw conclusions about how people make decisions.

c) all of these choices are correct

According to the law of demand: a.)as the quantity supplied of a good rises, the quantity demanded of a good falls. b)as the price of a good falls, quantity demanded will fall. c)as the price of a good rises, quantity demanded will fall. d)as the price of a good rises, quantity demanded will rise.

c) as the price of a good rises, quantity demanded will fall.

When the price of mangoes rises, Noor buys more pineapples. This means that, for Noor: a)mangoes are inferior and pineapples are normal. b)mangoes and pineapples are complements. c)mangoes and pineapples are substitutes. d)pineapples are inferior and mangoes are normal.

c) mangoes and pineapples are substitutes

Which of the following is the name given to simplified versions of theories that are expressed using stories, graphs, or equations? a)Normative economics b)Assumptions c)Models d)Forecasts

c) models

Which of the following describes the Central (or Great) Economic Problem? a)There is not enough money to lift everyone out of poverty b)If one person becomes richer, another person has to become poorer c)Resources are scarce relative to the wants they attempt to satisfy d)Greed can be both good and bad

c) resources are scare relative to the wants they attempt to satisfy

Most goods are normal goods, which means that when income rises: a)the demand for the good decreases. b)the supply of the good increases. c.)he demand for the good increases. d)the supply of the good decreases.

c) the demand for the good increases

A new policy that restricted the importing of butter from Europe would have what impact in the domestic butter market? a)It would increase the supply of butter, shifting the supply curve up and to the left. b)It would increase the supply of butter, shifting the supply curve down and to the right. c)It would decrease the supply of butter, shifting the supply curve up and to the left. d)It would decrease the supply of butter, shifting the supply curve down and to the right.

c)It would decrease the supply of butter, shifting the supply curve up and to the left.

In addition to the dollar cost of inputs, the use of inputs also imposes an opportunity cost because: a)businesses borrow money to purchase inputs. b)inputs cannot be stored and saved for later use. c)inputs could instead be used in the production of others goods. d)production technology can change at any moment.

c)inputs could instead be used in the production of others goods.

A decrease in quantity demanded can be caused by: a)an increase in supply. b)a decrease in quantity supplied. c)an increase in quantity supplied. d)a decrease in supply.

d) a decrease in supply

A "change in demand" refers to: a)a change in the curvature of a demand curve. b)a movement along a stationary demand curve. c)a change in the slope of the demand curve. d)a shift of the entire demand curve, either to the right or left.

d) a shift of the entire demand curve, either to the right or left

If, at a certain price, buyers suddenly demand a greater quantity of a good than they did previously, there has been: a)movement along a demand curve, from left to right. b)movement along a demand curve, from right to left. c)a decrease in demand d)an increase in demand.

d) an increase in demand

How do we show an increase in demand graphically? a)By movement upward and to the left along a demand curve. b)By a shifting in of the demand curve, to the southwest. c)By movement downward and to the right along a demand curve. d)By a shifting out of the demand curve, to the northeast.

d) by shifting out of the demand curve, to the northeast

At the most basic level, all supply shifters are essentially factors that change: a)income. b)prices. c)technology. d)costs.

d) costs

The overarching focus of economics is on: a)the flow of money b)managing businesses c)stock markets d)decision making

d) decision making

supply

willingness and ability of sellers to provide goods and services