ECO2023 MIDTERM 1 STUDY

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a

model

Rational behavior requires thinking at the margin. Which example represents this type of thinking?

All of these examples represent thinking at the margin: - deciding whether the overtime pay is worth working on your day off - deciding whether a second burger is worth the extra $2 - deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery

Suppose the demand for gasoline is rising. Which statement describes a possible cause? Incomes are falling. Consumers expect prices to rise in the near future. Commuters are switching from driving to public transportation. Drivers are purchasing more fuel-efficient cars.

Consumers expect prices to rise in the near future.

Supply is defined as the _____ over a particular time period at various prices, holding all other relevant factors constant.

MAXIMUM amount of a product that SELLERS are willing and able to provide for sale

What is the effect of a price ceiling set ABOVE equilibrium?

No change in equilibrium

True or false: scarcity is faced by all individuals and societies

TRUE

If a store sells a good that has a unitary elastic demand, what would be the net result on their total revenue from an increase in price?

There would be no change in total revenue.

Which statement is TRUE about specialization and exchange between two individuals?

They generally benefit the poorer individual AS WELL AS the richer individual.

Which item is most likely an inferior good? a city bus ticket gasoline a T-bone steak clothing

a city bus ticket

Which of these is NOT an example of market failure? a. Air is polluted by a manufacturing firm. b. Consumers must buy water from one local water utility. c. Water is polluted by a paper company located by the river. d. Competition leads firms to provide products at the lowest possible price.

d. Competition leads firms to provide products at the lowest possible price.

The opportunity costs of attending college do NOT include

food expenditures

Which of these is NOT correct? Price floors and price ceilings are typically instituted by government. can result in surpluses or shortages. can interfere with the process leading to market equilibrium. help a market balance the interests of sellers and buyers.

help a market balance the interests of sellers and buyers

Which of these circumstances would NOT affect the supply of new automobiles? an improvement in automobile manufacturing technology higher interest rates for new car financing a subsidy for struggling automobile manufacturers a labor strike in the steel industry

higher interest rates for new car financing

A shift to the right of the supply curve could be caused by a(n)...? increase in the price of a complementary good. decrease in the number of sellers. improvement in production technology. increase in the costs of resources.

improvement in production technology.

Supply and demand analysis is used

in both microeconomics and macroeconomics.

In which period can firms decide to leave an industry?

long run

People use _____ to determine how many hours to work, and businesses use _____ to determine how much of their product they are willing to supply to the market.

marginal analysis; marginal analysis

When quantity demanded in a market equals quantity supplied, then the

market is in equilibrium.

The economics of uranium mining would be studied in

microeconomics

When the government chooses to use resources to build tourist centers, the selected resources are no longer available to build highways. This BEST illustrates the concept of

opportunity cost

Because of scarcity

people face tradeoffs in nearly every choice they make.

Laws that prohibit price gouging are often politically

popular, but result in shortages.

When goods are produced at the lowest possible cost, an economy is said to have achieved

production efficiency

A tax in which the percentage of income tax rises as income falls is known as a _____ tax.

regressive

Economics is BEST defined as the study of how

resources are apportioned to satisfy human wants.

If demand is extremely elastic, it is likely that _____ will bear most of the burden of a tax and that the deadweight loss will be relatively _____.

sellers; large

Consumer surplus is defined as the difference between _____ and the market price.

the demand curve

Producer surplus is defined as the difference between

the market price and the supply curve.

A good example of a government-imposed price floor is

the minimum wage

At any price below the equilibrium price

the quantity demanded exceeds the quantity supplied in the market.

The primary determinant of the elasticity of supply is

time

Flu vaccination shots provide external benefits. Thus,

too few flu vaccination shots are given.

The measure of society's benefits due to a market transaction is called

total surplus.

MACROeconomics is concerned with issues such as

unemployment