econ
Which of the following is an example of market failure? A. Overuse of highways that leads to traffic congestion B. Reduced levels of vaccinations which increase illness and disease C. Substantial foreclosures caused by sub-prime lending D. All of the above
All of the above A. Overuse of highways that leads to traffic congestion B. Reduced levels of vaccinations which increase illness and disease C. Substantial foreclosures caused by sub-prime lending
Plagiarism is unethical because A. plagiarism might result in stealing profits from the original writer B. plagiarism can decrease the value of honest students' diplomas C. plagiarism can make it more difficult for instructors to assess the quality of students' writings D. plagiarism is a type of fraud
All of the above are reasons
Plagiarism is unethical because A. plagiarism might result in stealing profits from the original writer B. plagiarism can decrease the value of honest students' diplomas C. plagiarism can make it more difficult for instructors to assess the quality of students' writings D. plagiarism is a type of fraud E. all of the above are reasons
All of the above are reasons
Which of the following are reasons why most owners of companies want their employees to act ethically? A. Because they care about the well-being of their customers B. To enhance productivity C. To maximize public good will toward the company D. To avoid large fines and expensive lawsuits
All of the above are reasons why
Which of the following are reasons why most owners of companies want their employees to act ethically? A. Because they care about the well-being of their customers B. To enhance productivity C. To maximize public good will toward the company D. To avoid large fines and expensive lawsuits E. All the above are reasons why.
All of the above are reasons why
Which of the following is true? A. By putting unemployed resources to work or by putting already employed resources to better uses, we could expand output in an economy. B. To generate increased economic growth, a society would produce fewer consumer goods and more capital goods in the present. C. If the production possibility curve is concave from below (that is, bowed outward from the origin), it reflects increasing opportunity costs of producing additional amounts of a good. D. Increases in a society's output do not make scarcity disappear.
All of the above are true.
Which of the following is true? A. By putting unemployed resources to work or by putting already employed resources to better uses, we could expand output in an economy. B. To generate increased economic growth, a society would produce fewer consumer goods and more capital goods in the present. C. If the production possibility curve is concave from below (that is, bowed outward from the origin), it reflects increasing opportunity costs of producing additional amounts of a good. D. Increases in a society's output do not make scarcity disappear. E. All of the above are true.
All of the above are true.
Ethics violators like embezzlers, frauds, tax cheats and bank robbers A. usually follow most rules and other ethics most of the time. B. not only injure individuals and companies, but also often hurt entire markets. C. often use rational cost-benefit analysis when deciding whether to cheat. D. may feel so ashamed and guilty of their crimes that they are driven to suicide.
All of the above may be true of ethics violators.
Ethics violators like embezzlers, frauds, tax cheats and bank robbers A. usually follow most rules and other ethics most of the time. B. not only injure individuals and companies, but also often hurt entire markets. C. often use rational cost-benefit analysis when deciding whether to cheat. D. may feel so ashamed and guilty of their crimes that they are driven to suicide. E. All of the above may be true of ethics violators.
All of the above may be true of ethics violators.
Which of the following would reflect self-interested behavior? A. A worker pursuing a higher paying job and better working conditions. B. A consumer seeking a higher level of satisfaction with her current income. C. Donating a cell phone to a woman's shelter. D. Mother Theresa using her Nobel Prize money to care for the poor. E. All of the answers would reflect self-interested behavior.
All of the answers would reflect self-interested behavior.
Which of the following would reflect self-interested behavior?
All of the answers would reflect self-interested behavior. A. A worker pursuing a higher paying job and better working conditions. B. A consumer seeking a higher level of satisfaction with her current income. C. Donating a cell phone to a woman's shelter. D. Mother Theresa using her Nobel Prize money to care for the poor.
Which of the follwing is a resource exchanged in the factor markets? A. land B. Capital C. Labor D. Entrepreneurship E. All the above
All the above
wages
An amount of money paid to an employee at a specified rate per hour worked
How currency exchange rated are determined
An exchange rate is the number of units of one currency it takes to buy one unit of a second currency. How they are determined: The basic answer why one $ = 18 pesos (in January 2016) is: supply and demand
Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold? -an increase in the price of peanut butter, a complement to jelly -an increase in the price of Marshmallow Fluff, a substitute for jelly -an increase in the price of grapes, an input to jelly -an increase in consumers' incomes, as long as jelly is a normal good
An increase in the price of grapes,, an input to jelly If a change occurs in any of the factors that determine supply - such as an increase in the price of grapes, an input to jelly-the result is a shift of the supply curve. In this case, the change in he price of jelly causes the supply curve of jelly to fall. This leads to an increase in the equilibrium price of jelly, and a decrease in the equilibrium quantity of jelly sold (Question #6 graph)
Change of Supply (shift of S curve)
An increase or decrease in the quantity supplied at each possible price. An increase in supply is a rightward shift in the entire supply surve. A decrease in supply is a leftward shift in the entire supply curve.
Serivce
Any activity that fulfills a human want or need and returns money to those who provide it.
Which of the following is the correct way to describe equilibrium in a market?
At equilibrium, quantity demanded equals quantity supplied
Approximately _______ percent of job losses in the first three months of 2004 were caused by outsourcing. A) 1 B) 2 C) 4 D) 6
B) 2
Why might pollution from a paper mill be an example of a market failure? A) The paper mill is ignoring property rights by polluting. B) People living downwind of the mill bear part of the cost of production. C) People living near the paper mill are not offered jobs there. D) None of the above.
B) People living downwind of the mill bear part of the cost of production.
Adam Smith listed three reasons for specialization to increase productivity. What are they? A) Determination, Motivation, and Innovation. B) Repetition, Continuity, and Innovation. C) Repetition, Continuity, and Motivation. D) Repetition, Determination, and Innovation.
B) Repetition, Continuity, and Innovation.
From an economists' perspective, which of the following observations is not true? a.) Self-interest is purely monetary in nature. b.) Self-interest can include benevolence. c.) Self-interest is a good predictor of human behavior in most situations. d.) Self-interest is not the same as selfishness.
Self-interest is purely monetary in nature.
Shortages and their effects on Market price
Shortage: A market condition existing at any price at where the quantity supplied is less than the quantity demanded Increase in Demand -->rightward shits--> excess demand (quantity demanded, Q3, is greater than quantity supplied, Q1—a shortage) --> Increase in Pe , Increase in Qe-->shortage Decrease in Supply-->leftward shits--> excess demand (quantity demanded (Q1) is greater than quantity supplied (Q3) --> increase in Pe , decrease in Qe-->shortage
Supply schedule
Shows quantity of a offered for sale at different possible prices.
Which of the following people are more likely to break ethical rules:
Someone who is ignorant
Which of the following people are more likely to break ethical rules?
Someone who is ignorant
If Stephanie buys a laptop for $700 and the maximum she would have paid was $1,000, which of the following is true?
Stephanie received a consumer surplus of $300
Which of the following would shift a supply curve to the right?
Subsides
Which of the following statements is most consistent with the rule of rational choice?
"When evaluating new prescription drugs, the Food and Drug administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."
Your savings account pays 9 percent per year: Each $100 in the bank grows to $109 over a one-year period. If prices increase by 8 percent per year, by keeping $100 in the bank for a year you actually gain
$1
You earn 5 percent interest on funds in your money-market account. If consumer prices increase by 3 percent per year, your real earnings on $10 comma 000 in the money-market account are
$200 per year
Percent change
((New value - old value)/old value) X 100
When demand is elastic:
(All of the above are correct) -price elasticity of demand is greater than one -consumers are relatively responsive to changes in price -the percentage change in quantity demanded resulting from a price change is greater than the percentage change in price
Which of the following is not likely to be an inferior good for most Americans?
(All of the above are likely to be inferior goods for most americans) -Thrift store clothing -Wine in a box -Intercity bus travel -Store brand canned vegetables
Plagiarism is unethical because
(All of the above are reasons) -Plagiarism might result in stealing profits from the original writer -can decrease the value of honest students' diplomas -can make it more difficult for instructors to asses the quality of students' writings -plagiarism is a type of fraud
Ethics violators like embezzlers, frauds, tax cheats and bank robbers
(All of the above may be true) -Usually follow most rules and other ethics most of the time -Not only injure individuals and companies, but also often hurt entire markets -Often use rational cost-benefit analysis when deciding whether or not to cheat -May feel ashamed and guilty of their crimes that they are driven to suicide
Which of the following is true?
(All of the above) -By putting unemployed resources to work of by putting already employed resources to better uses, we could expand output in an economy -To generate increased economic growth, a society would produce fewer consumer goods and more capital goods in the present. -If the production possibility curve is concave from below (that is bowed outward from the origin), it reflects increasing opportunity costs of producing additional amounts of a good. -Increases in a society's output do not make scarcity disappear.
Resources and goods are free to move across state lines. If Oregon producers choose to specialize in producing honey and California producers choose to specialize in growing almonds, then we could reasonablly conclude that:
(All of the above) -California has a comparative advantage in producing almonds -Oregon has a comparative advantage in producing honey -the opportunity cost of growing almonds is lower in California than in Oregon -the opportunity cost of producing honey is lower in Oregon than in California
Which of the following are reasons why most owners of companies want their employees to act ethically?
(All of the above) -Decrease in market demand -Decrease in market supply -Decrease in equilibrium price -Total market collapse
which of the following would reflect self-interested behavior?
(All of the above) -a worker pursuing a higher paying job and better working conditions -a consumer seeking a higher level of satisfaction with her current income -donating a cell phone to a woman's shelter -Mother Teresa using her Nobel Prize money to care for the poor
Which of the following is not a resource exchanged in the factor markets?
(All of the above) -land -capital -labor -entrepreneurship
A student has a chance to see Green Day in concert. The student also has a major economics exam the next morning. If the student goes to the concert:
(All of the above) -she may receive a lower grade on the economics exam -the opportunity cost of the concert is the value of the time spent studying -the decision involves a trade-off
Ethics is defined as:
(Can be defined in any of the ways above) -a branch of philosophy -moral rules or standards governing human conduct, but not necessarily moral rules -the moral principals of an individual person
Which of the following is true?
(None of the above are true) -In the product markets, firms are buyers and households are sellers -In the factor markets, firms are sellsers and households are buyers -Firms receive money payments from households for labor, land, capital, and entrepreneurship
If the government wanted to reduce the quantity of a good traded, it could do so by:
(doing any of the above) -setting a price ceiling for the good below the equilibrium price -setting a price floor for the good above the equilibrium price -tax the good more heavily -tax an input used intensively in the industry more heavily
factors of production(5)
- natural resources(land) -labor -physical capital -human capital -entrepreneurship
Which of the following is true?
-An economy in which labor is relatively scarce would tend to use capital intensive production methods -An increase in the availability of labor relative to capital in the economy would tend to increase how labor intensive the production processes in that economy would be.
Effective free market ethical systems must provide for all of the following:
-Clearly defined rules and regulations -Meaningful punishments for rule breakers -Adequate market oversight and policing -Enough freedom for creativity and competition EXCEPT: a clearly defined moral foundation
More efficient positive market ethics will generally help improve all of the following challenges:
-Positive externalities of a market -Negative externalities of a market -Consumer surplus of a market -Producer surplus of a market
Cost-benefit analysis can determine the optimal amount of all the following:
-Regulations -Market inspectors -Severity of punishments -Inspections EXCEPT: fairness of rules
In order for a market's ethics to be effective, all of the following must occur:
-The ethics must be clearly defined -There must be clear penalties for ethics violators -There must be enough police or inspectors to find most violations -Police or inspectors must be unbiased EXCEPT: everyone must agree to take part in the market
If someone regularly acts unethically in a market:
-They will probably hurt consumers -They will probably hurt suppliers -They will probably hurt the market itself
Non-price determinants of supply (changes in these shift supply curve)
1. #of firms 2. Prices of inputs 3. Tech. Change 4. Taxes/subsidies 5. Wages 6. Price of Energy 7. Price of Raw materials
Supply decreases if( curve shifts left)
1. #of firms in industry decreases (there are fewer options)- direct 2. Tech. doesn't improve/falls (decrease)- direct 3. Taxes/subsidies rise- inverse 4. Wages increase/rise 5. Price of Energy rise 6. Price of Raw materials increase
Supply increase if (curve shifts right)
1. #of firms in industry increases (there are more options) 2. Tech. Improves 3. Taxes/subsidies fall 4. Wages fall 5. Price of Energy falls 6. Price of Raw materials fall
Factors which increase the demand for dollars a) Increased desire by foreigners to buy U.S. produced products (when their countries boom, or when U.S. price levels fall, for example?)
1. In order to purchase newly produced goods or services from the United States For example: If a person living in Oaxaca wants to purchase a Harley-Davidson motorcycle produced in the U.S., the product has to be paid for with dollars so they ahve to change pesos to dollars first.
c) Tastes, Population
Tastes There is a positive relationship between tastes and preferences and demand. If a good becomes more popular, ceteris paribus, demand for the good will increase. Conversely, if a good becomes less popular, the demand for the good will decrease. Population Positive Relationship. If Population INCREASES, Demand INCREASES (shifts to the right) for most goods, if Population DECREASES, Demand DECREASES (shifts to the left) for most goods
An example of a capital resource is: A. stock in a computer software company. B. the funds in a CD account at a bank. C. a bond issued by a company selling electric generators. D. a dump truck. E. an employee of a moving company.
A dump truck
price floor
A legal minimum on the price at which a good can be sold (pizza has to be sold for 5$ no less)
Equilibrium price
A market condition that occurs at any price and quantity at which the quantity demanded equals the quantity supplied.
resource market
A market in which a resource is bought and sold. Ex. Gas companies (labor or job)
Change in Quantity Supplied (move along S curve when Price changes)
A movement between points along a stationary supply curve, ceteris paribus.
renewable resource
A natural resource that can be replaced at the same rate at which the resource is consumed
Which of the following policies would be most effective in promoting monthly water conservation?
A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons
Maps are a good non-economic example of using assumptions to make things simpler. Which of the following are assumptions used to make maps useful?
The earth is flat. and The roads are flat
Which of the following is a statement of positive economics?
The income tax reduces after-tax incomes of the rich
Which of the following is a statement of positive economics? A. The income tax reduces after-tax incomes of the rich. B. A reduction in tax rates makes the after-tax distribution of income fairer. C. Tax rates ought to be reduced so that people will work more. D. All of the above are statements of positive economics. E. None of the above is statements of positive economics.
The income tax reduces after-tax incomes of the rich
Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes?
The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.
Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes? A. He has already made all the clothes he will need for a few years. B. The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career. C. Sergei just can't find the material he likes in the United States. D. Sergei has a comparative advantage in tailoring clothes. E. The opportunity cost of making clothes instead of playing hockey is relatively low, so he should instead concentrate on his hockey career (for which the opportunity cost is very high).
The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.
Consider a bicycle producer that initially employs 200 production workers and 10 customer-service workers. When the firm outsources its customer-service operation to India, the 10 customer-service workers lose their jobs. a. The net effect from outsourcing could be a loss of fewer than 10 jobs in the firm because b. There will be a net gain in jobs in the firm if
a. the savings may allow the firm to hire more production workers. b. additional demand for bicycles creates a large boost in production.
Effective free market ethical systems must provide for all of the following EXCEPT: A. Clearly defined rules and regulations. B. meaningful punishments for rule breakers. C. a clearly defined moral foundation. D. adequate market oversight and policing. E. enough freedom for creativity and competition.
a clearly defined moral foundation
public goods
a commodity or service that is provided without profit to all members of a society, either by the government or a private individual or organization. (air, etc.)
and Terry run a landscaping firm that prunes trees and cuts lawns. Sandy is more productive than Terry at both tasks. Sandy should prune trees and Terry should cut lawns if Sandy has advantage in pruning trees
a comparative
A downward sloping straight-line production possibilities curve implies:
a constant opportunity cost
A downward sloping straight-line production possibilities curve implies:
a constant opportunity cost.
A downward sloping straight-line production possibilities curve implies: A. an inefficient use of resources. B. an efficient use of resources. C. an increasing opportunity cost. D. a constant opportunity cost.
a constant opportunity cost.
Sellers who were originally willing to supply 800 units of a good at $4 per unit are now willing to supply 600 units at $4 per unit. That change would be described as:
a decrease in supply
Which of the following will not increase the demand for iced tea?
a decrease in the price of iced tea
A theory can best be defined as:
a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work.
A theory can best be defined as: A. an untestable assertion or statement of untestable fact. B. a testable statement that can be definitively proven to be true or false using empirical analysis. C. a normative statement that can be tested empirically through analysis of real-world data. D. a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work.
a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work.
subsidy
a government payment to an individual, business, or other group to encourage or protect a certain type of economic activity
Demand curve
a graphic representation of a demand schedule. Demand curves are downward sloping - the downward slope is a visual representation of the :law of demand": all else equal, as the price of an item rises, the quantity buyers are willing and able to buy decreases. The negative slope of a demand curve shows that there is an inverse relation between price and quantity demanded, all else equal.
demand curve
a graphical representation that shows the inverse relationship between price and quantity demanded. DOWN
Assume the demand schedule for cookies is downward sloping. If the price of cookies falls from $2.50 to $2.25 per dozen:
a larger quantity of cookies will be demanded
The private ownership of property and the use of the market system to direct and coordinate economic activity are the most characteristic of:
a market economy
The completely private ownership of property and the exclusive use of the market system to direct and coordinate economic activity are most characteristic of:
a market economy.
The completely private ownership of property and the exclusive use of the market system to direct and coordinate economic activity are most characteristic of: A. a command economy. B. a mixed economy. C. a market economy. D. a traditional economy.
a market economy.
product market
a market in which a good or service is bought and sold
price ceiling
a maximum price that can be legally charged for a good or service (pizza can be sold for 17$ no more)
exhaustible resource
a natural resource that does not renew itself and so is available in a finite amount, such as oil or coal
increase in demand
a rightward shift of the demand curve (greater quantity is demanded at each price)
excise tax
a sales tax on individual products such as alcohol, tobacco, and gasoline
The imposition of a price ceiling on a market often results in:
a shortage
economic theory
a simplification of economic reality used to make predictions about the real world
Which of the following lies primarily within the realm of microeconomics?
a study of supply and demand conditions in the market for orange juice
Which of the following lies primarily within the realm of microeconomics? A. an empirical analysis of the relationship between the growth of the money supply and the rate of inflation B. an economic model forecasting the impact of a tax increase on consumer spending and national output C. a study of supply and demand conditions in the market for orange juice D. a model forecasting the impact of a change in interest rates on the level of investment in the economy
a study of supply and demand conditions in the market for orange juice
what lies primarily within the realm of microeconomics?
a study of supply and demand conditions in the market for orange juice
Which of the following would be least likely to affect the supply of automobiles?
a successful physical fitness plan encouraging Americans to walk rather than to drive to their destinations
Assume a price floor is imposed in the wheat market at the equilibrium price and that a price ceiling is imposed in the gasoline market at the equilibrium price. An increase in supply in both the wheat and gasoline markets will create:
a surplus in the wheat market and an increase the quantity of gasoline traded.
Hypothesis:
a testable proposition
A hypothesis is:
a testable proposition.
A hypothesis is: A. a normative economic statement. B. a testable proposition. C. a statement that cannot be evaluated using real-world data. D. a model with no connection to the real world.
a testable proposition.
voluntary exchange
a trade that makes both parties better off
Non-price determinants of demand (changes in these shift demand curve)
a) Income (normal goods/inferior goods) b) Prices of related goods (substitutes/complements) c) Tastes, Population
Ethics A. is a branch of philosophy. B. are moral rules or standards governing human conduct. C. are rules or standards governing human conduct, but not necessarily moral rules. D. the moral principles of an individual person. E. can be defined in any of the ways above.
can be defined in any of the ways above
An individual has a comparative advantage in production if that individual:
can produce at the lowest opportunity cost
An individual has a comparative advantage in production if that individual:
can produce at the lowest opportunity cost.
An individual has a comparative advantage in production if that individual: A. can produce at the highest opportunity cost. B. is more self-sufficient than others. C. can produce at the lowest opportunity cost. D. both a. and b. E. both b. and c.
can produce at the lowest opportunity cost.
Interest Rates and ATM Trips. Carlos, who lives in a country where interest rates are very high, goes to an ATM every day to get $10 of spending money. Jim, who lives in a country with relatively low interest rates, goes to the ATM once a month to get $300 of spending money. Why does Carlos use the ATM more frequently?
carlos' opportunity cost of holding cash is higher.
Shift
caused by a change in a variable not on an axis
Movement along a line/curve
caused by a change in a variable on an axis
command economy
central planning
Marginal thinking is best demonstrated by:
choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time
To the extent that a government price control succeeds in affecting price, it can be expected to lead to a corresponding:
decrease in the volume of sales whether the price is forced up or down
An increase in the price of inputs used to produce good A will:
decrease supply, increase price and decrease the quantity exchanged.
If the price of the ice cream increases substantially (ceteris paribus), the equilibrium quantity of hot fudge sauce, a complement, is likely to
decrease, and the equilibrium price of hot fudge sauce is likely to decrease
Trade between different prisoner of war (POW) compounds _______ the difference in the price of beef across the compounds. increased/decreased
decreased
According to the law of demand, an increase in price the quantity demanded
decreases
Suppose that over a one-year period, the nominal wage increases by 4 percent and consumer prices increase by 10 percent. The real wage
decreases by 6%
Outsourcing production costs and consumer prices
decreases; decreases
Upper A decrease in demand (given a typical upward sloping supply curve) for a product the equilibrium price, and the equilibrium quantity.
decreases; decreases
normal good
demand increases as income increases
Consumer sovereignty
describes how individual consumers in market economies determine what is to be produced
flat tax/proportional tax
designed so that everybody would be charged the same percentage of their income
progressive taxes
designed so that those with higher incomes pay a greater proportion of their income in taxes
A market economy depends on market mechanisms to:
determine the most efficient way of using resources
A market economy depends on market mechanisms to:
determine the most efficient way of using resources.
A market economy depends on market mechanisms to: A. determine the most efficient way of using resources. B. determine how large the government's budget deficit should be. C. decide how much government regulation there should be. D. provide everyone with a minimum level of income. E. do all of the outcomes listed.
determine the most efficient way of using resources.
market mechanism
determines the most efficient use of resources
A firm produces its product using both capital and labor. When it does not change its capital usage, but doubles its labor input, its output increases by less than 50%. Which of the following is the most likely explanation of this finding?
diminishing returns
The function of an entrepreneur is to:
do all of the tasks listed
The function of an entrepreneur is to:
do all of the tasks listed.
The function of an entrepreneur is to: A. bear the business risks. B. organize the other factors of production. C. innovate. D. do all of the tasks listed.
do all of the tasks listed.
which of the following would break a positive ethic?
driving two mph over the speed limit
Shifts in the Demand Curve
due to changes in variables other than the price of the good itself and are known as a change in demand, which shift in the demand curve. Increase in demand represents a rightward shift in the demand curve A decrease in Demand represents a leftward shift in the demand curve
An example of a capital resource is:
dump truck
which of the following is not an example of a resource? a. a forest b. a river c. John Deere Tractor d. the chef at city's best cafe e. all answers are resources
e. all answers are resources term-2
rational self-interest
each individual tries to maximize the expected benefit achieved with a given cost or to minimize the expected cost of achieving a given benefit (benefits ur )
Adam Smith came up with
economics
Economics is different from a "hard" science like physics because:
economists cannot easily control all the variables that might influence human behavior
Economics is different from a "hard" science like physics because:
economists cannot easily control all the variables that might influence human behavior.
The longer the time period considered, the elasticity of supply tends to
increase
For a given increase in price, the greater is the elasticity of supply, the greater is the resulting
increase in quantity supplied
economic growth
increase in the economy's ability to produce goods and services-outward shift in the PPC
substitutes
increase in the price of one causes an increase in the demand for the other good. coke and pepsi
Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a date. This offer will likely:
increase the opportunity cost of going on the date
Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a date. This offer will likely: A. not affect the opportunity cost of going on the date. B. reduce the opportunity cost of going on the date because giving up the additional work dollars will make his girlfriend feel even more appreciated. C. increase the opportunity cost of going on the date. D. reduce the opportunity cost of working.
increase the opportunity cost of going on the date
Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a date. This offer will likely:
increase the opportunity cost of going on the date.
A government mandated price increase of doodads will:
increase the quantity of doodads supplied but decrease the quantity of doodads demanded
A recent study at a liberal arts college concluded that demand elasticity is 0.91 for college courses. The administration is considering a tuition increase to help balance the budget. An economist might advise the school to:
increase tuition in order to increase revenue
Elasticity of demand will ____ as the availability of substitutes ____.
increase, increase
A shortage exists in the market for corn at the prevailing price. The shortage can eliminated by a price:
increase, increasing the quantity supplied and decreasing the quantity demanded
According to the law of supply, an increase in a good's price the quantity supplied of that good
increases
An increase in the wage for high-school graduates the opportunity cost of college
increases
As a farmer adds more and more fertilizer to the soil, the crop yield, but at a rate.
increases; decreasing
The fact that some resources and skills cannot be easily adapted from their current uses to alternative uses is the basic reason for the law of
increasing opportunity cost
The fact that some resources and skills cannot be easily adapted from their current uses to alternative uses is the basic reason for the law of
increasing opportunity cost.
The fact that some resources and skills cannot be easily adapted from their current uses to alternative uses is the basic reason for the law of A. increasing opportunity cost. B. decreasing opportunity cost. C. comparative advantage. D. consumer sovereignty.
increasing opportunity cost.
benefits received principle
individuals receiving the benefits are those who pay for them: gas tax- the more you drive on the highway, the more gas you use, the more gas tax you pay
Specialization is a way for:
individuals to make the best use of resources by devoting themselves to one primary productive activity
Specialization is a way for: A. individuals to make the best use of resources by devoting themselves to one primary productive activity. B. society to become wealthier while not using their resources. C. people to avoid having to trade. D. increasing one's opportunity cost for an activity.
individuals to make the best use of resources by devoting themselves to one primary productive activity
A steel mill raises the price of steel by 20%, which results in a 7% reduction in the quantity of steel demanded. The demand curve facing this firm is:
inelastic
Supply is said to be ____ when the quantity supplied is not very responsive to changes in price
inelastic
outsourcing offsets
insourcing
substitute goods
interchangeable goods. If A&B are substitutes, an increase in the price of A causes and increase in the demand for B
The law demand illustrates a(n) _____ relationship between price and _____
inverse; quantity demanded
The current supply of Rembrandt paintings:
is perfectly inelastic
macroeconomics
is the study of the aggregate: inflation, unemployment, business cycles, economic growth
A nation has a comparative advantage in the production of cars over another nation if:
it can produce cars at a lower opportunity cost than the other country
A nation has a comparative advantage in the production of cars over another nation if:
it can produce cars at a lower opportunity cost than the other country.
A nation has a comparative advantage in the production of cars over another nation if: A. it can produce cars with fewer resources than the other country. B. it can produce cars at a lower opportunity cost than the other country. C. it can produce cars at a higher opportunity cost than the other country. D. it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country. E. it is more self-sufficient in all areas of production, including automobile manufacturing.
it can produce cars at a lower opportunity cost than the other country.
Your mother tells you, "Watching ten hours of TV per day will make you stupid." This is a positive statement because:
it is a proposition that can be tested
Your mother tells you, "Watching ten hours of TV per day will make you stupid." This is a positive statement because:
it is a proposition that can be tested.
Your mother tells you, "Watching ten hours of TV per day will make you stupid." This is a positive statement because: A. your mother says it with a positive tone in her voice. B. your mother is positive that you are stupid. C. it is a proposition that can be tested. D. your mother is only thinking of your best interest. E. you're positive that your mother is stupid.
it is a proposition that can be tested.
Four categories of resources
land, labor, capital, entrepreneurship
scare resources
land, labor, capital, entrepreneurship
In the first three months of 2004, the number of jobs moving to another state was _______ than the number of jobs moving to another country. larger/smaller
larger
In the first three months of 2004, the number of jobs moving to another state was than the number of jobs moving to another country.
larger
Excess demand occurs when the price is the equilibrium price; excess supply occurs when the price is the equilibrium price.
less than ; greater than
By promoting competition, the government generates _______ product prices. lower/higher
lower
By promoting competition, the government generates product prices
lower
The branch of economics that focuses on outcomes in highly aggregated markets, such as the markets for labor or consumer products, is called:
macroeconomics
The branch of economics that focuses on outcomes in highly aggregated markets, such as the markets for labor or consumer products, is called:
macroeconomics.
The branch of economics that focuses on outcomes in highly aggregated markets, such as the markets for labor or consumer products, is called: A. macroeconomics. B. Marxian economics. C. positive economics. D. normative economics. E. microeconomics.
macroeconomics.
normative economics
makes prescriptions about the way the economy should work based on opinión
The intersection of the supply curve and the demand curve is known as the
market equilibrium
when economists speak of markets, they primarily mean:
mechanisms that coordinate actions of buyers and sellers
When economists speak of markets, they primarily mean:
mechanisms that coordinate actions of buyers and sellers.
When economists speak of markets, they primarily mean: A. places where production of goods and services take place. B. those locations where sales of stocks and bonds of corporations take place. C. mechanisms that coordinate actions of buyers and sellers. D. the trillions of dollars that change hands in the foreign exchange markets.
mechanisms that coordinate actions of buyers and sellers.
Mike can wash a car in 5 minutes and wax a car in 15 minutes. Tony can wash a car in 10 minutes and wax a car in 20 minutes. Which of the following is true?
mike can wash a car faster and has comparative advantage in washing cars
price floor
minimum wage
Which of the following is not a factor of production?
money
More efficient positive market ethics will generally help improve all of the following challenges EXCEPT:
moral externalities of a market
More efficient positive market ethics will generally help improve all of the following challenges EXCEPT: A. positive externalities of a market B. negative externalities of a market C. moral externalities of a market D. consumer surplus of a market E. producer surplus of a market
moral externalities of a market
more efficient positive market ethics will generally help improve all of the following challenges except:
moral externalities of a market
Unlike its competitors, one glass producer can use its equipment to make either windows for houses or windows for cars. Other things equal, compared to its competitors, its supply curve of windows for cars would be:
more elastic than the supply curves of competitors
In free market economies,
most market exchanges will result in all parties "winning"
In free market economies,
most market exchanges will result in all parties "winning."
In free market economies, A. most market exchanges will result in a "winner" and a "loser." B. most market exchanges will result in all parties winning. C. any market exchange will follow no rules unless government imposes them. D. regulations and other written ethics will generally limit innovation and profitability. E. there is no way to measure the optimal level or type of market ethics.
most market exchanges will result in all parties "winning."
in free market economies,
most market exchanges will result in all parties "winning."
a change in a variable measured on an axis of a graph causes a the curve, while a change in a relevant variable that is not measured on an axis causes a
movement along, shift in
For the trade of producers, the price
must be greater than the opportunity cost
For the trade of consumer, the price
must be less than the opportunity cost
Mike, the manager of a car wash, is more productive at washing cars than any potential workers he could hire. Should he wash all the cars himself
no
competitive market
no single buyer or seller can influence the market price with their similar products
A market economy without any ethics would have:
no value
A market economy without any ethics would have: A. no value. B. immorally high prices and profits. C. too much illegal activity. D. only police and the courts to protect consumers. E. maximum free market freedom to achieve maximum productivity.
no value
a market economy without any ethics would have:
no value
Which of the following is true? A. In the product markets, firms are buyers and households are sellers. B. In the factor markets, firms are sellers and households are buyers. C. Firms receive money payments from households for labor, land, capital, and entrepreneurship. D. All of the above are true. E. None of the above is true.
none of the above are true
Ethical rules based on morals or concepts of fairness are called
normative ethics
Scarcity
not enough resources
Scarcity
not having sufficient resources to produce all the goods and services we want.
scarcity
occurs when the amount people desire exceeds the amount available
If we know someone pays all their taxes and gives money to charity, we know that
only that they pay their taxes and give money to charity
Ceteris Paribus
other things constant
law of supply
other things constant, the quantity supplied will vary directly with the price of the good
rent
pay for natural resources
wages
pay for their labor
rent
payment to resource owners for the use of their natural resources
What is Economics about?
people and the choices they make in a world of scarce resources
An externality occurs when:
people other than those making the demand and supply decisions share the benefits or the costs of an activity.
rational
people try to make the best choices they can, given the available time and information
When a person possesses a comparative advantage in the production of one good or service, it:
permits gain from trade to be realized due to a more efficient use of resources
When a person possesses a comparative advantage in the production of one good or service, it:
permits gain from trade to be realized due to a more efficient use of resources.
When a person possesses a comparative advantage in the production of one good or service, it: A. means that the person's opportunity cost is higher than for that of other goods. B. discourages specialization. C. promotes greater self-sufficiency. D. permits gains from trade to be realized due to a more efficient use of resources.
permits gain from trade to be realized due to a more efficient use of resources.
When a person possess a comparative advantage in the production of one good or service, it:
permits gains from trade to be realized due to a more efficient use of resources
What will happen to my income if I have to pay more taxes?
positive
Who is the United States largest trading partner
positive
law of demand
price and quantity demanded are inversely related
demand decrease
price decrease, quantity decrease
supply increase
price decrease, quantity increase
supply decrease
price increase, quantity decrease
demand increase
price increase, quantity increase
What is Terms of Trade?
price of one good service or resource in terms of another
entrepreneurship
process of combining the labor, land and capital together to produce goods and services
What is comparative advantage?
produce a good service at a lower opportunity cost than another producer
As a result of an increase in a product's price:
product supply does not change, but quantity supplied increases
primary source of state and local revenue
property taxes
market economy
pure capitalism, no government regulation
the change of price changes
quantity demanded
amount of shortage
quantity demanded - quantity supplied (at mkt price)
The difference between a change in quantity demanded and a change in demand is that a change in:
quantity demanded is caused by a change in good's own current price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations
If the demand is perfectly elastic, what would happen to the quantity demanded if there is a tiny increase in price?
quantity demanded will fall to zero
If the demand is perfectly inelastic, what would happen to the quantity demanded if there is a tiny increase in price?
quantity demanded will remain the same
A shortage is the amount by which the exceeds the
quantity demanded, quantity supplied
change in price causes change in
quantity supplied
Along a supply curve:
quantity supplied changes as price changes
The difference between a change in quantity supplied and a change in supply is that a change in:
quantity supplied is caused by a change in a good's own, current price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes
surplus
quantity supplied is greater than quantity demanded
When economists refer to economic behavior, they mean that:
rational people try to anticipate the likely consequences of their actions.
When economists refer to economic behavior, they mean that: A. from time to time, everyone behaves irrationally. B. changes in incentives influence behavior in unpredictable ways. C. the pursuit of money is the most significant factor influencing decision making. D. rational people try to anticipate the likely consequences of their actions.
rational people try to anticipate the likely consequences of their actions.
Some political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they parent. The economic way of thinking indicates that legislation of this type of would:
reduce the after-tax cost of raising children and therefore increase the birth rate
Some political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they parent. The economic way of thinking indicates that legislation of this type would:
reduce the after-tax cost of raising children and therefore increase the birth rate.
Some political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they parent. The economic way of thinking indicates that legislation of this type would: A. make it more expensive for parents to provide for their children. B. reduce the value of children to their parents and therefore lead to a reduction in the birth rate. C. reduce the after-tax cost of raising children and therefore increase the birth rate. D. exert no impact on either the cost of raising children or the birth rate since parenting children is a non-economic activity.
reduce the after-tax cost of raising children and therefore increase the birth rate.
Advantages of specialization do not include:
reduced interdependence
Advantages of specialization do not include:
reduced interdependence.
Advantages of specialization do not include: A. reduced interdependence. B. the exploitation of comparative advantage. C. the ability to utilize more complex production processes. D. gains from learning by doing. E. All of the above are advantages of specialization.
reduced interdependence.
A good economic theory:
relies on simplifying assumptions in order to explain economic behavior
A good economic theory:
relies on simplifying assumptions in order to explain economic behavior.
Marginal Airlines. Marginal Airlines runs 10 flights per day at total cost of $50 comma 000, including $30 comma 000 in fixed costs for airport fees and the reservation system and $20 comma 000 for flight crews and food service. a. If an 11th flight would have 25 passengers, each paying $125, would it be sensible to run the flight? b. If the 11th flight would have only 15 passengers, each paying $125, would it be sensible to run the flight?
a. yes b. no
which of the following is an example of an individual motivated by self interest? A. student volunteering at a soup kitchen B. an attorney providing free legal service to low income families C. a young person volunteering for the Peace Corps D. Man buying a new Camaro E. all answers are correct
all answers are correct
A free market lacking clear ethical rules, adequate oversight and meaningful punishments for rule breakers might suffer: A. decrease in market demand. B. decrease in market supply. C. decrease in equilibrium price. D. total market collapse.
all of the above
A free market lacking clear ethical rules, adequate oversight and meaningful punishments for rule breakers might suffer: A. decrease in market demand. B. decrease in market supply. C. decrease in equilibrium price. D. total market collapse. E. all of the above.
all of the above
Which of the following is one of the three basic questions a society must answer?
all of the above
which of the following is true? A. people specialize by concentrating their energies on activities they are best suited B. the primary reason people pursue their comparative advantage is their self interest C. one advantage of specialization is that workers acquire greater skill from repetition D. if a person, region, or country ... E. all of the above
all of the above
A student has a chance to see Green Day in concert. The student also has a major economics exam the next morning. If the student goes to the concert: A. she may receive a lower grade on the economics exam. B. the opportunity cost of the concert is the value of the time spent studying. C. the decision involves a trade-off.
all of the above are correct
A student has a chance to see Green Day in concert. The student also has a major economics exam the next morning. If the student goes to the concert: A. she may receive a lower grade on the economics exam. B. the opportunity cost of the concert is the value of the time spent studying. C. the decision involves a trade-off. D. all of the above are correct.
all of the above are correct
Which of the following is a resource exchanged in the factor markets? A. land B. capital C. labor D. entrepreneurship
all of the above are traded in the factor markets.
Which of the following is a resource exchanged in the factor markets? A. land B. capital C. labor D. entrepreneurship E. all of the above are traded in the factor markets.
all of the above are traded in the factor markets.
Resources and goods are free to move across state lines. If Oregon producers choose to specialize in producing honey and California producers choose to specialize in growing almonds, then we could reasonable conclude that: A. California has a comparative advantage in producing almonds. B. Oregon has a comparative advantage in producing honey. C. the opportunity cost of growing almonds is lower in California than in Oregon. D. the opportunity cost of producing honey is lower in Oregon than in California.
all of the above are true
Resources and goods are free to move across state lines. If Oregon producers choose to specialize in producing honey and California producers choose to specialize in growing almonds, then we could reasonable conclude that: A. California has a comparative advantage in producing almonds. B. Oregon has a comparative advantage in producing honey. C. the opportunity cost of growing almonds is lower in California than in Oregon. D. the opportunity cost of producing honey is lower in Oregon than in California. E. all of the above are true.
all of the above are true
Which of the following is true? a.) voluntary trades give both parties more in value than what they give up b.) w/o the ability to trade, ppl would not tend to specialize in those areas where they had a comparative advantage c.) ppl can gain by specializing in the production of the good in which they have a comparative advantage. d.) voluntary trade directly increases....
all of the above are true
Which of the following is true? a.) voluntary trades give both parties more in value than what they give up b.) w/o the ability to trade, ppl would not tend to specialize in those areas where they had a comparative advantage c.) ppl can gain by specializing in the production of the good in which they have a comparative advantage. d.) voluntary trade directly increases.... e.) all of the above are true
all of the above are true
Which of the following is true? a.) people specialize by concentrating their energies on the activity to which they are best suited, because they incur lower opportunity costs as a result. b.) the primary reason people pursue their comparative advantage is their self-interest c.) one advantage of specialization is that workers acquire greater skill from repetition d.) if a person, a region, or a country....
all of the above are true.
Which of the following is true? a.) people specialize by concentrating their energies on the activity to which they are best suited, because they incur lower opportunity costs as a result. b.) the primary reason people pursue their comparative advantage is their self-interest c.) one advantage of specialization is that workers acquire greater skill from repetition d.) if a person, a region, or a country.... e.) all of the above
all of the above are true.
Which of the following is an example of an individual motivated be self-interest? A. a student volunteering at a soup kitchen B. an attorney providing free legal service to low income families C. a young person volunteering for the Peace Corps D. a man buying a new Camaro
all of the answers
Which of the following is an example of an individual motivated be self-interest? A. a student volunteering at a soup kitchen B. an attorney providing free legal service to low income families C. a young person volunteering for the Peace Corps D. a man buying a new Camaro
all of the answers A. a student volunteering at a soup kitchen B. an attorney providing free legal service to low income families C. a young person volunteering for the Peace Corps D. a man buying a new Camaro
Economics is concerned with: A. the choices people must make because resources are scarce. B. human decision makers and the factors that influence their choices. C. the allocation of limited resources to satisfy virtually unlimited desires. D. all of the answers are correct.
all of the answers are correct
Economics is concerned with: A. the choices people must make because resources are scarce. B. human decision makers and the factors that influence their choices. C. the allocation of limited resources to satisfy virtually unlimited desires. D. all of the answers are correct.
all of the answers are correct A. the choices people must make because resources are scarce. B. human decision makers and the factors that influence their choices. C. the allocation of limited resources to satisfy virtually unlimited desires.
Which of the following is not an example of a resource? a.) a forest b.) a river c.) a John Deere tractor d.) the chef at the city's best café e.) all of the answers are resources
all of the answers are resources
Which of the following is not an example of a resource? a.) a forest b.) a river c.) a John Deere tractor d.) the chef at the city's best café e.) all of the answers are resources
all of the answers are resources a.) a forest b.) a river c.) a John Deere tractor d.) the chef at the city's best café
Ceteris Paribus
all other things held constant
A free market lacking clear ethical rules, adequate oversight and meaningful punishments for rule breakers might suffer: A. decrease In market demand B. decrease in market supply C. decrease in equilibrium price D. total market collapse E. all the above
all the above
Ethics violators like embezzlers, frauds, tax cheats and bank robbers: A. usually allow most rules and other ethics most of the time B. not only injure individuals and companies, but also often hurt entire markets C. often use rational cost benefit analysis when deciding wether to cheat D. may feel so ashamed and guilty of their crimes that they are driven to suicide E. All the above
all the above
which of the following are reasons why most owners of companies want their employees to act ethical? A. becasuser they care about the well being of their customers B. to enhance productivity C. to maximize public good will toward the company D. to avoid large fines and expensive lawsuits E. all the above
all the above
A student has a chance to see Green Day in concert. The student also has a major economics exam in the morning. If the student goes to the concert: A. shimmy recieve a lower grade on Econ exam B. the opportunity cost of the concert is the value of the time spent studying C. the decision involves a trade-off D. all the above are correct
all the above are correct
The term "ceteris paribus" means that:
all variables except those specified are constant
The term "ceteris paribus" means that: A. everything is variable. B. all variables except those specified are constant. C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole.
all variables except those specified are constant.
The term "ceteris paribus" means that: A. everything is variable. B. all variables except those specified are constant. C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole. E. all variables are held constant.
all variables except those specified are constant.
The real core of most economic problem is to:
allocate limited resources among competing uses
The real core of most economic problem is to:
allocate limited resources among competing uses.
The real core of most economic problem is to: A. increase the amount of leisure time available to people. B. guarantee everyone on the planet a minimum level of food, shelter and clean water. C. allocate limited resources among competing uses. D. eliminate scarcity.
allocate limited resources among competing uses.
The importance of the ceteris paribus assumption is that it:
allows one to analyze the relationship between two variables apart from the influence of other variables
The importance of the ceteris paribus assumption is that it:
allows one to analyze the relationship between two variables apart from the influence of other variables.
The importance of the ceteris paribus assumption is that it: A. allows one to separate normative economic issues from positive economic ones. B. allows one to generalize from the whole to the individual. C. allows one to analyze the relationship between two variables apart from the influence of other variables. D. allows one to hold all variables constant so the economy can be carefully observed in a suspended state.
allows one to analyze the relationship between two variables apart from the influence of other variables.
The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6. It is expected, therefore, that a 5% increase in price would lead to:
an 8% decrease in the quantity of gourmet coffee demanded
cartel
an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition.
behavioral assumption
an assumption that describes the expected behavior of economic decision makers; what motivates them
Centerally planned economy
an economic system in which the government makes all decisions on the three key economic questions
Buyers who were originally willing to buy 800 units of a good at $4 per unit are now willing to buy 1200 units at $4 per unit, That change would be described as:
an increase in demand
Which of the following is most likely a topic of discussion in a microeconomics course?
an increase in the price of lumber used to construct houses
Which of the following is most likely a topic of discussion in a microeconomics course? A. a decrease in the share of national income paid to the government in taxes B. an increase in the price of lumber used to construct houses C. an increase in the rate of inflation D. an increase in the number of jobless individuals filing unemployment claims E. the size of the national debt
an increase in the price of lumber used to construct houses
which of the following is most likely a topic of discussion is a microeconomics course?
an increase in the price of lumber used to construct houses
complements
an increase in the price of one good causes a decrease in the demand for the other good. peanut butter and jelly
Which of the following is an example of a capital resource?
an oil rig
Which of the following is an example of a capital resource? A. redwood trees B. unskilled labor C. stocks and bonds D. an oil rig
an oil rig
regressive tax
as a person's income rises, the amount his or her tax as a proportion of income falls
Pollution damages the environment we live in. An economist would advise that we reduce air pollution:
as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction
Pollution damages the environment we live in. An economist would advise that we reduce air pollution:
as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.
Pollution damages the environment we live in. An economist would advise that we reduce air pollution: A. as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction. B. until the total benefit from air pollution reduction just equals the total cost of pollution reduction. C. until air pollution levels reach near-zero levels. D. to the levels experienced in the 1950s when air was much cleaner near big cities.
as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.
Marginal benefit
benefit of one more unit
Pirating Textbooks? The government protects intellectual property rights by enforcing copyright rules on textbooks. Suppose Google scans the pages of this and other introductory economics textbooks and makes them available for downloading at no charge. a. Supposing you are a current textbook consumer, you would be b. What are the implications for the next generation of economics students?
better off; all of the above
If people are self-interested, A. they will always choose work over leisure. B. they will never choose work over leisure C. as their preferences for leisure time increase, they are likely to work less. D. as the wages they are offered increase, they are likely to work more. E. both c. and d. are true.
both c. and d. are true.
If people are self-interested, A. they will always choose work over leisure. B. they will never choose work over leisure C. as their preferences for leisure time increase, they are likely to work less. D. as the wages they are offered increase, they are likely to work more. E. both c. and d. are true.
both c. and d. are true. C. as their preferences for leisure time increase, they are likely to work less. D. as the wages they are offered increase, they are likely to work more.
Opportunity cost includes
both monetary and non-monetary costs
Opportunity cost includes A. monetary costs only. B. non-monetary costs only. C. both monetary and non-monetary costs. D. neither monetary nor non-monetary costs.
both monetary and non-monetary costs
opportunity cost includes:
both monetary and non-monetary costs
the opportunity cost of going to college includes:
both tuition and the value of the student's time
The opportunity cost of going to college includes:
both tuition and the value of the students time
The opportunity cost of going to college includes: A. both tuition and the value of the student's time. B. tuition, but not the value of the student's time, which is a cash cost. C. tuition, but not the value of the student's time, which is a monetary cost. D. neither tuition nor the value of the student's time, since obtaining a college degree makes one's income higher in the future. E. neither tuition nor the value of the student's time, at least at state-supported universities and colleges.
both tuition and the value of the students time
In a market economy, the amount of a good that is produced is primarily decided by the interaction of:
buyers and sellers
in a market economy, the amount of a good that is produced is primarily decide by the interaction of:
buyers and sellers
market
buyers and sellers carry out exchange at mutually agreeable terms
In a market economy, the amount of a good that is produced is primarily decided by the interaction of:
buyers and sellers.
In a market economy, the amount of a good that is produced is primarily decided by the interaction of: A. buyers and sellers. B. all consumers. C. producers and input suppliers. D. producers and government planning committees. E. all producers.
buyers and sellers.
An economic hypothesis is tested:
by comparing the hypothesis predictions to real world data
an economic hypothesis is tested:
by comparing the hypothesis's predictions to real-world data
An economic hypothesis is tested:
by comparing the hypothesis's predictions to real-world data.
An economic hypothesis is tested: A. by assessing the realism of its assumptions. B. by comparing the hypothesis's predictions to real-world data. C. most frequently by using a controlled experiment. D. by assessing the level of descriptive detail. E. by none of the above. Economic hypotheses are theoretical and therefore cannot be tested. Reset Selection
by comparing the hypothesis's predictions to real-world data.
A good economic theory: A. includes every detail that affects the economic behavior of interest. B. relies on simplifying assumptions in order to explain economic behavior. C. does not rely on simplifying assumptions. D. is impossible to achieve because of the difficulty of conducting controlled experiments. E. is normative and therefore not testable.
relies on simplifying assumptions in order to explain economic behavior.
price ceiling
rent control
production possibilities curve
represents the potential total output combinations of any two goods for an economy
increasing oppurtunity cost
resources are not equally well suited to each output
Economists believe that individuals act as if they are motivated by self-interest and:
respond in predictable ways to changing circumstances
Economists believe that individuals act as if they are motivated by self-interest and:
respond in predictable ways to changing circumstances.
Economists believe that individuals act as if they are motivated by self-interest and: A. respond selfishly. B. respond in predictable ways to changing circumstances. C. it leads to inconsistent and unpredictable behavior. D. all of the above.
respond in predictable ways to changing circumstances.
What is a resource?
result of production or the result of human effort
most used source for revenues
sales and income tax
Economic goods are:
scarce products that are created from scarce resources
economic goods are
scarce products that are created from scarce resources
Economic goods are:
scarce products that are created from scarce resources.
Economic goods are: A. only those commodities priced in monetary terms. B. scarce products that are created from scarce resources. C. the opposite of normative economic goods. D. not subject to scarcity. E. only theoretical, not real.
scarce products that are created from scarce resources.
Economic choices or tradeoffs are the result of:
scarcity
Economic choices or tradeoffs are the result of: A. basic human greed B. scarcity. C. poverty. D. private ownership of resources. E. the fallacy of composition.
scarcity
Which of the these conditions are most likely to motivate honest people to become corrupt?
seeing your boss and fellow workers get rich by lying and cheating
which of these conditions are most likely to motivate honest people to become corrupt?
seeing your boss and fellow workers get rich by lying and cheating
Total revenue represents the amount that:
sellers receive for a good or service which is computed as PxQ
If there is a surplus, ____ will be frustrated by their inability to exchange at the current price, and they will ____ the prices as a result.
sellers, lower
change in demand
shift of the entire command curve caused by the determinants PYNTE
ability to pay principle
simply that those with the greatest ability to pay taxes should pay more than those with the least ability to pay taxes
A leftward shift in supply could be caused by:
some firms leaving the industry
mixed economy
some private and some public ownership of resources
which of the following people are more likely to break ethical rules:
someone who is ignorant
diminishing returns
stage of production where output increases at a decreasing rate as more units of variable input are added
microeconomics
studies the behavior in particular markets: firms, households
Economics is most importantly concerned with...
studying how we allocate scarce resources to satisfy unlimited wants
Economics is most importantly concerned with... A. how to profit from trading in the stock market. B. government taxation and spending. C. studying how we allocate scarce resources to satisfy unlimited wants. D. how to reduce inflation. E. how to successfully launch a business.
studying how we allocate scarce resources to satisfy unlimited wants
Economics is most importantly concerned with:
studying how we allocate scarce resources to satisfy unlimited wants
Whenever the price of Good A increases, the demand for Good B increases as well. Good A and B appear to be:
substitutes
The market supply schedule reflects the total quantity
supplied at each price by all of the producers
An upward-sloping supply curve shows that:
suppliers are willing to increase production of their goods if they receive higher prices for them.
In free markets which allows a high level of unethical corruption:
suppliers will be forced to be corrupt or to leave the market
In free markets which allows a high level of unethical corruption: A. Suppliers may be forced to be corrupt or to leave the market. B. Consumers will be forced to be corrupt. C. Firms will always earn large long-term profits. D. the products sold will be worthless. E. there will be more creativity and competition than in highly ethical markets.
suppliers will be forced to be corrupt or to leave the market
In free markets which allows a high level of unethical corruption:
suppliers will be forces to be corrupt or to leave the market
Ceteris paribus, if an 8% increase in price leads to a 6% increase in the quantity supplied, then:
supply is inelastic
Which of the following is not determinant of supply?
tastes
invisible hand
term economists use to describe the self-regulating nature of the marketplace
fact
texas has no income tax
If the elasticity of demand coefficient for a good is one-sixth (in absolute terms), we know:
that for every 1% increase in quantity, there will be a 6% decrease in price.
comparative advantage
the ability to produce a good at a lower opportunity cost than another producer
absolute advantage
the ability to produce a product in less time (less resources) than another company
quantity demanded
the actual amount of a good or service consumers are willing to buy at some specific price
quanitity supplied
the amount that firms are willing and able to sell
Graphically, consumer surplus is measured by:
the area below the demand curve, but above the market price.
Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is:
the benefit to his grades from studying for an hour
Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is:
the benefit to his grades from studying for an hour.
Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is: A. nothing because he enjoys playing basketball more than studying. B. the benefit to his grades from studying for an hour. C. the increase in skill he obtains from playing basketball for that hour. D. nothing because he had a free pass into the sports complex to play basketball.
the benefit to his grades from studying for an hour.
capital
the buildings, equipment, and human skills used to produce goods and services
Entrepreneurship
the decision-maker role which in a market economy organizes the other kinds of resources so as to produce and sell a product, thereby earning a profit or taking a loss.
Consumer surplus is:
the difference between what consumers are willing to pay and what they are required to pay for a good.
Market failure occurs when:
the economy fails to allocate resources efficiently on its own.
Market failure occurs when: A. the stock markets tumble due to heavy selling. B. the economy fails to allocate resources efficiently on its own. C. demand shows signs of slowing down. D. a country cannot produce a good or service at a lower opportunity cost than others.
the economy fails to allocate resources efficiently on its own.
marginal/ on the margin
the effect of one more unit
The fallacy of composition is:
the erroneous view that what is true for the individual will also be true for the group
The fallacy of composition is:
the erroneous view that what is true for the individual will also be true for the group.
oppertunity cost
value of next best alternative given up when the choice is made (what you sacrifice to get something)
Because of scarcity
we must sacrifice valuable alternatives to obtain more goods and services we desire
Because of scarcity:
we must sacrifice valuable alternatives to obtain more goods and services we desire
Because of scarcity: A. we must sacrifice valuable alternatives to obtain more goods and services we desire. B. the opportunity cost of consumption is zero. C. we can obtain more of a desirable good without sacrificing other goods and services. D. shortages of goods prevail at current market prices. E. both a. and d. are correct.
we must sacrifice valuable alternatives to obtain more goods and services we desire
Which of the following is not true?
what one trader gains from a trade, the other must lose.
Which of the following is not true? a.) voluntary exchange is expected to be advantageous to both parties to the exchange b.) what one trader gains from a trade, the other must lose c.) if one party to a potential voluntary trade decides it does not advance his interests, he can veto the potential trade. d.) the expectation of gain motivates ppl to engage in trade.
what one trader gains from a trade, the other must lose.
which of the following are not very important to maintaining effective market ethics?
whether people understand the reasons for the rules of regulations
In a market economy how do we determine who will get the goods and services that have been produced?
whoever can afford them
For a given good, the market demand curve is generally ______ than the demand curves for the individual consumers
wider
The government protects intellectual property rights by enforcing patents on new pharmaceutical drugs. Suppose the government, by enforcing patent laws, prevents a new drug by Merck from being copied by another company and made available at a dramatically reduced price. If you were a current consumer of this new pharmaceutical drug, you would initially be as a result of the government's action. What are the implications for the next generation of pharmaceutical drug users?
worse off ; Pharmaceutical companies will have more revenue to cover research and development costs.
A taxi company currently has nine cabs in its fleet, and its total daily cost is $4,000. If a taxi company adds a tenth cab, the company's total daily cost will increase to $4,200 and its total revenue will increase by $250 per day. Should the company add the tenth cab?
yes
Between 1974 and 2011, the federal minimum wage increased from $2.00 to $7.25. Was the typical minimum-wage worker worse off in 2011?
yes
Extending Trade outside the Camp. Late in World War II, a German guard exchanged bread and chocolate at a rate of 2 loaves for 1 chocolate bar. Inside the Allied POW camp, the price of chocolate was 15 cigarettes per bar, and the price of bread was 30 cigarettes per loaf. Is there an opportunity for beneficial exchange?With the guard, a POW could exchange 2 chocolate bars for 4 loaves of bread. In the camp, the POW could exchange the extra loaves for 120 cigarettes, and then exchange the extra cigarettes for 8 chocolate bars. In other words, the POW's net gain from trade is 6 chocolate bars.
yes
Late in World War II, a German guard exchanged tea and chocolate at a rate of 3 tea bags for 1 chocolate bar. Inside the British POW camp, the price of chocolate was 5 cigarettes per bar, and the price of tea was 10 cigarettes per bag. Is there an opportunity for beneficial exchange?
yes
Suppose that in the French compound of a POW camp, the price of cheese is 28 cigarettes per cheese ration and the price of tea is 4 cigarettes per tea ration. In the British compound, the price of tea is 24 cigarettes per ration. Is there an opportunity for beneficial exchange?
yes
Suppose that stricter emissions standards would reduce health-care costs by $60 million but increase the costs of fuel and emissions equipment by $20 million. Is it sensible to tighten the emissions standards?
yes
Adam Smith listed three reasons for specialization to increase productivity. What are they?
Repetition, Continuity, and Innovation
natural resources
Gifts of nature used to make goods and services
What does the Latin expression ceteris paribus mean?
Other things being held fixed.
Normative economic thinking
value judgment (what should be)
An increase in supply causes
decrease in the equilibrium price and increases the equilibrium quantity
Normative statements answer questions like "What will happen if...
false
To explain the virtues of markets, Adam Smith used the metaphor of the invisible pancreas
false
true or false: what one trader gains from a trade, the other must lose
false
imperfect information
false information
imports
goods and services purchased from other countries
A surplus will result whenever the
government imposes a price floor above the equilibrium price.
What are the components of gross domestic product?
government purchases, net exports, private investment spending
Some markets are dominated by a few large firms, leading to
high prices and small quantities.
ceteris paribus
holding everything else constant
A perfectly elastic supply curve is
horizontal
The market demand curve is the sum of the individual demand curves.
horizontal
The market supply curve is the sum of the individual supply curves
horizontal
four types of decision makers in the economy
households, firms, governments, and the rest of the world
A supply schedule shows
how many units producers are willing and able to sell at various prices
The supply curve shows
how the quantity produced varies with price
Labor
human mental and physical capacity to work.
Capital
human-made goods useful in producing other goods or services. Capital in this context includes buildings ("plant"), equipment, and machinery. Any produced product useful for producing other products is a capital good.
Which of the following best illustrates the fallacy of composition?
if a person had more money they could buy more scarce goods, if the nation had more money, everyone could but more scarce goods
If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:
impose a tax on production of the good in order to decrease production.
Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that:
in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.
Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that: A. in the man's judgment, the expected marginal cost of smoking the cigarette outweighs the expected marginal benefit. B. the man is behaving irrationally. C. the smoker is unconcerned about his future health. D. in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost. E. smoking should be banned by the government in order to ensure the safety of smokers.
in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.
Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that:
in the mans judgement, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost
You lose $20 from your wallet and decide to miss an hour from work in order to search for it. To an economist, this means that:
in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage
You lose $20 from your wallet and decide to miss an hour from work in order to search for it. To an economist, this means that: A. you estimate the expected cost of searching for one hour to be greater than $20. B. you must earn more than $20 per hour. C. in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage. D. you are irrational, since it is always a waste of time to search for lost money. E. you place no value on your time.
in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage
What is Scarcity?
inability of limited resources to satisfy unlimited wants
inferior good
income increases, demand for the good decreases. If income decreases, demand for the good increases
Macroeconomic topics do not usually include:
the profit maximizing decisions of an individual manufacturer.
Macroeconomic topics do not usually include: A. the rate of inflation. B. the rate of unemployment. C. economic growth. D. the profit maximizing decisions of an individual manufacturer. E. the control of the money supply by the central bank.
the profit maximizing decisions of an individual manufacturer.
A change in price causes movement along a demand curve and a change in
the quantity demanded
Whenever there is a surplus at a particular price, the quantity sold at that price will equal:
the quantity demanded at that price
when the price of apples goes up
the quantity demanded for apples will decrease
law of demand
the quantity of a good or service demanded varies inversely with its price
Supply
the quantity of a good or service that sellers wish to sell in a time period
A change in price causes movement along a supply curve and a change in
the quantity supplied .
Equilibrium Quantity
the quantity supplied and the quantity demanded at the equilibrium price
Each point on the supply curve shows the
the quantity supplied at that price
demand
the relationship between price and the quantity demanded of a certain good or service (the entire curve)
supply
the relationship between price and the quantity supplied of a certain good or service
Ceteris paribus, if the vacancy rate in an apartment complex increased from 5% to 20% over the past two years, we would expect to see
the rent decrease leading to an increase in quantity demanded.
Entrepreneurship is:
the resource that organizes the other factors of production in order to produce goods and/or services
Entrepreneurship is:
the resource that organizes the other factors of production in order to produce goods and/or services.
Entrepreneurship is: A. human capital. B. another word for the financial capital that can be used to start a business. C. the resource that organizes the other factors of production in order to produce goods and/or services. D. another word for physical capital that is used to produce goods and services.
the resource that organizes the other factors of production in order to produce goods and/or services.
Economic Fluctuations
the rise and fall of economic activity relative to the long-term growth trend of the economy; also called business cycles
Human capital is:
the skill or knowledge of individuals
Human capital is:
the skill or knowledge of individuals.
Human capital is: A. machinery owned by firms, but not by individuals. B. machinery owned by individuals, but not by firms. C. machinery owned by individuals or firms, but not by the government. D. the skill or knowledge of individuals.
the skill or knowledge of individuals.
Which of the following represents a normative statement? A. a decrease in price leads to an increase in quantity demanded B. The temperature outside is 90 degrees C. the study of economics is more important than the study of history D. people will buy less butter at $1.50 per pound then they would at $1.00 per lb E. Normally, as an economy develops, the nations birth rate tends to fall
the study of economics is more important that the study of history
What is macroeconomics?
the study of economy at the large scale level
What is Microeconomics?
the study of economy at the small scale level
economics
the study of the allocation of our limited resources to satisfy our unlimited wants.
Microeconomics
the study of the economic behavior and decision making of small units, such as individuals, families, and businesses (the tree)
division of labor
the type of arrangement in which each worker specializes in a particular task or job
real value
the value of an amount of money in terms of what it can buy
opportunity cost
the value of an item or activity that is not chosen
What is Opportunity Cost?
the value of the opp. that you gave up when you chose one activity instead of another
Suppose there are two members of he U.S. congress who were once economics professors. Why is It important to be able to distinguish their positive from their normative statements about economic policy?
their positive statements help us understand the economies response to a particular policy, while their normative statements reflect their value judgements
Economists believe that in regards to criminal behavior:
those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs
Economists believe that in regards to criminal behavior: A. people engage in criminal activity because they are genetically predisposed to do so. B. those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs. C. individuals are irrational and don't respond to incentives. D. economics can shed very little light on the subject.
those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs
economists believe that in regards to criminal behavior:
those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs
fundamental resource of labor
time
Tom is a castaway who washes up on a remote island. He can catch eight birds per day or catch ten fish per day. The natives on the island can catch ten birds per day or catch twenty fish per day. According to comparative advantage,
tom should catch more birds and fish less, then trade birds for fish
profit
total revenue minus total cost
A 25% decrease in the price of breakfast cereal leads to 20% increase in the quantity of cereal demanded. As a result:
total revenue will decrease
Adam Smith suggested that self minus interest is more powerful than kindness or altruism.
true
Economists may differ in their conclusions from positive analysis.
true
Feeding the World from a Flowerpot? Comment on the following statement: "If agriculture did not experience diminishing returns, we could feed the world using the soil from a small flowerpot."
true
If a firm is subject to diminishing marginal returns, an increase in the number of workers increases the quantity produced at a decreasing rate.
true
President Lincoln's discomfort with imports resulted from his failure to recognize that money sent to England eventually returns to the United States to buy American exports
true
The legal system is an example of an institution that plays a key role in economic growth
true
true of false: "poverty could be eliminated but scarcity could not"
true
true or false: "The U.S. government defines and enforces business ethics in order to protect the economy"
true
true or false: "a theory may result from a tested and confirmed hypothesis"
true
Along a supply curve, a decrease in price will increase total revenue:
under no circumstances
If there are significant external costs associated with the production of a product, it can be said that the private cost of production to the firm ____ the cost to society associated with this product and output should ____ to move toward the efficient situation.
understates, decreases
Which of the following best defines rational behavior?
undertaking activities whenever the marginal benefit exceeds the marginal cost
Which of the following best defines rational behavior? A. analyzing the total costs of a decision B. analyzing the total benefits of a decision C. undertaking an activity as long as the total benefit of all activities exceeds the total cost of all activities D. undertaking activities whenever the marginal benefit exceeds the marginal cost E. undertaking activities as long as the marginal benefit exceeds zero
undertaking activities whenever the marginal benefit exceeds the marginal cost
what defines rational behavior?
undertaking activities whenever the marginal benefit exceeds the marginal cost
A secondary effect of an action that may occur after the initial effects is known as a(n):
unintended consequence
Demand is said to be ___ when the quantity demanded changes the same proportion as the price
unit elastic
change in quantity demanded
up and down the same demand line because of change in price
Marginal Benefits and Marginal Costs Charts....
!
which of the following is most likely an example of correlation but not an example of causation?
"Usually, if I eat a chili dog and drink a beer before a game, my team wins"
Which of the following statements is most consistent with the rule of rational choice? "
"When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."
Which of the following statements is most consistent with the rule of rational choice? A. "The Environmental Protection Agency should strive to eliminate virtually all air and water pollution." B. "When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects." C. "Police forces should be enlarged until virtually all crime is eliminated." D. "Manufacturers of automobiles should seek to make cars safer, no matter the costs involved."
"When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."
If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
Goods X and Y are complements
exports
Goods and Services sold to other countries
complementary goods
Goods that are consumed together, such as cars and gasoline or peanut butter and jelly.
Meaning of points on and off a PPC
1. Points on the PPC mean we are using all our resources efficiently. 2. Points inside the PPC indicate that it is inefficient. We are not using all our resources fully and efficiently. 3. Points outside the PPC indicate that it is unattainable. Scarcity of our resources prevents us from getting there right now
3 key questions of economics
1. what should we produce? 2. how do we produce the products we produce? 3. who consumes the products?
approximately of job losses in the first three months of 2004 were caused by outsourcing
2%
Factors which increase the demand for dollars b) Increased desire by foreigners to purchase assets (stocks, bonds, real estate, etc.) in the U.S. (happens when interest rates in U.S. rise or when conditions in other countries look unsafe or unprofitable relative to U.S, for example?)
2. In order to invest or purchase assets in the United States For example Mexican citizens may wish to buy U.S. real estate, stocks or bonds, enterprises, government bonds, or other things of value ("assets'). In order to do so they must first buy dollars with their pesos.
Bailey's Barber Shop knows that a 5% increase in the price of their haircuts results in a 15% decrease in the number of haircuts purchased. What is the elasticity of demand facing Bailey's Barber Shop?
3.0
Oprah just inherited a house with a market value of $100,000, and she does not expect the market value to change. Each year, she will pay $500 for utilities and $1,000 in taxes. She can earn 5 percent interest on money in a bank account. Her cost of living in the house for the year is
6500
Suppose you currently live and work in Cleveland, earning a salary of $70 comma 000 per year and spending $25 comma 000 for housing. You just heard that you will be transferred to a city in California where housing is 45 percent more expensive. In negotiating a new salary, your objective is to keep your real income constant
81250
outsourcing
A decision by a corporation to turn over much of the responsibility for production to independent suppliers (or other countries)
Demand schedule
A demand schedule presents the same information as a demand curve but in a chart or non-graphical form; it examines how much quantity demanded would be at a variety of prices, not just a single price This about it as a listing of the quantities of an item buyers wish to buy in a time period at various possible prices ceteris paribus.
circular flow model
A diagram that traces the flow of resources, products, income, and revenue among economic decision makers
Which of the following policies would be most effective in promoting monthly water conservation? A. A $100 flat fee for any household that uses over 1500 gallons B. A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons C. A $125 fee for all households in addition to a $0.50 per gallon fee for all consumption D. A $200 fee for all households with zero charge per gallon of consumption E. A $50 fee for all households with zero charge per gallon of consumption
A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons
Which of the following policies would be most effective in promoting monthly water conservation?
A per gallon fee that escales from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons
Entrepreneur
A person who organizes, manages, and takes on the risks of a business.
Price ceiling- purpose and effects
A price ceiling is the maximum legal price that can be charged for a good. To have any effect, a price ceiling is always below the equilibrium price Purpose: to prevent the market price from rising to the height it would otherwise reach. Example: A price ceiling of $600 has been set by the government because it believes that the market price of $900 is too high to provide decent housing for everyone. Therefore, markets will NOT clear. Note, at a price ceiling of $600, there is a shortage Effects: Black markets
Price Floor- purpose and effects
A price floor is the minimum legal price that can be charged/paid. By definition, a price floor is always above the equilibrium price. Purpose: prices are not be allowed to reach their equilibrium level due to government intervention Example: A price floor of $17 has been set by the government because it believes that the market wage of $6.00 is too low to provide a decent standard of living. Therefore, markets will not clear. At a minimum wage of $17, 2 million workers are willing to offer their labor services, but firms only want to hire 1 million workers. This results in a surplus of 1 million workers.
entrepreneur
A profit-seeking decision maker who starts with an idea, organizes an enterprise to bring that idea to life, and then assumes the risk of operation.
shortage
A situation in which quantity demanded is greater than quantity supplied
Recession
A slowdown in a nation's economy
Production possibilities
A society's "production possibilities" are the various combinations of goods and services it is capable of producing at a certain moment. How many hamburgers, tanks, haircuts, etc. it can possibly produce, given its scarce resources.
positive economic statement
A statement that can be proved or disproved by reference to facts
good
A tangible product used to satisfy human wants
Which of the following is correct?
A theory may result from a tested and confirmed hypothesis
Which of the following is correct?
A theory may result from a tested and confirmed hypothesis.
Which of the following is correct? A. "Theory" and "hypothesis" are interchangeable terms meaning the same thing. B. A hypothesis may result from a tested and confirmed theory. C. A theory may result from a tested and confirmed hypothesis. D. A hypothesis is a theory whose formulation relies on mathematics.
A theory may result from a tested and confirmed hypothesis.
Some markets are dominated by a few large firms, leading to... A) high prices and small quantities. B) high prices and many choices. C) large quantities and high profits. D) intense competition and low profits.
A) high prices and small quantities.
How Many Hours at the Barber Shop? Your opportunity cost of cutting hair at your barbershop is $15 per hour. Electricity costs $5 per hour, and your weekly rent is $275. You normally stay open nine hours per day. a. What is the marginal cost of staying open for one more hour? b. If you expect to give two haircuts in the 10th hour and you charge $15 per haircut, is it sensible to stay open for the extra hour?
A. $20; B. yes
The fact that some resources and skills cannot be easily adapted from their current uses to alternative uses is the basic reason for the law of A. increasing opportunity cost. B. decreasing opportunity cost. C. comparative advantage. D. consumer sovereignty.
A. increasing opportunity cost
market supply curve
ADD UP supply curves for individual firms
Market Price
Actual price that prevails in a market at any particular moment
Ceteris Paribus
All else constant
Land
All nature-given factors, above or below the ground, of use in producing goods and services. Examples might be water, water-power, timber, minerals, or the agricultural fertility of the soil.
Which of the following is an example of market failure? A. Overuse of highways that leads to traffic congestion B. Reduced levels of vaccinations which increase illness and disease C. Substantial foreclosures caused by sub-prime lending D. All of the above
All of the above
GDP
Gross domestic product is a monetary measure of the market value of all the final goods and services produced in a period of time, often annually
Which of the following statements is most consistent with the rule of rational choice? A. "The Environmental Protection Agency should strive to eliminate virtually all air and water pollution." B. "When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects." C. "Police forces should be enlarged until virtually all crime is eliminated." D. "Manufacturers of automobiles should seek to make cars safer, no matter the costs involved."
B. "When evaluating new prescription drugs, the food and drug administration should weigh each drugs potential health benefits against the potential health risks posed by known side effects"
Which of the following policies would be most effective in promoting monthly water conservation? A. A $100 flat fee for any household that uses over 1500 gallons B. A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons C. A $125 fee for all households in addition to a $0.50 per gallon fee for all consumption D. A $200 fee for all households with zero charge per gallon of consumption E. A $50 fee for all households with zero charge per gallon of consumption
B. a per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons
The marginal benefit to you of drinking bottled iced tea is $1.50. The price of a bottle of iced tea is $1.25. A. If you purchase iced tea you will suffer a net loss of 25 cents per bottle. B. If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents. C. You will not purchase iced tea if you are acting rationally. D. If you are acting rationally, you will purchase iced tea until the marginal benefit falls to 25 cents.
B. if you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents
The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000. A. If you are acting rationally, you will borrow $2,000 and purchase a new sport utility vehicle. B. You will not purchase the new sport utility vehicle at this time if you are acting rationally. C. If you do not purchase the new sport utility vehicle, your net loss will be $2,000. D. If you are acting rationally, you will purchase sport utility vehicles until the marginal cost of doing so falls to $20,000.
B. you will not purchase the new sport utility vehicle at this time if you're acting rationally
Bill says: "The imposition of a tax on tequila will increase its price." Bob says, "Taxes should be imposed on tequila because college students drink too much."
Bill's statement is positive, and Bob's statement is normative
Bill says: "The imposition of a tax on tequila will increase its price." Bob says: "Taxes should be imposed on tequila because college students drink too much."
Bill's statement is positive, and Bob's statement is normative.
Bill says: "The imposition of a tax on tequila will increase its price." Bob says: "Taxes should be imposed on tequila because college students drink too much." A. Both statements are normative. B. Both statements are positive. C. Bill's statement is normative, and Bob's statement is positive. D. Bill's statement is positive, and Bob's statement is normative.
Bill's statement is positive, and Bob's statement is normative.
Bill says: "The imposition of a tax on tequila will increase its price." Bob says: "Taxes should be imposed on tequila because college students drink too much."
Bills statement is positive, and Bobs statement is normative
Which of the following is true? A. An advanced market economy would tend to use both labor intensive and capital intensive production methods. B. An economy in which labor is relatively scarce would tend to use capital intensive production methods. C. An increase in the availability of labor relative to capital in an economy would tend to increase how labor intensive the production processes in that economy would be. D. All of the above are true. E.Both b. and c. are true.
Both b and c are true
Which of the following is true? A. An advanced market economy would tend to use both labor intensive and capital intensive production methods. B. An economy in which labor is relatively scarce would tend to use capital intensive production methods. C. An increase in the availability of labor relative to capital in an economy would tend to increase how labor intensive the production processes in that economy would be. D. All of the above are true. E.Both b. and c. are true.
Both b. and c. are true.
Which of the following is true? A. An advanced market economy would tend to use both labor intensive and capital intensive production methods. B. An economy in which labor is relatively scarce would tend to use capital intensive production methods. C. An increase in the availability of labor relative to capital in an economy would tend to increase how labor intensive the production processes in that economy would be. D. All of the above are true. E.Both b. and c. are true.
Both b. and c. are true. B. An economy in which labor is relatively scarce would tend to use capital intensive production methods. C. An increase in the availability of labor relative to capital in an economy would tend to increase how labor intensive the production processes in that economy would be.
markets
Bring buyers and sellers together to exchange goods and services
labor
Human effort directed toward producing goods and services (mental or physical)
which of the following is an example of a capital resource? A. Redwood trees B. unskilled labor C. stocks and bonds D. an Oil Rig
Oil Rig
You lose $20 from your wallet and decide to miss an hour from work in order to search for it. To an economist, this means that: A. you estimate the expected cost of searching for one hour to be greater than $20. B. you must earn more than $20 per hour. C. in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage. D. you are irrational, since it is always a waste of time to search for lost money. E. you place no value on your time.
C. In your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage
Which of the following is true with regard to production possibilities curves? A. Underutilized resources or those not being put to their best uses are illustrated by output combinations along the production possibilities curve. B. Economic growth means a movement along an economy's production possibilities curve in the direction of producing more consumer goods. C. Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future. D. From a point inside the production possibilities curve, in order to get more of one thing, an economy must give up something else.
C. investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now can be able to produce and therefore consume more in the future
The completely private ownership of property and the exclusive use of the market system to direct and coordinate economic activity are most characteristic of: A. a command economy. B. a mixed economy. C. a market economy. D. a traditional economy.
C. market economy
Some political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they parent. The economic way of thinking indicates that legislation of this type would: A. make it more expensive for parents to provide for their children. B. reduce the value of children to their parents and therefore lead to a reduction in the birth rate. C. reduce the after-tax cost of raising children and therefore increase the birth rate. D. exert no impact on either the cost of raising children or the birth rate since parenting children is a non-economic activity.
C. reduce the after-tax cost of raising children and therefore increase the birth rate
In a market economy how do we determine who will get the goods and services that have been produced? A. Whoever wants them B. Whoever needs them C. Whoever can afford them D. None of the above.
C. whoever can afford them
Monopoly
Complete control of a product or business (market) by one person or group
Microeconomics
Concerns the behavior of economic decision-makers (firms, consumers, etc.) and markets for individual products. Microeconomics focuses on markets for one good or service at a time.
Suppose the United States imposes higher steel tariffs. How does the change in steel import restrictions affect automobile manufacturers who use steel as an input? A) The cost of producing automobiles will decrease. B) Automobile manufacturers will become more profitable as the price of steel falls. C) The tariff change will prompt automobile manufacturers to lowerlower the price of vehicles. D) The automobile industry will experience job loss as manufacturers are more likely to relocate to other countries.
D) The automobile industry will experience job loss as manufacturers are more likely to relocate to other countries.
an example of market failure: A. overuse of highways that leads to traffic congestion B. Reduces levels of vaccinations which increase illness and disease C. Substantial foreclosures caused by sub prime lending D. All the above
D. All the above
Economics is concerned with: A. the choices people must make because resources are scarce. B. human decision makers and the factors that influence their choices. C. the allocation of limited resources to satisfy virtually unlimited desires. D. all of the answers are correct.
D. all of the answers are correct.
A downward sloping straight-line production possibilities curve implies: A. an inefficient use of resources. B. an efficient use of resources. C. an increasing opportunity cost. D. a constant opportunity cost.
D. constant opportunity cost
Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk: A. equals $6.00. B. equals $4.00. C. equals $3.00. D. equals $2.00. E. equals zero dollars.
D. equals to $2.00
From an economists' perspective, which of the following observations is not true? A. self-interest is purely monetary in nature B. Self interest can include benevolence C. Self interest is a good predictor of human behavior in most situations D. Self interest is not the same as selfishness
D. self interest is purely monetary in nature
Which of the following best illustrates the fallacy of composition?
If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods.
if a student enrolls in an additional course at the university, an economist would conclude that: A. comparing the total benefits of all actions to the total costs incurred as a result of those actions. B. abstract thinking, which is never actually utilized by consumers when making purchasing decisions. C. holding all other variables constant when isolating the relationship between two variables. D. comparing the additional benefit from an action to the additional cost.
D. the expected marginal benefit of an additional course must exceed the expected marginal cost of the course
Direct relationship
Direct relationship (positive): positive slope. ie. as x increases, y increases.
Function of an Entrepreneur: A. bear the business risks B. Organize the other factors of production C. Innovate D. do all tasks
Do all tasks
Which of the following would break a positive ethic?
Driving two miles per hour over the speed limit
Which of the following would break a positive ethic? A. Having lustful daydreams about your best friend's girlfriend (or boyfriend) B. Driving two miles per hour over the speed limit C. Cursing your instructor when you're alone at home at 3 AM answering these stupid questions D. Spending the day sleeping & watching TV instead of studying for your classes E. None of the above
Driving two miles per hour over the speed limit
ethics A. is a branch of philosophy B. are moral rules or standards governing human conduct C. are rules more standards governing human conduct, but not necessarily moral rules D. the moral principles of an individual person E. All the above
E. all the above
plagiarism is unethical because: A. Plagiarism might result in stealing profits from the original writer B. can decrease the value of honest students' diplomas C. can make it more difficult for instructors to asses the quality of students' writings D. plagiarism is a type of fraud E. All the above
E. all the above
Resources and goods are free to move across state lines. If Oregon producers choose to specialize in producing honey and California producers choose to specialize in growing almonds, then we could reasonable conclude that: A. California has a comparative advantage in producing almonds. B. Oregon has a comparative advantage in producing honey. C. the opportunity cost of growing almonds is lower in California than in Oregon. D. the opportunity cost of producing honey is lower in Oregon than in California. E. all of the above are true.
E. all the above are true
Which of the following is true? A. By putting unemployed resources to work or by putting already employed resources to better uses, we could expand output in an economy. B. To generate increased economic growth, a society would produce fewer consumer goods and more capital goods in the present. C. If the production possibility curve is concave from below (that is, bowed outward from the origin), it reflects increasing opportunity costs of producing additional amounts of a good. D. Increases in a society's output do not make scarcity disappear. E. All of the above are true.
E. all the above is true
market economy
Economic decisions are made by individuals or the open market
Positive Statements answer questions like " What ought to happen to..."
False
Which of the following best illustrates the fallacy of composition? A. If Mr. Smith had more money, he could buy more scarce goods; if the Adams family had more money, it could buy additional goods. B. If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods. C. If other variables are not held constant, economists may not observe the relationship between price and quantity demanded that is expected. D. Aggregate consumption may not behave in the same manner as the consumption of a particular individual.
If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods.
Change in quantity demanded (move along D curve when prices changes)
If all that changes is the price of the product, we move along an unchanged demand curve from one point to another. In fact, the only thing that will move you along the demand curve is a change in the price of the good in question. This is known as a change in quantity demanded.
Which of the following is true?
If input prices fall, this will lower the costs of production, causing the supply curve to shift to the right
The marginal benefit to you of drinking bottled iced tea is $1.50. The price of a bottle of iced tea is $1.25.
If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents.
The marginal benefit to you of drinking bottled iced tea is $1.50. The price of a bottle of iced tea is $1.25. A. If you purchase iced tea you will suffer a net loss of 25 cents per bottle. B. If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents. C. You will not purchase iced tea if you are acting rationally. D. If you are acting rationally, you will purchase iced tea until the marginal benefit falls to 25 cents.
If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents.
colluding
In business, where several businesses (or countries) make agreements among themselves which benefit them at the expense of either rival businesses or customers
marginal
Incremental, additional, or extra; used to describe a change in an economic variable (is the marginal benefit higher than the marginal cost?")
Inverse relationship
Inverse relationship (negative): negative slope. ie: as x increases, y decreases.
Which of the following is true with regard to production possibilities curves?
Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future
Which of the following is true with regard to production possibilities curves?
Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future.
Should the government raise taxes
Normative
Should the highway speed limit be raised?
Normative
Ethical rules based on morals or concepts of fairness are called:
Normative ethics
Which of the following is true with regard to production possibilities curves? A. Underutilized resources or those not being put to their best uses are illustrated by output combinations along the production possibilities curve. B. Economic growth means a movement along an economy's production possibilities curve in the direction of producing more consumer goods. C. Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future. D. From a point inside the production possibilities curve, in order to get more of one thing, an economy must give up something else.
Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future.
Slope of a straight line
It is always constant. Measures the rate at which changes are being made.
Economic Resources
Land, Labor, Capital, Entrepreneurship
Macroeconomics
Looks at the whole economy and worries about economy-wide issues like unemployment and inflation. We will look at the U.S. economy as a whole system of interacting parts. We will also look at the swings in the system -- business cycle ups and downs as well as the studies government policy tools for combating cyclical swings.
What is the decision rule?
MB >_ MC , MB<MC
Which of the following serve as the language of the market system?
Market prices
Which of the following serve as the language of the market system? A. Monetary and fiscal policies B. Morals C. Market prices D. Governments
Market prices
which serves as the language of the market system?
Market prices
analogy
Microeconomics looks at the trees; Macroeconomics looks at the forest
Mike can wash a car in 5 minutes and wax a car in 15 minutes. Tony can wash a car in 10 minutes and wax a car in 20 minutes. Which of the following is true? Mike can wash a car faster and has comparative advantage in washing cars.
Mike can wash a car faster and has comparative advantage in washing cars.
Mike can wash a car in 5 minutes and wax a car in 15 minutes. Tony can wash a car in 10 minutes and wax a car in 20 minutes. Which of the following is true? Mike can wash a car faster and has comparative advantage in washing cars. a.) Mike can wash a car faster and has comparative advantage in washing cars. b.) Mike can wax a car faster and has comparative advantage in waxing cars. c.) Tony can wash a car faster and has comparative advantage in washing cars. d.) Tony can wax a car faster and has comparative advantage in waxing cars. e.) Both a. and b. are true.
Mike can wash a car faster and has comparative advantage in washing cars.
Which of the following is true? A. In the product markets, firms are buyers and households are sellers. B. In the factor markets, firms are sellers and households are buyers. C. Firms receive money payments from households for labor, land, capital, and entrepreneurship. D. All of the above are true.
None of the above is true.
Which of the following is true? A. In the product markets, firms are buyers and households are sellers. B. In the factor markets, firms are sellers and households are buyers. C. Firms receive money payments from households for labor, land, capital, and entrepreneurship. D. All of the above are true. E. None of the above is true.
None of the above is true.
a) Income (normal goods/inferior goods)
Normal Goods If income increases in the U.S., ceteris paribus, demand for the normal good will increase. Conversely, if income decreases in the U.S., demand for the normal good will also decrease. When average income in U.S. rises from $30,000 to $31,000, the demand curve for automobiles, a normal good, will shift to the right. Inferior Goods If income increases in the US, ceteris paribus, demand for the inferior good will decrease. Conversely, if income decreases, demand for the inferior good will increase. When average U.S. income rises from $25,000 to $26,000, the demand curve for potatoes, an inferior good, will shift to the left We know that a particular product is a "normal" if statistically its demand exhibits a positive relationship with income in the economic data —economics is an empirical science
Is the president doing a good job?
Normative
Sources of long-term economic growth: a. More land, labor, capital, or entrepreneurship b. Technological progress; better human skills
PPC's shift out and up in response to long-term economic GROWTH. Long-term growth occurs when a society either gets more economic resources or learns to use its resources more efficiently (technological change occurs). 1.Technological advances allow us to produce more over time - as society learns how to produce more output per unit of resource used. 2.Increases in the availability of resources allow us to produce more over time. 3. Increases in the quality of resources (or of organizational ability to use resources) can also contribute to economic growth. For details look on Lecture 2 notes and Chapter 20-2
interest
Payment to resource owners for the use of their capital
Opportunity Cost
People like goods and services, and some goods and services have to be given up when more of one type good or service is produced. The real cost is thus an opportunity cost: a lost opportunity. More precisely the opportunity cost of a choice is the best alternative given up when that choice is made. Opportunity cost applies to decisions individual people make about their scarce personal resources (their time, money, etc.) as well as to decisions society makes about its scarce economic resources (land, labor, capital, and entrepreneurship).
Why might pollution from a paper mill be an example of a market failure?
People living downwind of the mill bear part of the cost of production
Which of the following must be true for markets to operate efficiently?
People must bear the full cost and reap the full reward from their decisions.
The market ethics that have been discussed in this section are:
Positive
Which of the following is true?
Poverty could be eliminated but scarcity could not.
Which of the following is true? A. Poverty could be eliminated but scarcity could not. B. Scarcity could be eliminated but poverty could not. C. Both scarcity and poverty could be eliminated. D. Neither scarcity nor poverty could be eliminated.
Poverty could be eliminated but scarcity could not.
If the economy goes into a recession and incomes fall, what happens in the market for inferior goods? - Prices and quantities both rise - Prices and quantities both fall - Prices rise, quantities fall - Prices fall, quantities rise
Prices and quantities both rise If the demand for a good rises when income falls, the good is called an inferior good. An increase in demand results in a rise in both the equilibrium price and quantity of a good (question #5 graph)
PYNTE- demand shifters
Prices of related goods, Yincomes, Number of demanders, Tastes, Expectations of demanders
the economic problem
Scarcity forces us to make choices
Which of these conditions are most likely to motivate honest people to become corrupt? A. Reading that Bernie Madoff was sentenced to life in prison after stealing billions of dollars B. Having your boyfriend (or girlfriend) elope with someone who is rich C. Seeing a film of Bonnie and Clyde being shot by machine guns D. Seeing your boss and fellow workers get rich by lying and cheating E. None of the above; if you're an honest person, you'll stay that way
Seeing your boss and fellow workers get rich by lying and cheating
From an economists' perspective, which of the following observations is not true?
Self-interest is purely monetary in nature.
changes in quantity supplied
up and down the same supply line because of change in price
b) Prices of related goods (substitutes/complements)
Substitutes Substitutes are goods that serve the same purpose. Generally, we substitute the cheaper for the more expensive good. For example, when the price of "good a" increases, the demand for "good b" will also increase Complements Complements are goods that are consumed together. If you consume one good, you must consume the other as well. When the price of "good m" increases, the demand for "good n" will decrease. We already know that we will buy less of "good m"—this is simply the law of demand. And if we buy less of "good m, " we will buy less of "good n" because they are complements. In the case of complements in consumption, there is a negative relationship between the price of "good m" and the demand for "good n"—the complement. Conversely, if the price of "good m"decreases, the demand for "good n" will increase, ceteris paribus.
SPENTRW- supply shifters
Supplier input, Prices of substitutes, Expectations, Number of suppliers, Technology, Regulations, Weather
In free markets which allows a high level of unethical corruption
Suppliers will be forced to be corrupt or to leave the market
How ill a decrease in price tend to affect supply?
Supply will not change
The discovery of a large new reserve of crude oil will shift the ___ curve for gasoline, leading to a ___ equilibrium price. -Supply, higher -Supply, lower -Demand, higher -Demand, lower
Supply, lower The supply curve for gasoline shows the relationship between the price of gasoline and the quantity of gasoline supplied by production, assuming that all the determinants of supply are held constant. The following list displays determinants of supply, which are the factors that affect the quantity of gasoline producers want to sell at a given price: FACTORS THAT DETERMINE SUPPLY -Price of inputs -Production technology -Number of producers -Expectations of producers Therefore, if the price of gasoline changes, the result is a movement along the supply curve from the old place to the new one. However, if a change occurs in any of the factors that determine supply, such as the discovery of a large new reserve of crude oil, the result is shift of the supply curve. In this case, the supply of gasoline increases because of the new oil reserve causing the equilibrium price to decline. (Question #4 for graph)
An increase in ___ will cause a movement along a given demand curve, which is also called a change in ___. - Supply, demand - Supply, quantity demanded - Demand, supply - Demand, quantity supplied
Supply, quantity demanded Demand refers to the position of the demand curve Quantity demanded refers to the amount consumers wish to buy Supply refers to the position of the supply curve Quantity supply refers to the amount of supplies you wish to sell In this case, an increase in supply will cause the equilibrium price to decrease, resulting in a movement along the demand curve. The demand curve itself remains unchanged, but the quantity demanded is affected. (Question 2 to see graph)
Surplus and their effects on Market price
Surplus: A market condition existing at any price at where the quantity supplied is greater than the quantity demanded Decrease in Demand -->leftward shits-->excess supply (quantity supplied, Q1, is greater than quantity demanded, Q3—a surplus)--> decrease in Pe , decrease in Qe-->surplus Increase in Supply-->rightward shits--> excess supply (quantity supplied, Q3, is greater than quantity demanded, Q1—a surplus)--> decrease in Pe , Increase in Qe-->surplus
Which of the following statements is TRUE?
TRUE: The U.S. government defines and enforces business ethics in order to protect the economy
interest
use for the capital
which of the following is not an example of the use of the problem solving perspective provided by economics?
The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember
Which of the following is NOT an example of the use of the problem solving perspective provided by economics?
The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember.
Which of the following is NOT an example of the use of the problem solving perspective provided by economics? A. An investor considers the tax consequences of selling stocks in order to buy bonds (which she believes offer a better return). B. A rancher recognizes that raising more cattle this year will damage his pasture and limit next year's herd size. C. The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember. D. An economics student considers the scarcity of available study time for studying the other subjects that she should be studying before deciding to study economics this evening.
The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember.
Law of demand
The Law of Demand: All else constant, there is a Negative (or "Inverse") Relationship between P and QD. Ceteris Paribus, if P rises, Qd decreases (a move up and to the left along an unchanged demand curve) Ceteris Paribus, if P falls, Qd increases (a move down and to the right along an unchanged demand curve) There is a negative relationship because consumers prefer lower to higher prices. This is a rational, common sense reaction.
Production possibilities curve (PPC)
The PPC shows a menu of choices, showing all the different combinations of (item A for example clothing) and (item B for example food) that can be produced given our resources and technology. All points on the ppc represent combinations of the two products we are capable of producing - IF we use all our resources efficiently. (ppc's slope is NEGATIVE. The negative slope illustrates scarcity.)
Which of the following statements is TRUE? A. The U.S. government specifies all business ethics adopted by American corporations. B. Ethics decisions are for philosophers, churches and individuals, not government. C. The U.S. government insists that foreign trading partners adopt systems of business ethics identical to ours. D. The U.S. government defines and enforces business ethics in order to protect the economy. E. The U.S. government does not define or enforce any ethical rules.
The U.S. government defines and enforces business ethics in order to protect the economy.
Economic growth (definition)
The ability of an economy to produce greater levels of output, represented by an outward shift of the production possibilites curve. Also, an expansion in the national output measured by the annual percentage increase in a nation's GDP.
Suppose the United States imposes higher steel tariffs. How does the change in steel import restrictions affect automobile manufacturers who use steel as an input?
The automobile industry will experience job loss as manufacturers are more likely to relocate to other countries
Movie tickets and DVDs are substitutes. If the price of DVDs increases, what happens in the market for movie tickets? - The supply curve shifts to the left - The supply curve shifts to the right - The demand curve shifts to the left - The demand curve shifts to the right
The demand curve shifts to the right When a fall in the price of one good reduces the demand for another good, the two goods are called substitutes. If movie tickets and DVDs are substitutes and the price of DVDs increases, this means he demand for movie tickets will also increase. This results in the demand curve shifting to the right.
The demand for dollars in a 2-country model
The demand for dollars comes from people who have pesos and are seeking to trade them for dollars.
Price controls
use of the power of the state to establish prices different from the equilibrium prices
A change in which of the following will NOT shift the demand curve for hamburgers - The price of hot dogs - The price of hamburgers - The price of hamburger buns - The income of hamburger consumers
The price of hamburgers The demand curve for hamburgers shows the relationship between the price of hamburgers and the quantity of hamburgers demanded by consumers, assuming that all the determinants of demand are held constant. The following list displays determinants of demand, which are the factors that affect the quantity of hamburgers consumers want to buy at a given price: FACTORS THAT DETERMINE DEMAND -Price of a related good (complement or substitute) -Income of consumers -Tastes of consumers -Number of consumers -Expectations of consumers Therefore, if the price of hamburgers changes, the result is a MOVEMENT along the demand curve from the old price to the new one. However, if a change occurs in any of the factors that determine demand - such as the price of hot dogs ( a substitute), the price of hamburger buns (a complement), or the income of hamburger consumers - the result is a shift of the demand curve
Law of Supply
The principle that there is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus.
A surplus currently exists in the market for apples. Which of the following statements is correct?
The quantity of apples supplied exceeds the quantity demanded and the market price is above the equilibrium price
Which of the following represents a normative statement?
The study of economics is more important than the study of history
Which of the following represents a normative statement?
The study of economics is more important than the study of history.
Which of the following represents a normative statement? A. A decrease in price leads to an increase in quantity demanded. B. The temperature outside is 90 degrees. C. The study of economics is more important than the study of history. D. People will buy less butter at $1.50 per pound then they will at $1.00 per pound. E. Normally, as an economy develops, the nation's birth rate tends to fall.
The study of economics is more important than the study of history.
Macroeconomics
The study of the economy as a whole (the forest)
The supply of dollars in a 2-country model
The supply of dollars comes from people who have dollars and are seeking to trade them for pesos.
Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy?
Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments.
Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy? A. Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments. B. Their positive statements help us understand the good results of a policy change, and their normative statements help us understand the negative results. C. We really do not have to worry about them since trained economists never make normative statements. D. Economists are always making assumptions, and policy should not be based on assumptions. E. Economists are "tricky" by nature, so we need to be able to distinguish truth from political rhetoric.
Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments.
what are resources?
They are inputs to produce goods and services
Which of the following is true of resources? A. Their availability is unlimited. B. They are the inputs used to produce goods and services. C. Increasing the amount of resources available could eliminate scarcity. D. They are inputs used to produce goods and services and increasing the amount of resources available could eliminate scarcity.
They are the inputs used to produce goods and services.
"As a rational person, you would expect individuals to always avoid actions that are illegal." T or F
This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway.
Which of the following are NOT very important to maintaining effective market ethics? A. A willingness by the vast majority of market participants to obey the ethics and report violators B. The number of inspectors or police C. The severity of punishments for cheating D. Whether people understand the reasons for the rules or regulations E. Whether the likely penalties for cheating are greater than the rewards
Whether people understand the reasons for the rules or regulations
efficiency
using resources to the fullest extent
"As a rational person, you would expect individuals to always avoid actions that are illegal." T or F A. This is a true statement because most people don't want to suffer the penalties associated with criminal behavior. B. This is a true statement because most individuals are good citizens and prefer not to commit crimes. C. This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway. D. This is a false statement because only people with certain genetic predispositions are likely to commit crimes.
This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway.
Tom is a castaway who washes up on a remote island. He can catch eight birds per day or catch ten fish per day. The natives on the island can catch ten birds per day or catch twenty fish per day. According to comparative advantage,
Tom should catch more birds and fish less, then trade birds for fish.
Tom is a castaway who washes up on a remote island. He can catch eight birds per day or catch ten fish per day. The natives on the island can catch ten birds per day or catch twenty fish per day. According to comparative advantage, A. Tom should catch more birds and fish less, then trade birds for fish. B. Tom should catch fewer birds and fish more, then trade fish for birds. C. Both should catch more birds and fish less. D. Both should catch fewer birds and fish more.
Tom should catch more birds and fish less, then trade birds for fish.
How a change in dollar value (for example an increase) affects U.S. exports
U.S. goods and services become more expensive for foreigners to purchase, so Exports fall. (Exports are goods and services produced in the U.S. and sold to foreigners.) As imports become cheaper to buy (since a $ buys more of the foreign currency than it did before), Imports increase. (Imports are goods and services produced abroad and sold to U.S. buyers.)
Which of the following is most likely an example of correlation but not an example of causation?
Usually, if I eat a chili dog and drink a beer before a game, my teams wins.
Which of the following is most likely an example of correlation but not an example of causation? A. In the U.S., more pizza is consumed on Super Bowl Sunday than any other day of the year. B. The cost of advertising during the first half of the Super Bowl is greater than the cost of advertising in the second half. C. Usually, if I eat a chili dog and drink a beer before a game, my teams wins. D. Generally speaking winning football teams tend to average more rushing yards than losing football teams.
Usually, if I eat a chili dog and drink a beer before a game, my teams wins.
Which of the following is most likely an example of correlation but not an example of causation?
Usually, if I eat chili dog and drink a beer before a game, my team wins
what according to an economist, forms the basis of rational human behavior under current and anticipated future circumstances?
Values and Information
What according to an economist, forms the basis of rational human behavior under current and anticipated future circumstances?
Values and information
What according to an economist, forms the basis of rational human behavior under current and anticipated future circumstances? A. Scarcity and rarity B. Opportunities and pay-offs C. Values and information D. Legal consequences
Values and information
Which of the following does not specify positive ethical rules? A. Webster's Dictionary B. Robert's Rules of Order C. Hoyle's Rules of Games D. The San Marcos Land Development Code E. The Amy Vanderbilt Complete Book of Etiquette
Webster's Dictionary
Which of the following does not specify positive ethical rules?
Webster's dictionary
which of the following does not specify positive ethical rules? A. Websters Dictionary B. Roberts rules of Order C. Hoyle's rules of games D. San Marcos land development code E. Army Vanderbilt complete book of etiquette
Webster's dictionary
Demand
When we speak of demand, we are referring to the quantities that people are willing and able to buy at various possible prices. *Note, along with the willingness to buy, the consumer must also have the wherewithal to purchase the good.
Which of the following are NOT very important to maintaining effective market ethics?
Whether people understand the reasons for the rules and regulations
Which of the following are NOT very important to maintaining effective market ethics?
Whether people understand the reasons for the rules or regulations
In a market economy how do we determine who will get the goods and services that have been produced?
Whoever can afford them
In a market economy how do we determine who will get the goods and services that have been produced? A. Whoever wants them B. Whoever needs them C. Whoever can afford them D. None of the above.
Whoever can afford them
Independent relationship
Y is independent of X: horizontal line X is independent of Y: vertical line
The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000.
You will not purchase the new sport utility vehicle at this time if you are acting rationally
The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000.
You will not purchase the new sport utility vehicle at this time if you are acting rationally.
The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000. A. If you are acting rationally, you will borrow $2,000 and purchase a new sport utility vehicle. B. You will not purchase the new sport utility vehicle at this time if you are acting rationally. C. If you do not purchase the new sport utility vehicle, your net loss will be $2,000. D. If you are acting rationally, you will purchase sport utility vehicles until the marginal cost of doing so falls to $20,000.
You will not purchase the new sport utility vehicle at this time if you are acting rationally.
A change in demand causes a shift of the demand curve. A change in quantity demanded causes a movement along the demand curve.
^
A change in supply causes a shift of the supply curve. A change in quantity supplied causes a movement along the supply curve.
^
If both demand and supply decrease simultaneously, the equilibrium price will increase if the change in supply is relatively large.
^
If supply decreases while demand increases, the equilibrium price will increase
^
If supply decreases while demand increases, the equilibrium quantity will decrease if the change in demand is relatively small
^
Suppose the equilibrium price of housing recently decreased and the equilibrium quantity decreased as well. These changes were caused by a(n) decrease in demand .
^
The price of the product is not held fixed in drawing a market demand curve. Consumer income is held fixed in drawing a market demand curve. The price of other related goods is held fixed in drawing a market demand curve. Consumer expectations about future prices are held fixed in drawing a market demand curve. The quantity of the product purchased is not held fixed in drawing a market demand curve
^
The price of the product is not held fixed when drawing a market supply curve. Wages paid to workers are held fixed when drawing a market supply curve. The price of materials used in production is held fixed when drawing a market supply curve. Taxes paid by producers are held fixed when drawing a market supply curve. The quantity of the good produced is not held fixed when drawing a market supply curve.
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Unemployment Insurance. Each worker employed by Risky Business has a 20 percent chance of losing his or her job in the next year. Each worker employed by Safe Business has a 2 percent chance of losing his or her job. You manage an insurance company that provides a lump sum of $10 comma 000 to each unemployed worker. a. The minimum amount you would charge Risky Business for each employee covered by the unemployment policy is $ 2000. (Enter your response as an integer.) b. The minimum amount you would charge Safe Business for each employee covered by the unemployment policy is $ 200. (Enter your response as an integer.) c. Suppose you charge the same premium to both businesses. The companies have the same number of workers and are required to purchase unemployment insurance. The minimum amount you would charge is $ 1100. (Enter your response as an integer.)
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When demand changes, the equilibrium price and equilibrium quantity move in the same direction. When supply changes, the equilibrium price and equilibrium quantity move in opposite directions
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in the supply of a product decreases the equilibrium price and increases the equilibrium quantity
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positive externality
a benefit received by someone who had nothing to do with the activity that generated the benefit
If the price of ice cream increases and the quantity demanded decreases, economists would describe this as:
a change in quantity demanded
Effective free market ethical systems must provide for all of the following EXCEPT:
a clearly defined moral foundation
For a given increase in price, a greater elasticity of demand will result in a greater
decrease in quantity demanded
Marginal thinking is best demonstrated by: A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. B. deciding to never purchase a coat made with animal skins or furs. C. acquiring the information relevant to a choice before making that choice. D. measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake. E. choosing to purchase beer until there is no additional enjoyment from the consumption of beer.
choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time
Pat and Marty run a landscaping firm that prunes trees and cuts lawn. Pat is more productive than Marty at both tasks. Pat should prune trees and Marty should cut lawns if Pat has a _______ advantage in pruning trees. comparative/absolute
comparative
it is impossible to have ___ in both goods
comparative advantage
specialize according to ____ to maximize your gains from trade
comparative advantage
trade results from
comparative advantage
Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n):
comparative advantage in production
Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n):
comparative advantage in production.
Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n): A. disincentive to trade with others. B. higher opportunity cost. C. absolute advantage in production. D. comparative advantage in production. E. None of the above. People, regions, and countries should learn to be self-sufficient.
comparative advantage in production.
Marginal analysis involves:
comparing the additional benefit from an action to the additional cost
Marginal analysis involves: A. comparing the total benefits of all actions to the total costs incurred as a result of those actions. B. abstract thinking, which is never actually utilized by consumers when making purchasing decisions. C. holding all other variables constant when isolating the relationship between two variables. D. comparing the additional benefit from an action to the additional cost.
comparing the additional benefit from an action to the additional cost
marginal analysis involves:
comparing the additional benefit from an action to the additional cost
An economy's resources:
consist of land, labor, capital and entrepreneurial skills
An economy's resources:
consist of land, labor, capital, and entrepreneurial skills.
An economy's resources: A. consist of land, labor, capital, and entrepreneurial skills. B. are unlimited in a country like the United States. C. are always efficiently utilized in wealthy nations. D. consist of land, labor, and entrepreneurial skills but not capital.
consist of land, labor, capital, and entrepreneurial skills.
An economy's resources:
consists of land, labor, capital, and entrepreneurial skills
The difference between the value of a good to consumers and its price is known as:
consumer surplus
total surplus
consumer surplus + producer surplus
Ceteris paribus, an increase in the price of a good will cause the:
consumer surplus derived from the good to decrease
"Mandating longer sentences for any criminal's third arrest will lead to a reduction in crime. Less crime will reduce the number of police officers cities will hire." This quotation:
contains positive statements only
"Mandating longer sentences for any criminal's third arrest will lead to a reduction in crime. Less crime will reduce the number of police officers cities will hire." This quotation:
contains positive statements only.
"Mandating longer sentences for any criminal's third arrest will lead to a reduction in crime. Less crime will reduce the number of police officers cities will hire." This quotation: A. contains positive statements only. B. contains normative statements only. C. contains both normative and positive statements. D. contains neither normative nor positive statements.
contains positive statements only.
Four social inventions that support markets are , which specify the terms of exchange; , which reduces the risk of entrepreneurs; , which increase the profitability of inventions; and rules, which provide potential investors with reliable information about the financial performance of firms.
contracts; insurance; patents; accounting
Marginal cost
cost of one more unit
Negative incentives:
decrease benefits or increase costs
Negative incentives:
decrease benefits or increase costs.
Negative incentives: A. increase benefits or reduce costs. B. increase behaviors. C. decrease benefits or increase costs. D. include both cash subsidies and taxes.
decrease benefits or increase costs.
Economics is different from a "hard" science like physics because: A. economists abstract from reality in creating their theories. B. economics is easier to study than physics. C. economists must explain their theories to policy makers who lack formal mathematical training. D. economists cannot easily control all the variables that might influence human behavior. E. research in economics is primarily conducted in a very "social" way via interviews of consumers and corporate leaders.
economists cannot easily control all the variables that might influence human behavior.
A new hormone will increase the amount of milk each cow produces
effect on the milk market is an increase in supply, lower equilibrium price and a higher equilibrium quantity
Demand is said to be ____ when the quantity demanded is very responsive to changes in price.
elastic
If an increase in price causes total expenditure on a product to decrease, then the price elasticity of demand is:
elastic
increase in supply
entire curve shifts rightward, greater quantity supplied at each price
profit
entrepreneurial ability
Every time an individual decides to try out new equipment, or finds better ways to manage exhibiting traits of:
entrepreneurship
Every time an individual decides to try out new equipment, or finds better ways to manage money, he or she is exhibiting traits of:
entrepreneurship.
Every time an individual decides to try out new equipment, or finds better ways to manage money, he or she is exhibiting traits of: A. money management. B. entrepreneurship. C. strategic management. D. capital management.
entrepreneurship.
If the supply curve for a product is vertical, then the elasticity of supply is:
equal to zero
Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk:
equals $2.00
Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk:
equals $2.00.
Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk: A. equals $6.00. B. equals $4.00. C. equals $3.00. D. equals $2.00. E. equals zero dollars.
equals $2.00.
In order for a market's ethics to be effective, all of the following must occur, EXCEPT
everyone must agree to take part in the market
In order for a market's ethics to be effective, all of the following must occur, EXCEPT: A. the ethics must be clearly defined. B. there must be clear penalties for ethics violators. C. everyone must agree to take part in the market. D. there must be enough police or inspectors to find most violations. E. police or inspectors must be unbiased.
everyone must agree to take part in the market
Economics
examines how people use their scarce resources to satisfy their unlimited wants
patent
exclusive rights over an invention, copyright
Problem of scarcity
exists because resources are limited relative to wants
The problem of scarcity:
exists because resources are limited relative to wants.
The problem of scarcity: A. exists because resources are limited relative to wants. B. exists because resources are unlimited relative to wants. C. is solved by economists using abstract models. D. can be eliminated through appropriate government intervention into markets. E. does not exist in communist societies.
exists because resources are limited relative to wants.
The problem of scarcity:
exists because resources are limited to relative to wants
To obtain the greatest gains from trade, a country should specialize in and ____ those goods for which it has a comparative advantage and ____ those goods for which other countries have a comparative advantage.
export, import
To obtain the greatest gains from trade, a country should specialize in and _____ those goods for which it has a comparative advantage and ______ those goods for which other countries have a comparative advantage
export; import
pollution
externality (situation where a 3rd party is effected by market activity they are not directly involved in)
nominal value
face value of a given amount of money
nominal value
face value of a given amount of money (# of dollars)
Economic resources are also known as:
factors of production
Economic resources are also known as: A. profits B. financial capital. C. factors of production. D. costs.
factors of production
Positive economic thinking
facts and figures (what is)
Cost-benefit analysis can determine the optimal amount of all the following EXCEPT:
fairness of rules
Cost-benefit analysis can determine the optimal amount of all the following EXCEPT: A. regulations B. market inspectors C. severity of punishments D. fairness of rules E. inspections
fairness of rules
cost-benefit analysis can determine the optimal amount of all of the following except:
fairness of rules
MB tends to ________ and MC tends to _______
fall, rise
The fallacy of composition is: A. the erroneous view that an economic activity can sometimes exceed the sum of its components. B. the erroneous view that what is true for the individual will also be true for the group. C. the view that the aggregation of economic activity will necessarily lead to an outcome that is different than the outcome generated by each individual in the group. D. the idea that association need not imply causation. E. the failure to hold other variables constant when analyzing the relationship between two particular variables.
the erroneous view that what is true for the individual will also be true for the group.
If a student enrolls in an additional course at the university, an economist would conclude that:
the expected marginal benefit of an additional course must exceed the expected marginal cost of the course
If a student enrolls in an additional course at the university, an economist would conclude that: A. the total benefit that the student expects to receive as a result of completing her college degree exceeds the total cost of her college education. B. the student is not following the rule of rational choice. C. the student must not be involved in extracurricular campus activities. D. the expected marginal benefit of an additional course must exceed the expected marginal cost of the course.
the expected marginal benefit of an additional course must exceed the expected marginal cost of the course
Human capital is:
the expertise of knowledge possessed by workers
Human capital is:
the expertise or knowledge possessed by workers.
Human capital is: A. the same as labor. B. a term describing the tools and equipment owned by households. C. a worker's physical effort when working with machines. D. the expertise or knowledge possessed by workers. E. the money in checking, savings, or CD accounts at banks.
the expertise or knowledge possessed by workers.
negative externality
the harm, cost, or inconvenience suffered by a third party because of actions by others (the market)
the opportunity cost of an item is:
the highest valued alternative you give up to get that item
The opportunity cost of an item is:
the highest valued alternative you give up to get that item.
The opportunity cost of an item is: A. The total value of opportunities you give up to get that item. B. the highest valued alternative you give up to get that item. C. the value of all available alternatives you sacrifice to get that item. D. always equal to the dollar value of the item. E. always less than the dollar value of the item.
the highest valued alternative you give up to get that item.
The opportunity cost of an action is equal to:
the highest valued opportunity that must be sacrificed in order to take the action
the opportunity cost of an action is equal to:
the highest valued opportunity that must be sacrificed in order to take the action
The opportunity cost of an action is equal to:
the highest valued opportunity that must be sacrificed in order to take the action.
The opportunity cost of an action is equal to: A. the monetary payment the action required. B. the total time spent by all parties in carrying out the action. C. the highest valued opportunity that must be sacrificed in order to take the action. D. the value of all of the alternative actions that could have been taken. E. zero, as only goods cost money.
the highest valued opportunity that must be sacrificed in order to take the action.
physical capital
the human-made objects used to create other goods and services (machines,buildings and tools)
what statement is described as positive economics?
the income tax reduces after tax incomes of the rich
Resources
the inputs used to produce goods and services
human capital
the knowledge and skills a worker gains through education and experience
We can tell if a market has too many ethics rules because:
the marginal cost of the ethics rule is higher than the marginal benefit
A quantity of a good bought and sold in a market will be below the equilibrium quantity if:
the market price is either above or below the equilibrium price
Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes?
the opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career
Price elasticity of demand is defined as
the percentage change in quantity demanded divided by the percentage change in price
Equilibrium price
the price at which the quantity demanded equals the quantity supplied