ECON 200 Final

What are the 3 basic questions in economy?

-What to produce? -How to produce? -For whom to produce?

the higher the price, the lower the quantity demanded; the lower the price, the higher the quantity demanded; other things equal

Law of Demand

the higher the price, the higher the quantity supplied; the lower the price, the lower the quantity supplied; other things equal

Law of Supply

What happens to P & Q of SUV's when gas prices go up?

P down, Q up

What happens to P & Q of plastics when the cost of oil goes up?

P up, Q down

All of the following shift the supply of watches to the right except a. an increase in the price of watches b. an advance in the technology used to manufacture watches c. a decrease in the wage of workers employed to manufacture watches d. manufacturers' expectations of lower watch prices in the future e. all of the above cause an increase in the supply of watches

a

the ability to produce with less in resources than others

absolute advantage

An increase (rightward shift) in the demand for a good will tend to cause

an increase in the equilibrium price and quantity

If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is

an inferior good

banning something you would do

binding restrictions

Which of the following statements is true? a. self-sufficiency is the road to prosperity for most countries b. a self-sufficient country consumes outside its production possibilities frontier c. a self-sufficient country at best can consume on its production possibilities frontier d. only countries with an absolute advantage in the production of every good should strive to be self-sufficient

c

Which of the following will not shift a country's production possibilities frontier outward? a. an increase in the capital shock b. an advance in technology c. a reduction in unemployment d. an increase in the labor force

c

the ability to produce at a lower opportunity cost than others

comparitive advantage

a market in which there are many buyers and sellers so that each has a negligible impact on the market price

competitive market

when the price of a good goes down, the demand for all its _____ go up

complements

How does technology influence the supply relationship?

cost-reducing technology increases supply

According to the principle of comparative advantage, a. countries with a comparative advantage in the production of every good need not specialize. b. countries should specialize in the production of goods that they enjoy consuming. c. countries should specialize in the production of goods for which they use fewer resources in production than their trading partners. d. countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.

d

Which of the following is true about trade? a. Unrestricted international trade benefits every person in a country equally. b. People who are skilled at all activities cannot benefit form trade. c. Trade can benefit everyone in society because it allows people to specialize in activities in which they can have an absolute advantage. d. Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

d

Which of the following issues is related to microeconomics? a. the impact of money on inflation b. the impact of technology on economic growth c. the impact of the deficit on saving d. the impact of oil prices on auto production

d

a conditional desire to purchase

demand

the study of how society manages its scarce resources

economics

the study of how households and firms make decisions and how they interact in specific markets

microeconomics

when the market has only one seller

monopoly

What are the effects of price ceilings and floors?

-changed price on units sold -reduced quantity sold -surplus or shortage -incentives to evade

Where is the Law of Demand followed?

-consumer goods -labor markets and wages -inputs for business -credit markets and interest rates -lab rats and pigeons

If the economy is operating on the production possibilities frontier, it is operating ____ because it is producing a mix of output that is the maximum possible from the resources available. Points inside the curve are ____.

-efficiently -inefficient

Mankiw's ten principles can be grouped into what three categories?

-how people make decisions -how people interact -how the economy works as a whole

Rational decision makers only proceed with an action if the ____ exceeds the ____.

-marginal benefit -marginal cost

If the price of a good is equal to the equilibrium price, is it a shortage or a surplus? Also, what will happen to the price?

-none, quantity supplied equals quantity demanded -price is unchanged

A technological advance in production shifts the production possibilities frontier ____. This is a demonstration of ____.

-outward -economic growth

What are the determinants of productivity?

-physical capital -human capital -natural resources -technological knowledge

If the price of a good is below the equilibrium price, is it a shortage or a surplus? Also, what will happen to the price?

-shortage -price will rise

If the price of a good is above the equilibrium price, is it a shortage or a surplus? Also, what will happen to the price?

-surplus -price will fall

What are Mankiw's principles that fall into the "How the Economy as a Whole Works" category?

1. a country's standard of living depends on its ability to produce goods and services 2. prices rise when the government prints too much money 3. society faces a short-run trade-off between inflation and unemployment

What are the two reasons for why economists have a reputation for giving conflicting advice to policymakers?

1. different judgments 2. different values

What are Mankiw's principles that fall into the "How People Make Decisions" category?

1. people face trade-offs 2. the cost of something is what you give up to get it 3. rational people think at the margin 4. people respond to incentives

What are the 6 influences of the demand relationship?

1. price 2. income 3. prices of related goods 4. tastes 5. number of buyers 6. buyer expectations

What are the 5 influences on the supply relationship?

1. price 2. input prices 3. technology 4. number of sellers 5. seller expectations

What two characteristics does a perfect competitive market have?

1. the goods offered for sale are all exactly the same 2. the buyers and sellers are so numerous that no one buyer or seller can influence the price

What are Mankiw's principles that fall into the "How People Interact" category?

1. trade can make everyone better off 2. markets are usually a good way to organize economic activity 3. governments can sometimes improve market outcomes

If a nation has an comparative advantage in the production of a good, a. it can produce that good at a lower opportunity cost than its trading partner. b. it can produce that good using fewer resources that its trading partner. c. it can benefit by restricting imports of that good. d. it must be the only country with the ability to produce that good. e. none of the above is true.

a

Which of the following statements about microeconomic and macroeconomics is not true? a. the study of very large industries is a topic within macroeconomics b. macroeconomics is concerned with economy-wide phenomena c. microeconomics is a building block for macroeconomics d. microeconomics and macroeconomics cannot be entirely separated

a

Which of the following statements is true about a market economy? a. Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being b. Taxes help prices communicate costs and benefits to producers and consumers c. With a large enough computer, central planners could guide production more efficiently than markets d. The strength of a market system is that it tends to distribute resources evenly across consumers

a

If a nation has an absolute advantage in the production of a good, a. it can produce that good at a lower opportunity cost than its trading partner. b. it can produce that good using fewer resources that its trading partner. c. it can benefit by restricting imports of that good. d. it will specialize in the production of that good and export it. e. none of the above is true.

b

Which of the following shifts the demand for watches to the right? a. a decrease in the price of watches b. a decrease in consumer incomes if watches are a normal good c. a decrease in the price of watch batteries if watch batteries and watches are complements d. an increase in the price of watches e. none of the above

c

Which of the following statements is false? a. Printing too much money causes inflation. b. People work harder if the wage is higher. c. The unemployment rate should be lower. d. Large government deficits cause an economy to grow more slowly.

c

Positive statements are a. microeconomic b. macroeconomic c. statements of prescription that involve value judgments d. statements of description that can be tested

d

Which of the following is not a factor of production? a. land b. labor c. capital d. money e. all of the above are factors of production

d

Which of the following could not shift the demand curve for video streaming to the right? a. increased income b. increased leisure time c. reduced price of Smart TVs d. invaders from Mars e. reduced price of video streaming

e

Which of the following involve a trade-off? a. buying a new car b. going to college c. watching a football game on Saturday afternoon d. taking a nap e. all of the above involve trade-offs

e

Points on the production possibilities frontier are

efficient

balanced forces or market clearing price

equilibrium price

goods produced domestically and sold abroad

exports

when one person's actions have an impact on a bystander

externality

What is the classic example of Makiw's principle that people face trade-offs?

guns and better

How do seller expectations influence the supply relationship?

higher expected future prices reduce supply now

How does input price influence the supply relationship?

higher input prices reduce supply

goods produced abroad and sold domestically

imports

Anything outside of the production frontier is ____.

impossible

something that induces a person to act

incentive

goods in which demand goes down when income goes up

inferior goods

an increase in the overall level of prices in the economy

inflation

the study of economy-wide phenomena such as the federal deficit, the rate of unemployment, and policies to improve our standard of living

macroeconomics

an incremental change to an existing plan

marginal change

A group of buyers and sellers of a particular good or service is called a(n)

market

the sum of the quantities demanded for each individual buyer at each price

market demand

the sum of the quantity supplied for each individual seller at each price

market supply

How does the number of sellers influence the supply relationship?

more sellers means a greater supply

Shift of demand curve or movement along the curve? change in price

movement

Do economists disagree about minimum wage substantially above equilibrium?

no

banning something you wouldn't do

non-binding restrictions

goods in which demand goes up when income does

normal goods

Normative or positive: "Developed nations should do more to reduce extreme poverty globally."

normative

Normative or positive: "The government should cut taxes."

normative

what should be in the world

normative economics

To get a good or supply, the buyer must overcome the seller's ____.

opportunity cost

what you give up to get an item; the true cost of the item

opportunity cost

What is "ceteris paribus"?

other things equal

____ is higher if people specialize in their comparative advantage.

output

Principle that describes, "There ain't no such thing as a free lunch."

people face trade-offs

Normative or positive: "Over the past 30 years, extreme poverty has increased globally."

positive

how the world works

positive ecnomics

If a market is perfectly competitive, both buyers and sellers are said to be ____ because they cannot influence the price.

price takers

freedom to use, buy or sell something as the owner sees fit; necessary to markets

property rights

the amount of a good that buyers are willing and able to purchase

quantity demanded

the amount of a good that sellers are willing and able to sell

quantity supplied

Trade-offs are required because wants are unlimited and resources are

scarce

Shift of demand curve or movement along the curve? change in income

shift

Shift of demand curve or movement along the curve? change in prices of related goods

shift

Shift of demand curve or movement along the curve? expectations change

shift

Shift of demand curve or movement along the curve? number of buyers

shift

Shift of demand curve or movement along the curve? tastes change

shift

Describe the Circular-Flow diagram.

shows the flow of goods and services, factors of production, and monetary payments between households and firms; households sell factors of production (e.g. land, labor, capital to firms) in the market for factors of production, and in exchange the households receive wages, rent and profit; households use these dollars to buy goods and services from firms in the market for goods and services; the firms use this revenue to pay for the factors of production and so on

If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are

substitutes

when the price of a good goes down, the demand for for all its _____ go down

substitutes

the natural adjustment of the price to bring the quantity supplied and the quantity demanded into balance

the law of supply and demand

What plays a central role in determining the quantity demanded of a good?

the price of a good

Although many things determine the quantity supplied of a good, ____ is central.

the price of the good

Do economists disagree about minimum wage slightly above equilibrium?

yes