Econ 25 Ch. 1 and 2 Exam

In the simple circular-flow diagram, _____________ sell their resources to __________ who produce the goods and services for _____________ to purchase.

households; firms; households

In a market economy, economic activity is guided by

self-interest and prices.

Which of the following events would explain the shift of the production possibilities frontier from A to B?

A general increase in resources and/or a technological advance

Inefficient production is represented by which point(s)?

C

Given your answer to Michael's and Angelo's comparative advantage, Michael should specialize in _______________ and Angelo should specialize in ________________.

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Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Use this table to answer the six questions that follow. Michael: Sculpture- 10. Painting- 5 Angelo: Sculpture- 6. Painting- 2 Does either Michael or Angelo have an absolute advantage?

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Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Use this table to answer the six questions that follow. Michael: Sculpture- 10. Painting- 5 Angelo: Sculpture- 6. Painting- 2 What is Angelo's opportunity cost of a sculpture?

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The opportunity cost of this economy moving from point A to point D is

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Which of the following is NOT a gain from specialization and trade?

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Which of the following statements about economic models is NOT correct?

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Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Use this table to answer the six questions that follow. Michael: Sculpture- 10. Painting- 5 Angelo: Sculpture- 6. Painting- 2 What is Angelo's opportunity cost of a painting?

.....

Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Use this table to answer the six questions that follow. Michael: Sculpture- 10. Painting- 5 Angelo: Sculpture- 6. Painting- 2 What is Michael's opportunity cost of a painting?

.....

When recommending specific policies to undertake, economists make

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Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Use this table to answer the six questions that follow. Michael: Sculpture- 10. Painting- 5 Angelo: Sculpture- 6. Painting- 2 What is Michael's opportunity cost of a sculpture?

1/2 painting

It is not possible for this economy to produce at point

B

Which of the following concepts is shown by the negative slope of the Production Possibilities Frontier?

Countries face trade-offs in production due to scarce resources

Which of the following statements does NOT apply to a market economy?

Government policies are the primary forces that guide the decisions of firms and households.

A person has a comparative advantage in the production of a good when he or she can produce the product at a(n) ________ opportunity cost compared to another person.

Lower

Nearly all of the countries in the world have what type of economic system?

Mixed economy

Which of the following is NOT a resource or factor of production?

Money

Which of the following is NOT true regarding a public good?

Public goods are considered a market failure

The book titled ___________________________, authored by __________________ in ________ is considered the beginning of the formal study of economics.

The Wealth of Nations; Adam Smith; 1776

Which of the following is NOT a question societies must answer in order to form an economy?

What currency will be used?

Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Use this table to answer the six questions that follow. Michael: Sculpture- 10. Painting- 5 Angelo: Sculpture- 6. Painting- 2 Does either Michael or Angelo have a comparative advantage?

Yes, Michael has a comparative advantage in paintings, and Angelo has a comparative advantage in sculptures.

When trade is voluntary, who benefits?

both the buyer and the seller

Microeconomics is the study of:

individual decision-making units such as households, firms and government..

The term used to describe a situation in which markets do not allocate resources efficiently is

market failure

The cost of a trade-off is known as the ________ cost of that decision.

opportunity

A parent that pays a child an allowance for doing chores is providing a(n) ________ incentive.

positive

Economists believe that individuals compare the benefits and costs of various options when making a decision and in so doing act:

rationally

The overriding reason why households and societies face many decisions is that

resources are scarce

Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by

the actions of government central planners.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that

the nation is not using all available resources

The bowed-outward shape of the production possibilities frontier can be explained by the fact that

the opportunity cost of producing one good rises in terms of the other good, due to specialized resources.

The opportunity cost for Elijah of going to a water park is:

the price of the admission pass plus the highest-valued alternative activity Elijah could have done instead.

Economics is the study of how society manages its

unlimited wants and limited resources

Prices direct economic activity in a market economy by acting as a signal. That is, they reflect the ________ of buyers and the _______ to producers simultaneously.

value; cost

The opportunity cost of an item is

what you give up to get that item, which includes direct and indirect costs.