Economics Midterm Question Bank
Total cost
$370 for producing 120 chairs.
Total cost
$380 for producing 100 chairs.
Equilibrium price and quantity
$46 and 65 units.
Total revenue
$480 from selling 120 chairs at $4 per unit.
Total revenue
$500 from selling 100 chairs at $5 per unit.
Excise tax
Applied to cigarettes and indoor tanning.
Business owners
Assume most of the business risk.
Other things equal
Assumption that relevant variables are constant.
Entrepreneurial opportunities
Quitting the job to start an organic soap company.
Increase in the excise tax on gasoline
Raises the price of gasoline by shifting the supply curve leftward.
Goods and services
Real flows in the circular flow diagram.
Goods and services flow
Real goods and services and a flow of money.
Lower resource prices
Reduce production costs and increase profits.
Budget line
Reflects the price ratio of two products.
Circular flow model
Resource markets exchange labor, product markets exchange goods.
Land, labor, capital, entrepreneurial activity
Resources in the circular flow diagram.
Choice of consumers and producers
Results in a wide variety of goods in the market.
Private property
Right to obtain, control, and dispose of property.
Creative destruction
Sacrificing quality for quantitative targets in the Soviet Union.
Businesses in circular flow model
Sell goods and buy labor.
Businesses
Sellers of goods and buyers of labor in the circular flow diagram.
Invisible hand
Setting prices correctly in the old Soviet Union.
Supply curves for agricultural products
Shift left due to the use of more costly big trucks.
Overfarming in sub-Saharan nations
Shifted inward the production possibilities curves of such nations.
Decrease in consumer incomes
Shifts the demand curve for an inferior good to the right.
Market system
Shops stock goods and pay sales tax for public services.
Complement goods
Smartphones and apps.
Consumer expenditures
Spending by households in the circular flow diagram.
Microeconomic statement
Statement about specific economic factors.
Responsibility for business loss
Ted and Fred, the owners of the gas station.
Equilibrium price
The market-clearing price.
Market-clearing price
The price at which quantity demanded equals quantity supplied.
Progress in market system
Through technological improvements and capital accumulation.
Mutually agreeable transactions
Transactions that benefit both the buyer and the seller.
Combination of candy
Two lollipops and two candy bars.
Scientific method
Used by economists and other scientists to formulate and test hypotheses.
Scientific method
Using observed data to form a hypothesis.
Dependent variable
Value determined by the independent variable.
Consumption
Varies directly with after-tax income.
Maximizing profits
Withholding current wheat harvest to reduce current wheat supply.
Division of labor
Workers specialize in tasks that utilize their abilities.
Surplus
21 units at a price of $50.
Command economy
Allocates scarce goods based on government planning.
Market system
Allocates scarce goods based on market prices.
Partnership
Business structure with shared profits and debts.
Independent goods
Butter and golf balls.
Households
Buyers of goods and sellers of labor in the circular flow diagram.
Rising demand for motor homes
Caused by an increase in the number of retirees.
Command system
Central government decides on allowing flower shops.
Complementary goods
College classes and textbooks.
Post hoc fallacy
Concluding causation based on temporal sequence.
Self-interest
Consumers and producers acting in their own self-interest.
Consumer-determined production
Consumers determine what is produced by buying or not buying goods.
Upward-sloping data sets
Data sets 1, 2, and 5.
Economizing problem
Deciding how to make the best use of limited resources to satisfy unlimited wants.
Decrease in the price of iron ore
Decreases the price of steel by shifting the supply curve rightward.
Decrease in consumer incomes
Decreases the quantity demanded of a normal good at each price.
Reduction in university subsidies
Decreases the supply of higher education.
Network effect
Driving on a crowded highway.
Variety of goods in market system
Due to diverse individual wants.
Leftward shift in demand curve for car washes
Due to fewer cars in town as more people use rideshare companies.
Decrease in demand for housing
Due to out-migration from small rural towns.
Normal good
Electronic equipment.
Creative destruction
Emergence of self-driving cars replacing traditional cars.
Specialization and trade
Enable individuals to obtain goods they don't specialize in.
Invisible hand
Expecting dinner from self-interest of the butcher, brewer, and baker.
Costs
Expenses incurred by businesses in the circular flow diagram.
Households selling finished products
False statement.
Substitute in production
Firms switch to producing alternative goods when prices increase.
Freedom of enterprise
Firms' freedom to obtain resources and produce goods.
Freedom of choice
Freedom to dispose of resources and spend incomes.
Economic laws
Generalizations that allow us to predict and adjust to events.
Inferior good
Generic beer.
Positive relationship between x and y
Graphs as an upward-sloping line.
Substitute goods
Haagen-Dazs ice cream and Ben & Jerry's ice cream.
Shielding employees and suppliers
Improves economic outcomes.
Capital in production
Improves efficiency, increases output, and provides growth.
Private property
Incentivizes maintenance and transfer of property ownership.
Revenue
Income received by businesses in the circular flow diagram.
Money income
Income received by households in the circular flow diagram.
Principle of increasing opportunity costs
Indicated by a steeper slope on the production possibilities curve.
Self-interest
Individuals and firms seeking what is best for themselves.
Resources
Inputs used in production in the circular flow diagram.
Market
Institution that brings buyers and sellers together.
Ceteris paribus
Latin term meaning 'other things equal.'
Marginal cost curve
Lines A and D in the diagram.
Negative relationship between x and y
Lines C and E in the diagram.
Pitfall to sound economic reasoning
Marginal analysis.
Invisible hand
Market prices coordinate the economy and provide incentives.
Opportunity cost
Move from point B to point C on the production possibilities curve.
Invisible hand
New entries in the list of powerful and profitable companies.
Input availability in market economies
Not a constant concern for firms.
Laissez-faire system
Only taxes for defense, law enforcement, and legal system.
Demand schedule
Option A in the graph.
Data set 3 equation
P = 90 - 0.5N.
Production possibilities curve
PP3 rather than PP2 would result from position A relative to PP1.
Competition
Presence of independent buyers and sellers in the market.
Entrepreneurial opportunities
Quitting the job to develop an Internet-based cable company competitor.
