Macro Exam 1

The additional cost to a firm of producing one more unit of a good or service is the

marginal cost

Scarcity

A situation in which unlimited wants exceed the limited resources available to fulfill those wants.

What does the term "marginal" mean in economics?

additional

Marginal cost is the ________ associated with a particular increase in an activity.

additional cost

The Stogie Shop, a cigar store in the mall, sells hand-rolled cigars for $10.00 and machine-made cigars for $2.50 each. What is the opportunity cost of buying a hand-rolled cigar?

4 machine made cigars

Market

A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade.

Marginal Analysis

Comparing Marginal cost and Marginal benefit

What country does not come close to the free market benchmark?

Cuba

"An increase in the price of oranges will increase the demand for grapefruits." This statement is an example of a normative economic statement. Normative economic statement: opinion based True or False?

False

A positive technological change will cause the quantity of a good supplied to increase. True or False?

False

As population declines, scarcity eventually disappears. True or False?

False

Deadweight loss refers to a loss in revenue resulting from producers having to reduce their selling price to remain competitive. True or False?

False

Examining the conditions that could lead to inflation in an economy is an example of a microeconomics topic. True or False?

False

If Blake can pick more cherries in one hour than Cody, then Blake has a comparative advantage in cherry picking. True or False?

False

If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is with an advance in technology. True or False?

False

If the demand for a product decreases and the supply of the product does not change, equilibrium price and equilibrium quantity will both increase. True or False?

False

Optimal decisions are made at the point where marginal benefit is maximized. True or False?

False

Rent control is an example of a price floor. True or False?

False

There is a shortage of every good that is scarce. True or False?

False

Characteristic of a perfectly competitive market

Many buyers and sellers

Opportunity costs are constant as more of one good is produced.

PPF is linear

Trade-Off

The idea that, because of scarcity, producing more of one good or service means producing less of another good or service.

If the United States lifts the embargo on Cuban products, what will happen in the U.S. market for Cuban cigars?

The supply curve will shift to the right

A welding machine is an example of a factor of production if it is being used to produce automobiles. True or False

True

An increase in population results in an increase in demand. True or False

True

If a country produces only two goods, it is possible to have an absolute advantage in the production of both goods. True or False?

True

Market equilibrium occurs where the quantity supplied is equal to the quantity demanded. True or False

True

The division of the burden of a tax between buyers and sellers in a market is called tax incidence. True or False?

True

When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it, ________ occurs.

allocative efficiency

If, in response to a decrease in the price of coffee, the quantity of coffee demanded increases, economists would describe this as

an increase in quantity demanded

Which of the following is part of an economic model?

assumptions

The ________ production points on a production possibilities frontier are the points along and inside the production possibilities frontier.

attainable

If a vineyard wants to raise funds to purchase a new bottling machine, it does so in the

factor market

Economics is the study of the ________ people make to attain their goals, given their ________ resources.

choices; scarce

The roles played by households and firms in the market system.

circular flow model

In a market economy, who decides what goods and services will be produced?

consumers and producers

Compared to prices charged by Uber, traditional taxi companies charge government-regulated prices. These government-regulated prices ________ in the market for shared rides.

decrease consumer surplus

If the government implements a price ceiling on insulin, this will

decrease quantity of insulin

The willingness of consumers to buy a product at different prices is shown on a

demand curve

Producing more of one good means less of another good can be produced.

economic trade-offs

When there is a decrease in supply and an increase in demand for the product.

increase in equilibrium price

An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in

increase in equilibrium quantity

An outward shift of a nation's production possibilities frontier can occur due to

increase in labor force.

The more resources already devoted to any activity, the benefits from allocating yet more resources to that activity decreases by progressively larger amounts.

increasing marginal cost

Adam Smith's ________ refers to the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole.

invisible hand

Economics

is the study of the choices people make to attain their goals, given their scarce resources.

A decrease in the price of pork will result in

larger quantity of pork

A consumer is willing to purchase a product up to the point where

marginal benefit it equal to price of product

The branch of economics which studies how households and firms make choices, interact in markets, and how government attempts to influence their choices is called

microeconomics

In order to be binding, a price floor

must be above equilibrium price

Suppose the U.S. government encouraged new teachers to take jobs in under performing schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying the economic idea that

people respond to economic incentives

The minimum wage is an example of

price floor

In a market economy, those who are willing and able to buy what is produced

receive the most

Economists assume that rational people

respond to economic incentives.

A critical function of the government in facilitating the operation of a market economy is

setting up and enforcing private property rights.

Hurricane Katrina damaged a large portion of refining and pipeline capacity when it swept through the Gulf coast states in August 2005. As a result of this, many gasoline distributors were not able to maintain normal deliveries. At the pre-hurricane equilibrium price (i.e., at the initial equilibrium price), we would expect to see

shortage of gasoline

The change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes.

substitution effect of a price change

Suppose a drought resulted in a major reduction in the California lettuce crop. In the market for lettuce

supply curve shifted to the left

The processes used to produce goods and services describes

technology

If in the market for bananas the supply curve has shifted to the right, then

the supply of bananas increased

Buyers will bear the entire burden of a unit tax if the demand curve for a product is

vertical