macro midterm

Which will not cause supply to increase?

A decrease in resource prices

Which of the following best describes an inferior good?

A good for which income and quantity demanded are inversely related

Which best expresses the law of demand?

A lower price reduces demand

The unemployment rate in November 2010 was 9.8%. This statement is an example of a normative economic statement

False

Two rational individuals will always make the same choices when faced with the same circumstances.

False

"Through the guiding function of prices and the incentive function of profits" is the market system's answer to which question?

How will the system accommodate change?

Which of the following best exemplifies the "guiding function" of prices?

Milk production increases in response to an increase in consumer preferences for milk

In a market system, "those willing and able" answers which fundamental question?

Who will get the goods and services?

From society's perspective, in the presence of a supply-side market failure, the last unit of a good produced typically

costs more to produce than it provides in benefits.

Land, labor, capital, and entrepreneurial ability combined are called

factors of production

"Rational self-interest is the same as selfishness."

false

A command system promotes the efficient use of resources by guiding them into the production of the goods and services most wanted by society.

false

The government plays no role in the United States economy.

false

Competition is characterized by

freedom of buyers to enter or leave markets

In a market system, which of the following enables owners to employ or dispose of their property and money as they see fit?

freedom of choice

In a market system, which of the following ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services and to sell them in their chosen markets?

freedom of enterprise

Unlike a private good, a public good

has benefits available to all, including nonpayers.

Economic profits and losses

help determine which industries survive or fail

A partial explanation for the inverse relationship between price and quantity demanded is that a

higher price reduces the real incomes of buyers

A microeconomist would most likely study

how consumers respond to a change in gasoline prices

You should decide to study an extra hour tonight if

if the marginal benefit of studying an extra hour exceeds its marginal cost

An increase in consumer incomes will

increase the demand for a normal good but decrease the demand for an inferior good

Consider the market for good X. A simultaneous drop in the price of a production input and an increase in the price of substitute good Y will necessarily

increase the equilibrium quantity of X

Human specialization, or the division of labor

increases output by enabling workers to take advantage of differences in their skills

In the circular flow diagram, firms...

incur costs and demand resources in the resource market

the production possibilities curve

is bowed out from the origin

An efficiency loss (or deadweight loss)

is measured as the combined loss of consumer surplus and producer surplus.

Consumer surplus

is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.

Producer surplus

is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.

Barter

is the direct exchange of goods for goods

The scarce resource of capital in economics, refers to

manufactured aids like machinery, tools, equipment, and facilities.

If the quantity supplied of oranges exceeds the quantity demanded

market forces will cause the price to fall unless there is an effective price floor

The market system is characterized by

private property rights

In terms of the circular flow diagram, firms receive revenue in the _____ market and incur costs in the _____ market.

product; resource

According to economists, human wants will never be fulfilled completely because

productive resources are scarce

It is in a firm's best interest to utilize the least-cost production technique because

profitability requires that firms produce their output at minimum cost per unit

The competitive market system encourages innovation and technological advance, primarily through

profitable returns to innovative firms

The two major features of the economic perspective are

purposeful behavior and marginal analysis

A nation's production possibilities curve is "bowed out" from the origin because

resources are not perfectly adaptable to production of alternative goods

Consider the choice Marsha faces of how to allocate her weekly allowance between coffee and cheeseburgers. An increase in Marsha's income will

shift her budget line to the right

The "command system" is also known as

socialism or communism

Demand-side market failures occur when

the demand and supply curves don't reflect consumers' full willingness to pay for a good or service.

Supply-side market failures occur when

the demand and supply curves don't reflect the full cost of producing a good or service.

Goods X and Y are complements while goods X and Z are substitutes. If the price of good X increases

the demand for Y will increase while the demand for Z will decrease

macroeconomics mainly focuses upon

the economy as a whole

"The pursuit of self-interest automatically promotes the social interest." This concept is known as

the invisible hand

At the output level defining allocative efficiency

the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output.

According to the marginal-cost-marginal-benefit rule

the optimal project size is the one for which MB = MC.

Economics is primarily the study of

the problem of scarce resources relative to human wants

When movie ticket prices increase, families tend to spend less time watching movies and more time at home watching videos instead. This best reflects

the substitution effect

Nonexcludability describes a condition where

there is no effective way to keep people from using a good once it comes into being.

At the equilibrium price...

there will be neither a shortage nor a surplus

iPhones and headphones are substitute goods.

true

Suppose you can purchase milk for $3 a gallon or eggs for $1.50 per dozen. Your opportunity cost of a gallon of milk is

two dozen eggs

Graphically, if the supply and demand curves are linear, consumer surplus is measured as the triangle

under the demand curve and above the actual price.

The satisfaction obtained from consuming a good or service is

utility

The scarcity problem

will persist so long as productive resources are limited

If consumer incomes increase, the demand for product Y

will shift to the right if Y is a normal good

A market is characterized by

exchange between buyers and sellers

Which of the following is a capital good?

A steel fabrication facility

Private ownership of resources is best captured by which of the following concepts?

Property rights

What two conditions must hold for a competitive market to produce efficient outcomes?

Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay.

The trains of the Transcontinental Railway Company, when shipping goods, sometimes emit sparks that start fires along the tracks and damage the property of others. If Transcontinental does not pay for the damage it causes, what has occurred?

Supply-side market failure

Which of the following is NOT a determinant of demand?

Taxes and subsidies

Which of the following is NOT a determinant of supply?

Technology

For a market system, which of the following best answers the question, "What goods and services will be produced?"

The goods and services produced at a continuing profit

Suppose that the demand and supply for some product both increase. Then, in that market

equilibrium quantity will increase

A change in quantity demanded is

a movement along a stationary demand curve.

A change in quantity supplied is

a movement along a stationary supply curve.

Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences:

a producer surplus of $9 and Nathan experiences a consumer surplus of $3.

An increase in demand is shown as

a shift of the demand curve to the right.

Which of the following is an example of a public good?

a weather warning system

When constructing a typical production possibilities curve, economists assume

all available resources are fully employed

The negative slope of the production possibilities curve illustrates that

an economy can produce more of one thing only by producing less of something else

A leftward shift in the demand curve for product E might be caused by

an increase in the price of a product that is complementary to E

Purposeful behavior and marginal analysis

are part of the economic perspective

In the equation y = a + bx, where y is the dependent variable and x is the independent variable, the slope of line is given by

b

In studying economic principles, economists make use of

both the economic perspective and the scientific method

The "market system" is also known as

capitalism

The command systems of the Soviet Union and eastern Europe failed in part because

central planners found it increasingly difficult to coordinate the economic decisions of consumers, resource suppliers, and business

Cost-benefit analysis attempts to

compare the benefits and costs associated with any economic project or activity.

The term "consumer sovereignty" means

consumer choices ultimately determine which goods and services are produced

When an economist says that the demand for a product has decreased, this means that

consumers desire to purchase less of this product at each possible price

People enjoy outdoor holiday lighting displays, and would be willing to pay to see these displays, but can't be made to pay. Because those who put up lights are unable to charge others to view them, they don't put up as many lights as people would like. This is an example of a

demand-side market failure

Compared to a command system, economists typically favor a competitive market system because it promotes

efficiency

The two main characteristics of a public good are

nonrivalry and nonexcludability.

The unemployment rate in November 2010 should have been 2 percentage points lower. This statement is an example of

normative economics

Margaret decides to stay home and study for her exam rather than going out with her friends to a movie. Her dilemma is an example of

opportunity cost

When society forgoes the opportunity of getting the next best thing, that sacrifice is

opportunity cost

Which of the following will cause the demand curve for product A to shift to the right?

population growth that causes an expansion in the number of consumers for product A.

When drawing demand and supply curves, economists are assuming that the primary influence on production and purchasing decisions is

price

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium

price must rise

A demand curve for a public good is determined by

summing vertically the individual demand curves for the public good.

Because of unusually warm weather, the supply of strawberries has substantially increased. This statement indicates that

the amount of strawberries that will be available at various prices has increased

A positive externality or spillover benefit occurs when

the benefits associated with a product exceed those accruing to people who consume