Micro Exam 1

Examples of complements:

Guitars & guitar strings, peanut butte & jelly

Substitute goods:

are viewed as replacements for other goods

The producer with the _______ relative opportunity cost has a comparative advantage and should specialize in the production of that good

lower

The producer with the ________ relative opportunity cost has a comparative advantage and should specialize in the production of that good.

lower

A potential risk of specialization is:

susceptibility to market fluctuations

The income effect and substitution effect, and diminishing marginal utility explain:

why the QD will fall when prices rise

Economist use the phrase __________ ________ _________ to refer to the positive gain enjoyed by both buyers and sellers when they trade

"trade creates wealth"

On a PPF with Good X on the horizontal axis and Good Y on the vertical axis, we can say that the slope of the PPF (in absolute value) equals the opportunity cost of producing Good X with respect to the production of Good Y. This is true because the slope

Describes the trade-off resulting from the production of Good X in terms of Good Y

An economy should continue producing a good or service so long as:

MB exceeds MC

The effect of an extension in unemployment benefits on the unemployment rate in the country

Macroeconomics

An economy is better off when it stops producing output at the point where:

Marginal benefit=marginal cost

When you decide after studying for three hours that another hour of sleep is more beneficial to you than a fourth hour of studying, you are engaging in:

Marginal decision making

Economics is the study of how individuals and societies allocate:

Scarce resources among many competing uses

___________ in trade causes individuals and nations to become interdependent

Specialization

What are some non-price determinants of demand?

Tastes and preference, number of buyers, consumer expectations

A PPF that illustrates a 1-for-1 trade off between goods is drawn as

a straight, downward-sloping line

Marginal Benefit:

additional benefit associated with one or more unit of each activity

Because the world is characterized by scarcity, people must ___________ the resources at their disposal to many competing uses

allocate

The more of a good or a service that is consumed in a given period of time, the lower the marginal ________ that is associated with each additional unit

benefit

In a market:

buyers and sellers interact to trade goods, services, or resources

As long as there are differences in opportunity costs, there are _____________ advantages, and there will be potential for trade to make both parties better off

comparative

specialization in a particular good is based on ____________ advantage on the good

comparative

Gains from trade can be measured by:

comparing the levels of consumption available before and after the trade

The simple model of production assumes that the opportunity cost of production is ___________

constant

The more of a good or service that is produced in a given period of time, the higher the marginal ___________ that is associated with each additional unit

cost

As the amount of an activity increases, its marginal benefit:

decreases

A change in ________ occurs when a non-price determinant of demand changes

demand

According to the Law of _______, price and quantity demanded are inversely related

demand

Without individuals and households that are willing and able to buy a good, the ________ side of the market cannot exist

demand

The ___________ __________ represents the relationship between the price of a good, service, or resource and the quantity that individuals and firms are willing and able to buy, all else held constant, in table form

demand schedule

The quality of an ___________ model can be measured by how well it reflects reality and whether it gives us insights that can be used in the real world

economic

The demand curve focuses entirely on the:

effect of a change in price on the quantity of the product consumed and holds everything else constant.

In the circular flow model, the two markets are :

factor market & product market

In the circular flow model, _______ must buy resources from _______ in order to produce the output they will sell to households

firms; households

Markets, such as the New York Stock exchange and your local retail store, are __________ markets

formal

The benefit, or wealth, that accrues to a buyer or seller as a result of trading one good, service, or resource for another is the

gains from trade

The horizontal summation of individual demand curves:

gives the market demand curve

A _______ is a tangible product that consumers, firms, or governments wish to purchase

good

According to the circular-flow diagram, which two groups interact in the resources market?

households and firms

The earliest two fundamental steps in learning the economic way of thinking are understanding

how people make choices & how resources and scarcity affect the costs & benefits of choices

____________ capital refers to the knowledge and skills that people acquire in order to increase productivity

human

the harm in specializing is that:

if the demand for the good or service you produce decreases, its price and your income will decrease too.

You are wasting resources that would be better spent elsewhere:

if you continue producing when marginal benefit is less than marginal cost

In the real world, the opportunity cost of production ____________ as production increases

increases

Specialization causes individuals and nations to rely on one another and:

increases the degree of interdependence among them

The law of __________ costs says that because some resources are better suited to producing one or good service than another, as the production of a good or a service increases, the _____ cost of each individual unit rise

increasing; opportunity

For _____ goods, an increase in income decreases demand, and a decrease in income increases demand.

inferior

Products such as generic, store-branded dried noodles are considered:

inferior goods, & normal goods

Examines the entire economy of a state, a country, or even the world, So it examines total output, the price level, and other aggregate measures of the economy

macroeconomics

The additional benefit associated with 1 more unit of an activity is ______________ benefit

marginal

The additional cost associated with 1 more unity of an activity is the ____________ cost

marginal

When someone compares marginal benefits associated with an activity to its marginal costs, that person is making a ______________ decision.

marginal

A _________ refers to a group of buyers and sellers who exchange one specific good, service, or resource, not to a specific place.

market

The effect of a tax credit for purchasing new energy-compliant appliances on the use of electricity

microeconomics

Diminishing marginal utility describes the:

negative relationship between the quantity of a good, service, or resource and the marginal utility obtained from each additional unit consumed in a given period of time.

a good for which there is a direct relationship between the demand for the good and income is a _________ good

normal

If the terms of trade are the same as your ______________ cost, you will receive no gains from the trade

opportunity

________ cost is most plainly visible when spending more money on one thing means that less money can be spent on another thing.

opportunity

______________ cost is most plainly visible when spending more money on one thing means that less money can be spent on another thing

opportunity

the value of the next-best, forgone alternative is the

opportunity cost

The terms of trade that are beneficial to both parties are prices that lie between both the parties

opportunity costs

Market demand is based on the:

overall preferences of everyone in the market

Labor as a resource is defined as all ____ and ____ activity devoted to producing goods and services

physical & mental

When a firm receives money for a good or service it sold to a household, the interaction occurs in the ________ market

product

When we talk about the demand for sunglasses, we are referring to the:

quantity that consumers are willing and able to buy at a variety of different prices all else held constant

Tomatoes represent a small subset of food, so tomatoes are

relatively more scarce than food in general

According to the circular-flow diagram, when a household receives a wage for supplying a firm with labor, the interaction occurs in the _________ market

resource

Any item, whether a gift of nature, the result of production, or the result of human effort, that is used to produce goods and services is a:

resource

Every person's and every economy's standard of living relies on the effective use of

resources

Households can obtain the income they need to purchase the products for consumption only by selling __________

resources

In the circular flow model, firms can produce the output they sell to households only by buying _________ from households

resources

Because resources are ______ they must be allocated between competing use

scarce

Economics is the study of how individuals and societies allocate __________ resources among many competing uses.

scarce

Due to the ____ of natural resources, we cannot have all the housing and all the forests we may want.

scarcity

An intangible product or action that consumers, firms, or governments wish to purchase is a

service

The law of demand says that lower prices lead to a higher quantity demanded. As a result, the demand curve:

should slope down

The _______ of the production possibilities frontier equals the trade-off of the production of one good or service in terms of the other

slope

For an entire economy, the PPF is going to be bowed out because:

some resources are better suited for producing some goods or services than others

Because of differences in opportunity costs, individuals and businesses

specialize in the production of the good for which they wield a comparative advatange

__________ is the result of low-cost producers focusing all their efforts on producing a single good or service

specilization

the perceived desirability of consuming a good, service, or resource is refers to the _______ and preference of the buyers

taste

Two different ways in which we usually express info about the demand for a good, service, or resources are:

the demand schedule & the demand curve

Increasing marginal cost describes

the direct relationship between the marginal cost associated with the use of a good or a service and the quantity produced

Decreasing marginal benefit describes:

the inverse relationship between the marginal benefit associated with the use of a good or a service and the quantity consumed

Terms of trade refers to

the price of one good or service in terms of another

The three main reasons why demand curves are downward sloping are:

the substitution effect, the income effect, & diminishing marginal utility

Comparative advantage is the foundation for establishing the benefits of

trade

Whether a good or a service will be traded depends largely on the terms of _________

trade

The term "scarcity" describes the fact that people's _______ wants cannot be completely satisfied with _______ resources

unlimited; limited

A society's ability to produce needed goods and services is permanently reduced if

uses resources too quickly

individuals and countries specialize because the opportunity cost of producing goods and services:

varies

the entire demand curve shifts to the right or left:

when there is a change in demand