Mid-Term Exam ECN 212
The one unique price at which quantity demanded equals quantity supplied is________ and the corresponding quantity is ________ .
$14, 31
Identify the normative statement(s) among the following statement(s)
- College tuition is too high.- College tuition is not high enough.
In order to deal with a budget deficit, the city of Portland reduces its subsidy of doughnut shops. What happens in the market for doughnuts in Portland?
- Doughnut prices rise. - The equilibrium quantity falls.
Which of the following statements is/are reflecting decision-making on the margin?
- If we double the order to a dozen doughnuts, we will pay only twenty percent more. - One more day in this cottage will be nice, but how much will the cost of the rental rise?
Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of demand for the dolls over this range is:
2.5
Exhibit 2-1 Production possibilities curve data In Exhibit 2-1, the opportunity cost of producing the fourth unit of capital is:
4 units of consumption goods.
At a price of $13, quantity demanded is ________, quantity supplied is ________, therefore excess ________ has occurred.
45, 27, demand
Which of the following is the most likely result of an increase in the minimum wage?
A decrease in the employment of unskilled workers
Assuming coffee and tea are substitutes, a rise in the price of coffee will have which of the following effects on the market for tea?
A rightward shift in the tea demand curve.
According to the law of demand, assuming other factors are held constant
As the price of milk decreases, the quantity of milk demanded will increase
Which of the following can bring about a change in the quantity demanded?
Change in product price
Which of the following statements describe(s) a free market?
Government does not intervene in any way
Exhibit 4-4 Supply and demand curves for good X An increase in the price of a complementary good would be represented in which of the graphs in Exhibit 4-4?
Graph C
Which of the following questions would be asked by an economist studying elasticity?
How responsive are consumers and producers to changes in price?
If a decrease in the price of MP3 players decreases the demand for CD players, this means that
MP3 players and CD players are substitutes
The equilibrium price and quantity are:
Pe = $14, Qe = 31
Which of the following three statements are normative?
Retired professionals should work less and get out more.
Which of the following statements are positive?
Social security benefits are not taxed.
Identify the microeconomic topic(s) among the following.
The price that a farmer asks for her watermelons.
Which of the following statements describe a competitive market?
There are a large number of buyers and sellers
Exhibit 2-14 Production possibilities curve In Exhibit 2-14, this economy was located at point E but has now moved to point F.
This economy has achieved full employment.
Which of the following is an example of market failure?
all of these.
Complete the following sentence: If people think that the price of televisions will decrease in the near future, that belief may cause a(n)
decrease in the demand for televisions today
In a market with relatively inelastic demand, if the supply curve shifts due to a fall in production costs, the equilibrium price will ________ by ________ than equilibrium quantity.
decrease; more
When there are positive externalities associated with the consumption of a good, we can expect the market:
demand curve to lie below the social demand curve
A lower price elasticity of demand coefficient occurs when:
few substitutes exist
Microeconomics deals with the analysis of all the following questions except how:
high did unemployment rise during the Great Depression.
A perfectly elastic demand curve has an elasticity coefficient of:
infinity
The fact that price and quantity demanded are related negatively illustrates the:
law of demand
The term Ceteris paribus means that:
one influence is changing and everything else is being held constant.
The distinguishing feature of economic capital (as opposed to financial capital, like money) is that it is
productive.
Analyze the following diagram: Demand "C" represents a demand curve that is
relatively inelastic
Elastic supply occurs if the change in quantity supplied is ________ to a change in price.
relatively responsive
The responsiveness of suppliers to changing prices is called the:
supply elasticity
Efficient production means producing:
the maximum feasible output for a given amount of resources.
The longer the time period under study,
the more elastic is the price elasticity of demand
Adding more resources causes:
the production possibilities curve to shift out.
A competitive market is one in which
there is a large number of buyers and sellers
Nearly all supply curves share a basic similarity. They slope
up from left to right.
In general, supply curves slope
upward from left to right
The very best models have an unusual combination of characteristics. They are both
useful and simple.
Normative statements are based upon
value judgement
Making an economically rational decision requires
weighing prospective marginal benefits and marginal costs to oneself
An economic model is useful only if it:
yields accurate predictions.
It is said that the rational consumer will act according to their self-interest, and that self-interest can include a concern for one's family and friends, but not often society as a whole. Which of the following illustrates this type of decision?
- The boat rental was worth the additional fish catch, regardless how little fish we left behind. - Renting of recreational vehicles for use in national parks is responsive to the price charged, but not to concerns of noise pollution.
Identify the positive statement(s) among the following statement(s).
- The federal government budget deficit reached 4% of GDP last year. - The federal government spending is greater than revenue to the Treasury.
The city of Portland aims to increase tourism. A recent study showing the high popularity of doughnuts causes the city to subsidize its doughnut shops. What happens in the market for doughnuts in Portland?
- The quantity supplied and the quantity demanded both rise - Doughnut prices fall.
Assuming there are only two types of outputs in Cuba: consumer goods and nuclear missiles. All else constant, as the nation produces more missiles
- every additional missile will reduce consumer goods production by more and more. - the greater is the opportunity cost of consumer wants satisfied.
The nature of the relationships between variables can be expressed by way of
- mathematical equations. - graphs.
Budget constraints impose scarcity , and are based upon
- the prices of the items purchased. - the limitation of the budget.
In the case of a direct relationship between two variables, all else remaining constant:
- the values of the two variables will move in the same direction - graphically, the data line representing the relationship between the variables has a positive slope
In the case of a positive relationship between two variables, all else remaining constant:
- the values of the two variables will move in the same direction - graphically, the data line representing the relationship between the variables has a positive slope
Exhibit 5-3 Demand curves for gallons of orange juice Using Exhibit 5-3, whose "quantity demanded" experiences the largest percentage increase when the price falls from $2 to $1?
Albert
The supply curve will shift to the right if which of the following occurs?
An improvement in technology
A filtration improvement has been proposed for the old water plant that serves the entire city. Water rates have been only 2 cents per gallon, but with the improvement, the rate would be 5 cents per gallon.
Are the additional benefits of cleaner water worth paying 3 more cents per gallon?
Down at the water plant, there is a proposal for a new filtration system to serve the entire city's needs. The cost of the new system will double water rates. A rational city council should deliberate which following question on behalf of the city's residents?
Are the benefits of cleaner water greater than the additional costs of the new filtration system?
Self-interest can include more than a concern for oneself. To the extent that the happiness of others contributes significantly to the our own happiness, actions taken in our own self-interest may have benefits for
C close friends and family.
Self-interest is not necessarily selfish, some say. In fact, self-interest likely includes an individual's consideration for
C close friends and family.
The following country has characteristics of a command economy?
China
If Jackie needs special film to go with her new camera, then for her these two goods have what type of relationship?
Complementary
Which of the following three statements are normative?
Congress gives too many tax breaks to corporations.
Exhibit 4-4 Supply and demand curves for good XA decrease in buyers' income, assuming good X is a normal good, combined with a decrease in the wage rate paid to workers producing good X would be represented by which of the following changes in equilibrium shown in Graph C of Exhibit 4-4?
E1 to E4.
Which of the following is a free rider?
Fred watches many public television programs, but he has never sent in a contribution.
Which of the following would decrease the supply of airline travel?
Higher fuel costs.
Which of the following will cause the demand curve for a good to shift to the right?
Increase in the price of a substitute good.
In order to avoid the free-rider problem, which of the following goods is best provided by the government and paid for with tax dollars?
Lighthouses
At a price of $5, Sam buys 10 units of a product; when the price increases to $6, Sam buys 8 units. Martha says Sam's demand has decreased. Is Martha correct?
No, Martha is incorrect. Sam's quantity demanded has decreased, and his demand has not changed.
Which of the following events can shift the level of demand (demand is the relationship between price and quantity demanded)?
Population grows in a particular market area.
Suppose there is a major technological advance in the production of a good that causes production costs to fall. If demand for the product is relatively inelastic, what will happen in the market?
Price will relatively decrease greater than the increase in quantity
If demand increases and supply remains constant, what happens to the market equilibrium?
Quantity and price both rise
If demand increases and supply remains constant, what happens to the market equilibrium?
Quantity and price both rise.
Positive economics is a(n):
Statement of fact
Which fundamental economic question is most closely related to the issues of income distribution and poverty?
The For Whom to Produce question.
Information campaigns about tobacco hazards and taxes on tobacco are two ways to discourage its use. Which one decreases demand for smoking?
The Information campaign on hazards of tobacco
It is said that the rational consumer will act according to their self-interest, and that self-interest can include a concern for one's family and friends, but not often society as a whole. Which of the following illustrates this type of decision?
The boat rental was worth the additional fish catch, regardless how little fish we left behind.
Which of the following must be true if good X is a normal good and income increases?
The demand for X will increase, and thus the price and quantity sold and bought will increase.
A free market is described by which of the following statements?
The government does not intervene in any way.
A restaurant chain sponsors a charity that provides for children with cancer to be treated with their parents present. How would the use of company funds for this purpose be justified by a business whose goal is to maximize profit?
The money spent is worth the boost it gives to corporate image
When an economist or mathematician uses equations to calculate changing economic conditions, they use variables to simplify this process. What is a variable?
The name given to a quantity that can assume a range of values.
Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?
The price of orange juice will fall, and the quantity purchased will fall.
A rock star intentionally sets her ticket prices below what would be necessary to sell out her shows. How might this be justified by a manager whose goal is to maximize long-term profit?
The revenue sacrificed is worth the boost it gives to her image as lines form for tickets.
Exhibit 4-10 Supply and demand data for apricots Which of the following would occur if the government set a price ceiling of $1 in the market shown in Exhibit 4-10?
There would be a shortage of apricots
You are the manager of the public transit system. You are informed that the system faces a deficit, but you cannot cut service, which means you cannot cut costs. Your only hope is to increase revenue by increasing fares. You are advised that the estimated price elasticity of demand for the first few months after a price change is about −0.3. Select the statement that best describes the results of raising the fare in the short run.
Total revenue rises immediately after the fare increase, since demand over the immediate period is price inelastic.
What combination of model characteristics are frequently used it the most effective models?
Useful and simple.
The circular flow diagram demonstrates
a direct relationship between groups in an economy.
If butter is a substitute for margarine, then an increase in the price of butter would be most likely to cause:
a rightward shift of demand for margarine
If the equilibrium price of natural gas is $4 per thousand cubic feet and a price ceiling is imposed at $3 per thousand cubic feet, the result will be:
a shortage of natural gas
An economic model is defined as:
a simplified representation of the way in which facts are related.
A positive statement is:
a statement testable by facts.
If wage increases by 10%, a(n) ________ worker is likely to supply 7% more labor because elasticity of labor supply is assumed to be ________.
adult; inelastic
When economists use the term Ceteris paribus, they are indicating that:
all other variables except the ones specified are assumed to be constant.
Complete the following analogy: A criminal is to a police artist's sketch as the economy is to:
an economic model
Robinson Crusoe's decision to produce more capital goods and fewer consumer goods in a given period causes:
an increase in economic growth in future periods.
According to the law of supply, assuming other factors are held constant
as the price of bread increases, the quantity of bread supplied will increase.
Due to limits on our time, money, and effort, we are best off when we allocate those things...
by constantly assessing the opportunity costs of our choices.
A positive statement is
can be shown to be correct or incorrect.
On a production possibilities curve diagram, greater entrepreneurship:
causes the curve to shift outward.
If John purchases 10 percent more compact discs when his income increases 5 percent, then:
compact discs would be income elastic
Negative cross price elasticity of demand between two goods indicates that the two goods are
complements
After cost overruns of the solar project, $10 million was already spent and unrecoverable. It was going to cost $12 million more in order to complete the project, and now society somehow needs to make the rational choice to
continue with the project provided that the additional solar electricity is worth more than $10 million.
When ________, business firms will collectively supply a lower quantity of output at any given price, and the supply curve will shift to the left.
costs of production increase
A 10% decrease in the price of potato chips leads to a 30% increase in the quantity of soda demanded. It appears that
cross-price elasticity of demand for soda is -3.
Given that total revenue = price x quantity, what will happen to total revenue if price increases when demand is elastic?
decrease
Two goods, X and Y, are complementary goods if the demand for X:
decreases when the price of Y increases.
A positive statement is always
devoid of value judgements
The law of demand is illustrated by a demand curve that is:
downward-sloping.
Market economies are based on private enterprise, which means
economic decision-making happens through markets
In economics, functions often describe cause and effect. In an economic function, the variable being described on the left-hand side represents a(n) ________?
effect
Supply is said to be ________ when the quantity supplied is very responsive to changes in price.
elastic
Teenage workers are assumed to have ________ labor supply, therefore a 5% increase in wage would result in ________ percentage change in quantity of labor supplied.
elastic, greater
The one unique point in which quantity demanded equals quantity supplied is called
equilibrium
When the actual price in some market is above the equilibrium price, the resulting market condition is known as
excess supply
If supply falls and demand remains constant, once the market has adjusted to its new equilibrium there will be
fewer transactions, and they will take place at a higher price
Exhibit 2-19 Production possibilities curves In Exhibit 2-19, the production possibilities curves for a country are shown for the years Year X and Year Y. Suppose this country was located at point A in Year X and point B in Year Y. This economy:
has lower unemployment in Year Y than in Year X.
A perfectly elastic supply curve is
horizontal
The slope of a budget constraint line is influenced by
how much one item costs compared to the cost of the other item.
If an individual's income increases, then the demand for a normal good will:
increase
The law of increasing costs indicates that the opportunity cost of producing a good:
increases as more of the good is produced.
Sally is an average shopper, with average income. When she is in the store she buys a few items which cost more than $20, several items which cost between $5 and $20, and many items which cost less than $1. The price elasticity of Sally's demand for these goods most likely ____.
increases as the price increases
Which of the following is not true about a production possibilities curve? The curve:
indicates which production point will be chosen.
Suppose the quantity demanded of steak is 200 million pounds per year when the price is $6 per pound and 400 million pounds per year when the price is $2 per pound. The price elasticity of demand for steak over this range is:
inelastic
The size of the change in the quantity demanded of a good or service due to change in its price is measured by the elasticity of demand. When the percentage change in the quantity demanded for a good or service is less than the percentage change in price, the demand for that good or service is ________ and the price elasticity coefficient is
inelastic, less than 1
A person who takes life-saving prescription drugs most likely has a(n) ________demand for that drug. Therefore an increase in the price of the drug will result in ________ total revenue for the drug company.
inelastic; increased
If a data line on a graph has a slope of zero it means there
is a constant relationship between x and y.
A surplus of wheat:
is impossible if the price of wheat is below equilibrium.
The amount of a good that is given up to produce another good is:
its opportunity cost.
Compared to ideal economic efficiency, when the production of a good generates external costs, competitive markets will result in an output that is too:
large and a price that is too low.
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the
law of demand.
Economists refer to the relationship that a higher price leads to a higher quantity supplied as the
law of supply
To finance medical care, the federal government raises the tax per pack paid by sellers of cigarettes. Other things being equal, the price of cigarettes rises because of a(n):
leftward shift of the supply curve for cigarettes.
Natural resources, or land, can include the fertility of the land, minerals below it, and what other aspects?
livestock
Suppose you are in charge of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair. Assume that the company wants to earn as much revenue as possible from this drug. If the elasticity of demand for your company's product at the current price is 1.4, what would you advise the company to do?
lower the price
Policies to create jobs in the nation are the concern of:
macroeconomics.
Policies to lower the price level of goods in the nation are a concern of:
macroeconomics.
Economists believe that scarcity forces everyone to:
make choices.
Marginal cost is necessary to consider in a rational decision, and should be compared to
marginal benefit.
What is one way to express economic theory?
mathematical equations
Any point on the production possibilities curve illustrates:
maximum production combinations.
What will we never do in a world of scarcity?
meet all of society's wants
Determining the price of compact discs is a concern of:
microeconomics.
Economic capital is productive, so it does not include________?
money
What is NOT included in economic capital?
money
One method of correcting for ____ externalities is to create a ____ to make sure the market accounts for all costs and benefits.
negative; tax
"The government should provide health care for all citizens." This statement is an illustration of:
normative economic analysis.
An entrepreneur is a(n):
organizer who seeks profitable opportunities and is willing to accept risks.
The perpetual problem in economics is:
our inability to satisfy everyone's wants with the available resources.
Externalities get their name from the fact that they are:
outside of decisions.
Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a(n):
outward shift of the curve.
The elasticity of supply is defined as the ________ change in quantity supplied divided by the ________ change in price.
percentage : percentage
The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in
price
The downward slope of a demand curve illustrates the pattern that as ________ decreases, ________ increases.
price : quantity demanded
Since it is always a negative number, economists use the convention of taking the absolute value of:
price elasticity of demand
A demand curve shows the graphical relationship between quantity demand and
price.
A supply curve is a graphical illustration of the relationship between quantity supplied and
price.
If a 10 percent decrease in the price of product A brings about a 3 percent increase in the sales of product B, then:
products A and B are complementary
If a 1 percent decrease in the price of product A brings about a 3 percent increase in the sales of product B, then:
products A and B are complementary.
If demand deceases and supply remains constant, what happens to the market equilibrium?
quantity rises and price falls
Of factors which affect any economy's production potential, the best two listed below are:
resources and technology.
The price elasticity of demand measures the
responsiveness of quantity demanded to a change in price
Exhibit 2-4 Production possibilities curve data According to the data in Exhibit 2-4, a total output of 140 units of consumer goods and 10 units of capital goods would:
result in a less than maximum rate of growth for this economy.
Other things being equal, the effect of a decrease in the price of DVDs on the market for DVD players is a(n):
rightward shift in the demand curve for DVD players
If a technology change reduces a company's production costs, it will
shift the supply curve to the right.
Which of the following is true about the production possibilities curve when a technological progress occurs? The curve:
shifts outward to the right.
In order to satisfy as many wants as possible, it is necessary to achieve ALLOCATIVE efficiency,
since otherwise output may go to where it is less valued.
Which of the following factors does NOT influence the price elasticity of demand of a product?
slope of the supply curve
If each of us relied exclusively on the market to determine what to buy, we would probably end up with few, if any:
streetlights
An Uber driver faces costs for driving that include sunk costs like insurance that contribute to the average cost per mile of $.50. Yet when a rider offers to pay less than that for a ride, the driver agrees because
sunk costs like auto insurance (in this case) do not increase as driving increases.
Good weather and heavy winter rain increases the supply of agricultural products. This means that at any given price, a higher quantity will be supplied. Conversely, a drought would shift the
supply curve to the left
Exhibit 3-12 Supply and demand data In Exhibit 3-12, at a price of $2.00 the market will experience a(n):
surplus of 100 units.
Marginal cost is
the cost of obtaining or producing one more unit of something.
The perpetual state of insufficiency of resources to satisfy people's unlimited wants is:
the definition of scarcity.
The excess supply created when governments impose a price floor is:
the difference between the new quantity supplied and the new quantity demanded.
Externalities are unintended costs or benefits that are imposed on unsuspecting people and that result from:
the economic activity of others.
The former Soviet Union was known for black markets. An explanation for the existence of these illegal markets is that:
the government imposed a price ceiling below the equilibrium price
When a 10% increase in income causes a 4% increase in quantity demanded of a good
the income elasticity is .4 and the good is a normal good
When a 5% increase in income causes a 3% drop in quantity demanded of a good
the income elasticity is .6 and the good is an inferior good
The production possibility curve is bowed outward from the origin because of:
the law of increasing opportunity costs.
The musician was known for multiple encore performances, but had limited stamina and a rational mind. Even she would eventually call it a night when, by her judgement
the marginal cost is greater than the marginal benefit of an additional encore.
When the consumption of a good generates an external benefit:
the market demand curve will understate the total benefits derived from consumption of the good, and as a result, too little of it will be produced and consumed.
The elasticity of demand is defined as
the percentage change in quantity demanded divided by the percentage change in price.
The elasticity of supply is defined as the
the percentage change in quantity supplied divided by the percentage change in price.
Exhibit 3-15 Supply and demand curves for good X In Exhibit 3-15, if the market price of good X is initially $.50, a movement toward equilibrium requires:
the price to rise above $.50, the quantity supplied to rise, and the quantity demanded to fall.
A budget constraint model differs from production possibilities model in that, typically
the production possibilities model demonstrates diminishing returns.
In the context of the production possibilities curve, opportunity cost is measured in:
the quantity of other goods given up.
If a data line on a graph slopes upward as it goes to the right, it is depicting that
the relationship between the variables on the axes is direct.
Suppose Congress passes legislation that offers subsidies to orange farmers. The impact on the market for orange juice will be a rightward shift of
the supply curve
When quantity demanded decreases in response to a change in price
there is a movement from one point to another along the demand curve
When quantity demanded increases in response to a change in price
there is a movement from one point to another along the demand curve.
If the price of tea is below its equilibrium level, then:
there is a shortage of tea.
A community in a Southeastern state passed a beautification ordinance (law) prohibiting the placement of indoor furniture outside of homes (i.e., no couches on the porch). The law represents a conflict between ____ and ____.
third parties; market participants
A normal good is defined by economists to be a good:
whose demand increases when incomes increase.
The finite nature of the economy's resource base:
will always be with us.
All things equal, the price elasticity of supply:
will be greater in the long run than in the short run
While waiting in line to buy a cheeseburger for $2 and a drink for 75 cents, Aaron notices that the restaurant has a value meal containing a cheeseburger, drink, and French fries for $3. For Aaron, the marginal cost of purchasing the French fries:
would be 25 cents.
Two goods that are complementary are:
wrapping paper and scotch tape
If a model can predict outcomes (accurately), what can be assumed?
- The model is valuable. - The assumptions of the model are generally accurate.
Scarcity is imposed on individual households in the form of
- income (budget) limitations. - the prices of the goods that we may purchase.
The theory of rational behavior
- is an assumption that economists make to have a useful model for how decisions are made - assumes that people will always attempt to act in their own self-interest
Scarcity is a condition that is everywhere and always, since it is based upon two assumptions that reflect permanent universal conditions. The assumptions are that
- more output satisfies more wants - the world has limited productive resources
Which assumptions reflect permanent universal conditions?
- more output satisfies more wants - the world has limited productive resources
The advantages that society gains through trade lie in the ability to
- refine tasks associated with production - specialize resources to the uses where opportunity cost is minimized.
Marginal benefit is
- the additional benefit that one more unit of something will provide. - the change in the total benefit that one more unit of something will provide.
The ability of a model to predict outcomes (accurately) is an indicator that
- the model is valuable. - the assumptions of the model are generally accurate.
If a data line on a graph slopes down as it goes to the right, it is depicting that
- the relationship between the variables on the axes is inverse - as the value of one variable falls, the value of the other rises (all else constant)
Exhibit 2-16 Production possibilities curve In Exhibit 2-16, which of the following points on the production possibilities curve are unattainable with the resources and technology currently available?
E and W
In order to calculate an economic equation to understand its economic implications, what must one remember to do?
Follow the correct order of operations.
Lynne sat down to calculate the economic equation, y=12+7x18, for her economics course. What should she remember to do in order to find Y?
Follow the correct order of operations.
Which of the following represents positive economics?
If policy A is followed, then outcome B results.
Bill has $10 to spend on a Superman, Batman, or an X-Men T-shirt. Bill buys the Superman T-shirt and the Batman shirt was a close second choice. What is the opportunity cost?
The Batman T-shirt.
Identify the macroeconomic issue among the following statements.
The average cost of producing electricity nationally is rising.
Functions are often described as cause and effect in economics. In an economics function, if the variable is on the right-hand side and is doing the explaining, it represents a(n)________?
cause
Making an economically rational decision requires
considering all prospective marginal benefits and marginal costs to oneself
Exhibit 2-2 Production possibilities curve The production possibilities in Exhibit 2-2 indicates that the opportunity cost of corn is:
constant.
After cost overruns of the electric project, $20 million was already spent and unrecoverable. It was going to cost $12 million more in order to complete the project, and now society somehow needs to make the rational choice to
continue with the project provided that the additional electricity is worth more than $12 million.
Exhibit 2-7 Production possibilities curve For the economy shown in Exhibit 2-7 to operate at point C, it must:
experience an increase in its resources and/or an improvement in its technology.
If a graph data line indicates that there is a zero slope, this means there
is a constant relationship between x and y.
A profit-maximizing decision must be made about whether to keep a bed & breakfast operating. Until the place sells, the mortgage of $3000/month must be paid, since it is a sunk cost. If the restaurant operates, costs rise by $4000 per month, but revenue will be only $6000 per month. Until the building can be sold,
it is best to ignore sunk cost and keep the bed & breakfast operating.
If an economist is trying to predict the outcome from particular causes and effects, what is the best tool(s) for her to use in order to test out her economic model?
mathematical functions
Syd is an economist putting together an economic model to predict the outcome from particular causes and effects in the economy. What tool is best for testing out his model?
mathematical functions
In a world of scarcity, we will never...
meet all of society's wants.
Once a model of reality is constructed around certain assumptions, it can be tested to determine its value in
predicting outcomes.
When certain assumptions are used to create a model of reality, its value can be tested and determined by
predicting outcomes.
The production possibilities model is illustrated with a negatively sloped line because
production of different types will compete for limited resources.
The production possibilities model shows an inverse relationship between the amount of one thing that can be produced and the amount of something else because
production of different types will compete for limited resources.
Financial capital, like money, is simply a tool. Once financial capital is converted to economic capital (invested), it produces a resource that is
productive
A non-linear ("bending") production possibilities model assumes that
some land or labor is more productive in one use than another.
Rational decision-making considers all of the following except
sunk costs.
Rational decision-making ignores any consideration of:
sunk costs.
A common economic model that reveals a relationship between two types of groups interacting in marketing in an economy is called
the circular flows diagram
As life would have it, we all come to forks in our paths when we need to make a choice, knowing that...
the correct choice depends upon the opportunity cost of a choice.
The agricultural extension agent told the farmer that one more crop-dusting will likely add a ton of additional wheat to the harvest. The rational farmer then calculated the selling price of a ton of wheat, since he would decide to crop-dust again if and only if
the marginal benefit is greater than the marginal cost of an additional crop-dusting.
For an economist or mathematician, a variable is
the name given to a quantity that can assume a range of values.
In the case of an inverse relationship between two variables, all else remaining constant
the value of the two variables will move in opposite directions from each other.
In the case of an negative relationship between two variables, all else remaining constant
the value of the two variables will move in opposite directions from each other.
Land, or natural resources, include(s) the fertility of the land, minerals below it, and________?
wind and sun
Given that spending for a certain household will always include a base amount of $1000/month, and that additional spending is equal to half of any income earned, we can predict household spending with a model y=b+mx, where
x represents income earned.
The house that Jeanne inherited from her mother can rent for $2000/month, but Jeanne decides to allow her brother to stay there for only half of that. This decision carried with it a
zero monetary cost but a $1000 per month opportunity cost.