Test 1

Macroeconomics is the study of

The performance of national economies and the policies that governments use to try to improve that performance.

Increasing Opportunity Cost explains why production possibilities curves have

a slope that becomes steeper as production of the good on the x-axis increases

If it takes a person less time to perform a task than anyone else, then that person has a _____ advantage in performing that task.

absolute advantage

economists view scarcity as

an unavoidable fact of life

people sometimes apply the cost-benefit principle incorrectly because they evaluate the cost and benefits:

as proportions rather than absolute dollar amounts

A bow-shaped production possibility curve that becomes deeper as production of the good on the X axis increases reflects the fact that _______.

as you produce more of the good on the x-axis, the opportunity cost of producing that good increases

Any combination of goods that can be produced using currently available resources is known as a(n) _______.

attainable point

Cost of total benefit divided by the units of an activity n/n

average benefit

factors that are likely to effect a country's comparative advantage

climate institutions culture natural resources

everyone can be made better off if each person specializes in performing the task at which he/she has an

comparative advantage

the reason why some people are opposed to free trade agreements such as NAFTA is that free trade

doesn't guarantee that every individual will be made better off

_____________ is the study of how people make choices under conditions of scarcity and the results of those choices for society as a whole.

economics

Any combination of goods for which currently available resources do not allow an increase in the production of one good without a reduction in the production of another good is known as an ________ point.

efficient

the scarcity principle applies to

everyone

T/F economic models are useful in explaining and predicting behavior only to the extent that people are consciously aware of those models when making decisions

false

The fact that the production possibility curve is downward slope in illustrates the idea that:

having more of one thing generally means having less of something else

The ______________ Principle states that a person (or a firm or society) is most likely to take an action if its benefit rises, and less likely to take an action if its cost rises.

incentive

all else equal, as population density increases, you would expect specialization to

increase

the value of what must be forgone to undertake an activity

opportunity cost

If a software company located in the United States uses an Indian company to handle customer service calls, it is typically referred to as _______.

outsourcing

a new government policy that encourages investment in new factories and equipment is likely to cause a ______ shift in a economy's production possibilities curve

outward

economic growth is represented by an _________ shift in country's production possibilities curve

outward

In the long run, a government program to subsidize education is likely to lead to an ______.

outward shift in a countries production possibilities curve.

A ____________ economic principle is one that predicts how people will behave.

positive

the incentive principle is a _______ economic principle

positive

A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good is a ______

production possibility curve

In Economic, a ____________ individual is someone with well-defined goals who tries to fulfill those goals as best he or she can.

rational

the slope of a straight line is often calculated as

rise over run

Which kinds of jobs are likely to be vulnerable to outsourcing?

rule-based jobs that can be broken down into series of tasks jobs that do not require the worker to be physically present to complete the task

A cost that is beyond recovery at the moment a decision is made is a(n):

sunk

which of the following should be ignored when weighing costs and benefits of an action ?

sunk cost

Economic ______________ is the benefit of taking an action minus its cost

surplus

According to the Cost-Benefit Principle, an individual or society should:

take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs.

on the graph of a production possibility curve, the opportunity cost of the good on the horizontal axis is determined by

the absolute value of the slope of the production possibilities curve

on the graph of a production possibility curve, the opportunity cost of the good on the vertical axis is determined by

the reciprocal of the absolute value of the slope of the production possibilities curve

Suppose you consider going to your eco class. If you do not go you can sleep in an extra hour, which you value at $10. Or you can go to the gym, which you value at $7. What is the opportunity cost of going to class?

$10, opportunity cost of an action is the value placed on the next best option.

The Scarcity Principle captures the notion that although we have boundless needs and wants, the resources available to us are limited, so

having more of one thing usually means having less of another

When deciding whether to take an action, one common decision pitfall is to:

ignore the implicit cost

A(n) ______________ variable in an equation determines the value taken by another variable in the equation

independent

the ________ benefit of an activity is the increase in total benefit that results from carrying out one additional unit of the activity

marginal

The increase in total costs that results from carrying out one additional unit of an activity is its _____________ cost

marginal cost

a ______________ economic principle is one says how people should behave

normative

the cost-benefit principle is a _________ economic principle

normative

a _______ is a quantity that is free to take on different values

variable

if Cathy has an absolute advantage over Reid in cooking dinner than,

Cathy takes less time to cook dinner than Reid

if Cathy has a comparative advantage over Reid in cooking dinner than,

Cathy's opportunity cost is lower than Reid's