Ch1 Eco
the total amount produced of most goods is ___ the amount that consumers would like to buy. To allocate the goods produced to the people who value them the most, we use ____
below; the price mechanism
Policy decisions made by the government are analyzed by
both microeconomics and macroeconomics.
Since optimization is used to analyze people's choices and help them improve the outcomes of their choices, its
both normative and positive.
Everything else the same, as the price of the good increases, quantity demanded
decreases
A price ceiling set below the natural equilibrium price would cause the quantity______ to exceed quanity_____
demanded; supplied
The concept of diminishing marginal benefits means that
each additional unit consumed is worth less to you than the previous one.
Economics is all about making choices. The reason we have to choose one thing over another is:
economic resources are scarce.
Empiricism describes a situation where
economists use data to analyze what is happening in the world .
When economists test their theories using evidence-based analysis, they are most likely using __________.
empiricism through the use of data.
Marginal analysis is a cost-benefit calculation that
focuses on the differences between one feasonable alternative and the next feasible alternative.
For a trade to take place, a buyer's willingness to pay must be
higher than the seller's willingness to accept and equal to the seller's willingness to accept.
The demand curve shows ___________.
how the quantity demanded responds to changes in the price of the good.
If opportunity cost were to suddenly increase, total cost would
increase and net benefit would decrease.
As a firm produces more of a good, the cost of producing each additional unit
increases
the marginal cost of producing a good________ as you make more of that good
increases
Subjects should be assigned ______ to either a test or control group in order to get the most unbiased comparison.
randomely
Holding all else constant, if the number of cell phone manufacturers suddenly decreased due to increased regulations, then
supply would shift leftwards, equilibrium price would increase, and equilibrium quantity would decrease.
A budget constraint represents
the bundles of goods or activities that a consumer can choose given her limited budget.
Optimization is the process that describes
the choices that governments make
The supply curve represents
the minimum price sellers are willing to accept to sell an extra unit of a good.
The concept of diminishing marginal benefits states that
the more you consume of a good, your willingness to pay for an additional unit declines.
Price takers exist throughout______ markets
competitive
For a market to be in equilibrium, three conditions must hold
1) The amount produced by sellers must be equal to the amount purchased by buyers. 2)The costs of making a product must be less than the final price at which the product sells 3) Buyers must place a value on the uses of the product that is greater than the cost of buying the product.
There are three necessary ingredients to the buyer's problem:
1. Consumer's tastes and preferences 2. Prices of goods and services 3. Amount of money the consumer has to spend
How does a natural experiment differ from a randomized one?
A natural experiment uses existing variation, while a randomized experiment generates variation.
How is the mean calculated from a series of observations?
The mean is the sum values of the observations divided by the number of observations.
Microeconomics is concerned with:
Externalities arising from production and consumption.
The Law of Supply states that supplies____ as price increases
Increase
Which of the following statements is true in the case of an anecdotal argument?
It can lead to skeptical and misleading conclusions. ;It is appropriate when contradicting a blanket statement.
Consumer surplus is based on which of the following economic theories?
Marginal analysis
How does microeconomics differ from macroeconomics
Microeconomics is the study of how individuals, households, firms, and governments make choices, while macroeconomics is the study of the economy as a whole.
Which of the following would be considered a scarce resource for producers?
Natural resources for productionNatural resources for production. B. Equipment and toolsEquipment and tools. C. Low minus skill laborLow−skill labor.
Why does a demand curve with a constant slope not have a constant elasticity?
Slope is based on absolute change and elasticity is based on percentage change.
How would a decrease in demand affect the equilibrium price in a market?
The equilibrium price decreases
How would the equilibrium price in a market be affected if there were a small increase in demand and a large increase in supply?
The equilibrium price decreases
How would the equilibrium price in a market be affected if there were a small decrease in demand and a large decrease in supply
The equilibrium price increases
A consumer's budget set refers to the collection of all possible bundles that
a consumer can purchase with her income
Holding all else equal, if the price of a digital camera rises, then we can expect
a decrease in the quantity demanded of digital cameras.
the price elasticity of demand shows the percentage change in the quantity demanded of a good due to ________ change in the goods price
a percentage change 0.4-1.4
Microeconomics studies _____ while macroeconomics studies _____
a small piece of the overall economy; the economy as a whole.
An experiment would be conducted to determine_____ among the chosen variables.
causation
Economists study_____ ; therefore, the unifying feature of economics is a focus on
all human behavior; choice
Economists conduct research on the "effects of global warming on the economy". This means they study the effects of global warming on the national income, international trade etc. It is considered a
macroeconomics
an increase in a consumers income causes her budget set to encompass _____ bundles
more
for two goods that are complements, the cross-price elasticity of demand will be _______
negative
Equilibrium describes a situation where
no one would benefit from changing his or her behavior
Which of the following areas are addressed in the study of economics
optimal tax policies, The benefits associated with a decision, money, prices
Optimization describes a situation where
people weigh costs and benefits when making a decision
Which change causes a movement along the demand curve?
price of the good itself
An indifference curve is the set of bundles that
provide an equal level of satisfaction for the consumer.
Financial incentives can help make people behave in a desired way when the incentives are __________.
provided consistently.
The Law of Demand states that as the price of a good increases, ceteris paribus, the_______ decreases
quantity demanded
One reason free-riders exist could be that:
the private benefit exceeds the private cost.
The concept of opportunity cost is a measure of
the value of the best alternative use of a resource.
Optimization in levels examines ___________, while optimization in differences analyzes __________
total net benefits of alternatives; the change in net benefits.
a budget constraint implies that the consumer faces
trade-offs
Scarcity is the situation of having ________ wants in a world of _______ resources.
unlimited; limited
positive questions ask
what is or what will be
normative questions ask
what ought to be
The lowest price that a seller is willing to receive to sell an extra unit of a good is called
willingness to accept
Can two indifference curves intersect
No, intersecting indifference curves would imply that a consumer is indifferent between bundles that yield different total benefits.
Which type of experiment is likely to yield more accurate results?
Randomized, because a natural experiment may not be completely randomized.
Does the principle of optimization imply that people always make the best choices?
Yes, it is a good approximation for the decisions people make.
Comparing a set of feasible alternatives and picking the best one is an optimization process called
cost-benefit analysis.