Chapter 2 Intro into Microeconomics

The primary purpose of patents and copyrights is to

encourage the expenditure of funds on research and development to create new products

To compete in the automobile market, BMW must make many strategic decisions such as whether to introduce a new car model, whether to produce alternative-fuel vehicles, and where to advertise. At BMW's Spartanburg, South Carolina plant, managers must decide on the monthly production quantities of their X3, X5 ,and X6 models. In making this decision, the managers

face a trade-off, because producing more of one model means producing less of the others

Firms

sell goods in the product market.

A critical function of the government in facilitating the operation of a market economy is

setting up and enforcing private property rights

Increasing opportunity cost along a bowed out production possibilities frontier occurs because

some factors of production are not equally suited to producing both goods or services.

If the best lawyer in town is also the best at operating a word processor, then according to economic reasoning, this person should

specialize in being a lawyer because its opportunity cost is lower.

In the circular flow model, households

spend earnings from resource sales on goods and services in the product market.

Comparative advantage means

the ability to produce a good or service at a lower opportunity cost than any other producer.

The production possibilities frontier shows

the maximum attainable combinations of two products that may be produced in a particular time period with available resources.

The circular flow model demonstrates

the roles played by households and firms in the market system.

Without technological advancement, how can a nation achieve economic growth

through an increase in supplies of factors of production

The resource income earned by those who supply labor services is called

wages and salaries.

Suppose your expenses for this term are as follows: Tuition: $5,000, room and board: $3,000, books and other educational supplies: $500. Further, during the term, you can only work part-time and earn $4,000 instead of your full-time salary of $10,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?

$11,500

Carmelita can perform either a combination of 35 manicures and 70 pedicures or a combination of 50 manicures and 45 pedicures. If she now performs 35 manicures and 70 pedicures, what is the opportunity cost of performing an additional 15 manicures?

25 pedicures

Suppose there is some unemployment in the economy and society decides that it wants more of one good. Which of the following statements is true?

It can increase output without giving up another good by employing more resources.

Which of the following statements is true about a simple circular flow model?

Producers are buyers in the factors marke

________ exists because unlimited wants exceed the limited resources available to fulfill those wants.

Scarcity

An example of a factor of production is

a worker hired by an auto manufacturer.

If society decides it wants more of one good and ________, then it has to give up some another good and incur some opportunity costs.

all resources are fully utilized

If you can produce more of something than others with the same resources, you have

an absolute advantage

An outward shift of a nation's production possibilities frontier can occur due to

an increase in the labor force.

A successful market economy requires well-defined property rights and

an independent court system to adjudicate disputes based on the law.

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?

consume a combination of goods that lies outside its own production possibilities frontier

Which of the following statements about an entrepreneur is true?

develops the vision for the firm and funds the producing unit

When a celebrity has the desire to have his image protected following his death, this is best described as an example of the protection of

intellectual property

The ability to exercise control over one's own resources within the confines of the law refers to

one's property rights

The principle of ________ is that the economic cost of using a factor of production is the alternative use of that factor that is given up

opportunity cost

When you purchase a new surfboard you do so in the

product market.

Households

purchase final goods and services in the product market.