Econ Exam 1 Part one

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Which of the following best describes​ scarcity?

Unlimited wants exceed the limited resources available.

What does increasing marginal opportunity costs​ mean?

Increasing the production of a good requires larger and larger decreases in the production of another good.

A primary difference between macroeconomics and microeconomics is

Microeconomics examines individual markets while macroeconomics examines the economy as a whole.

What is comparative​ advantage?

The ability to produce a good or service at a lower opportunity cost than other producers.

What is absolute​ advantage?

The ability to produce more of a good or service than competitors using the same amount of resources.

What happens if a country produces a combination of goods that efficiently uses all of the resources available in the​ economy?

The country is operating on its production possibilities frontier.

What are the implications of this idea for the shape of the production possibilities​ frontier?

The production possibilities frontier will be bowed outward.

The federal government should spend more on AIDS research. This represents

a normative analysis

The price of coffee at Starbucks is too high. This represents

a normative analysis

A​ 50-cent-per-pack tax on cigarettes will reduce smoking by teenagers by 12 percent. This represents

a positive analysis

Rising paper prices will increase textbook prices. This represents

a positive analysis

The primary difference between absolute and comparative advantage is

absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.

The grading system used by a teacher can affect the incentives of students to learn the course material by

altering the payoffs to achieving success on the various components of the course.

Societies organize their economies in two main ways to answer the three questions of​ what, how, and who. A society can have a __________________________________ economy in which the government decides how economic resources will be allocated. Or a society can have a ______________ economy in which the decisions of households and firms interacting in markets allocate economic resources.

centrally planned; market

The basis for trade is ____________ advantage

comparative

If teachers put too much weight in the grading scale on a certain part of the​ course, like readings outside the​ textbook, students might respond by....

de-emphasizing other parts of the course.

Scarcity is central to the study of economics because it implies that

every choice involves an opportunity cost.

The production possibilities frontier will shift outward

if resources are used to produce capital goods

Teachers often wish that students came to class prepared having read the upcoming material. A teacher could design the grading system to motivate students to come to class prepared by

increasing the grade weight assigned to being prepared.

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

marginal benefit equals marginal cost.

One of the​ trade-offs Tesla faces is between safety and the maximum range someone can drive an​ all-electric car before having to recharge it. For​ example, adding steel to a car makes it safer but also​ heavier, which results in fewer mileage between recharges. Assume that this​ trade-off is consistent with increasing costs of added safety. ​Tesla's production possibilities frontier has a _______________ slope ​Furthermore, Tesla's production possibilities frontier is....

negative slope bowed outward

Consider a production possibilities frontier that shows the​ trade-off between the production of cotton​ (on the​y-axis) and the production of soybeans​ (on the​ x-axis). What effect would improved fertilizers have on the initial production possibilities​ frontier? If fertilizers improve​, then the PPF will This indicates that more ______________ can be produced

shift out along both axes. more of both goods can be produced

A production possibilities​ frontier:

shows the maximum attainable combinations of two goods that may be produced with available resources.

One of the great benefits of trade is

that it makes it possible for society to become better off by increasing its consumption

In colonial​ America, the population was spread thinly over a large​ area, and transportation costs were very high because it was difficult to ship products by road for more than short distances. As a​ result, most of the free population lived on small farms where they not only grew their own food but also usually made their own clothes and very rarely bought or sold anything for money. Why were the incomes of these farmers likely to rise as transportation costs​ fell? As transportation costs​ fell,

the farmers gained access to new markets and customers. Using comparative​ advantage, the farmers​specialized, producing those goods for which they had lower opportunity cost. As they traded for other​goods, their incomes and living standards increased.

A freelance​ singer-songwriter is planning the restoration of a recently purchased civil​ war-era farmhouse. While he professes an enjoyment​ of, and talent in the construction​ trades, the theory of comparative advantage implies that

the income lost while away from music will likely exceed the savings realized by doing the work​ himself, thus, he should hire professionals to do the restoration work.

Is it possible for a country to have a comparative advantage in producing a good without also having an absolute​advantage? A country without an absolute advantage in producing a good

will have a comparative advantage if it has a lower opportunity cost of producing that good.

We can show economic​ inefficiency:

with points inside the production possibilities frontier

We can show economic​ efficiency:

with points on the production possibilities frontier.

Even if you are better at unloading the dishwasher than your​ spouse, you​ shouldn't always be the one to unload it because

you may be even better at some other household task and must consider the opportunity cost.


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