Econ Midterm 1
The current rate of unemployment of 5 percent is too high. This is a ___ statement
normative
The efficiency condition requires:
prices in the marketplace confront decision makers with the marginal benefits and marginal costs of their decisions.
When we are forced to make choices we are facing the concept of
scarcity
Economics is a
social science concerned chiefly with how people choose among alternatives
Factors of production are
the resources the economy has available to produce goods and services.
Any point inside of production possibilities curve indicates
unemployment and/or inefficiency
The scientific method is more difficult for economist then, say, chemists because
All of the above
When we judge the performance of the economy we must consider
All of the above
If countries do not engage in international trade:
All the above are true -They give up the ability to specialize in production, worldwide levels of production are lower & the world will be operating inside its production possibilities curve.
Exhibit: the demand for Macintosh computers The seller's total revenue at point S equals the
Area OPSM
Which of the following most correctly states the law of demand
As the price falls, all other things unchanged, the quantity demanded will increase
The price elasticity of demand for milk has been estimated to be somewhere between -0.49 and -0.63. If a new system of feeding and milking cows you would add a 15% increase in the production of milk throughout the country, how will that affect total expenditures on milk, all other things unchanged
Total expenditures will fall
The cost of the great depression between 1929 in 1942 was a loss of
More than the United States ultimately spent on World War II
If the production possibilities curve were straight line sloping down from left to right this with suggest that
No factor of production has any particular comparative advantage over other resources
Most economists' disagreements are a result of
Normative considerations
When making a choice to do more of one activity, the highest valued other choice society does not make is called _____, and it is measured _____.
Opportunity cost; by the slope of the production possibilities curve at that level
Exhibit: the demand for Macintosh computers The change in the firm's total revenue resulting from a change in price from P to T suggests that demand is
Price elastic
If a good that involves external cost is priced to take these costs into account, then its
Price would raise and output would fall
The law of increasing opportunity cost is associated with the slope of the
Production possibilities curve
The difference between a firm's total revenue and it's total economic cost is
Profit
If the price of a commodity increases, all and other things unchanged, you would expect the
Quantity demanded to decrease
A supermarket initially exhibits a shortage. Assuming that both prices and quantities are flexible, which of the following will be true after the market adjusts to equilibrium
Quantity supplied is more
Exhibit: the market for chocolate covered peanuts If the price of chocolate covered peanuts is $.60 the price will
Remain unchanged
If steak and potatoes are complements, when the price of state goes up, the demand curve for potatoes
Shifts to the left
According to the textbook, economics is a
Social science
Two friends one in engineer and the other an accountant decide to form a partnership. If the accountant takes care of the books and the engineer runs the factory, they are likely to enhance the economies productivity through
Specialization of labor
Property rights are defined as a set of rules that
Specify the ways in which an owner can use a resource
An example of a supply shifter is
Technology
Exhibit: Strawberries and Submarines Suppose the economy is now operating a point C. Achieving production at point F would require
That the economy improve its technology or increase the quantities of factors of production that it has
An important determinant of the price elasticity of demand is the
Time period
Exhibit: the market for chocolate covered peanuts Is the price of chocolate covered peanuts is $.80, there is
A surplus of 140 bags per month
The relationship between the price of a good and the quantity people are willing and able to purchase is
Demand
Exhibit: demand and supply curves The highest price per unit that buyers will be willing to pay for 250 units is
$10
Exhibit: demand and supply of gasoline The initial price and quantity (At intersection of S1 and D) in equilibrium are
$2.50 and 300 gallons
Exhibit: demand and supply schedules for a good The equilibrium price is _____ and the equilibrium quantity is ______
$3.00 ; 240 units
Exhibit: demand for shirts The price elasticity of demand for the segments FG is
0.09
Exhibit: demand and price elasticity 2 The price elasticity of demand between points B and A is
1, Since total revenue is zero at the price of $8 and $12 at the price of $6
Exhibit: Production Possibilities Schedule 1) If the economy produces 10 units of capital goods per period, it also can produce at most _______ unit(s) of consumer goods per period.
4
The primary difference between a change in demand and a change in the quantity demanded is
A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.
And example of capital is
A factory building
An industry with external cost produces
A larger quantity of output then the socially ideal quantity
The difference between iron or deposit and the steel produced from these deposits that is later used to make factory equipment illustrate the difference between
A natural resource and capital
In our society a good for which exclusion is not possible is
Military defense
A good for which no exclusive property rights exist is a
Common property resource
An increase in the price of football tickets because the _____ for (of) basketball tickets (a substitute) to ______.
Demand; increase
If a cold powered electrical generator discharges smoke into the air and causes uncompensated cost and discomfort to the residents of a town this situation is an example of an
External cost
The incorrect presumption that because two events tend to occur together, one must cost the other is the
Fallacy of false cause
Economy is said to have a comparative advantage in producing a particular good if it
Has the lowest cost for producing that good
An answer to the question "how are goods produced?" Determines
How resources are combined in the production of goods
An allocation of resources that does not achieve the maximum net benefit from one or more activities is
Inefficient
Although water is very abundant in most places, it is scarce because:
It has two or more alternative uses.
The problem of determining how goods and services should be produced is a problem of deciding
The best combinations of resources to be used for producing goods and services
The answer to "what goods are to be produced?" deals with
The kinds and quantities of goods and services produced
Based on the type of analysis described in the case in point on preventing oil spills and economist might reasonably argue that too few people die in airplane crashes if
The marginal benefit of preventing airplane crashes with less than the marginal cost of preventing them
Whenever MB equals MC the decision maker should do ________ of the activity
The same amount
The price elasticity of demand for ground beef has been estimated to be negative one. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on Hamburger, all of her things and changed.
Total expenditures will remain unchanged
A product that has good substitutes is likely to have a higher price elasticity of demand then one that does not
True
If people purchase less of a good when they have an increase in income, the good in question is an inferior good.
True
Which would not cause the supply curve to shift
a change in the price of the good
An increase in supply is caused by
a decrease in the price of a good using the same resources.
An example of a normative statement is
a high rate of economic growth is good for the county
Ceteris Paribus means
all other things unchanged
The demand curve for on demand videos has shifted to the right what could have caused it
an increase in the income of buyers
A shift to the left of a supply curve is caused by
an increase in the returns from other supply possibilities.
It is true that the equilibrium quantity will always go up if supply
and demand both increase
A public good is a good or service for which exclusion
cannot be applied and for which marginal cost of an additional user is zero.
The three broad types of factors of production are
capital, labor, and natural resources
Which of the following is a public good
clean air
A decrease in demand with no change in supply, will lead to ______ in equilibrium quantity and _____ in equilibrium price
decrease; decrease
The law of demand is illustrated by a demand curve that is
downward sloping
The best example of making a choice at margin is
drinking another cup of coffee
Many disagreements among economists result because:
economists sometimes make normative judgments
Which of the following is an example of capital
gravel truck
Income elasticity of demand measures
how the demand for a good changes in response to changes in income.