Econ101 Exam 1

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firms

(In the circular flow model of the economy) the suppliers of goods and services.

what is the actual cost and also the opportunity cost of distributing the tickets this way?

-The cost of people blocking traffic in and around the​ department's office building. -The activities that cannot be done​ (such as earning money at​ work) when one is standing in line. -The cost of travel to the​ department's office

Macroeconomics can be used to understand

-how the national economy works -what causes economic booms and recessions . -national unemployment

Why are independent courts important for a​ well-functioning economy? Independence is necessary for​ courts:

-to make their decisions free of influence from people with powerful political connections. -to make their decisions free of influence from other parts of the government. -to make their decisions based on the law. -to make their decisions free of intimidation by criminal gangs.

Macroeconomics is concerned with

-unemployment rates -inflation rates -standard of living

Suppose an inverse demand curve has the following​ equation: P=2-0.01Q 1.) the inverse demand curve intersects the graph's vertical axis when P equals... 2.) the inverse demand curve intersects the graph's horizontal axis when Q equals... 3.) the demand curve's slope is...

1.) 2 2.) 200 3.) -0.01

Production possibilities frontier​ (PPF )

A curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.

economic efficiency

A market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

What do economists mean by market​ equilibrium?

A market outcome where quantity supplied is equal to quantity demanded.

Many banks have been reluctant to install these barriers.​ Wouldn't banks have a strong incentive to install bandit barriers to deter​ robberies? Why,​ then, do so many banks not do​ so?

Banks have no economic incentive to install the barriers

According to the rationality assumption, people:

Do not intentionally make decisions that would leave them worse off.

What incentives does a market system provide to encourage​ self-interest?

Financial reward.

Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer?

How do we produce the products?

What does increasing marginal opportunity costs​ mean?

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

product market

Markets for goods​ -- such as computers​ -- and services​ -- such as medical treatment

Productive efficiency occurs when a good or service​ (such as the distribution of​ tickets) is produced at the lowest possible cost. Is this an efficient way to distribute the​ tickets? (Yes or No)

No

What are copyrights designed to accomplish?

Protect intellectual property rights

comparative advantage

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

If demand decreases and supply​ increases

The equilibrium price will decrease.

If demand and supply both​ increase

The equilibrium quantity will increase.

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

The production possibilities frontier will be bowed outward.

What is the opportunity cost of spending more money to find a cure for heart​ disease?

The reduction in funding for research to cure other diseases.

Microeconomics

The study of how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

macroeconomics

The study of the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Is Buffet correct that it is the role of the federal government to make sure people who work will have enough income to live a​ "decent lifestyle"?

This is a normative economic​ question, so the answer is a matter of the norms or values of the person answering.

decrease in demand

When consumers decrease the quantity of a product they wish to buy at all​ prices, the entire demand curves shifts from D 1 to D 3.

increase in​ demand.

When consumers increase the quantity of a product they wish to buy at all​ prices, the entire demand curves shifts from D 1 to D 2.

example of law of supply

When the market price of pens​ increased, sellers started supplying more pens.

If you were a manager at​ McDonald's, how would you go about analyzing whether to switch to​ fresh, never-frozen beef​ patties? In your​ answer, consider whether your decision would have to be all or nothing- all ​fresh, never-frozen beef patties in all​ McDonald's hamburgers, and whether you would have to switch in all​ McDonald's locations around the world​ (they are in 119​ countries), or just in certain countries

You would want to compare the marginal benefits and marginal costs of serving hamburgers made with fresh beef.

In what type of economy does the government decide how economic resources will be allocated?

a centrally planned economy

a change in quantity supplied is caused by

a change in market price and is shown by a movement along the supply curve.

productive efficiency means that

a good or service is produced at the lowest possible cost.

​McDonald's distributes ​$1.00 off coupons. This will cause...

a movement along the demand curve for​ McDonald's Big Mac hamburgers.

A good for which demand increases as income rises is​ ________, and a good for which demand increases as income falls is​ ________.

a normal​ good; an inferior good

If a surplus exists in a​ market, we know that the actual price is

above the equilibrium​ price, and the quantity supplied is greater than the quantity demanded.

Ms. Boulware is the best lawyer and the best secretary in town. She has: (absolute or comparative advantage)

absolute advantage in both jobs

According to the theory of comparative advantage, specialization and free trade will benefit

all trading partners who specialize in goods where they have comparative advantage

critical to the success of the market system

allow individuals or firms to have exclusive use of their property

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

property rights

are guaranteed by two amendments to the U.S. Constitution

If a shortage exists in a​ market, we know that the actual price is

below the equilibrium​ price, and the quantity demanded is greater than the quantity supplied.

Suppose that your local police department recovers 100 tickets to a big NASCAR race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 A.M. Monday morning at City Hall. Suppose that your college decides to give away​ 1,000 tickets to the football game against your​ school's biggest rival. The athletic department elects to distribute the tickets by giving them away to the first​ 1,000 students who show up at the​ department's office at 10 a.m. the following Monday. The groups of people that are most likely to get the tickets will be those for whom the expected marginal _____ of going to the​ department's office on Monday morning are greater than the expected marginal _____.

benefits, costs

__________ goods and services are those bought by businesses to be used to increase efficiency or enhance production.

capital

the new production possibilities frontier will indicate that with the technological advance, more ____ can be produced

consumption goods

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 ____ other parts of the course

de-emphasizing

State whether each of the following events will result in a movement along the demand curve for​ McDonald's Big Mac hamburgers or whether it will cause the curve to shift. The price of Burger​ King's Whopper hamburger declines. This will cause

demand for​ McDonald's Big Mac hamburgers to decrease

What role do private property rights play in the working of a market​ system?

encourage a significant number of people to be willing to risk funds by investing them in business AND encourage firms to spend money on research and development.

One of the first steps in deciding whether to complete your education is to:

evaluate the marginal cost and marginal benefit of that decision.

allocative efficiency means that

every good or service is produced up to the point where marginal benefit is equal to marginal cost.

Tesla increases employment at its Fremont Plant (product or factor market)

factor market

tangible products like cars and . televisions are referred to as

goods

If a country has a comparative advantage in the production of a good, then that country

has a lower opportunity cost in the production of that good

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.

All else being​ equal, an increase in the price of Nike Air Jordan XXXI Fly Low shoes will cause an​ ________.

increase in quantity supplied

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 _______ the grade weight assigned to being prepared

increasing

Contracts, insurance, patents and accounting rules are

inventions that make a market work better

economics

is concerned with how people respond to incentives

The effect of higher income taxes on the total amount of consumer spending. (micro or macro)

macroeconomic

The reasons for the economies of East Asian countries growing faster than the economies of​ sub-Saharan African countries (micro or macro)

macroeconomic

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

Economists believe that an individual or firm should continue any activity until:

marginal benefit is equal to marginal cost.

factor markets

markets for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability

product markets

markets where goods such as computers or services such as medical treatment are offered

The effect of higher cigarette taxes on the quantity of cigarettes sold. (micro or macro)

microeconomic

the reasons for low rates of profit in the airline industry (micro or macro)

microeconomic

The United States economy is best classified as a:

mixed economy

invention

name given to the development of a new good

The resources provided by nature and used to produce goods and services are also known as:

natural resources

consumer and producer measures...

net benefit not total benefit

the federal government should spend more on AIDS research (positive or normative)

normative analysis

the price of coffee at Starbucks is too high (positive or normative

normative analysis

Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority?

north korea

Is this an equitable way to distribute tickets? why or why not?

not an equitable way to distribute the tickets because some students who really want them may be unable to go and get them

When nations specialize in their comparative advantage and engage in trade

overall standards of living increase

Jim declined to take part in a health study on a free basis but changed his mind after being offered $1,000 to participate in the study. Jim's behavior best illustrates which economic principle?

people respond to economic incentives

The stock of computers, factory buildings and machine tools used to produce goods is known as:

physical capital

A​ 50-cent-per-pack tax on cigarettes will reduce smoking by teenagers by 12 percent. (normative or positive analysis)

positive analysis

rising paper prices will increase textbook prices (positive or normative)

positive analysis

If minimum wage rates rise, then unemployment will rise. (positive or negative)

positive economic statement

George buys a Tesla Model S. (product or factor market) .

product market

import

product produced in a foreign country and purchased by residents of the home country

economics is the study of choice under conditions of

scarcity

a change in supply results from

sellers attempting to sell more at each and every price. This is caused by a change in a variable other than market price.

if a technological advance occurs that affects the production of consumption goods but not capital goods, then the production possibilities frontier will...

shift outward along the consumption goods axis

The role of the entrepreneur always involves

taking risks

absolute advantage

the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources

Tax incidence

the actual division of the burden of a tax.

Percentage change in real GDP from 2017 to 2018 is 2.93%. This percentage change in real GDP is also known as...

the economic growth rate

centrally planned economy

the government decide how most economic resources will be allocated

opportunity cost

the highest valued alternative that must be given up to engage in an activity

principle of increasing marginal opportunity cost

the more resources devoted to any activity, the smaller the payoff to devoting additional resources to that activity

scarcity

the principle of opportunity cost evolves from the concept of

The law of demand is the assertion that

the quantity demanded of a product is inversely related to its price.

Private property rights​

the rights individuals and firms have to the exclusive use of​ tangible, physical property and intellectual property.

An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More​ specifically,

the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in​ consumers' purchasing power.

How should policymakers determine the amount of money that should be allocated for research curing heart​ disease? They should base their decision on

whether the last dollar devoted to research on heart disease results in more benefit than the last dollar spent on research for curing other diseases.

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.

A perfectly competitive market is a market that meets the conditions of

​(1) many buyers and​ sellers, (2) all firms selling identical​ products, and​ (3) no barriers to new firms entering the market.

Would a decline in oil prices ever cause a reduction in the supply of​ oil?

​No, a decline in oil prices would reduce the quantity of oil​ supplied, not the supply of oil.

Goods and services that can be used for the same purpose are​ ________, and goods and services that are used together are​ ________.

​substitutes; complements


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