econ201 sample midterm 1

a rise in the price of a substitute in production for a good leads to

a decrease in the supply of that good

capital is a factor of production. what is an example of capital

a drill press in your local machine shop

an example of a capital good is

a fiber optic cable tv system

"comparative advantage" is defined as a situation in which one person can produce

a good for a lower opportunity cost than another person

one reason supply curves have an upward slope is because

a higher price brings a greater profit, so firms want to sell more of that good

in one hour john can produce 20 loaves of bread or 8 cakes. in one hour phyllis can produce 30 loaves of bread or 15 cakes. phyllis has

an absolute advantage in both goods

the difference between consumption and capital goods is that

capital goods are used to produce additional goods while consumption goods are not

what is not a function of federal governments

collecting property taxes

the largest share of total production in the united states is

consumption goods and services

the decisions of firms and households are

coordinated by markets

car insurance and cars are complements. if the price of car insurance increases, the

demand for cars decreases

a change in the price of a good ____ its supply curve and ____ a movement along its supply curve

does not shift; causes

if there is unemployment in an economy, then the

economy is producing at a point inside the production possibilities frontier

consider the market for peanut butter. if there is a decrease in the price of deli turkey slices (a substitute in consumption for peanut butter) along with a decrease in the price of peanut brittle (a substitute in production for peanut butter), the

equilibrium price of peanut butter definitely falls

consider the market for peanut butter. if there is an increase in the price of bread (a complement for peanut butter) along with a drought in peanut growing areas, the

equilibrium quantity of peanut butter definitely decreases

the demand for cat food decreases while the supply increases. the equilibrium price of cat food ____, and the equilibrium quantity ____

falls; perhaps changes but we can't say if it increases, decreases, or stays the same

hank requires 1 hour to cut the grass and 3 hours to clean the house. his sister holly requires 1 hour to cut the grass and 4 hours to clean the house. holly

has a comparative advantage in cutting the grass

____ the owners of the factors of production, while ____ what amounts of those factors to hire

households are; firms determine

what increases the supply of a good

improved productivity

a bowed out production possibilities frontier shows

increasing opportunity cost and that resources are not equally productive in all uses

what is true about a competitive market

it has so many buyers and sellers that no one can influence the price

if a country is operating at a point of production efficiency,

it produces on its production possibilities frontier

as an economy grows,

its production possibilities frontier shifts outward

what factor of production does human capital enhance

labor

what are some assumptions when drawing a production possibilities frontier

only two goods are considered and the level of technology is fixed and unchanging

consider a production possibilities frontier with books and tables. a combination of 1000 books and 500 tables is on the frontier. what is attainable/unattainable

production of 700 books and 400 tables is attainable but inefficient; production of 1000 books and 600 tables is unattainable

a free lunch (the absence of a tradeoff) when the production of a good is increased is possible for the entire economy only if

resources are used inefficiently

if an early frost destroys most of the apple crop, the equilibrium price of an apple ____ and the equilibrium quantity ____

rises; decreases

what is not considered capital

stocks and bonds that are sold by pepsico

the opportunity cost of economic growth is

the decrease in the current production of consumption goods

consider the market for camera film. if more people start using digital cameras, which do not require film,

the demand curve for film shifts leftward

consider the market for feather pillows. if there is an increase in the price of feather dusters, a substitute in production for feather pillows, then

the supply curve for feather pillows shifts leftward

plywood is used in the construction of houses. if the price of plywood rises, what happens to the supply of houses

the supply decreases so that the supply curve shifts leftward

what determines the income flows that households receive

their ownership of factors of production, how much they sell in the factor markets, and the prices received when sold

if toni has an absolute advantage in both sewing and ironing when compared to tom, then

they might benefit from trading, but we need more information to determine in which task they should specialize

people come to expect that the price of gasoline will rise next week. as a result,

today's demand for gasoline increases

in the circular flow model, what flows in the opposite direction from the flow of factors of production

wages, rent, interest, and profit