Macro Midterm
Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog show at
$20
If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good, then for that consumer, consumer surplus amounts to
$4
You quit your $40,000 a year job and go to college for four years. Tuition and books cost $10,000 a year. What is your opportunity cost of going to college for four years?
$50,000
Price of coke increases 10% and quantity demanded declines 20%. The absolute value of
Ep= 2
Equity means distributing society's resources in the most efficient manner.
False
The supply curve is downward sloping.
False
There are two sectors in the circular-flow diagram: the household sector and the business sector.
False
Choosing not to attend a concert so that you can study for your exam is an example of a trade-off.
True
Prices allocate a market economy's scarce resources.
True
The production possibilities frontier shows the trade-offs that the producer/society faces.
True
Trade allows a country to consume outside (to the right of) its production possibilities frontier.
True
If a good is inferior, then an increase in income will result in
a decrease in the demand for the good
price elasticity of demand is
a measure of how much buyers respond to changes in prices of goods
Minimum-wage laws dictate
a minimum wage that firms must pay workers
A market includes
both buyers and sellers
When a tax on a good is enacted
buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers
A legal maximum on the price at which a good can be sold is called a price
ceiling
Positive statements are
claims about how the world is (relationships proven by historical data)
Normative statements are
claims about how the world should be
Trade among nations is ultimately based on
comparative advantage
The most obvious benefit of specialization and trade is that they allow us to
consume for goods than we otherwise would be able to consume if we didn't trade
Total surplus in a market is equal to
consumer surplus + producer surplus
The absolute value for the price elasticity of demand for Caribbean cruises is 4.4. If the price increases 10% then the quantity demanded for cruises will
decrease by 44%
A tax on sellers of coffee mugs
decreases the size of the coffee mug market
Q=10-2P+3Y, where P=price of the good and the Y=consumers income. This is a:
demand function
If the number of buyers in a market decreases, then
demand will decrease
If preferences or tastes for a good increase, then
demand will increase
The property of society getting the most it can from its scarce resources is called
efficiency or productivity
The absolute value for the price elasticity of demand for good X is 1.5. That indicates that the good has
elastic demand
If consumption of a good affects other people than the person that is consuming it then that is called
externalitites
Hot dogs are an inferior good if the demand
for hot dogs declines when income rises
Economics is the study of
how society manages its scarce resources
Welfare economics is the study of
how the allocation of resources affects economic well-being
If a good is normal, then an increase in income will result in
increase in the demand for the good
If hamburgers patties and hamburger buns are complements, then an increase in the price of hamburger patties will result in
less of hamburger buns being sold
The factors of production that we talked about in class are
money, labor, and capital
Coke and Pepsi are substitutes. If the price of coke increases, then
more Pepsi will be sold
Pollution from smoking is an example of a good that has _____ with consumption.
negative externalities
"Allowing all individuals access to Medicare and Medicaid for health insurance is the fair thing to do" is an example of a
normative economic statement
Beef has an inelastic demand. If prices increase the total revenue will
not change
What you give up to obtain an item is called your
opportunity cost
The phrase "no such thing as a free lunch" means
people must face trade-offs
"Prices rise when the quantity of money rises rapidly" is an example of a
positive economic statement
A vaccine is an example of a good that has ______ with consumption.
positive externalities
For economists, statements about the world are of two types:
positive statements and normative statements
In a free, competitive market, what is the rationing mechanism?
price
The primary determinant of a country's standard of living is
productivity, ie the country's ability to produce goods and services
The price elasticity of demand measures how much
quantity demanded responds to a change in price
The dead weight loss due to a tax is the result of
reduction in sales due to the tax, ie loss of welfare in the market
The phenomenon of scarcity stems from the fact that
resources are limited
The law of supply states that, other things equal, when the price of a good
rises, the quantity supplied of the good rises
The price elasticity of supply measures how responsive
sellers are to a change in price
A improvement in the production technology will shift the
supply curve to the right
Wheat is the main input in the production of flour. If the price of wheat decreases, then we would expect the
supply of flour to decrease
The benefit that government receives from a tax is measured by
tax revenue
Producer surplus is
the amount a seller is paid minus the cost of production
The higher the elasticity of demand/supply the
the higher the burden of the tax for consumers/producers
A downward-sloping demand curve illustrates
the law of demand
Assuming that demand=supply initially. A tax drives a wedge between the price buyers pay and the price sellers receive because
the price consumers pay is now higher and the price sellers receive is now lower
A production possibilities frontier is a straight line when
the rate of trade-off between the two goods being produced is constant
Efficiency in a market is achieved when
the sum of producer surplus and consumer surplus is maximized
Producer surplus directly measures
the well-being of sellers
The demand for a good or service is determined by
those who buy the good or service (consumers)
The supply of a good or service is determined by
those who sell the good or service (suppliers)
A sellers opportunity cost measures the
value of everything she must give up to produce a good
Consumer surplus is equal to
value to buyers - amount paid by buyers
