micro 1111
Consider Frank's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Frank's cost of going to college is
$42,600
An outcome is said to be efficient if an economy is conserving the largest possible quantity of its scarce resources while still meeting the basic needs of society.
False
If the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be irrational for the railroad to allow any passenger to ride for less than $75.
False
In the circular-flow diagram, factors of production are the goods and services produced by firms.
False
While the scientific method is applicable to studying natural sciences, it is not applicable to studying a nation's economy.
False
Stephen is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $5,800. Stephen discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should he do?
He should sell the car now for $3,800
A rational decision maker takes an action only if the
Marginal Cost < Marginal Revenue
After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events would prompt you to reverse this decision?
The marginal benefit of going to Spain increases.
Which of the following characteristics is required for a perfectly competitive market?
There are so many buyers and sellers that no single buyer or seller has any influence over the market price. The goods offered for sale are exactly the same.
Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is
This cannot be determined from the information given.
A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.
True
A technological advance in the production of the first good increases the opportunity cost of the first good in terms of the second good.
True
An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.
True
Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.
True
Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.
True
hoosing not to attend a concert so that you can study for your exam is an example of a tradeoff.
True
Which of these statements best represents the law of demand?
When the price of a good decreases, buyers purchase more of the good.
When the government attempts to improve equality in an economy the result is often
a reduction in efficiency
An increase in demand is represented by a
a rightward shift of the demand curve
When society requires that firms reduce pollution, there is
a trade off because of reduced incomes to the firms' owners and workers.
Economic models are
are simplifications of reality, and in this respect economic models are no different from other scientific models.
A competitive market is one in which there
are so many buyers and so many sellers that each has a negligible impact on the price of the product.
A circular-flow diagram is a model that
both A and B are correct. (helps to explain how participants in the economy interact with one another. helps to explain how the economy is organized.)
In economics, capital refers to
buildings and machines used in the production process
The Get-There-Safe Bus company incurs an average cost of $45 for each passenger it carries on its trip from Atlanta to Chattanooga. In advance of a particular trip, four seats remain unsold. The bus company could increase its profit only if it
charged any ticket price above $0 for the four remaining seats
If a good is inferior, then an increase in income will result in a(n)
decrease in the demand for the good.
If the number of buyers in a market decreases, then
demand will decrease.
The property of society getting the most it can from its scarce resources is called
efficiency
The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that
equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
The law of demand states that, other things equal, when the price of a good
falls, the quantity demanded of the good rises.
Efficiency means everyone in the economy should receive an equal share of the goods and services produced.
false
Inflation is the primary determinant of a country's living standards.
false
When a production possibilities frontier is bowed outward, the opportunity cost of one good in terms of the other is constant.
false
Pizza is a normal good if the demand
for pizza rises when income rises.
Instead of conducting laboratory experiments to generate data to test their theories, economists often
gather data from historical episodes of economic change.
An economic outcome is said to be efficient if the economy is
getting all it can get from the scarce resources it has available
In the circular-flow diagram, firms produce
goods and services using factors of production and output using inputs
The market for ice cream is a
highly competitive market
A market demand curve shows
how much of a good all buyers are willing and able to buy at each possible price.
Economics is the study of
how society manages its scarce resources
According to the circular flow diagram, if Suzy is a worker who delivers flowers for Happy Day Flower Company, she participates
in the markets for factors of production exchanging labor for income.
If muffins and bagels are substitutes, a higher price for bagels would result in a(n)
increase in the demand for muffins.
If a good is normal, then an increase in income will result in a(n)
increase in the demand for the good.
A decrease in the price of a good will
increase quantity demanded.
If a decrease in income increases the demand for a good, then the good is a(n)
inferior good.
If a increase in income decreases the demand for a good, then the good is a(n)
inferior good.
Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth
is more equal but less efficient for society.
Economists make assumptions to
make a complex world easier to understand
Economists, like mathematicians, physicists, and biologists,
make use of the scientific method. try to address their subject with a scientist's objectivity. devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.
Economists build economic models by
making assumptions
A rational decision maker takes an action only if the
marginal benefit is greater than the marginal cost.
A likely example of substitute goods for most people would be
pencils and pens.
Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that
people face trade-offs.
The adage, "There is no such thing as a free lunch," means
people face tradeoffs.
Each of the following is a determinant of demand except
production technology.
Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager should
rent the room because the marginal benefit exceeds the marginal cost.
The phenomenon of scarcity stems from the fact that
resources are limited.
Economists believe that production possibilities frontiers are often bowed because
resources are not completely adaptable.
Production possibilities frontiers are usually bowed outward. This is because
resources are specialized; that is, some are better at producing particular goods rather than other goods.
decrease in quantity demanded
results in a movement upward and to the left along a demand curve.
Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should
sell the ticket because the marginal benefit exceeds the marginal cost.
An example of a perfectly competitive market would be the
soybean market
Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is
the enjoyment she would have received had she gone to the park
In the circular-flow diagram, in the markets for
the factors of production, households are sellers and firms are buyers.
A certain production possibilities frontier shows production possibilities for two goods, jewelry and clothing. Which of the following concepts cannot be illustrated by this model?
the flow of dollars between sellers of jewelry and clothing and buyers of jewelry and clothing
A movement along the demand curve might be caused by a change in
the price of the good or service that is being demanded.
Efficiency is illustrated by
the production possibilities frontier only
An assumption an economist might make while studying international trade is
there are only two countries. countries only produce two goods. technology does not change
A production possibilities frontier can shift outward if
there is a technological improvement
The business cycle refers to fluctuations in economic activity such as employment and production.
true
The government can potentially improve market outcomes if market inequalities or market failure exists.
true
Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's prodictivity.
true
Because it is difficult for economists to use experiments to generate data, they generally must
use whatever data the world gives them.
Factors of production are
used to produce goods and services
Which of the following is a decision that economists study?
what people buy how much people work how much money people save
