Microeconomics Chapters 1-4

The opportunity cost of studying for an economics test is:

the best alternative use of your time.

The concept of equity focuses on

the issue of fairness

Having a comparative advantage in a particular task means that

you give up less to accomplish that task than do others

A technological advance would best be represented by:

A shift outward of the production-possibilities curve

The ability to produce a good with fewer resources than other producers (i.e., better than other people).

Absolute advantage

When individuals decide how much of an activity they should do,

All above

Specialization and trade are beneficial to two countries {calc}

All of the above

Which of the following events would allow the production-possibilities curve to shift outward?

All of the above

We have to make choices because:

B resources are scarce. C choices involve a trade-off. both b and c.

If an economy experiences increasing opportunity costs with respect to two goods, then the production-possibilities curve between the two goods will be:

Bowed outward

The ability to produce a good at a lower opportunity cost than others could

Comparative advantage

Which of the following statements is always true?

Comparative advantage does not require absolute advantage.

Goods produced domestically and sold abroad

Exports

All output combinations that lie outside a production-possibilities curve are attainable with available resources and technology.

False

By specializing according to their absolute advantage and then engaging in trade, individuals and countries are better off.

False

If an economy's resources are used efficiently, then it is guaranteed that the economy will also achieve equity. {calc} T or F

False

Positive economic analysis employs analysis to answer questions about how the economy should work.

False

Enables people to enjoy greater production, and higher living standards, than would be otherwise possible

Gains from trade

An example of an externality is the impact of

John's actions on Jane's well-being.

A method of production in which each person concentrates on a limited number of activities (i.e., the things they are relatively good at)

Specialization

Which one of the following statements is true of a market economy but not true of a command economy?

The allocation of scarce resources is determined by the decentralized decisions of individuals.

Most individuals choose careers in which they specialize in producing only one type of good or service, yet as consumers they have access to a wide variety of goods and services. What principle allows for this?

Trade

In making choices people find that

all are true

Opportunity cost may be defined as the:

goods or services that are forgone in order to obtain something else.

When markets don't achieve efficiency, then:

government may intervene to improve society's welfare.

Application of the Principle of Comparative Advantage leads to

greater specialization of labor and other factors of production.

Goods produced abroad and sold domestically

importa

People respond to incentives because

incentives act as rewards that encourage people to behave in certain ways.

Specialization in production and trade

increases the amount of goods and services available in an economy.

The focal point of economic inquiry is

individual choice.

According to the incentive principle...

people tend to do more of something when the benefits are greater.

The term "productivity"

refers to the quantity of goods and services produced from each hour of a worker's time.

When a market is not in equilibrium

there are opportunities available to people to make themselves better off.

Which of the following statements is true?

there is a tendency for markets to move toward equilibrium

Economists generally agree that people are most likely to change their behavior when ...

they are given incentives to do so.

When people interact in markets we know that

this interaction must increase economic efficiency

All output combinations that lie on the production-possibilities curve are characterized by efficient use of resources.

True

Goods are scarce because society's desire for them exceeds society's ability to produce them.

True

If the economy is inside the production-possibilities curve, then more output can be produced using existing resources.

True

Individuals or countries have a comparative advantage in producing a good when they produce that good with a lower opportunity cost than can another individual or country.

True

Macroeconomics addresses the economy as a whole.

True

Scarcity results when available resources cannot satisfy all desired uses of those resources.

True

The purpose of an economic system is to...

allocate scarce resources.

Inflation is defined as

an increase in the overall level of prices in the economy

Economic models

are a simplified representation of reality.

Larry has a comparative advantage in writing a term paper if he

has a low opportunity cost for writing a term paper.

To say that an individual possesses an absolute advantage in the production of software means that that individual

can produce more and/or higher quality software in a given amount of time.

The condition of scarcity means that

choices must be made in the allocation of productive resources.

Adam Smith used the idea of the invisible hand to refer to the ability of market economies to

harness the power of individual self-interest for the good of society as a whole

Economics is best defined as the study of

how people make choices under the conditions of scarcity and the results of the choices.

The best description of the focus of economics is:

how scarce resources are allocated to fulfill society's goals.

Rational decision making means that...

if the marginal benefit of the last unit of an activity exceeds its marginal cost, then more of that activity should be undertaken.

The business cycle is the

irregular fluctuations in economic activity.

The marginal benefit from consuming another unit of a good:

is the additional benefit above what you have already derived.

The marginal cost of consuming another unit of a good...

is the additional cost to you over and above any cost you have already incurred.

If production is efficient, then:

it is not possible to produce a given quantity of output at a lower cost.

When a single person (or small group) has the ability to influence market prices, there is

market power.

For an economist, the cost of something is...

what you gave up to get it

Economic theory asserts that people will behave in ways that...

will enhance their own overall well-being.