Microeconomics Exam 1 quizlet

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.

government

Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.

circular flow diagram

If macroeconomics looks at the economy as a whole, it focuses on which of the following?

Unemployed people

In countries like _____________ the command economy predominates.

Cuba and North Korea

In the ______________, households receive goods and services and pay firms for them.

goods and services market

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.

division of labor

The basic difference between macroeconomics and microeconomics is that:

microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

The circular flow diagram of economic activity is a model of the:

flow of goods, services, and payments between households and firms.

Which of the following statements most likely lies within the realm of macroeconomics?

Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.

Which of the following is most likely a topic of discussion in macroeconomics?

a decrease in the unemployment rate

Which of the following best describes a monetary policy tool?

interest rates

Which of the following best characterizes the circular flow of income?

Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

Which of the following best describes a fiscal policy tool?

government spending

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:

buyers and sellers.

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

market-oriented economy

In the circular flow diagram model:

Both (a) and (b) are correct.

Macroeconomics:

is concerned with the expansion and contraction of the overall economy.

_____________ a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.

Economies of scale

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

$44

Attending college is a case where the ________________ exceeds the monetary cost.

opportunity cost

Economists refer to this pattern, the ___________________________________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines.

law of diminishing marginal utility

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

the benefit to his grades from studying for an hour

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

marginal analysis

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.

positive statements

Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is: (WINE AND BREAD)

All of the above occur. (THIS ONE)

Refer to Figure 2-2. When the economy moves from Point A to Point B in the diagram below: (CLOTHING AND FOOD)

All of the above occur.

Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The table below shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is:

15 points on the history exam.

Scarcity exists because of:

unlimited wants and limited resources.

The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.

diminishing marginal utility

Why is there scarcity?

Because our unlimited wants exceed our limited resources

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

budget constraint

The opportunity cost of an action:

is a subjective valuation that can be determined only by the individual who chooses the action.

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible.

budget constraint

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options.

sunk costs

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:

either b) or c) occurs, but not as a result of a).

The marginal benefit of a slice of pizza is the:

maximum amount that a consumer is willing to pay for the slice.

The opportunity cost of attending university is likely to include all except which of the following?

the cost of haircuts received during the school term

A change in price of a good or service typically causes ________________ for that specific good or service.

a change along the supply curve

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the _________________________.

supply curve to the right

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and _________________, shown on the horizontal axis.

quantity

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:

a shift of the demand curve for beef to the left.

Any given demand or supply curve is based on the ceteris paribus assumption that _________________________.

all else is held equal

But nearly all supply curves share a basic similarity: they slope ________________.

up from left to right

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________________.

law of demand

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

Goods X and Y are complement goods.

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ________________.

excess demand

In economics, the demand for a good refers to the amount of the good that people:

will buy at various prices.

Refer to Figure 3-2. A change from Point A to Point B represents a(n): (PRICE AND QUANTITY)

decrease in quantity demanded.

Refer to Figure 3-1. Using the graph below and beginning on D1, a shift to D2 would indicate a(n): (PRICE AND QUANTITY)

increase in demand.

Refer to Figure 3-3. A change from Point A to Point B represents a(n): (PRICE AND QUANTITY)

decrease in supply.

___________________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.

Price floors

Which of the following would reduce the supply of microcomputers?

higher wage rates for the workers that assemble the computers

When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.

costs of production fall

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, ______________ decreases.

price, quantity demanded

The demand curve for a typical good has a(n):

negative slope because some consumers switch to other goods as the price rises.

The _________ is the only price where quantity demanded is equal to quantity supplied.

equilibrium price

The _______________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.

equilibrium quantity

A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that:

cross-price elasticity of demand for soda is -3.

A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:

cross-price elasticity of demand for iced tea is 2

A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:

total revenue will decrease.

A perfectly elastic supply curve is:

horizontal.

Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased.  What is the elasticity of demand facing Billy Bob's Barber Shop?

3.0

Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.

unit elastic

Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.

inelastic

If cola and iced tea are good substitutes for consumers, then it is likely that:

their cross price elasticities are greater than zero.

If the demand curve is perfectly elastic, then an increase in supply will:

increase the quantity exchanged but result in no change in the price.

If the supply curve for a product is vertical, then the elasticity of supply is:

equal to zero.

If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to:

fall and the equilibrium quantity to stay the same.

__________ is the change in what is on the horizontal axis (quantity) divided by the change in what is on the vertical axis (price).

Elasticity

When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as _________.

inelastic

When demand is inelastic:

consumers are not very responsive to changes in price.

The price elasticity of demand measures the:

responsiveness of quantity demanded to a change in price.

The longer the time period considered, the more the elasticity of supply tends to:

 

increase

The elasticity of supply is defined as the ________ change in quantity supplied divided by the _______ change in price.

percentage; percentage

The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in __________.

price

The demand for a product is unit elastic.  At a price of $20, 10 units of a product are sold. If the price is increased to $40, then one would expect sales to equal:

5 units.

Supply is said to be ____________ when the quantity supplied is very responsive to changes in price.

elastic