ECON EXAM 1

In countries like _____________ the command economy predominates.

Libya and North Korea

Characteristic of Economy

Arrangements that determine what, how, and whom the product is produced for

In which of the following countries will the national government have the greatest influence with respect to the nation's economy?

Cuba

Characteristics of black market

An illegal market that breaks government rules on prices or sales.

4 goals of Macroeconomics

economic growth,
low unemployment,
low inflation,
sustainable balance of trade

In the ____________, households work and receive payment from firms.

labor market

Which of the following best describes a fiscal policy tool?

government spending

The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending.

government

What is meant by microeconomics?

The branch of economics that focuses on actions of particular actors within the economy, like households, workers, and business firms.

When nations desire a healthy macroeconomy, they typically focus on four goals, one of these being:

low inflation

The basic difference between macroeconomics and microeconomics is:

microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

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

a decrease in the unemployment rate

Macroeconomics primarily examines:

broad issues such as national output, employment and inflation.

What name is given to policy that involves altering the quantity of money and thus affecting the level of interest rates and the extent of borrowing?

Monetary policy

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

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

Model is an institution that brings together buyers and sellers of goods or services. (T or F)

false

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

Goods and services market is a market in which firms are sellers of what they produce and households are buyers. (T or F)

true

Scarcity

people's desires exceed possibility

Consumption Choice

budget constraint (range of choices available)

According to the text regarding Intra-Industry U.S. Exports and Imports in 2012, the largest export category for the USA was:

Manufactures

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product.

absolute advantage

Colombia produces coffee with less labor and land than any other country; it therefore necessarily has:

an absolute advantage in coffee production

The idea behind comparative advantage reflects the possibility that one party:

may be able to produce something at a lower opportunity cost than another party.

What term is used to describe international trade of goods within the same industry?

Intra-industry trade

What is meant by comparative advantage?

The goods in which a nation has its greatest productivity advantage or its smallest productivity disadvantage; also, the goods that a nation can produce at a lower cost when measured in terms of opportunity cost.

What term is used to describe when one nation can produce a product at lower cost relative to another nation?

Absolute advantage

In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true? (THINK ratio: higher one wins)

India has a comparative advantage in the production of rice.

A nation cannot have a __________ in the production of every good.

comparative advantage

Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude:

Canada has a comparative advantage in the production of hockey sticks.

If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:

The USA specializes in potatoes because of its comparative advantage in producing potatoes.

When nations increase production in their area of _________________ and trade with each other, both sides can benefit.

Comparative advantage

Jethro has a(n) __________________ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up.

absolute advantage

What name is given to whatever must be given up to obtain something that is desired?

opportunity cost

The reasons that nations trade includes the fact that:

no one country produces all of what citizens within the country want.

Some nations that seek to produce all of their own needs face the problem that:

some industries are too small to be efficient if restricted to their domestic markets alone.

Which of the following characteristics relate to demand?

A relationship between price and the quantity demanded of a certain good or service.

What term is used to describe the total number of units of a good or service purchased at a certain price?

Quantity demanded

What is meant by law of demand?

The common relationship that a higher price leads to a lower quantity demanded of a certain good or service.

Which of the following refers to a table that shows a range of prices for a certain good or service and the quantity demanded at each price?

Demand schedule

Which of the following characteristics relate to supply?

A relationship between price and the quantity supplied of a certain good or service.

What term is used to describe the total number of units of a good or service sold at a certain price?

Quantity supplied

What is meant by law of supply?

The common relationship that a higher price is associated with a greater quantity supplied.

The nature of demand indicates that as the price of a good increases:

buyers desire to purchase less of it.

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

all else is held equal

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

law of demand

_________________ refers to the total number of units that are purchased at that price.

Quantity demanded

What is meant by surplus?

When at the existing price, quantity supplied exceeds the quantity demanded.

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.

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

Price floors

Yomi views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:

Yomi's demand for beer to increase.

One alternative reaction occurs when buyers and seller decide to break the government rules on prices or sales, which is referred to as _______________.

black markets

Price floor means a law that prevents a price from falling below a certain level.

True

Price ceiling is a law that prevents a price from rising above a certain level.

True

The term complements describes goods that can replace each other to some extent, so that a rise in the price of one good leads to a lower quantity consumed of another good, and vice versa.

False

Substitutes means goods that can replace each other to some extent, so that a rise in the price of one good leads to a lower quantity consumed of another good, and vice versa.

True

Interest rate (3 components)

risk premium, rate of inflation, and time you wait to spend that money

Intertemporal choices

enjoy rn suffer later vice versa

Labor/Leisure budget

chose budget based to maximize utility

opportunity cost

measures cost by what is being given up

marginal analysis

most decisions are not all or nothing

law of diminishing marginal utility

more of goods we get the less satisfied you are

sunk cost

occurred in the past and can’t be recovered

production possibilities frontier

set of choices faced by society as a whole

law of diminishing returns

more resources marginal benefit will decline

production efficiency

impossible to produce more of x without decreasing production of y

allocative efficiency

mix of goods produced represents what society wants

positive statement

describe world as is

normative statement

describes the world as it should be

5 factors of production

labor, land, capital, tech, entrepreneurship

shortage

more demand

surplus

more supply