ECON TEST

Why is every choice associated with an opportunity cost?

Resource are limited and have alternative uses

A production possibilities curve that is bowed outward indicates

increasing oppurtunity cost

What does specialization require

Focusing production on goods with the lowest opportunity cost

What is the primary focus of microeconomics?

Individual and firm decision-making

Why is specialization beneficial in trade?

it allows to focus on good with lower opportunity costs

Specialization and trade lead to?

Less total output

Which of the following is a benefit of specialization?

Increased total output

In the absence of trade a country must

reduce all goods it consumes

What does the concept of opportunity cost represent 

the value of the next best alternative foregone

Which of the following would shift the production possibilities curve outward

an improvement in capital equipment

If demand is elastic and price increases what happens to total revenue

it decreases

Which of the following is most likely to shift both the supply and demand curves

A natural disaster that affects consumers and producers

A movement along the demand curve is caused by 

a change in the price of the good itself

The price of a substitute god rises what happens to the demand for the original good

it increases

What does total revenue equal 

price multiplied by quantity sold

The market supply curve reflects

the amount producers are willing and able to sell at various prices

the law of supply states that

higher prices increase quantity supplied 

The law of demand states that

as price rises quantity demanded falls

Price elasticity of demand measures

responsiveness of quantity demanded to price changes

What would increase the equilibrium price and quantity in a market

increase in demand only

When a per unit tax is imposed on a good which if the following occurs

buyers and sellers share the burden depending on elasticity

If both demand and supply decrease what happens to equilibrium quantity

it decreases

What does a perfectly elastic demand curve look like 

Horizontal

What is a primary cause of a shortage in a market

price set below eqeuillibrium

What effect does a price floor set above equilibrium have

surplus