MicroEconomics Questions

Opportunity cost is the value of the next-best alternative that is given up as a result of making a particular choice.

True

Scarcity forces choice which involves…

Opportunity costs

What does the term technology mean to an economist?

The way various factors of production are combined to obtain output

Wages, interest, rent, and profits are the four factors of production.

False

All of the following except one are included in the four Cs used, throughout history, by humankind to coordinate its economies. Which is the exception?

Communism

Normative Statements

are based on people's beliefs and value systems and cannot be verified by facts.

All of the following statements, except one, are positive statements. Which is the exception?

The government must increase the tax on cigarettes.

Which pair of the four Cs would play the dominant role in a simple hunter/gatherer society such as that of the San people of the Kalahari Desert?

Cooperation and custom

All of the following except one are factors of production. Which is the exception?

Money

What do economists assume is true about human wants?

They are unlimited.

Which of the following would best describe a policy of laissez-faire?

An emphasis on the role of the market.

All of the following except one are macroeconomic topics. Which is the exception?

The effect of an interest rate change on the cost of your monthly loan payment

What are the four factors of production?

Land, Labour, Capital, and Enterprise

All of the following statements, except one, are normative statements. Which is the exception?

Government spending is a topic in macroeconomics.

Gwen had only $10 yesterday. She was uncertain whether to go out for lunch or to buy beer. In the end, she bought beer. Which of the following statements is correct?

The opportunity cost of beer is lunch.

Which pair of the four Cs plays the dominant role in Canada today?

Command and competition

All of the following except one are true of economic theories or models. Which one is the exception?

They always perfectly reflect reality.

Which of the following is an alternative for the term, "factors of production"?

Productive resources or inputs

What is the distinction between a positive and a normative statement?

Positive statements are assertions that can be tested with data, whereas normative statements are based on a value system of beliefs.

What are the factors of production?

land, labour, capital, and enterprise.

What do most of the disagreements among economists involve?

The appropriate goals and policies for the economy.

Ana had only $10 yesterday and was uncertain whether to go out for lunch or to buy beer. In the end, Ana bought beer. Which of the following statements is correct?

The opportunity cost of beer is lunch.

Which of the following terms describes the next best alternative that must be sacrificed as a result of making a particular choice?

Opportunity cost

What are the four basic ways that society can use to organize its economic affairs?

Using cooperation, command, custom or competition.

Meredith had only $16 to spend this last weekend. She was, at first, uncertain about whether to go to two movies she had been wishing to see or to buy a new CD she had recently heard. In the end she went to the movies. Which of the following statements is correct?

The opportunity cost of the two movies is one CD.

How is technological improvement illustrated graphically on a production possibility curve?

By a rightward shift of  the production possibilities curve.

What term is used to describe the way that the various factors of production are combined to obtain output?

Technology

Which of the following is a microeconomic topic?

Supply and demand analysis of a factor market.

What do economists mean when they say that the economy faces scarcity?

The resources available are not sufficient to produce all that everyone wants.

The fact that the typical movie theatre charges people for popcorn but does not charge them to use the restrooms is an example of which of the four Cs?

Custom

What do economists always do when they are constructing theories or models?

They make simplifying assumptions.

What are the names of the factor payments?

Wages, interest, rent, and profits

What is the opportunity cost of a particular product?

The value of the next-best alternative that is given up as a result of buying that particular product.

A production possibility curve is a graphical representation of the various combinations of output that are wanted.

False

What is the term for the mechanism which brings buyers and sellers together to assist them in negotiating the exchange of products?

the market

What is the term for income measured by the amount of goods and services which it will buy?

Real income

What is meant by the term ceteris paribus?

Other things being equal.

What is the term for those products whose demand will decrease as a result of an increase in income and will increase as a result of a decrease in income?

Inferior products

What is the correct way to label the axis on a graph which illustrates a demand curve?

Quantity on horizontal axis and price on the vertical axis.

What is the equilibrium price?

The price at which the quantity demanded equals the quantity supplied.

What is the effect of a decrease in the supply of a product?

It will cause an increase in the price but a decrease in the quantity traded.

What is the term for a table that shows the various quantities demanded per period of time at different prices?

Demand schedule

Purchases will always be ___________ sales.

equal to

What is supply?

The quantities that producers are willing and able to sell per period of time at various prices.

What is the slope of the demand curve?

It is downward-sloping because when the price of a product falls, consumers are willing and able to buy more.

What is meant by the term change in the quantity demanded?

The change in the quantity which results from a price change and implies a movement along the demand curve.

What is the effect of an increase in the price of resources?

It will cause a decrease in supply.

Which of the following is a result of the greater availability of electronic communication?

Markets are becoming more efficient.

What is an inferior product?

It is a product which consumers buy less of as their incomes increase.

What is a normal product?

It is a product which consumers buy more of as their incomes increase

What is the effect on income if there is a decrease in the price of a product?

It will increase consumers' real income while leaving their actual income unchanged.

Which of the following pairs of goods are complementary?

Skis and ski boots

What is the income effect?

The effect of a price change on real income and therefore on the quantity demanded of a product.

What is true of complementary products?

When the price of one increases, the quantity purchased of the other decreases.

What is market demand?

The total demand for a product by all consumers.

What is the name of those products whose demand will increase as a result of an increase in income?

Normal products

What does the term demand refer to?

The amounts that consumers are both willing and able to purchase at various prices.

Which of the following is not a result of the greater availability of electronic communication?

Supply chain bottlenecks are increasing.

What will cause the supply of a product to decrease?

An increase in the price of a substitute in production.

What is the effect of a decrease in business taxes?

It will cause an increase in supply.

What is the substitution effect?

The substitution of one product for another as a result of a change in their relative prices.