VirtualSC Economics Honors Final Review

In the Circular Flow model, _____ .

individuals and households are sellers of resources and demanders of products

In a mixed economy _____ .

firms can enter and exit the market as they wish

In a mixed economy, which of the following is true?

The government owns some of the factors of production.

How are transactions shaped in a traditional economy?

Elders and ancestors make certain that things are done in specific ways.

In a command economy, which of the following is true?

The government owns all factors of production.

There is always some degree of government involvement in a mixed economy.

True

When one decision is made, the next best alternative not chosen is called which term?

Opportunity cost

As a consequence of scarcity, _____ .

producing more of one good means producing less of another good

Within the market system, prices are determined by which of the following _____ ?

buyers and sellers (demand and supply)

Which of the factors of production involves taking risks and combining resources to provide a good or service?

Entrepreneurship

How many distinct factors of production do economists recognize?

Four

Which of the following is an example of capital?

A factory

Scarcity in economics means:

This is not having enough resources to produce all the goods and services we want.

Which of the following is a consequence of scarcity?

Producing more of one good means producing less of another one.

Which country is an example of a capitalist economy?

South Korea

What kind of economy offers the same wage no matter how productive a person is?

Command economies

Economics is best defined as the study of how societies deal with which of the following?

The problem scarcity

In a command economy, prices may be determined by _____ .

a central planning committee

Scarcity is best defined as which of the following?

A society's wants and needs are unlimited and material resources are limited.

In which of these systems is the government most likely to provide people with goods and services they could not otherwise afford?

A command economy

What does Point X identify?

Impossible use of resources

What does Point B identify?

Efficient use of resources

What does moving from Point B to D represent?

Trade-off

What does Point A identify?

Underutilized resources

What does the outward shift of the curve represent?

Economic growth

An economy operating on its production possibilities curve has which of the following?

is efficient

How would you describe an economy that is using its resources in a way that will maximize production?

efficient

Which of the following would result in a change in the production possibilities frontier in the mythical country Alpha?

- new technology

- many workers from other countries move in

- the discovery of a new natural resource

(all of the above)

Which of the following will cause an outward shift of the production possibilities curve?

An increase in skilled workers

What does Point C represent?

Inefficency

What does Point E represent?

Impossible

What does Point D represent?

Efficiency

Opportunity cost is ...

that which we forgo, or give up, when we make an economic choice or decision

A graph showing all the combinations of goods and services that can be produced if all of society's resources are used efficiently is called which term?

production possibilities curve

Economic growth usually can be achieved without investing in new resources.

False

Which of the following is true if eating one piece of cake yields a total utility of 50 and consuming a second piece increases total satisfaction by 10?

The total utility of consuming two pieces of cake is 60.

When a business or person needs to decide whether a certain action is worth the cost, the most helpful analysis would be a(n) ...

cost-benefit analysis

the additional cost of producing one unit

marginal cost

giving up one thing for another

trade-off

the added benefit from adding one unit

marginal benefit

the next best alternative given up when a decision is made

opportunity cost

evaluating the costs and benefits of additional units

thinking at the margin

Marginal analysis is only used by corporations and businesses, not individual consumers.

False

In economics, marginal means _____ .

additional

Canada decides to spend oil and gas revenue on high speed rail instead of a new university. What does this decision indicate?

The marginal benefit of the new university is less than the marginal benefit of the high speed rail.

Marginal analysis could be useful to a parent deciding whether to return to the workforce after the birth or adoption of a child, or a student deciding what plans to make after graduating high school.

True

What is the additional cost of the use of consumption of a good or service?

Marginal cost

Marginal analysis is of no benefit to a store owner considering whether to sell an item with the promotion "buy one, get one half off."

False

Marginal analysis/decision-making is best described as which of the following?

Making decisions based upon the marginal benefits and marginal costs of that decision.

The graph above shows _____ .

a decrease in supply

Which of the following products has inelastic demand?

Cancer medication

When the price of something increases, the quantity demanded _____ .

decreases

Which statement describes the law of demand?

When the price of a product is lower, people will buy more of it.

The Law of Supply states that price and quantity supplied have a direct relationship (when one increases the other increases).

True

Which of the following would be an example of complementary goods?

Hot dogs, hot dog buns

A right, outward shift of a supply curve (an increase in supply) for avocados might be caused by _____ .

an improvement in avocado picking techniques

Consider the term marginal utility. Which word is the best synonym for marginal?

additional

What is another name for excess supply?

surplus

Which part of the market determines supply?

Producers

If the demand for potatoes increases whenever a person's income increases, then potatoes are an example of _____ .

a normal good

According to the Law of Supply, which of these would happen to an item as its price goes up?

Producers (sellers) would make more of it.

Assume that the demand for apples is downward sloping. If the price of apples falls from $0.80 per pound to $0.65 per pound, which of the following will occur?

A larger quantity of apples will be demanded.

Assuming Ramen noodles are an inferior good, a decrease in income will shift the _____ .

demand curve for Ramen noodles outward, to the right

Which of the following best refers to the market equilibrium price?

The quantity demanded is the same as the quantity supplied.

If there is an increase in demand for a good, what will most likely happen to the price and quantity of the good exchanged?

Price will increase and quantity will increase

Which of the following would most likely result in a decrease in the equilibrium price of oranges?

New studies suggest that oranges contain traces of cancer-causing substances due to pesticide residue.

Equilibrium price and quantity is often referred to as the market clearing price and quantity.

True

Due to a disappointing economy, Americans are cutting back on the family vacation road trips. What happens to the market for gasoline?

Demand for gasoline will decrease.

Which of the following would shift the short-run supply curve for strawberries?

A strike by all farmworkers

The Law of Demand states that price and quantity demanded have an inverse relationship (when one increases the other decreases).

True

The point where quantity demanded and quantity supplied is equal is called _____ .

equilibrium

What is the main cause of a change in the quantity demanded?

change in price

The additional satisfaction received from consuming an additional unit of a good is called which of the following?

Marginal utility

A change in consumer tastes and preferences will shift the demand curve.

True

An oligopoly can be described as an industry in which _____ .

3-5 companies produce most of the output

Which of the following is a characteristic of a monopolistic market?

Firms set the price they charge.

Which of the following is NOT a problem caused by monopolies?

More competition

It is OK for firms to fix prices together in oligopolistic markets.

False

Collusion (price fixing) is legal in the United States.

False

A clothing store has a wide selection of clothing for women. Within the clothing racks are shirts, pants, dresses, skirts, blouses, etc. Clothing manufacturers such as Guess, Donna Karan, Levi, Calvin Klein, etc. have built up their brand names through marketing and advertising to differentiate their clothes in the mind of the consumer. This group of clothing manufacturers competes to sell similar but not identical products, they are engaging in _____ .

monopolistic competition

Which of the following would represent product differentiation?

A hair product company launches a new organic line of shampoo with new packaging.

The table above shows data for the production of apples for an individual firm operating in a perfectly competitive market.

Given this data, what is the per-unit price of apples?

$4

Perfect competition and monopoly _____

are opposites

Which market structure provides the lowest prices for consumers?

Perfect competition

Changes in the population have created a significant demand in which of the following career fields?

Health care

The demand for _____ may outpace supply, mainly due to low pay.

Home healthcare workers

Due to the aging population in the United States, health care workers in the United States are in high demand.

True

The security of data is extremely important for organizations, leading to a high demand for workers in information security.

True

The movement of American jobs overseas is called _____ .

Outsourcing

Which of the following is NOT included in GDP?

Consumer spending on stocks and bonds.

Jasmine works at BMW. She did such a good job last year that she received a 5% raise. Inflation this year was 3%, how much has her real income increased?

2%

A good that would NOT be included in GDP would include _____ .

A used truck

When calculating Nominal GDP, inflation is taken into account.

False

Which of the following is true regarding inflation?

Inflation decreases a consumer's purchasing power.

_____ is harder to fix since it occurs with a change in technology or the market reduces the demand for certain types of products and workers.

Structural unemployment

When calculating GDP, investment is best defined as _____ .

business spending on capital goods

What is the first step in constructing a price index?

Select commonly purchased goods and services.

When workers are replaced by machines or computer systems, _____ occurs.

structural unemployment

Which of the following is NOT a form of unemployment that is counted by the government?

Under employment

Which of the following is included in the unemployment rate?

The jobless who made an effort to find a job during the past month.