Economics Exam Practice Flashcards

Flashcards covering core microeconomics concepts, market structures, economic policies, and political economy based on the lecture transcript.

What is the "economizing problem"?

How to satisfy our unlimited wants while utilizing our unlimited resources.

How is the "fallacy of composition" defined?

False generalization.

Are "positive statements" based on value judgment?

No, positive statements are factual.

Which statements are based on value judgment, as opposed to positive statements?

Normative statements are the ones based on judgment.

How do economists define "rationality"?

When benefits exceed the costs.

What is "opportunity cost"?

How much is being sacrificed in every financial decision.

Does "microeconomics" study the behavior of specific units and specific markets?

Yes.

Do libertarians favor extensive government regulation?

No, they believe in minimal intervention.

Is "economic rent" equal to a "normal return"?

No, economic rent is usually above opportunity cost.

Why is the production possibilities curve downsloping?

Because of increasing opportunity cost and diminishing returns.

Why is the typical production possibilities curve "bowed out"?

Because of increasing opportunity cost and diminishing returns.

If resources are assumed to be perfectly shiftable, would the production possibilities curve still be bowed out?

No, it would be straight.

How does trade affect the production possibilities curve?

It causes an outward shift.

What is noted regarding the "comparative advantage of trade"?

You may gain it over time or lose it over time.

Does the notion of the "invisible hand" assume a competitive market structure?

Yes.

Did Friedrich Hayek support "central planning"?

No, he thought the big problem was coordination.

What is "creative destruction"?

New technologies replacing old ideas.

Which country pioneered the "Industrial Revolution"?

United Kingdom, England, and Scotland.

Did "scientific management" allow workers to control the labor process?

No, it was an attempt to give control to management.

Did Adam Smith believe that specialization and division of labor increase productivity?

Yes, he showed that productivity increases significantly.

According to Adam Smith, what negative effect occurs when workers perform specialized division of labor?

People become bored in their job.

What is Laissez-faire capitalism?

Free market economy.

Does a change in the price of a product cause its "demand" to change?

No, the change would be in quantity demanded.

How is a "normal good" defined?

When income and demand vary directly.

If the price of gas rises, would you expect the demand for SUVs to shift leftward?

Yes, people buy fewer SUVs when gas is expensive.

Does a change in the price of a product cause its supply curve to shift?

No, that is a movement along the curve.

Which factor leads to a change in "supply": a change in product price, rising costs of inputs, or a change in consumer preferences?

Rising costs of inputs.

Do subsidies cause the supply curve to shift rightward?

Yes, it increases production.

Is monopoly power assumed when discussing supply and demand in this chapter?

No, competition is assumed.

If there is a surplus of a product, is the market price above the equilibrium price?

Yes.

Given a supply curve and a rightward shift of the demand curve, what is the effect on equilibrium price and quantity?

Higher price and higher quantity.

Why does an effective "price ceiling" cause a shortage?

It is below the equilibrium price.

Is "minimum wage legislation" considered a price ceiling?

No, it is a price floor.

Did Fordism generate a system primarily based on customization and differentiation?

No, it was based on mass production.

What is "contingent labor"?

Part-time and temporary labor.

What is the definition of "outsourcing"?

Buying components and sources from other countries.

How is "producer surplus" defined?

When market price is above minimum price at which proceeds would sell the product.

Does an increase in the price level raise the producer surplus?

Yes, the price moves further away from the minimum.

What is "progressive taxation"?

Higher marginal tax rate as income rises.

Why did the Federal Reserve decide to raise interest rates?

In an attempt to reduce spending and fight inflation.

Are "private goods" subject to exclusion and rivalry?

Yes.

Which of the following is a "public good": a restaurant, an automobile, or national defense?

National defense.

Are activities that generate "positive externalities" subject to high taxes?

No, on the contrary, they are usually subsidized.

Why is climate considered a "global common"?

Available to all, and not within one country.

How does "revealed preference" differ from "stated preference"?

Revealed preference is what you actually do.

What is "moral hazard"?

If you do not pay for misdeeds, you keep doing them.

Who are the "principals" in our political system?

Voters.

Who are the "agents" in our political system?

Members of Congress.

What is "rent seeking behavior"?

People who want benefits without making a contribution.

What does the problem of "regulatory capture" refer to?

Agencies/commissions are represented by industries they are supposed to regulate.