BECO Quiz Flashcards
An institution, in economics is
A rule governing social behavior, like a property right
Rationality, in economics, means
individuals pursue their self interest, however they perceive it.
The Scientific aspect of economics is
positive- it deals in statements of “is”
Self-interest, in economics, means
trying to satisfy one’s preferences
The first law of demand states
Price and quantity demanded are inversley related.
All else being equal, consuming additional quantities of a good makes you less and less additionally happy. This principle is known as
Diminishing marginal utility
In economics “cost” means
The value of the next best forgone alternative
If a bakery currently is earning 2% accounting profit, but all other bakeries in town are earning 5% then the first bakery’s profit economically speaking is?
-3%
Which of these is an example of a variable cost ( in the short run)
wage payments to labor
A firm’s Average cost curve will typically have what shape?
Parabola- U shaped
Which of the following laws of economics is the best description of what determines a worker’s wages?
Diminishing marginal returns.
A firm maximizes profit by producing at the point where?
Marginal revenue = marginal cost
The chief feature of markets is
Facilitating anonymous cooperation, and harnessing dispersed knowledge.
Which of the following is a shifter of demand
changes in income, and changes in expected future price.
Which of the following is shifter in supply?
Price of a factor of production
Which of the following is the best descriptor of how markets work, according to the supply and demand model
Market activity is mostly random
In economics, a situation from which nobody has any incentive to change his or her behavior is called
equilibrium
the variable that adjust to “clear” markets is
price
Which of the following conceptions of entrepreneurship was discussed in chapter 4?
entrepreneurship as ‘creative destruction’ and entrepreneurship as ‘alertness to profit opportunities’
Hayek’s article “ The Use of Knowledge in Society.” was published in what year
1945
Hayek’s article is about
How markets harness dispersed knowledge
Which of the following are examples of price price discrimination
volume discounts, personal characteristic discounts, knowledge-based discounts
socialism is best defined as
a system where all the means of production are publicly owned . e.g., no private property.
what role do prices perform in a market economy
provide information about potentially profitable production ex ante
provide feedback about actual profitability ex post
provide and environment for creative arbitrage and entrepreneurship
What phenomenon do Fama and Jensen explain in their article
Separation of ownership and control
Which of the following assumptions is used in building the ‘perfect competition model’
homogeneous product (output)
Large number of buyers and sellers
zero transaction costs
According to Coase, which of the following best explain why firms exist
minimization of transaction cost
What role does profit perform in a market economy
an incentive roe: profits reward successful production
an information role: profits give firms the knowledge they need to know if they are producing successfully.
The best prediction of whether a firm will behave like a monopolist is
if there are legal barriers to entry
According to Alchian and Demsetz, which of the following is not part of the explanation as to why firms exist?
separation of ownership and control
A government’s budget deficit is
the excess of spending over revenue
Which of the following is not of one of Adam Smith’s Taxation
Taxes should be flat, i.e., directly proportional to wealth, regardless of an individuals’ level of wealth
Which of the following does not partly determine a bond’s price
interest rate on the bond
The chief function of banks is
financial intermediary’s.
All else being equal , $100 today is worth more than $100 a year from now. what concept explains why
time value of money
according to Salter (2014), monetary policy is best conceived as
adjustment of the money supply to meet macroeconomic goals
Which of the following rules or institutions is not discussed by Salter (2014)
100% reserve banking
Which of the following is an example of s real variable
unemployment rate
Inflation can be socially costly because
- it may change the relative prices of goods and services
- it may induce individuals to expend resources hedging against it.
- it may result in individuals confusing genuine supply and demand changes with purely monetary changes.
What is the phrase that refers to the erosion of the value of government bonds by inflation.
debt monetization
Which of the following equations is relevant to understanding fiscal policy
Y=C+I+G+NX
in order to have a stimulation effect, fiscal policy must
increase the deficit
if fiscal policy significantly raises interest rates, the result can be
crowding out
in order to be most effective, fiscal policy must be
timely, targeted,and temporary
Which of the following economist developed ideas that challenged orthodox notions of fiscal policy
- F.A. Hayek
- Milton Friedman
- James Buchanan
Normal spending , also called nominal GDP, is the same thing as
aggregate demand.
Which of the following are not concepts Salter (2014) employs to argue in favor of monetary policy rules
Irrationality problems
Which of the following can result from taxation
- individuals work less
- individuals expend resources to avoid the tax
- individuals emigrate.
The (false) belief that a nation’s weatlh depends on its trade balance is known as?
Mercantilism
Which of the following statements accurately describes international trade?
- Trade is positive-sum
- Trade fosters specialization and growth
- Trade contributes to a level economic playing field
The principle stating that nations can benefit from trade with each other, even if one nation is better at producing everything than another nation is called
comparative advantage
if a country has a current account deficit. what also must be the case?
The country has a capital account surplus
If interest rates in the U.S. rise relative to interest rates in the U.K., what would you expect to happen
The dollar will appreciate against the pound
