Eco 201 ch 1-4

Question 1

What is a business cycle?

Answer 1

fluctuations in economic activity

Question 2

4 distinct parts to the business cycle?

Answer 2

Recession - GDP is decreasing; unemployment increasing
Expansion- GDP is increasing; unemployment is decreasing
Peak- GDP is at maximum level; low unemployment
Trough - GDP is a minimum level; high unemployment

Question 3

Recession

Answer 3

• GDP is decreasing; unemployment increasing

Question 4

Expansion

Answer 4

• GDP is increasing; unemployment is decreasing

Question 5

Peak

Answer 5

• GDP is at maximum level; low unemployment

Question 6

Trough

Answer 6

• GDP is a minimum level; high unemployment

Question 7

Opportunity costs

Answer 7

• whatever must be given up to obtain some item.

Question 8

Two goals in economics

Answer 8

efficiency vs equity

Question 9

Efficiency

Answer 9

• society is getting the most from its scarce resources

Question 10

Equity

Answer 10

• distribute economic prosperity fairly among the members of society

Question 11

Scarcity

Answer 11

• society has limited resources and therefore cannot produce all the goods and services people wish to have. Ex. Clean water is a scarce resource

Question 12

Economics

Answer 12

• the study of how society manages its scarce resources

Question 13

World price

Answer 13

• the price of a good that prevails in the world market for that good

Question 14

Protectionism

Answer 14

• the efforts of government to protect domestic firms or industries from competition of imported goods

Question 15

row Cameras | Opp cost coffee | opp cost

A 0 ——— 400 ______
B 50 _____ 300 ______
C 100 _____ 200 ______
D 150 _____ 100 ______
E 200 _____ 0 ————

Answer 15

---------  50/100
100/50 50/100
100/50 50/100
100/50 50/100
100/50 ----------

Question 16

What is an absolute advantage?

Answer 16

When one country creates more products than another.

Question 17

What is a comparative advantage and how do you determine it?

Answer 17

The comparative advantage is when you compare countries and then you divide each countries opportunity, whichever countries opportunity cost #s are lower, has the comparative advantage.

Question 18

How can you tell a country should specialize in something?

Answer 18

It has the best comparative advantage

Question 19

What is the Market

Answer 19

A group of buyers and sellers of a particular good or service

Question 20

What is Quantity Demanded?

Answer 20

The amount of the good that buyers are willing and able to purchase.

Question 21

What is Law of Demand?

Answer 21

As the price of the good increases, the quantity demanded decreases

Question 22

What is a Demand Schedule?

Answer 22

A table that shows the relationship between the price of a good and the quantity demanded.

Question 23

What is a Demand Curve?

Answer 23

A graph of the demand schedule

Question 24

What is a Change in demand?

Answer 24

A shift of the demand curve in response to a change in some variable other than price.

Question 25

What is the Law of Supply?

Answer 25

As the price of a good increases, the quantity supplied will increase

Question 26

Law of Demand

Answer 26

As the price of the good increases, the quantity demanded decreases

Question 27

Decrease in Demand

Answer 27

Shift of the demand curve to the left | This leads to a decrease in equilibrium price and a decrease in equilibrium quantity

Question 28

Increases in Demand

Answer 28

Shift of the demand curve to the right. | This leads to an increase in equilibrium price and an increase in equilibrium quantity

Question 29

In the market for computers there is a decrease in the number of computer firms. How would this affect the market for computers?

Answer 29

Supply will decrease which leads to an increase equilibrium price and a decrease in equilibrium quantity

Question 30

The following argument for Protection states that high wages in one country keeps industries from being competitive in world markets

Answer 30

Cheap Foreign Labor Argument

Question 31

The determinant of comparative advantage that looks at climates and harbors is known as

Answer 31

Physical features

Question 32

In the market for computers there is a decrease in the number of computer firms. How would this affect the market for computers? a. Demand will increase which leads to an increase in equilibrium price and a decrease in equilibrium quantity. b. Supply will increase which leads to an increase in equilibrium price and an increase in equilibrium quantity. c. Demand will decrease which leads to a decrease in equilibrium price and an increase equilibrium quantity. d. Supply will decrease which leads to an increase equilibrium price and a decrease in equilibrium quantity

Answer 32

d. Supply will decrease which leads to an increase equilibrium price and a decrease in equilibrium quantity

Question 33

The determinant of comparative advantage that looks at climates and harbors is known as a. different physical features b. different endowments of natural resources c. different supplies of labor d. different states of development of financial markets

Answer 33

a. different physical features

Question 34

Now suppose the price of oranges has increased. Apples and oranges are considered substitutes in consumption. Below let me know if the demand curve or the supple curve will change. (Only 1 will change) Also let me know what happens to equilibrium price and equilibrium quantity. ``` Supply or demand change (increase or decrease) Equilibrium price (increase or decrease) Equilibrium quantity (increase or decrease) ```

Answer 34

demand increase Equilibrium price increase Equilibrium quantity increase

Question 35

The market for premium coffee is in equilibrium. Now suppose there is an increase in taxes on premium coffee. This increase in taxes affects the production side. Below let me know if the demand curve or the supple curve will change. (Only 1 will change) Also let me know what happens to equilibrium price and equilibrium quantity. ``` Supply or demand change (increase or decrease) Equilibrium price (increase or decrease) Equilibrium quantity (increase or decrease) ```

Answer 35

Supply decreases (shifts to the left) Equilibrium price increases Equilibrium quantity decreases

Question 36

The market for Michelin Tires is in equilibrium. Now suppose the number of production plants of Michelin Tires has increased. This has an effect on the production of tires. Below let me know if the demand curve or the supple curve will change. (Only 1 will change) Also let me know what happens to equilibrium price and equilibrium quantity. ``` Supply or demand change (increase or decrease) Equilibrium price (increase or decrease) Equilibrium quantity (increase or decrease) ```

Answer 36

Supply increases (shifts to the right) Equilibrium price decreases Equilibrium quantity increases

Question 37

The market for Microsoft Surface tablets is in equilibrium. Now suppose the expected prices for Microsoft Surface Tablets will increase. This will have an effect on the consumption of Microsoft Surface Tablets. Below let me know if the demand curve or the supple curve will change. (Only 1 will change) Also let me know what happens to equilibrium price and equilibrium quantity. ``` Supply or demand change (increase or decrease) Equilibrium price (increase or decrease) Equilibrium quantity (increase or decrease) ```

Answer 37

Demand increases (shifts to the right) Equilibrium price increases Equilibrium quantity increases

Question 38

Below is the demand and supply schedule for cell phones. Price | Quantity Demanded | Quantity Supplied A $20 | 1000 | 200 B $40 | 800 | 400 C $60 | 600 | 600 D $80 | 400 | 800 E $100 | 200 | 1000 a. What is the equilibrium price and equilibrium quantity for cell phones? b. If the price was at $40 would the market have excess demand or excess supply? c. If the price was $100 would the market have excess demand or excess supply?

Answer 38

a. What is the equilibrium price and equilibrium quantity for cell phones? Qty=600; Price=$60 b. If the price was at $40 would the market have excess demand or excess supply? Excess Demand c. If the price was $100 would the market have excess demand or excess supply? Excess Supply