ECON Final Flashcards
Income inequality tends to be greatest in:
A. Richest Countries
B. Poorest Countries
C. Middle Income
D. None above
B. Poorest Countries
Poor countries have low GDPs relative to population size and are not necessarily controlled by democratic governments.
Which of the following is purchased in a product market?
A. Undeveloped farmland in Texas.
B. The skills of an X-ray technician.
C. Cell phone service.
D. Crude oil.
C
A product market is where finished goods and services are bought and sold. Cell phone service is a finished product.
Which of the following is purchased in a factor market?
A. National defense.
B. A motorized scooter used for commuting by a student.
C. The labor of a state university professor.
D. A bag of jellybeans.
C
A factor market is where the factors of production, in this case labor, are bought and sold.
Which of the following is considered a service in the calculation of GDP?
A. Constructing new homes.
B. Manufacturing reclining chairs.
C. Tax preparation.
D. Manufacturing automobiles.
C
Any consumption spending on intangibles is for services.
Assume that pencils and pens are substitutes. If the price of pencils rises ceteris paribus, then we will see
A. A decrease in the supply of pens.
B. A decrease in the demand for pens.
C. An increase in the supply of pens.
D. An increase in the demand for pens.
D. An increase in the demand for pens.
Consumers will substitute the relatively cheaper pens when the price of pencils rises, thereby causing the demand for pens to increase.
The goal of the business firms in a market economy is to maximize
Total utility.
Total welfare.
Total sales.
Total profits.
Profits
Which of the following events would allow the production possibilities curve to shift outward?
Technology is lost.
The economy’s capital stock declines.
People begin to retire at earlier ages.
More teenagers enter the labor force.
More teenagers enter the labor force.
Which of the following can change without shifting demand, ceteris paribus?
The price of the good itself.
Expectations.
Incomes.
The prices of other goods.
The price of the good itself.
A change in the price of a good causes a movement along the demand and the supply curves. It will not cause the demand or supply to shift.
Tickets to a sporting event go on sale and sell out almost instantly. This suggests that
A. The tickets must be very expensive.
B. There are too many tickets to the event.
C. There is a surplus of tickets.
D. The price for the tickets is below the equilibrium price.
D. The price for the tickets is below the equilibrium price.
When a price is below equilibrium price, a shortage will occur. Tickets selling almost instantly imply that everyone who is willing and able to go may not be able to obtain tickets.
Which of the following is an example of a progressive tax?
The federal income tax.
Social Security payroll tax.
An excise tax.
A local sales tax.
The federal income tax.
The federal income tax is progressive because people with high incomes pay a larger fraction of their income in taxes.
The price ceiling that the federal government placed on human organs caused
A shortage.
An increase in demand.
An increase in supply.
A surplus.
A shortage.
Price ceilings increase the quantity demanded, decrease the quantity supplied, and create market shortages.
If there are only two airlines that fly between Dallas and New Orleans, what will happen in the market for one airline if the other one goes out of business?
The demand curve will shift to the left.
There will be a movement to the right along the initial demand curve.
The demand curve will shift to the right.
There will be a movement to the left along the initial demand curve.
The demand curve will shift to the right.
If one airline goes out of business, the number of consumers willing and able to buy from the other airline will increase, causing demand to increase.
Which one below fits an example if a city decides to limit smoking in public areas
Market success.
Government intervention.
The market mechanism at work.
The invisible hand at work.
Government intervention.
A change in the price of a good
-Results in a change in supply.
-Causes a shift in the supply curve.
-Results in a change in quantity supplied.
-Is a determinant of supply.
-Results in a change in quantity supplied.
Because the supply curve shows the quantity supplied at different price levels, when the price changes, we can track changes in quantity supplied along the supply curve.
According to the law of demand, a demand curve
-Exceeds the economy’s ability to produce.
-Is a horizontal or flat line.
-Has a positive slope.
-Has a negative slope.
-Has a negative slope.
Because price and quantity demanded are inversely related, the demand curve is downward-sloping (has a negative slope).
Air pollution best illustrates
An inequity.
An external cost.
Market power.
Government failure
An external cost.
Air pollution damages the surrounding environment, and the cost of the damage is borne by a third party.
If there is a surplus at a given price, then
-That price is greater than the equilibrium price.
-The price is zero.
-That price is lower than the equilibrium price.
-The market is in equilibrium at that price.
That price is greater than the equilibrium price.
At prices above equilibrium, quantity supplied will be greater than quantity demanded, so a market surplus will exist.
Which of the following scenarios would support the theory of public choice?
Correct!
-The local police chief fails to give the mayor a speeding ticket because the mayor might fire him.
-The governor of the state vetoes a highway bill even though the highway would enhance the value of property he or she owns.
-The president of Colombia goes after drug traffickers despite death threats and the offer of bribes that could make him a rich man.
-A college president eliminates wasteful departments and programs even though this will shorten her tenure and her political future.
The local police chief fails to give the mayor a speeding ticket because the mayor might fire him.
Public choice is the theory of public sector behavior emphasizing rational self-interest of decision makers and voters.
Ceteris paribus, if the price of a digital camera rises, then we can expect
An increase in the quantity demanded of digital cameras.
A decrease in the demand for digital cameras.
A decrease in the quantity demanded of digital cameras.
An increase in the demand for digital cameras.
Correct!
A decrease in the quantity demanded of digital cameras.
Quantity demanded and price are inversely related.
A change in demand means there has been a shift in the demand curve, and a change in quantity demanded
Also means demand has shifted.
Means that price has changed and there is movement along the demand curve.
Results from a change in price of other goods.
Means a shortage or surplus will result from holding prices constant.
Means that price has changed and there is movement along the demand curve.
Movements along a demand curve are a response to price changes for that good.
Factors of Production
Land, Labor, Capital, Entrepreneurship
A proportional tax is one that
Collects the same rate on every dollar of income.
Rises as income rises.
Falls as income rises.
Is collected voluntarily for specific expenditure purposes.
Collects the same rate on every dollar of income.
A proportional tax is a tax that levies the same rate on every dollar of income.
A tax that is placed on the quantity of the item being purchased, such as gallons of it, is called a(n)
Property tax.
None of the choices are correct.
Excise tax.
Income tax.
Excise tax.
A tax on the quantity of the item and not its value is an excise tax.
Ceteris paribus, which of the following is most likely to shift both the demand and the supply curves?
The price of the good itself.
Technology.
Expectations.
Income.
Expectations.
If public goods were marketed like private goods, then
Society would be closer to achieving the optimal mix of output.
Market failure would not occur.
Public goods would be efficiently produced.
People would avoid paying for these goods.
People would avoid paying for these goods.
Because the familiar link between paying and consuming is broken, public goods cannot be peddled in the supermarket. People are reluctant to buy what they can get for free.
If the government places a price ceiling on cancer-treating drugs, then
There will be no change in the number of people who die from cancer.
Fewer cancer treating drugs will be available.
Fewer people will die from cancer.
The supply of cancer-treating drugs will increase.
Fewer cancer treating drugs will be available.
Price ceilings increase the quantity demanded, decrease the quantity supplied, and create market shortages.
Ceteris Paribus, when the following events occur, what would happen to US made car market (Made in USA by US companies)? Please select among the following 4 possible choices. (Demand increases, Demand decreases, Supply increases, Supply decreases):
Hint – You have to determine if an event is a demand issue or a supply issue first and then decide whether it will increase or decrease.
The U.S. economy falls into a recession
One of the main domestic auto part suppliers go on strike, causing shortage of parts for the domestic car makers
Imported cars become cheaper (than before)
The price of gasoline decreases
- Demand Decreases
- Supply Decreases
- Demand Decreases
- Demand Increases
National income accounts assist
Economic policy makers in formulating policies and evaluating performance.
Market investors in making more profitable investments.
Individuals in maximizing their incomes.
Analysts in measuring the performance of the stock market
Economic policy makers in formulating policies and evaluating performance.
National income is one way to calculate an economy’s well-being.
