Econ Test 2 Flashcards
Its almost over guys
The quantity of a good that producers will make available at different prices is the ________________.
Supply
A non-durable good has a life expectancy of less than ____________.
3 Years
In a free market, who ultimately determines what goods are produced and in what quantities?
The Consumer
If Miss Johnson quit a job where she annually made $40,000 to start a business whose expense was $20,000 and total revenue was $15,000 during the first year, her opportunity cost for year equaled __________.
$45,000
A nation with a totalitarian government has a __________ economy
Command
___________ Is the amount of satisfaction that results from a one-unit increase of a good.
Marginal Utility
The excess of total revenue over total expense is a producer’s ___________.
Profit
The ___________ effect says that when the price of a certain good rises, people tend to find alternatives that are less expensive
Substitution
A government established minimum wage is an example of a price ___________.
Floor
_________ is the point at which quantity demanded and quantity supplied are equal.
Equilibrium
If you already owned 3 pairs of black shoes and someone gave you another, this fourth pair would have __________ marginal utility.
Diminishing
The __________ motive gives people the incentive to work in order to acquire money and goods.
Profit
___________ and __________ and are two of the 6 factors that can cause a shift in a good’s supply.
(1) technology (2) prices of related goods (3) resource prices (4) number of sellers (5) producer expectations (6) gov’t taxes, subsidies, and regulations.
__________ and __________ are two of the 5 factors that can change the demand for a good.
(1) income, (2) taxes and preferences (3) population (4) consumer expectations (5) prices of related goods.
What term refers to incentives given by the government to businesses to try to encourage production?
Subsidies
(T or F) Tend to cause a surplus of goods.
Price Floors
The amount of money a buyer gives a seller.
Price
Developed to avoid governmental regulation.
Black Market
Tend to cause shortage of goods.
Price Ceilings
The value of a particular good in trade for some other good.
Value in Exchange
The value of the direct benefit the owner of a good receives.
Value in Use
The value of something minus liabilities.
Equity
(T or F) Economists use the ___ axis of a graph to represent supply.
Horizontal
__________ is the relationship between a good’s price and the amount the consumer buys.
Demand
If a producer suddenly triples the price he charges for a product but consumers continue to buy the same amount, the demand for the good is __________.
Inelastic
(T or F) The purchase of _________ goods, such as tires, decreases as the average income rises.
Inferior
(T or F) A demand ________ is a graphic representation of the amount of goods purchased at different prices.
Curve
__________ cost is the value of the best alternative that is foregone when a different alternative is taken.
Opportunity
(T or F) The PUBLIC sector is the part of an economy controlled by national, state, and local governments.
True
If a grocery store were to introduce a brand of frozen peas at a price significantly below the equilibrium price of similar products, the result would likely be a __________ of the new brand.
Shortage
If the supply of stereos fell while consumer demand remained steady, the average price of a stereo would _________.
Rise
If a hardware store owner wished to know what kinds of hammers to make available, he would pay attention to the ___________ consumer sent
Market Signals
When the price of a good falls, the quantity demanded tends to __________.
Increase
If the demand for snowmobiles remained steady while the supply grew larger, producers would be able to __________ prices.
Decrease
When the price of a good rises, the quantity demanded tends to ______________.
Decrease
Since bread is a complement of peanut butter, the demand for peanut butter will decrease if the price of bread ____________.
Rises
If the demand for a car dealer’s new convertibles fell but he still wanted to sell the same amount of cars, he would have to __________ his prices.
Decrease
When a government fixes a good’s price above the point where it would naturally fall, the result is usually a __________ of that good.
Surplus
Be able to read a quantity / price chart ( graph )
Okay 😒
Be able to explain the laws of supply and demand.
The law of supply and demand is the theory that prices are determined by the relationship between supply and demand. If the supply of a good or service outstrips the demand for it, prices will fall. If demand exceeds supply, prices will rise. (Copied)
When the price of a good rises, the quantity supplied tends to __________.
Increase
Why are businesses that are able to make tremendous profits relatively rare in a free market?
When other companies see that one company is doing well, they often copy it and their strategies, doing this, the market becomes saturated. There is also a lot of risk and uncertainty in a free market, one minute they may be doing well, the next, they could be on a downfall.
What refers to the total amount of satisfaction received from possessing a particular amount of a good?
Total Utility
What type of good is capable of being used in conjunction with another?
Complementary Good
In a free market, who ultimately determines the distribution of goods?
Consumers
(T or F) PROFIT MOTIVE gives a person the willingness to trade certain goods for other goods that have greater personal value to him.
True
(T or F) If the demand for snowmobiles remained steady while the supply grew larger, producers would be able to INCREASE prices.
Decrease
(T or F) If the demand for a car dealer’s new convertibles decreases but he still wanted to sell the same amount of cars, he would have to DECREASE his prices.
True
(T or F) The amount of money that a buyer pays the seller for a particular item is the item’s PRICE.
True
(T or F) The availability of substitutes is a major reason why the demand for most goods is INELASTIC.
Elastic
(T or F) The income effect says that when the price of a good falls, consumers tend to buy LESS of that good or of other items because they can do so without giving up anything.
More
The price at which a good could be sold in an open market.
Market Price
(T or F) The price paid for a good is HIGHER at point D than it is at point C. (see graph at right on test)
Lower
(T or F) A shift from curve 2 to curve 3 would represent an increase in QUANITITY DEMANDED. (see graph at right on test)
Demand
(T or F) the quantity demanded is HIGHER at point C than it is at point B. (refer to graph at right on test)
True
(T or F) the quantity demanded is HIGHER at point C than it is at point B. (refer to graph at right on test)
True
Assuming that point E is equilibrium and that supply remains constant, a shift from curve 3 to curve 2 would most likely set the new equilibrium at point B. (refer to graph at right on test)
D
ESSAY: Explain the differences in how prices are determined in market economics and in command economies. What are the results of each?
Discuss in some detail the differences between free market capitalism and communism.
ESSAY: How do the laws of supply and demand restrict many companies from making large profits in a competitive free enterprise system?
When the laws of supply and demand are allowed to work without interference by government or some other entity, a business cannot raise the prices it charges for its products above that which its competitors are charging. If it does, people will buy their goods elsewhere and the overcharging business will soon collapse. Consequently, businesses try to keep their prices as low and competitive as possible.
