economics 76-150

Question 1

what is commodity money

Answer 1

a form of money that people value both because it serves as a medium of exchange and because of its intrinsic quality

Question 2

what is the relative price of a good

Answer 2

the opportunity cost of producing it, expressed in units of the next best alternative good

Question 3

what is the major reason that an assembly line can produce an automobile faster than a group of individuals who work in a small garage

Answer 3

In the assembly line, each worker is a specialist in a particular part of the production process

Question 4

what conditions must be met in order for the barter to occur

Answer 4

all participating parties must expect to gain and there must be a double coincidence of wants

Question 5

what is a subsidy

Answer 5

a payment from the government to an individual or group to encourage or support production but without any anticipation of production in return

Question 6

what is a quota

Answer 6

a limit on the quantity of a good that may be imported or exported

Question 7

what are complementary goods

Answer 7

goods that are purchased together such that the demand for one can directly affect the demand for the other. the classic example: hot dogs and hot dog buns

Question 8

what is a tariff

Answer 8

a tax on an imported good

Question 9

what is token money

Answer 9

money whose face value is greater than the cost of producing it

Question 10

What happens to total world output if every nation specializes in the goods in which it has a comparative advantage

Answer 10

total world output increases

Question 11

The (supply/demand) curve for a profit-maximizing firm is equal to its rising marginal cost curve.

Answer 11

supply

Question 12

The law of demand states that quantity demanded is (directly/inversely) related to price.

Answer 12

inversely

Question 13

How are exchange rates determined?

Answer 13

Supply and demand for both currencies naturally sets an equilibrium price.

Question 14

The Paris Conference of 1867 set most of the world on a ____ exchange rate system based on the ____ gold standard.

Answer 14

fixed, gold

Question 15

One ice cream cone may be very satisfying. The next ice cream cone will probably be less so. Ten ice cream cones would probably make a person sick. This example illustrates what economic law?

Answer 15

the law of diminishing marginal utility

Question 16

Complementary goods have a (positive/negative) cross-price elasticity.

Answer 16

negative

Question 17

You can sell 10 hockey pucks at $5 each or 9 hockey pucks at $6 each. Demand in this price range is (elastic/inelastic).

Answer 17

inelastic; $54 is more than $50

Question 18

Suppose that the price elasticity of demand of bread is 0.2, and the price of bread increases by 10%. What will happen to the quantity demanded of bread?

Answer 18

It will decrease by 2%.

Question 19

If the cross-price elasticity between two products is negative, what can be said about the two products?

Answer 19

They are complements.

Question 20

If the cross-price elasticity between two products is positive, what can be said about the two products?

Answer 20

They are substitutes.

Question 21

If a change in price has no effect on the quantity demanded, demand is completely (elastic/inelastic).

Answer 21

inelastic

Question 22

What type of elasticity represents the relationship between the demand for one product and the price of another?

Answer 22

Cross-price elasticity.

Question 23

If demand is elastic, what does this mean for the price elasticity of demand?

Answer 23

The price elasticity of demand is greater than one.

Question 24

What is marginal utility?

Answer 24

the value of consuming an additional unit of a good or service

Question 25

Why can't a supply curve extend infinitely to the right?

Answer 25

At some point, producers will not have enough resources to produce additional units of a good or service, no matter how high the price.

Question 26

The downward slope of the demand curve is explained by the law of ______ marginal utility.

Answer 26

diminishing (or decreasing)

Question 27

In a graph of supply and demand, what does the vertical axis represent?

Answer 27

price

Question 28

True or false: Supply and demand curves are always straight lines.

Answer 28

False (but they are usually drawn as straight lines in economics textbooks)

Question 29

The law of diminishing marginal utility helps to explain the law of (supply/demand).

Answer 29

demand

Question 30

Spaghetti and tomato sauces are (complements/substitutes).

Answer 30

complements

Question 31

What factors affect the supply of a good or service?

Answer 31

productivity changes, taxes, subsidies, expectations, regulation. the number of sellers

Question 32

What factors affect the demand of a good or service?

Answer 32

the number of buyers, consumer, income, tastes and preferences, consumer expectations, the prices of complements and substitute

Question 33

You can sell 10 hockey pucks at $5 each or 9 hockey pucks at $6 each. Demand in this price range is (elastic/inelastic).

Answer 33

inelastic; $54 is more than $50

Question 34

what is the balance of trade

Answer 34

the difference in value between a nation's exports and imports

Question 35

how does the concept of absolute advantage apply to international trade

Answer 35

it doesn't. international trade is based on comparative advantage.

Question 36

what is a resource market

Answer 36

a market in which resources are bought and sold

Question 37

how does the division of labor save time in the production process

Answer 37

workers do not spend any time moving from one task to another, and each worker becomes a specialist in his particular part of the production process

Question 38

when is the best time for two countries to set an exchange rate for an international transaction

Answer 38

at the time of the trade (in order to avoid changes in the exchange rate before the transactions occurs)

Question 39

in general, what happens to people and countries who specialize and trade?

Answer 39

they become independent

Question 40

what is an unfavorable balance of trade

Answer 40

a condition in which a nation imports more than it exports

Question 41

what are three reasons why the division of labor is effective

Answer 41

tasks are assigned according to each worker's preference and abilities, more sophisticated technology can be used, and each worker can become very good at one isolated part of the production process.

Question 42

what is an embargo

Answer 42

a restriction on exports intended for sale in another country

Question 43

what happens to total production for two nations who specialize according to their comparative advantages and then trade?

Answer 43

total production increases

Question 44

how did many Asian economies achieve rapid economic growth in the 1970s and 1980s

Answer 44

their goods were competitively priced because their wage rates and capital costs were low

Question 45

what is money

Answer 45

anything that is generally accepted in return for resources, goods. or services, or for the repayment of debts

Question 46

what is a favorable balance of trade

Answer 46

a condition in which a nation exports more than it imports

Question 47

what is the main reason that a fast food restaurant produces a meal faster than the average person can produce it in his/her kitchen

Answer 47

a fast food restaurant has division of labor, so large scale production machinery is practical

Question 48

what is an exchange

Answer 48

a reciprocal transfer of money or a resource, good, or service in return for a resource, good or service

Question 49

how do people and nations become economically interdependent

Answer 49

by specializing in the production of some goods and trading to obtain others

Question 50

what is an export

Answer 50

a good that is produced domestically but sold to consumers in a foreign country

Question 51

what is a comparative advantage

Answer 51

the position of an individual or a nation that can produce a good for the lowest opportunity cost

Question 52

why is the concept of comparative advantage important to international trade

Answer 52

nations specialize in the production of goods in which they have a comparative advantage and this gives them an incentive to trade with other nations that specialize in the production of other goods

Question 53

why is a barter system inefficient

Answer 53

finding a double coincidence of wants for every transaction is costly and time consuming

Question 54

what condition must be met in order for voluntary exchange to occur

Answer 54

all participating parties must expect to gain

Question 55

what is a trade barrier

Answer 55

a government imposed restriction that prevents or inhibits free trade between countries

Question 56

what good was the subject of an embargo that devastated the US economy in the 1970s

Answer 56

oil ( the embargo was imposed by OPEC)

Question 57

quantity demanded decreases as price increases because higher prices provide a (positive/negative) incentive for consumers

Answer 57

negative

Question 58

on a graph of the supply and demand for a particular god, where is the equilibrium price found

Answer 58

at the intersection of the supply and demand curves

Question 59

what happens to exchange quantity if there is a decrease in demand

Answer 59

exchange quantity decreases

Question 60

as the price of a good increases what typically happens to the quantity supplied

Answer 60

quantity supplied increases

Question 61

what is quantity supplied

Answer 61

the amount of a good that producers are willing and able to sell at a particular price

Question 62

what is the equilibrium price of a good or service

Answer 62

the price at which the quantity demanded equals the quantity supplied

Question 63

what happens to exchange quantity if there is a simultaneous decrease in demand and increase in supply

Answer 63

we cannot tell exactly

Question 64

how is quantity demanded related to demand

Answer 64

demand is the quantity demanded at each price within a range of prices

Question 65

what happens to exchange quantity if there is an increase in demand

Answer 65

exchange quantity increases

Question 66

what area of economics explores how a firm decides what price to charge for its product

Answer 66

microeconomics

Question 67

how do prices act as signals to consumers

Answer 67

they help consumers decide how best to allocate their incomes

Question 68

what happens to the equilibrium price of a good if there is a decrease in supply, ceteris paribus

Answer 68

the price increases

Question 69

as the price of a good decreases, what typically happens to the quantity supplied

Answer 69

quantity supplied decreases

Question 70

how is an internet website an example of a market

Answer 70

a website may be used to bring buyers and sellers together to make an exchange

Question 71

what happens to exchange quantity if there is a simultaneous increase in both supply and demand

Answer 71

exchange quantity increases

Question 72

what happens to exchange quantity if there is a simultaneous decrease in both supply and demand

Answer 72

exchange quantity decreases

Question 73

what is supply

Answer 73

the relationship between the price of a good and the quantity of it that sellers are willing and able to produce and sell

Question 74

what is market demand

Answer 74

the sum of individual demand for every consumer in a market

Question 75

what happens to equilibrium price if there is a simultaneous decrease in both supply and demand

Answer 75

we cannot tell exactly