Exam #1 Flashcards
The concave, or bowed-out, shape of the production possibilities curve illustrates the law of increasing opportunity costs
True
Rational behavior suggests that
individuals will make different choices because their preferences and circumstances differ
The law of increasing opportunity costs states that
if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so
The alternative combinations of two goods which a consumer can purchase with a given money income is shown by
a budget line
For economists, the word “utility” means
pleasure and satisfaction
DVD players and DVDs are
complementary goods
Consumers purchase more normal goods as
incomes increase
Toothpaste and toothbrushes are substitute goods
False
A positive statement is one which is
objective and based on facts
Rational individuals may make different choices because their preferences and circumstances differ.
True
The term Ceteris paribus means
other thing being equal
The law of demand states that
price and quantity demanded are inversely related
The market demand for a product is found by
horizontally summing the individual demand curves
The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment and productive efficiency
True
Economic rationale for the law of increasing opportunity cost is that economic resources are not fully adaptable to alternative uses.
True
The graph above shows the production possibilities curve for an economy producing two goods, X and Y. Which of the points on the graph indicate unemployed resources?
E and A only
Which is not a factor of production?
money
Refer to the above diagram. A shortage of 160 units would be encountered if price was
$.50
Refer to the above diagram. A surplus of 160 units would be encountered if price was
$1.60
Refer to the above diagram. The equilibrium price and quantity in this market will be
$1.00 and 200
The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____.
direct, inverse
When consumers discard their gasoline-powered automobiles for electric-powered ones, this partially reflects the ___________ of gasoline:
Scarcity
The movie Saving Private Ryan is about a military mission to find and recover a
particular soldier - Private Ryan. The movie is predominantly about how much was given up in an effort to save this one particular soldier. The main economic theme of the movie is:
opportunity cost
Black markets are associated with:
ceiling prices and the resulting product shortages
The four factors of production are land, labor, capital, and government services
False
Chuck drives past the same gas station every day. He realizes that the gas station always changed its prices on Tuesdays but keeps price steady the rest of the week. On Saturday, Chuck turns on the news and hears a report projecting that the price of gasoline is going to increase. Holding all else constant (ceteris paribus), what do you think would happen to Chuck’s demand for gasoline on Monday?
His demand would shift to the right
An inferior good is
not accurately defined by any of the above statements
Productive efficiency means that goods and services are being produced by society in the least costly way
True
When you chose a major, you likely thought about your skills. Let’s say you don’t enjoy dealing with numbers. How could you explain to your parents, using logics from economics, why you chose to major in English instead of mathematics?
The opportunity cost of learning mathematics is too high
Which one of the following expressions best states the idea of opportunity cost?
“There is no such thing as a free lunch.”
Economics is the study of:
how to allocate resources to satisfy wants and needs
Microeconomics is the branch of economics that focus on the
choices and decision-making of individuals and firms
Instead of taking an economics course, you could have taken a history course that meets at the exact same time. The total cost of taking the economics course would be:
the tuition cost, the cost of textbook and notebook, and the fact that you could not take the history course at the same time
The assertion that “There is no free lunch” means that
all production involves the use of scarce resources and thus the sacrifice of alternative goods.
Normative statements are concerned with
what ought to be
The economizing problem of economics is
that productive resources are scarce relative to economic wants
What is the opportunity cost of taking this exam?
the highest valued alternative that you gave up to prepare for and attend the exam
Opportunity cost is best defined as:
the amount of one product that must be given up to produce one more unit of another product.
According to economists, one reason few professional athletes have PhD’s is that the:
opportunity cost of going to graduate school is too high
Imagine you find yourself in a heat wave and your air-conditioner has broken. Unable to find a new one at the store because of a price gouging law, you purchase an air conditioner on the black market. What role did the price gouging law have?
It increased the incentive of individuals to supply the good on the black market
