exam 1

Question 1

fundamentally, economics deals with…

Answer 1

scarcity

Question 2

efficiency means that…

Answer 2

society is getting the most it can from its scarce recources

Question 3

opportunity cost

Answer 3

the highest benefit obtained from opportunities forgone

Question 4

quantity supplied

Answer 4

amount of a good sellers are willing and able to sell at a given price

Question 5

supply

Answer 5

willingness of sellers to supply different quantities of a good at different prices

Question 6

supply curve

Answer 6

shows the quantity supplied by sellers at different prices

Question 7

law of supply

Answer 7

as price increases, quantity supplied increases -
AKA an increase in price makes production more profitable which raises the incentive to sell more goods

Question 8

what is happening when the supply curve shifts right?

Answer 8

the supply/good is higher despite the price not changing

Question 9

when do shifts occur of the supply curve?

Answer 9

if something makes selling more profitable at all prices or increases the number of units produced

Question 10

4 reasons a supply curve can shift right

Answer 10

1. the number of producers rises
2. technological advances reduce cost of production
3. input prices decrease
4. future price decreases

Question 11

technology advancement makes phones easier to produce - supply or demand shift? what direction?

Answer 11

supply shifts right (technological advancement)

Question 12

cupcakes are found to cause liver cancer - supply or demand shift? what direction?

Answer 12

demand shifts left (change in taste)

Question 13

in the market of cheesecake, a cheesecake factory burns down - supply or demand shift? what direction?

Answer 13

supply shifts left (fewer producers)

Question 14

in the market of sushi, what happens if pasta becomes more expensive - supply or demand shift? what direction?

Answer 14

demand shifts right (price of substitute increases)

Question 15

the price of tea rises, what happens to the market of coffee?

Answer 15

demand of coffee increases (substitutes)

Question 16

gram crackers become cheaper, what happens to the market of marshmallows?

Answer 16

demand of marshmallows increases (compliments)

Question 17

movies become more expensive, what happens to the market of popcorn?

Answer 17

demand of popcorn decreases (compliments)

Question 18

PS4s are on sale, what happens to the market of xboxes?

Answer 18

demand of xbox decreases (substitutes)

Question 19

equilibrium

Answer 19

where supply and demand curves intersect,
quantity demand = quantity supply

Question 20

market clearing

Answer 20

people can purchase all they want and sellers sell all they are willing and able at that price

Question 21

surplus

Answer 21

if the price is above equilibrium, the quantity supplied is larger than the quantity demanded

Question 22

what do sellers do when there is a surplus?

Answer 22

sellers lower prices to sell their surplus of supply, the price falls until equilibrium is reached

Question 23

shortage

Answer 23

if the price is below equilibrium, the quantity demanded is larger than the quantity supplied

Question 24

what do sellers do when there is a shortage?

Answer 24

sellers raise prices until equilibrium is reached where quantity supplied equals quantity demanded

Question 25

how do you find the size of a surplus/shortage?

Answer 25

find the difference between quantity demanded and quantity supplied (is always a positive number)

Question 26

the shift of ONE curve

Answer 26

price falls, quantity demanded increases

Question 27

what happens in the market of hamburgers if income increases? (hamburgers are a normal good)

Answer 27

demand curve shifts right, price increases and quantity increases

Question 28

what happens to the price and quantity in the market of sushi if one of two sushi places closes?

Answer 28

price increases, quantity decreases

Question 29

if price and quantity decrease, what is happening?

Answer 29

income is rising and it is an inferior good

Question 30

what happens to the P and Q in the market of wine if another producer enters the market and tastes change from preferring champagne to preferring wine? (size of change is not given)

Answer 30

quantity increases and the price is ambiguous of wine

Question 31

what happens to the P and Q in the market of wine if another small producer enters the market and tastes change from preferring champagne to preferring wine? (size of changes given)

Answer 31

quantity and price increase of wine

Question 32

absolute advantage

Answer 32

who has the higher productivity

Question 33

comparative advantage

Answer 33

who has a lower opportunity cost

Question 34

taxes net of transfers (T) calculation

Answer 34

T = taxes - transfer payments