Exam 1 Flashcards
The opportunity cost of playing tennis with your friend is
the next-best alternative use of your time that is forgone
The primary concern of economics is the study of
how best to allocate scarce resources among competing uses
The market mechanism
uses prices as a means of communication between consumers and producers
Given that resources are scarce
opportunity costs always exist whenever choices are made
Economic theories can be used to do all of the following except
determine exact economic outcomes
In economics, which of the following is the best example of capital?
a computer used by a lawyer to prepare legal documents
Government intervention designed to address market failure
may either improve or worsen the mix of output produced
Most Americans do not trust the federal government to do the right thing. If they are correct, then government intervention results in
a less desirable mix of output
Which of the following is the best example of the “what” economic question?
What is the optimal mix of output?
Welfare programs are designed to address the
“for whom” question
Which of the following is associated with microeconomics?
an increase in sales for a chain of pet supply stores
A shift in a curve indicates that
a change has occurred in the underlying relationship between the two variables
Which of the following is an example of labor as a factor of production?
the skills and abilities of workers
Investment refers to all of the following except:
the purchase of stock by an individual
Which of the following is an example of a negative externality?
an increase in the incidence of cancer due to pollution
In the figure, a grade-point average of 3.0 is associated with how many hours of study time per week?
30 hours
The essential signal of the market mechanism is
price
An economist who says that “there is no such thing as a free lunch” means that
Both we cannot have everything we want, even if the price is $0, and even when a meal is free, we give up the chance to do something else with that time
Pollution is an example of:
market failure
Which of the following statements is consistent with central planning?
Government planners play the dominant role in deciding how resources are allocated
Which of the following is true if there is a surplus of a particular good?
Both the market price is above the equilibrium price and the quantity supplied is greater than the quantity demanded
Ceteris paribus, the law of demand says that
price and quantity demanded are inversely related
Ceteris paribus, according to the law of supply, if the price of product Z increases from $6 to $8, then the
quantity supplied of Z will increase
The goals of the principal participants in the economy are to maximize
happiness for consumers, profits for businesses, and general welfare for government
At the equilibrium market price, which of the following is true?
Quantity demanded and quantity supplied are equal
In the market for gym equipment, what would we expect to happen if the price of gym equipment rises?
A decrease in the quantity demanded of gym equipment
The equilibrium price and quantity depicted in the figure are, respectively,
$30 and 15 units
In the U.S. economy, foreigners participate in
both the product and factor markets
According to the law of demand, a change in _________ causes a movement along the demand curve
the price of the good
Taylor Swift’s “Reputation” tour, proved that
dynamic pricing helped her fill the stadium
For government, most market activity can be explained by the goal of
public welfare maximization
Which of these would cause both the supply and demand curves of a product to shift?
change in expectations of future prices
Which of the following participates in the product market?
consumers, governments, and foreigners
Which of the following situations is sufficient to represent current demand for a car?
You have enough money to buy it and you are willing to spend the money on the car
The equilibrium price and quantity are determined by the
market mechanism
In a market, the equilibrium price is determined by
the interaction of both demand and supply
When there is a surplus in a market, prices are likely to fall because
sellers would rather lower their prices to sell some of their goods or services than keep prices higher and be stuck with unsold products
People benefit by participating in the market because
it facilitates specialization, increased production, and increased consumption
A demand curve doesn’t convey
why a consumer is willing to pay specific prices for various amounts of the desired good
Ceteris paribus, according to the law of supply, if the price of lawn mowing services decreases from $50 per lawn to $45 per lawn, then the
quantity supplied of lawn mowing will decrease
Consumers provide money as an inflow to which of the following markets?
product markets
Shortages are the same thing as excess
demand
Assume that pens and pencils are substitutes for each other. In the market for pens, what would we expect to happen if the price of pencils rises?
An increase in the demand for pens
Which of the following is true about American spending habits?
Teenagers spend their money on electronics, cars, and clothes
The law of demand and the law of diminishing marginal utility are related since both
assume that the first units consumed have more utility than subsequent units
According to the law of demand
as the price of a good falls, the quantity demanded will increase in a given time period, ceteris paribus
Socio-psychiatric explanations of consumer demand for a good or service include the
desire for ego and status
If quantity demanded rises only slightly following a moderate price cut, then the response would be considered
inelastic
Which of the following is a determinant of demand for a good?
consumer income
Which of the following is true about demand?
In order to demand a good, a person must be willing and able to buy the good
Price elasticity of demand shows how
quantity demanded responds to price changes
A good with relatively elastic demand is more likely to be a _________blank, or a good with _________blank substitutes
luxury; many
The demand for _________blank is relatively elastic
vacation travel
Socio-psychiatric theories are
not sufficient to explain which goods will be purchased because they tell us why consumers desire certain goods but not what they are willing and able to pay for it
If marginal utility is positive, then total utility must be
increasing
If demand is elastic, then
quantity demanded is very responsive to changes in price
At some point during a meal, each extra bite provides less and less additional satisfaction. This can be explained by
the law of diminishing marginal utility
The assumption of ceteris paribus is important because it
allows us to focus on the effects of a change in one variable at a time on another variable of interest
The difference between total utility and marginal utility is that
total utility is the complete satisfaction from consuming a product while marginal utility is the satisfaction from consuming one additional unit of a product
Which of the following are determinants of price elasticity?
All of these choices are correct
If the marginal utility of one more piece of candy is positive, then the
total utility will increase with additional consumption
Marginal utility is an important economic concept because it
can be used to predict the amount of a good a rational consumer will purchase
The law of diminishing marginal utility helps to explain the
downward-sloping demand curve
Which of the following is true about consumer spending over time?
Spending habits are likely to change when new products enter the market
A survey about American spending habits of the young (under 25) by the BLS shows that
young women are more likely to go into credit card debt because of their spending than are young men
Recent prices increases for Starbucks coffee will cause an increase in revenue for the company if
All of these choices are correct
Which of the following causes the market demand curve for a good to shift?
the number of buyers in the market
The following table shows the utility (enjoyment) that Joyce receives from eating ice cream cones on a hot summer day:
diminishing marginal utility
