Exam 1 Review Flashcards
The economic perspective entails:
a comparison of marginal benefits and marginal costs in decision making.
You should decide to go to a movie:
if the marginal benefit of the movie exceeds its marginal cost.
The concept of opportunity cost:
suggests that the use of resources in any particular line of production means that alternative outputs must be forgone.
In the circular flow model:
households sell resources to firms.
Economic scarcity:
Applies to all economies.
What would be a distinguishing feature of a market system?
Wide-spread private ownership of capital.
If we say that a price is too high to clear the market, we mean that:
quantity supplied exceeds quantity demanded.
If the supply and demand curves for a product both decrease, then equilibrium:
quantity must decline, but equilibrium price may either rise, fall, or remain unchanged.
An improvement in production technology will:
shift the supply curve to the right.
What would cause a decrease in market equilibrium price and an increase in equilibrium quantity?
An increase in supply.
A market externality referts to:
economic costs and benefits of market activities that go to those who are not directly involved in the market transaction.
As it relates to a public good, nonrivalry means that:
one person’s benefit from the good does not reduce the benefit available to others.
When the percentage change in price is greater than the resulting percentage change in quantity demanded:
an increase in price will increase total revenue.
We would expect the cross elasticity of demand between Pepsi and Coke to be:
positive, indicating substitute goods.
The concept of price elasticity of demand measures:
the sensitivity of consumer purchases to price changes.
In constructing models, economists:
make simplifying assumptions.
Microeconomics is concerned with:
a detailed exam of specific economic units that make up the economic system.
According to economists, economic self-interest:
is a reality that underlies economic behavior.
There is too little of a good thing when its marginal:
benefit exceeds its marginal cost.
Economics may best be defined as the:
social science concerned w/ the efficient use of scarce resources to achieve max satisfaction of economic wants.
Households and Businesses are:
sellers in the resource and product markets respectively.
What is a limitation of the simple circular flow model:
the determination of product and resource prices is not explained.
An economic system:
is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.
the term “laissez faire” suggests that:
government should not interfere w/ the operation of economy.
