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.
