Midterm 1-4 Flashcards
If all the world’s resources were to magically increase one hundredfold, then
People would still have to make tradeoffs
Chris has a onehour break between classes every wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision chris must make is
an economic problem becasue chris has only one hour and engaging in one activity means giving up the other
If a person takes an action if, and only if, the extra benefits from taking that action are at least as great as the extra costs, then that person is
following the cost benefit principle
Yoshi must choose to either mow the lawn or wash clothes. If he mows the lawn, he will earn $25, and if he washes clothes, he will earn $40. He dislikes both tasks equally and they both take the same amount of time. Yoshi will therefore choose ______ because ______.
to wash clothes, it generated a bigger economic surplus
Lauren was accepted at three different graduate schools, and she must choose one. Elite U costs $50,000 per year and did not offer Lauren any financial aid. Lauren values attending Elite U at $60,000 per year. State College costs $30,000 per year and offered Lauren an annual $10,000 scholarship. Lauren values attending State College at $40,000 per year. NoName U costs $20,000 per year and offered Lauren a full $20,000 annual scholarship. Lauren values attending NoName at $15,000 per year. Lauren’s opportunity cost of attending Elite U is
$70,000
Kendall is thinking about going to the movies tonight. A movie ticket costs $12, and she’ll have to cancel a $25 dog-sitting job that she would have been willing to do for free. Kendall’s opportunity cost of going to the movies is
$37.00
Suppose Monique is willing to pay up to $15,000 for a used Ford pick-up truck. If she buys one for $12,000, her economic _____ would be ______.
surplus, $3000.00
costbenefit principle
an action should be taken if and only if the benefit is as great as the cost.
Ashley has a comparative advantage over her classmates in writing term papers if she
has a lower opportunity cost of writing term papers than her classmates
absolute advantage
the ability to produce a good or service more efficiently than competitors
Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tamika 6 minutes to make a sandwich and 12 minutes to make a smoothie. What is the opportunity cost to Dan of making a sandwich?
1/3 smoothies
opportunity cost
the value of what is given up when choosing one option over another
Points that lie outside the production possibilities curve are ______, and points that lie inside the production possibilities curve are ______.
unattainable, attainable
Assume point A on a linear production possibilities curve represents the combination of 12 coffees and 3 cappuccinos, and point B represents 3 coffees and 6 cappuccinos. Suppose coffees are on the vertical axis and cappuccinos are on the horizontal axis. The absolute value of the slope of the production possibilities curve between points A and B equals
3
comparative advantage
the ability to produce a good or service at a lower cost than others
absolute advantage
the ability to produce mroe of a good or service than a competitor using the same amount of resources
when a market is in equillibrium
there is neither excess demand nor excess supply
if the price is above equillibrium price, then there will be
excess supply
the price of bananas will increase
excess demand for bananas
Suppose you drive a car that gets good gas mileage, and you notice that more and more people are driving gas-guzzling cars. Their increased demand for gas
is likely to cause the price you pay for gas to increase
a movement along a demand curve from one price-quantity combination to another is called a
change in quantity demanded
If the demand for a good decreases as income decreases, then the good is
A normal good
If the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are
Complements
A decrease in the price of pizza will lead to
An increase in the quantity of pizzas demanded
