More Review Questions Flashcards
The principle of increasing marginal opportunity costs state that the initial opportunity costs are:
Low but increase the more you concentrate on the activity
According to Adam smith, individuals are directed to do those things for which they have a comparative advantage by:
Their self interest
John can clean the house in 3 hours and do laundry in 4. Jane can clean in 2 and laundry in 2. Can they benefit by specialization?
Both can benefit because John has comparative advantage in cleaning (because if Jane does both she takes four hours if she does laundry she takes two and John takes 3)
A market economy:
Expects people to be self interested
Markets coordinate economic activity through:
Price mechanism
Government regulation of working conditions is an example of:
Government referee
The law of demand states that consumers buy more of a good when its price decline:
Provided all else remains constant
The explanation for the law of demand involves:
Consumers ability to substitute different goods
Explanation for demand for college education in US?
Income in US has risen
If the law requires apartment building owners to lower rent, the law of supply predicts that, other things constant, the:
Quantity of apartment units supplied will fall
What explains a decrease in the supply of squash ?
An increase in the price of other vegetables
When quantity supplied is greater than quantity demanded, prices tend to:
Fall
The marginal benefit of consuming another unit of a good:
Equals the increase in total benefits from consuming the unit
Government as an actor
Collects money in taxes and spends money in its own projects such as defense and education
Govt as a referee
Sets the rules that determine relations between businesses and households
