Test 1 - application Flashcards
What are the 3 incentives for society?
moral, social, and material (economic)
What are the factors of production?
land, labor, capital, entrepreneurial ability, and technology
Why is the productions possibility curve curved?
Law of increasing opportunity costs/law of diminishing marginal returns
Why would production fall under the PPC?
unemployment, inefficiency, or discrimination
Why would production fall over the PPC?
overextending resources or trade
What happens when the PPC is not held constant?
resources improve, growth, curve pushes out
A reduction in unemployment would cause the PPC to…
grow from UNDER the curve towards the curve
New jobs would cause the PPC to…
Grow/push out
What would cause the PPC to shrink?
disasters
What are the determinants of demand?
- taste and preferences
- income
- price/availability of related goods
- # of buyers
Why is the demand curve downward sloping?
- diminishing marginal utility
- income, opportunity to buy
- people will find alternatives if prices are too high
An increase in which determinants of demand will move the demand curve out for normal goods?
income, compliments, and number of buyers
An increase in which determinants of demand will move the demand curve in for normal goods?
substitutes
A decrease in income will push the demand curve out in what circumstances?
for inferior goods
What are the determinants of supply?
price/availability of inputs and technology
Maria has $20 and can either go to a concert or go to a movie. She chooses the concert. What is her opportunity cost?
The money spent on & time spent at the concert
A coffee shop lowers prices and sees an increase in customers. Is this a microeconomic or macroeconomic concept?
microeconomic
A car factory assigns workers to specialize in one task, such as installing doors. How does this affect productivity?
Increases efficiency by reducing time lost switching tasks, leading to higher output
A technological breakthrough improves farming techniques, allowing more food production. How will this affect the PPC?
The PPC will shift outward, showing economic growth
Due to a natural disaster, a country’s factories are destroyed. How will this affect the PPC?
The PPC will shift inward, showing a loss of production capacity.
John eats three slices of pizza. He enjoys the first slice a lot, the second slightly less, and the third even less. What economic principle does this illustrate?
diminishing marginal utility
The price of beef rises sharply. How might this affect the demand for chicken?
The demand for chicken will increase as consumers substitute beef with chicken
A factory producing smartphones experiences a major labor shortage. What happens to the supply of smartphones?
The supply decreases, shifting the supply curve to the left.
The government imposes a price ceiling on rent in a city. What is a likely consequence?
a housing shortage
The demand for a good increases, and at the same time, the supply decreases. What happens to equilibrium price and quantity?
Price rises, but quantity is uncertain (depends on the relative size of the shifts).
A new fashion trend causes a surge in demand for vintage clothing. What happens to the equilibrium price and quantity?
Both increase—higher demand shifts the curve right, raising both price and quantity.
If the production possibilities frontier for a given country increased (i.e. shifted up and to the right), what would this mean?
the country could produce more goods and services
What would cause an increase in demand for economics textbooks?
an increase in the number of students enrolled in college econ classes
The difference between the minimum price that a firm must receive in order to produce a good and the market price is also known as
producer surplus
Assume that you are willing to pay as much as $12 to see the remake of “Robocop,” which hits theaters later this month. You decide to see the movie with two friends who are willing $10 and $9, respectively, to see the movie. If a ticket to the movie costs $8, what is the total consumer surplus for all three of you?
$7
During the fall of each year, starting just after Labor Day, the price of gasoline tends to decrease, and fewer gallons of gasoline are sold. This is most likely due to
a decrease in the demand for gasoline
What type of statement is “if we provide a basic income to all living people, world hunger will decrease”?
positive
Douglas entered the Air Force’s Officer Candidate School (AFOCS) after graduating from Clemson. Had he not entered the AFOCS, Douglas would have attended business school (he was accepted by Duke). Had he not been accepted by either the Air Force or Duke, he would have gone to work for his father. The opportunity cost of his going to AFOCS was…
attending Duke Business School
Suppose you know the following facts: (i) UT has just won the national championship and the nation is going crazy, and (ii) a new technology has lowered the cost of producing orange dye. What would be the effect in the market for orange t-shirts?
The equilibrium quantity would rise but the effect on equilibrium price is uncertain
The price of jelly rises, what will likely happen to the price of peanut butter?
it will decrease
You want to purchase two pizzas. The price is $8 per pizza, 2 for $15, 3 for $20. What will be the marginal cost to you of buying a third pizza?
$5
If Switzerland can make 35 pounds of chocolate or 5 watches while Albania can make 6 pounds of chocolate or 1 watch, who has the comparative advantage?
Switzerland has the comparative advantage in chocolate; Albania in watches
If you’ve bought an $80 sticker to park on campus, and you plan to park on campus eighty times before the semester ends, the marginal cost to you each time you park is
$0
sunken cost fallacy- you’ve already paid!
Which of the following is an example of a scarce good: Coca Cola, Big Macs, Water, Diamonds
All are scarce goods
