Macro Final Review from Tests Test 1 When economists say the supply of a product has increased they mean the o Supply curve has shifted to the right According to the law of supply o More of a good will be offered by suppliers as the price rises A rational decision maker takes an action if and only if o The marginal benefit of the action exceeds the margin cost of the action Why are people willing to pay more for a diamond than for a bottle of water o Because the marginal benefit of an extra diamond far exceeds the marginal benefit of a bottle of water If an airline company has several empty seats on a flight and the full price of an air ticket is 500 and the marginal cost per passenger is 100 then it will be profitable for the airline to o Charge a stand by passenger more than 100 The difference between positive economic statements and normative economic statements is that based on opinion o Positive statements are based on fact while normative statements are Which of the following is a major implication of the invisible hand concept o When directed by competitive market prices the actions of self interested individuals will tend to promote overall economic prosperity An improvement in a country s legal system that enhanced the ability of citizens to protect their property rights and enforce contracts would result in which of the following changes to the country s production possibilities curve o An outward shift of the curve If an economy uses its resources inefficiently this situation would be illustrated on a production possibilities diagram as o Operating at a point inside the production possibilities curve In a competitive market economy a resource in short supply will be allocated o To those firms that can make the most profitable use of it If a surplus exists in a market we know that the actual price is o Above equilibrium price and quantity supplied is greater than quantity demanded Which of the following would most likely cause both a decrease in the price of plasma screen TVs and a decrease in the number sold o A decrease in the demand for plasma screen TVs Which of the following is true of private ownership o Private ownership links responsibility with the right of control Which of the following would be most likely to increase your opportunity cost of attending college o Receiving a very attractive offer to start a job today that would permit you to earn about 50 percent more than you expected to make after graduation If there is an increase in both the supply and demand for a good which of the following will definitely occur o The equilibrium quantity will increase If there is both an increase in the supply of a good and a decrease in demand for a good which of the following will definitely occur o The price of the good will decrease Economic debates that focus on the distribution of a nation s income are generally associated with which basic economic question o For whom will the goods be produced If Crusoe and Friday want to maximize their consumption possibilities o Crusoe should specialize in producing good X and Friday in producing good Y trade should occur to maximize joint consumption According to the law of comparative advantage o Individuals and nations gain when they specialize in producing those items for which they are low opportunity cost producers and exchange for other desired goods they can t produce as cheaply The fallacy of composition is the incorrect view that o If something is true for the individual then it must be also true for the A decrease in the expected future price of a good will cause the current group demand for the good to o Decrease which is a shift to the left of the demand curve In which statement s are demand and quantity demanded used correctly o I An increase in the price of coffee will reduce the quantity o II An increase in the price of coffee will reduce the demand for demanded for coffee creamer used in coffee Both statements Which of the following best represents the effects of a decrease in the price of tomato juice other things being equal o A downward movement along the demand curve for tomato juice Which of the following is the best description of the scientific method in economics o The unbiased development and testing of theories about how the world works Henry Ford made millions of dollars producing and marketing automobiles Many workers and consumers must have suffered in order for Ford to amass such enormous wealth The person who made this observation o Failed to understand that specialization and exchange generally result in mutual economic gain Test 1 Clickers Basic ingredients in any economic decision o Scarcity and choice When a good is scarce o Human desire for the good exceeds the amount freely available from nature The term marginal refers to which of the following o The change or difference between two alternatives The unintended consequence of an economic change that are not immediately identifiable but are felt only with time are known in economics as o Secondary effects What are transaction costs negotiate an exchange 7 000 which is true o The time effort and other resources needed to search out and Han values a ship a 4 000 and Lando values it at 9 00 Lando buys it for o Han gains 3 000 of value and Lando gains 2 000 value When private ownership is defined and enforced the private owner o Has strong incentive to use that resource wisely Increase amount of output for the same amount of inputs would be illustrated as o An outward shift of the curve Opportunity costs differ among nations because o Nations have different endowments of land labor skills etc When voluntary trade occurs o Both people gain some value The curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price o Demand curve The demand for a good refers to the amount of the good people o Are willing to buy at various prices When quantity demanded of a product has increased they mean o Price of the product has fallen and consequently consumers are buying more of it Demand for a product has decreased they mean o The demand curve has shifted to the left According to the law of supply When does a shortage occur o More of a good will be offered by supplies as the price rises o When prices is less than equilibrium price Ceteris paribus an increase in the price of a good will cause the o Quantity supplied of the good to increase When economists say the supply of a product has
View Full Document
Unlocking...