Econ Test 1

Created by SeanNeely 

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Understand that the opportunity cost of attending college is very high

High-school athletes who skip college to become professional athletes

equality refers uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources

The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that

are well aware that the opportunity cost of college is very high

College age athletes who drop out of college to play professional sports

benefit of leaving was greater than the marginal cost

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal

opportunity cost

What you give up to obtain an item is called your

the price of the ticket you pay and the value of your time

When computing the opportunity cost of attending a concert you should include

it is more important to distinguish between the long run and the short run

When studying the effects of changes in public policy, economists believe that

the diagram leaves out the details that are not essential for understanding the economic transactions that occur between households and firms

Which of the following statements about the circular flow diagram is correct?

is a normative statement

A statement describing how the world should be

Macroeconomics and Microeconomics

The field of economics is traditionally divided into two broad subfields

makes positive statements

You know an economist has crossed the line from policy advisor to scientist when he or she

it is impossible to produce more of one good without producing less of the other

An economies production of two goods is efficient if

output

In the circular flow diagram, another name for goods and services produced by firms is

firms provide households with output

In the markets for goods and services in the circular flow diagram,

Both the equilibrium price and quantity would increase

If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins falls?

supply of baskets will decrease

If sellers expect higher basket prices in the near future, the current

shifted to the left

When quantity demanded decreases at every possibly price, the demand curve has

a surplus of a good

What would cause price to decrease?

an increase in the price of the complement

Which of the following might cause the demand curve for an inferior good to shift to the left?

how much of a good all buyers are willing and able to buy at each possible price

A market demand curve shows

Both the equilibrium price and quantity would increase

What would happen to the equilibrium price and quantity of lattés if consumers' incomes rise and lattés are a normal good?

decrease in quantity demanded

A movement upward and to the left along a demand curve is called an

price and quantity supplied

The supply curve for a good is a line that relates

an increase in the price of American cheese

If American cheese and cheddar cheese are substitutes, then which of the following would increase the demand for cheddar cheese?

price of good x increases

Good X and Y are substitutes. If the price of good Y increases, then the

the supply curve shifts

If something happens to alter the quantity supplied at any given price, then

increase quantity supplied

An increase in the price of the good will

numerous buyers and sellers

When all market participants are price takers who have no influence over prices, the markets have

the equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous

What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce steamed milk, which is used to make lattés, and scientists discovered that lattés cause heart attacks?

the United States should produce more pork than what it requires and export some of it to Mexico

Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that

Normative statement

"Allowing all individuals access to Medicare and Medicaid for health insurance is the fair thing to do" is an example of a

households provide firms with labor, land, capital,

In the markets for factors of production in the circular flow diagram

assumptions

Economic models are built with

dollars spent on goods and services

In the circular-flow diagram, which of the following items flows from households to firms through the markets for goods and services?

makes positive statements

You know an economist has crossed the line from policy advisor to scientist when he or she

the flow of dollars between sellers of jewelry and clothing and buyers of jewelry and clothing

A certain production possibilities frontier shows production possibilities for two goods, jewelry and clothing. Which of the following concepts cannot be illustrated by this model?

circular flow diagram

A model that shows how dollars flow through markets among households and firms is called the

an expectation by firms that the price of tennis racquets will increase in the very near future

Which of the following would cause the supply curve to shift from Supply B to Supply A in the market for tennis racquets?

price takers

Buyers and sellers who have no influence on the market price are referred as

competitive market

If a firm is price taker, it operates in a

wheat

An example of a perfectly competitive market would be the market for

New medical evidence has been released that indicates a negative correlation between a persons beef consumption and life expectancy

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?

price will rise

Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils rises, consumers experience an increase in income, writing in ink becomes fashionable, people expect the price of pens to rise in the near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers increase?

decrease the number of skis sold

Holding all other things constant, a higher price for ski lift tickets would

below the equilibrium price, and quantity demanded is greater than quantity supplied

If a shortage exists in a market, then we know that the actual price is

horizontally summing individual supply curves

A market supply curve is determined by

a decrease in the price of wool shirts and a decrease in the price of raw cotton

Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts?

a change in the price of the good or service

Which of the following changes would not shift the demand curve for a good or service?

Jim as a comparative advantage in the production of baseball bats

Suppose Jim and Tom can both produce baseball bats. If Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, then

Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources

Which of the following statements about comparative advantage is not true?

5 chairs for Mike and 3 chairs for Sandy

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 table is

3.5 mixers and 6 toasters

Assume that Maya and Miguel each has 40 hours available. If each person divides his/her time equally between the production of mixers and toasters, then total production is

He should complete the repair and sell the boat for $900

George has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $900 once the repairs are complete. George discovers that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $900 to potential buyers. He can sell the boat as it is now for $400. What should he do?

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