Economics Final

Created by HappyJackieP 

Upgrade to
remove ads

Exam 1

Questions

In economics, the basic problem is

scarcity

Which of the following is not an example of a capital resource? A. Mineral Deposit B. Machinery C. factory D. agricultural land E. employee

E. employee

The know-how and the means and methods of production available within an economy are known as

technology

What measures the market value of all final goods and services produced within an economy during a specific time period?

gross domestic product (GDP)

In recent decades, China has been transitioning from a ______ economy to a _______ economy

In recent decades, China has been transitioning from a command economy to a market economy

In a pure market economy, coordination of resource-use decisions is made through

markets

(T/F) Per capita real GDP is simply real GDP divided by the number of acres of land within a given economy

False

(T/F) Efficiency in production or full employment of resources is implied when an economies output lies inside its production possibilities curve

False

(T/F) Labor resources consist only of the efforts of past and present union members available for use in production processes

False

In a pure command economy, resource decisions are made

through centralized planning

In the market economy, decision making is

decentralized

If a decrease in the price of Wege Broken Pretzels leads to a decrease in the demand for Diorites, Wege Broken Pretzels and Diorites must be

substitute goods

You get a high paying job. As a result of your increased income, you buy more Maryland Blue Crab. For you, Maryland Blue Crab is a

normal good

A few months later, you get a layoff notice. As a result of your lower income; you buy more Ramen Soup. For you, Ramen Soup is an

inferior good

The Law of Demand suggests that

the lower the price of a good, the larger will be the quantity demanded, other things being equal

(T/F) Private property rights are an important feature of pure market economies

True

(T/F) In pure command economies, resources are owned and/or controlled by the state (the government), so there is always enough for everyone

False

(T/F) WHen the entire demand curve shifts in to the right, economists say there had been an increase in quantity demanded

False

When economists say the demand for a product has decreased, this means that consumers are now willing to purchase less of that product at each alternative price

True

A maximum allowable price for a good or service is a

price ceiling

Give an example of a price floor

minimum wage

The Law of Diminishing Returns says as additional units of a variable input are added to a given amount of a fixed input, increases in output eventually will

decline (the additional employees in the McDonald's example, too crowded, or the factory example)

When there are no externalities, equilibrium in a market

maximizes social well-being

When a change in satisfaction happens for someone other than the direct consumer of an item, what exists?

an externality in consumption

The optimal level of pollution control occurs when

MSB of control just equals MSC

Exam 2

Questions

In a private education market, what happens as educational tuition decreases?

the number of years of education demanded increases

Consumption of education is said to create

positive externalities in consumption

To be socially optimal, education should be provided to the point where MSB ___ MSC

Marginal Social Benefit = Marginal Social Cost

(T/F) The marginal benefit of education increases as a student completes more years of education

False

(T/F) Without public schools, there would be no K-12 education

False

(T/F) Economic forces unleashed by increased competition in K-12 education are beneficial to our schools

True

(T/F) The move from illiteracy to literacy has high marginal benefits

True

Government has attempted to alleviate poverty through (name 4)

income support programs, health care support programs, food and nutrition assistance programs, and housing assistance programs

One of the unintended consequences of paying Government subsidies to the poor is that

incentives to work may be reduced

(T/F) Income effect causes poor workers to increase their hours of work when they receive cash welfare assistance

False

Economically speaking discrimination results in

an actual GDP that is below potential GDP

What factors often contribute to wage differentials in our economy?

following

1

workers exhibit different degrees of experience and skill

2

some workers are more productive than others

3

the level of demand varies across markets for different products

4

prices of different products vary tremendously in a market economy

(T/F) The poverty problem within the United States is mostly absolute poverty, rather than relative poverty

False

(T/F) Relative poverty will seldom exist in a market-based economy

False

(T/F) A result of employment discrimination may be that some qualified people are not hired because of non-economic considerations such as race and sex

True

Firms that coordinate their actions to maximize joint profits are said to have formed a

cartel

A market with only one buyer or employer is called a

monopsony

In a product market with a cartel, prices will be ____ and output will be ___ than in a competitive market

In a product market with a cartel, prices will be higher and output will be lower than in a competitive market

The average baseball player earns an average salary greater than the average college professor because

baseball players generate more revenue for their employers

(T/F) Tickets and broadcast rights to football gamer are bought and sold in the product market

True

(T/F) The shortage of teams in professional sports is a primary reason that teams often relocate to new cities

True

(T/F) Professional sports leagues, like the NFL and others, were formed to increase economic competition between the teams

False

Concentration ration is used to measure

monopoly power

Profits represent the difference between

total revenue and total cost

(T/F) Barriers to entry encourage the entry of more new firms into a market

False

Exam 3

Questions

Describe an economy experiencing inflation

there is a continuing rise in the general level of prices

When inflation redistributes income from one group to another, its an example of what effect?

equity

Who is most likely to be hurt by inflation?

people on fixed incomes

Money functions as (3 things)

a measure of value, a store of value, and a medium of exchange

(T/F) The money supply consists primarily of gold, silver, and other precious metals held by the Chinese

False

(T/F) The use of wage and price controls during inflation will likely be a permanent solution to the problem

False

(T/F) The discount rate of interest that Federal Reserve Banks charge consumers with good credit

False

(T/F) Demand-pull inflation involves increases in total consumer, investment, and government spending

True

Why is economic growth an important economic and social issue?

following 3

1

Economic growth leads to improvements in our standard of living

2

Lower levels of unemployment and poverty can be achieved through economic growth

3

A growing economy provides consumers with more choices and opportunities

A country has a comparative advantage in the production of any good that it can produce

with smaller opportunity cost than can other countries

(T/F) Protectionists argue that world output is greatest if all countries are free to engage in voluntary trade

False

(T/F) Everyone in the economy immediately experiences net benefits from free international trade

False

(T/F) Both tariffs and quotas result in higher prices and lower quantities for consumers

True

(T/F) The index of leading economic indicators is used by economists to trigger changes in economic performance over time

False

(T/F) Investments in capital goods increase the economy's ability to produce consumer goods in the future

False

Tax incidence is the

burden or final resting place of tax

government expenditures in the form of money payments to people who have not contributed to the current production of goods and services are

transfer payments

What term describes erratic short-run fluctuations in economic activity around the long run growth trend?

business cycle

What happens at the end of every period of economic expansion?

peak

(T/F) Hyperinflation is severe and prolonged inflation that results in the value of money losing its acceptability as a medium of exchange

True

(T/F) Exogenous theories postulate that factors outside the economic system are responsible for short run economic fluctuations

True

The economic experts you see confidently making predictions on TV business networks

might not really know as much about the economic future as they say they do

The M2 money supply includes M1 plus

savings and time deposits of small denomination and money-market mutual funds

(T/F) The psychological law of consumption states that when income changes, consumption changes, but by less than the change in income

True

(T/F) The labor force includes all persons who are able and willing to work regardless of age

False

Vocabulary

Following

Chapter 1

Alleviating Human Misery, The Role of Economic Reasoning

labor resources

the physical and mental efforts of an economy's people that are available to produce goods and services

capital resources

all nonhuman ingredients of production. Capital resources can be further divided into natural and man-made categories

technology

the know-how and the means and methods of production available within an economy

gross domestic product (GDP)

the market value of all final goods and services produced within an economy during a specific time period. GDP ignores the issue of whether ownership of the resources used for the production is domestic or foreign.

production possibilities curve

graphical representation of the maximum quantities of two goods and/or services that an economy can produce when its resources are used in the most efficient way possible

opportunity cost principle

the true cost of production an additional unit of a good or service is the value of other goods or services that must be given up to obtain it

increasing opportunity cost

as more of a particular good or service is produced, the cost in terms of other goods or services given up grows. This gives the production possibilities curve its bow shape

marginal social cost (MSC)

the true cost (opportunity cost) borne by society when the production of a good or service is increased by one unit.

marginal social benefit (MSB)

the true benefit to society of a one-unit increase in the production of a good or service

cost-benefit analysis

a technique for determining the optimal level of an economic activity. In general, an activity should be expanded so long as the expansion leads to greater benefits than costs.

real GDP

GDP in current dollars corrected for inflation. The correction requires dividing each year's GDP in current dollars by that year's price index, in decimal form.

per capital real GDP

Real GDP divided by population

per capital GDP

GDP in current dollars divided by population

Chapter 2

Economic Systems, Resource Allocation, and Social Well-Being, Lessons from China's Transition

pure market economy

economic system based on private ownership and control of resources, known as private property rights, and coordination of resource-use decisions through markets

pure command economy

economic system characterized by state ownership and/or control of resources and centralized resource-use decision making

mixed systems

economics that combine elements of the pure market and pure command economies

transitional economy

a nation which is in the process of replacing an economic system of command and control with one based on market principles

purely competitive market

a market in which there are a large number of mobile buyers and sellers of a standardized product. Further, the price of the product is free to move up or down, and there are no obstacles preventing firms from entering or leaving the market

purely monopolistic market

a market in which there is only one seller of a product. THe monopolist has substantial control over price and is often able to prevent potential sellers from entering the market

imperfectly competitive markets

markets that fall between the purely competitive and the purely monopolistic extremes; they may exhibit characteristics of either or both of these extremes

demand

the quantity of the product that consumers are willing to purchase at various prices, other things being equal

the other things that must be equal

are following

1

the consumers' incomes

2

the prices of goods related in consumption

3

the consumers' tastes

4

the consumers' expectations

5

the number of consumers

law of demand

the lower the price of a good, the larger will be the quantity demanded; and the higher the price, the smaller will be the quantity demanded, other things being equal.

change in quantity demanded

a movement along one demand curve, brought about by a change in the price of the product

change in demand

a shift to an entirely new demand curve, brought about by a change in one or more of the factors assumed to be held constant

normal good

a good whose demand increases as incomes rise adn decreases as incomes fall; caviare

inferior good

a good whose demand decreases as incomes rise and increases as incomes fall; Ramen Noodles

substitute goods

two goods for which an increase in the price of one leads to an increase in the demand for the other; Coke and Pepsi

complementary good

two goods for which an increase in the price of one leads to a fall in the demand for the other: headphones and iPods

supply

the quantity of a product that sellers are willing to sell at various prices, other things being equal.

the other things that must remain equal

are following

1

the cost of production

2

the prices of goods related in consumption

3

sellers' expectations

4

the number of sellers

law of supply

the higher the price of the product, the larger will be the quantity supplied; and the lower the price, the smaller will be the quantity supplied, other things being equal

change in the quantity supplied

a movement along one supply curve, brought about by a change in the price of the product

change in supply

a shift to an entirely new supply curve, brought about by a change in one or more of the factors assumed to be held constant.

equilibrium price

the price at which the sellers of a product wish to sell exactly the same amount as the consumers wish to buy. As such, the equilibrium price indicates when consumers feel that precisely the correct share of the economy's scarce resources is devoted to producing the product

equilibrium quantity purchased

the quantity of the product that is actually exchanged at the equilibrium price.

Chapter 3

Government Control of Prices in Mixed Systems, What Are the Actual Outcomes?

price ceiling

maximum allowable price for a good or service, usually set by a government; rent controls

price floor

a minimum allowable price for a good or service, typically set by a governmental unit or by a group of sellers; minimum wage

derived demand for labor

the demand for labor is said to be dependent on, or derived from, the demand for the product being produced

marginal revenue product of labor

the increase in revenue that accrues to the firm when an additional worker is hired; indicates the value of the worker to the firm

marginal product of labor

the increase in output due to hiring an additional worker

marginal revenue

the increase in revenue from selling an additional unit of the product

law of diminishing returns

as additional units of a variable input are added to a given amount of a fixed input, the resulting increases in output will eventually decline; McDonald's too many workers

substitution effect

the change in the hours of work that occurs in response to a wage change, other things being equal

income effect

a measure of the change in the hours of work that occurs when there is a change in income, other things being equal

Chapter 4

Pollution Problems, Must We Foul Our Own Nests?

marginal private benefit (MPB)

the benefit that accrues to the direct consumers of a good or service resulting from a one-unit increase in consumption as reflected in the demand curve for the good or service.

externality in consumption

a change in satisfaction, which can be either positive or negative, for someone other than the direct consumer of an item

marginal social benefit =

marginal private benefit +/- externality

marginal private cost (MPC)

the increase in total cost that producers incur when output is increased by one unit as reflected in the supply curve for the good or service

externality in production

the production of one good or service leading to cost changes, either positive or negative, in the production of other items

See More

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions above and try again

Example:

Reload the page to try again!

Reload

Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

Star this term

You can study starred terms together

NEW! Voice Recording

Create Set