Exam 1 Review

Created by SarahSep06 

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Which of the following is the best definition of economics

The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided

Opportunity cost is

that which we forgo, or give up, when we make a choice or a decision

The reason that opportunity cost arise is that

resources are scarce

An efficient market is a market

in which profit opportunities are eliminated almost instantaneously

The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units is

microeconomics

Inflation and unemployment

are a focus of macroeconomics

To isolate the impact of one single factor, economists invoke the assumption of

ceteris paribus

Capital, as economists use the term

refers to things that have already been produced that are in turn used to produce other goods and services

according to the theory of comparative advantage, specialization and free trade will benefit

all trading parties, even when some are absolutely more efficient producers than others.

Someone has a comparative advantage in producing a good if they can produce that good

at a lower opportunity cost

Periods of less than full employment correspond to

points underneath the production possibility frontier

The production possibility frontier is used to illustrate the concept of

opportunity costs

The production possibility frontier is a graph that shows

all the combinations of goods and services that can be produced if all of society's resources are used efficiently

As more of a good, such a s television sets, is produced, the opportunity costs of producing it increases. This most likely occurs because

resources are not equally well suited to producing all goods and as more of a good is produced it is necessary to use resources less well suited to the production of that good.

refer to figure 2.6. which of the following will NOT cause the production possibility frontier to shift from ppf1 to ppf2?

a decrease in the unemployment rate

Which of the following will NOT cause a shift in the demand curve for compact discs?

a change in the price of compact discs

According to the law of demand, as prices rises, ceteris paribus

quantity demanded decreases

Refer to figure 3.1. Which of the following would be most likely to cause the demand for Dr. Pepper to shift from D0 to D1?

a decrease in income, assuming that Dr. Pepper is a normal good

Suppose the demand for books goes down when the price of video games goes down. We can say that these two goods are

substitutes

A decrease in demand for cameras would likely be caused by

an increase in the price of a complementary good

Demand for one item goes down when the price of another item goes up. These items must be

complements

According to the law of supply, there is a

positive relationship between price and the quantity of a good supplied

If the price of chili increases, there will be ___ of chili cheese fries.

a decrease in the supply

Refer to figure 3.14. An increase in supply is represented by the movement from

S2 to S3

Refer to figure 3.16. The supply curve for hula hoops shifts from S0 to S1. This could be caused by

a decrease in the number of firms selling hula hoops

Refer to Table 3.1. This market will be in equilibrium if the price per pizza is

$9

Refer to Table 3.1. If the price per pizza is $12, the price will

decrease because there is an excess supply in the market.

Which of the following will definitely occur when there is an increase in demand for and a decrease in supply of milk?

an increase in equilibrium price

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