Economics is the study of
How people, institution, ans society make choices under conditions of scarcity
The term scarcity in economics refers to the fact that
no country can produce enough products to satisfy everyodys economic wants
From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the
marginal benefits of more insurance coverage are greater than the marginal cost.
Economic models do not reflect the full complexity of reality and instead are based on:
The Purpose of the ceteris paribus assumption used in economic analysis is to:
restrict the analysis to the effect of a single economic factor
Which question is an example of a microeconomics question?
Will the merger of two airlines likely lead to higher airline ticket prices?
Which would be considered a macroeconomic study? A study of the effect of
government spending to increase employment
If a consumer has an income of 200, the price of X is 5, and the price of Y is 10. the maximum quantity of X the consumer is able to purchase is
Assume that a consumer purchases two products and there is an increase in the consumer's money income. All other things equal, the most likely effect is:
an outward shift in the budget line because the consumer can now purchase more of both products
Which is not consider to be an economic resource?
When an economy is at full employment and full full production, more of any one product:
can be produced only if there is a less production of some other products
On a production possibilities curve, the single optimal or best combination of output for any society:
depends upon the preferences of society
the productive possibilities curve
is the boundary between attainable outputs
If an economy is producing at a point inside of a production possibilities curve
resources are unemployed
Which statement is an economic rationale for the law of increasing opportunity cost?
Many economic resources are better at producing one product than another
opportunity cost is best defined as
the value of the best foregone alternative
A nation can increase its production possibilites by
improving labor productivity
Another term for capitalism is
the market system
Legal ans social rules that affect the ownership of property are
Consumers express self-interest when they
seek the lowest price for a product
competition denotes a condition where
there are many independent buyers and sellers in a market.
Advantages of specialization do not include
consumer sovereignty and "dollar votes" are most related to which fundamental question about a competitive market system
What goods and services will be produced?
From society's point of view, the economic function of profits is to
direct resources in response to changes in the economy
the idea that firms ans resource suppliers in seeking to further their own self interests in a competitive market economy also simultaneously promote the public or social interest is a description of
the "invisible hand"
The influential book written by Adam Smith was
The Wealth of Nations
In the circular flow model, households
buy products ans sell resources
the circular flow model:
illustrates the interdependence of business ans consumers
What is the largest source of earned income for U.S. households
Wages and salaries
The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is____
When the price of a product increase , a consumer is able to buy less of it with a given money income. This describes
the income effect
When product prices change, consumers are inclined to purchase larger amounts of the now cheaper products ans less of the now more expensive products. this describes
the substitution effect
If X is normal good, a rise in money income will shift they:
demand curve for X to the right
When an economist says that the demand for a product has increased, this means that:
consumers are now willing to purchase more of this product at each possible price.
The law of supply indicates that
producers will offer more of a product at high prices that they will at low prices
An improvement in production is production technology will
shift the supply curve to the right
The equilibrium price
There are pressures on price to either rise or fall
At the current price there is a shortage of a product. We would expect price to
increase, quantity demanded to decrease, and quantity supplied to increase
When price of a product is increase 10 percent, the quantity demanded decreases 15 percent. in this range of prices, demand for this product is
A straight line downward sloping demand curve has a price elasticity of demand which:
decreases as price decrease
When the demand for a good is price-elastic at a given output level
total revenue for the good will increase if its price decrease
Which will cause a demand curve to be relatively elastic?
The time interval considered is large
If demanded for farm crops is inelastic, a good harvest will cause farm revenues to:
decrease because of a percentage fall in price greater than the percentage increase in quantity sold.
When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition
have inelastic demand and students who use financial aid have elastic demand
A positive income elasticity of demand coefficient indicates that
a product is normal good
For complementary goods, the coefficient of the cross price elasticity of demand is
Market failure occurs when
the competitive market system under- or over allocates resources to production goods
What are the two characteristics that differentiate public goods from private goods
non rivalry and non excludability
If a tax takes a larger percentage of a high income that it takes of a low income, the tax is said to be a