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According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because:
people are greedy.

there are limited resources, and unlimited wants.

In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:

scarcity and opportunity costs.

Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

Holly's statement is normative, but Ben's is positive.

Which of the following do economists consider to be capital?

a construction crane

Assume that a change in government policy results in greater production of both consumer goods and investment goods. We can conclude that:

the economy was not employing all of its resources before the policy change.

If an economy is operating on its production possibilities curve for consumer goods and capital goods, this means that:

more consumer goods can only be produced at the cost of fewer capital goods.

A nation's production possibilities curve might shift to the left (inward) as a result of:

the depletion of its soil fertility due to overplanting and overgrazing.

Examples of command economies are:

Cuba and North Korea.

The term laissez-faire suggests that:

government should not interfere with the operation of the economy.

Specialization in production is important primarily because it:

results in greater total output.

The "coincidence of wants" problem associated with barter refers to the fact that:

in order for an exchange to occur each seller must have a product that some buyer wants.

In a market economy a significant change in consumers' desire for product X will:

alter the profits or losses received by suppliers of product X.
cause a reallocation of scarce resources.
cause some industries to expand and others to contract.

In a market economy the distribution of output will be determined primarily by:

the quantities and prices of the resources that households supply.

Two major virtues of the market system are that it:

allocates resources efficiently and allows economic freedom.

"Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfill the output quantities specified in the central plan caused a chain-reaction of adverse repercussions on production." This quotation best identifies the:
incentive problem under central planning."

coordination problem under central planning.

Business' provide resources to households'.
Households' provide resources to business'.
This is known as the

resource market

The law of demand states that, other things equal:

price and quantity demanded are inversely related.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the

income effect.

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes:
an inferior good.

the substitution effect.

If X is a normal good, a rise in money income will shift the

demand curve for X to the right.

Change in quantity demanded

Movement along the curve!

Change in demand

Shift to the left, or right

Other things equal, if the price of a key resource used to produce product X falls, the:

product supply curve of X will shift to the right.

Allocative efficiency refers to

the production of the product mix most wanted by society.

Ticket scalping:

creates economic gains for both buyers and sellers.

A public good:

is available to all and cannot be denied to anyone.

Supply-side market failures occur when:

the demand and supply curves don't reflect the full cost of producing a good or service.

Consumer surplus:

is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.

producer surplus is represented by areas:

The the bottom left hand triangle, under the equilibrium price!

Which of the following conditions does not need to occur for a market to achieve allocative efficiency?

The total revenue received by producers equals the total cost of production.

Alex, Kara, and Susie are the only three people in a community and Alex is willing to pay $20 for the 5th unit of a public good; Kara, $15, and Susie, $25. Government should produce the 5th unit of the public good if the marginal cost is less than or equal to:


Refer to the above diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production, including external costs. Assume that the number of people affected by these external costs is large. Without government interference, this market will reach:

an overallocation of resources to this product.

If a good that generates positive externalities were produced and priced to take into account these spillover benefits, then its:

price and output would increase.

Darcy and Rachel live down the hall from each other in the same dorm. Darcy likes to play her music loudly down the hall, and Rachel finds the music annoying. A Coase theorem solution for this problem would be for:

Darcy and Rachel to negotiate a mutually agreeable level of volume and/or selection of music.

In a cap-and-trade program

government fixes the maximum amount of a pollutant that firms can discharge and issues permits that firms can buy from and sell to each other.

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