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The scientific method is...

the dispassionate development and testing of theories about how the world works

In the circular-flow diagram,

labor flows from households to firms

Where can an economy not produce?

outside its production possibilities frontier

In a certain economy, jam and bread are produced, and the economy currently operates on its PPF. Which of the following events would allow the economy to produce more jam and more bread, relative to the quantities of those goods that are being produced now?

The economy experiences economic growth

Which of the following trade-offs does the PPF illustrate?

once an economy has reached the efficient points on its PPF, the only way of getting more of one good is to get less of the other

In the simple, circular-flow diagram, the participants in the economy are

households and firms

A microeconomist as opposed to a macroeconomist might study

the effect of rising oil prices on employment in the airline industry

The bowed shape of the PPF can be explained by the fact that

the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing

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

the supply curve shifts

If the number of sellers in a market increases, then the

supply in that market will increase

An improvement in technology will shift the

supply curve to the right.

Which of the following demonstrates the law of supply?

When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup.

Most markets in the economy are

highly competitive

Regan grows flowers and makes ceramic vases. Jayson also grows flowers and makes ceramic vases, but Regan is better at producing both goods. In this case, trade could

benefit both Jayson and Regan.

An economy's PPF is also its consumption possibilities frontier

when the economy is self sufficient

Pocoyo bakes cookies and Pato grows vegetables. In which of the following cases is it impossible for both Pocoyo and Pato to benefit from trade?

Pocoyo does not like vegetables and Pato does not like cookies.

Which of the following is not a reason people choose to depend on others for goods and services?

to allow people to produce outside their PPF

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

cannot be determined from the information given

Suppose your college institutes a new policy requiring you to pay for a permit to park your can in a campus lot.

The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise.

Guns and butter are used to represent the classic societal tradeoff between spending on

national defense and consumer goods.

Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This illustrates the basic concept that

people face trade-offs.

Canada and the U.S. both produce wheat and computer software. Canada is said to have the comparative advantage in producing wheat if

the opportunity cost of producing a bushel of wheat is lower for Canada than it is for the U.S.

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

5 chairs for Mike and 3 chairs for Sandy

Two individuals engage in the same two productive activities. In which of the following circumstances would neither individual have a comparative advantage in either activity?

One individual's opportunity costs are the same as the other individual's opportunity cost.

A decrease in quantity demanded

results in a movement upward and to the left along the demand curve

Most studies indicate that tobacco and marijuana tend to be


If a decrease in income increases the demand for a good, the demand is an

inferior good

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

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

If suppliers expect the price of their product to fall in the future, then they will

increase supply now

An increase in supply is represented by

rightward shift of a supply curve

A rightward shift of a supply curve is called an

increase in quantity supplied

When supply and demand both increase, equilibrium

price may increase, decrease, or remain unchanged

Another term for equilibrium price is

market-clearing price

A decrease in the price of a good will

increase quantity demanded

If the number of buyers in a market decreases, then

demand will decrease

An increase in the price of a good will

decrease demand

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer, you should make your choice by comparing

the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs

For a college student who wishes to calculate the true costs of going to college, the costs of room and board

should be counted only to the extent that they are more expensive at college then elsewhere

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