Econ 40 - Exam 1 Ch. 01, 02, & 03
Terms in this set (43)
In the study of economics, the concept of "scarcity":
is defined as the inability to satisfy all humans wants.
What is the fundamental problem that societies face and economists study?
how societies allocate limited resources to satisfy as many human wants and needs as possible.
In the Wealth of Nations, Adam Smith argued that ______________ would increase productivity and the amount of output societies can produce from their scarce resources.
specialization and the division of labor
"Microeconomics" includes the study of the:
decisions made by individual consumers in product markets
Which of the following is not one of the three economic questions (or decisions)?
When and where should goods and services be produced?
An economic system where the basic economic questions are answered through the interaction of individual buyers and sellers based on prices is best described as:
a market economy.
As economists use the term, a "market" is defined as:
an institution that brings to together buyers and sellers of goods and services.
The basic circular flow diagram of a market economy includes:
firms, households, resource (labor) markets, and product (goods & services) markets.
In the basic circular flow diagram of a market economy:
all of the above. Firms receive expenditures (payments) from households in the product market.
Households receive goods & services from firms in the product market.
Households receive incomes (wages) from firms in the labor market.
A simplified representation of how two or more economic variables interact with each
other is called an economic:
When examining economic data, two variables are directly (positively) related when the
one variable increases as the other increases.
The graph of a direct (positive) relationship between two variables will show:
an upward-sloping line.
In the study of microeconomics, the "opportunity cost" of a choice is measured in terms
value of the best alternative given up when we make the choice.
From the perspective of economic analysis, the decision to go to graduate school will be a
rational one for a college student if:
the marginal benefit of graduate school exceeds the marginal cost of graduate school.
In the study of microeconomics, the goal of an individual (consumer) is:
to maximize their utility subject to their budget constraint.
A consumer's "budget line" illustrates:
the possible combinations of two goods they can buy, given their income and the prices
of both goods.
In economics, the concept of "utility":
refers to the satisfaction individuals receive from consuming goods and services
"Diminishing marginal utility" means that an increase in the consumption of a good
a decrease in additional utility from the consumption of the good.
If the economy (represented by the PPF graph above) is operating with full employment
and full efficiency, it will be at point:
any of the above - points A, B and C all represent full employment and full efficiency.
If the economy (represented by the PPF graph above) is operating with some
unemployment and/or inefficiency in its use of resources, it will be at point:
If the economy (represented by the PPF graph above) moved from point B to point C:
it would experience an opportunity cost equal to the number of SUVs it would give up.
According to the Production Possibilities model, which of the following will cause a
Production Possibility Frontier (PPF) to shift outward?
an increase in the economy's resources and/or technological change.
"Allocative efficiency" occurs when:
the mix of goods produced represents the mix that society most desires.
In The Wealth of Nations, Adam Smith used the concept of the "invisible hand" to argue
that if markets are competitive:
self interested individual choices will lead to outcomes that have positive social
In the equation Y = f (X):
Y is the dependent variable.
A "demand schedule" is table illustrating:
the relationship between price and quantity demanded.
The "law of demand" states that:
there is an inverse relationship between price and quantity demanded.
If everything else stays the same, a decrease in the price of smart phones will ___ of smart phones.
increase the quantity demanded.
Which of the following would cause an increase in the demand for smart phones?
a successful advertising campaign on the advantages of using smart phones.
If the price of cream cheese decreases and the demand for bagels increases, this tells us that cream
cheese and bagels are:
If consumers of generic macaroni & cheese experience an increase in their incomes and the demand for generic macaroni & cheese decreases, this tells us that generic macaroni & cheese:
is an inferior good.
The "law of supply" states that there is:
a direct relationship between price and quantity supplied.
If everything else stays the same, a decrease in the price of laptop computers will ____ of laptop
decrease the quantity supplied
Which of the following would cause a decrease in the supply of laptop computers?
an increase in the labor costs for producing laptop computers.
If a market is experiencing "equilibrium," this means that at the current price of the product:
all of the above. a. the quantity demanded is equal to the quantity supplied.
b. the demand curve and supply curve intersect.
c. there is no surplus or shortage.
A "shortage" of tomatoes at the farmer's market means that:
at the current price of tomatoes, the quantity demanded is greater than the quantity supplied.
A "surplus" of tomatoes at the farmer's market means that:
at the current price of tomatoes, the quantity demanded is less than the quantity supplied.
A technological advance that makes it cheaper to produce electric cars will:
increase the supply of electric cars, decreasing price and increasing quantity.
If buyers in the market for luxury homes experience an increase in their incomes:
the demand for luxury homes will increase, increasing both price and quantity.
If the producers of cotton shirts face higher cotton prices, this will:
decrease the supply of cotton shirts, increasing price and decreasing quantity
According to the Pew Research Center, more and more people prefer to get their news from online
and digital sources. How will this change impact the market for print newspapers?
the demand for print newspapers will decrease, decreasing both price and quantity.
When a policy establishes a "price floor" in a market:
the price of the product is set above the equilibrium price, causing a surplus.
____________ are an example of a policy establishing a "price floor":
agricultural price supports
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