When economists say that people act rationally in their self interest, they mean that individuals:
look for and pursue opportunities to increase their utility.
Joe sold gold coins for $1000 that he bought a year ago for $1000. HE says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, b/c he could have received a 3% return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:
economics may be best defined as the:
social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.
The study of economics is primarily concerned with:
choices that are made in seeking the nest use of resources.
the economic perspective refers to:
the making of purposeful decisions in a context of marginal costs and marginal benefits.
marginal costs exist because:
the decision to engage in one activity means forgoing some other activity
the assertion that "There is no free lunch" means that:
all production involves the use of scarce resources and thus the sacrifice of alternative goods.
if someone produced too much of a good, this would suggest that:
the good was produced to the point where its marginal cost exceeded its marginal benefit.
Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact:
implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.
Which of the following is an economic explanation for why most college-aged movie stars do not attend college
the opportunity cost in terms of reduced income is too great
the basic purpose of the other-things-equal assumption is to:
allow one to reason about the relationship between variables X and Y without the intrusion of variable Z
the term laissez faire suggests that:
government should not interfere with the operation of the economy
Economic systems differ according to what two main characteristics?
who owns the factors of production, and the methods used to coordinate economic activity.
specialization in production is economically beneficial primarily because it:
permits the production of a larger output with fixed amounts of resources.
the coincidence-of-wants problem associated with barter refers to the fact that:
for exchange to occur each seller must have a product that some buyer wants
if competitive industry Z is making substantial economic profit, output will:
expand in industry Z as more resources will move to that industry.
From society's point of view the economic function of profits and losses is to:
reallocate resources from less desired to more desired uses.
In a market economy a significant change in consumers' desire for product X will:
(1) alters the profits or losses received by certain firms
(2) cause a reallocation of scarce resources
(3) cause some industries to expand and others to contract
what are essential to the reallocation of resources from less desired goods to more desired goods.
economic profits and losses
In a competitive economy prices
(1) influence consumers in their purchases of goods and services.
(2) influence businesses in their purchases of economic resources
(3) influence workers in making occupational choices.
the competitive market system
encourages innovation because successful innovators are rewarded with economic profits.
economists use the term demand to refer to
a schedule of various combinations of markey prices and amounts demanded
the relationship betweeen quantity supplied and price is ___ and the relationship between quantity demanded and price is ____.
when the price of a product increase, a conwumer 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:
the substitution effect
the construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is.:
the demand curve for a product might shift as the result of a change in
consumer tastes, consumer incomes, & the prices of related goods
when an economist says that the demand for a product has increased, this means that:
consumers are now willing to purchase more or theis product at each possible price.
the law of supply indicates that
producers will offer more of a product at high prices than they will at low prices
the personal distribution of income regers to the
way income is distributed among specific households or spending units
the functional distribution of income refers to the
distribution of income to basic resource classes, that is wages rents, interest, and profits.
listed in descending order of relative size, households divide their total incomes among:
comsumption expenditures, taxes, and saving.
in economics, a physical establishment such as a factory, farm, mine, store, or warehouse that performs one or more functions ina fabricating and distributing goods is called a
a firm that produces a single product but owns plants in many differnt stages of the production process for example, a steel producer that owns iron ore mines and rolling mills-best illustrates a :
vertically intergrated firm
a firm comprised of plants or units operating in differnt industries, say, beer and theme parks, best illustrates a:
which form of business enterprise accounts for the largest number of firms in the united states
government may lessen income inequality by
providing transfer payments to the poor, directly modify market prices as, for example, by establishing a legal minimum wage, and using the tax system to tax the wealthy relatively more eavily than the poor
negative externalities arise:
when firems "use" resources without being compelled to pay for their full costs.
positive externalities benefits reger to
benefits that accrue to parties other than the producer and buy of a good
when externalities cause substantial positive benefits for third parties, a competitive market:
underallocates resources to the production ofthe good
as it relates to a public good, nonexcludability means that
free riders cannot be barred rom receiving the benefits