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Roger Moore ASU Beebe

For economists, the word "utility" means:

pleasure and satisfaction

When economists say that people act rationally in their self interest, they mean that individuals:

look for and pursue opportunities to increase their utility.

According to economists, economic self-interest:

is a reality that underlies economic behavior

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:

opportunity costs.

a person should consume more of something when its marginal

benefit exceeds its marginal cost.

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

which of the following most closely relates to the idea of opportunity cost


a well-tested economic theory is often called:

a principle

Who use both the economic perspective and the scientific method?


What are generalizations based on a careful observations of facts?

economic theories

in constructing models, economists

make simplifying assumptions

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

Macroeconomics approaches the study of economics from the viewpoint of:

the entire economy

the two general types of economic systems that exist today are:

market systems and command systems

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

Economic scarcity:

applies to all economies

Economic systems differ according to what two main characteristics?

who owns the factors of production, and the methods used to coordinate economic activity.

which of the following is a fundamental characteristic of the market system?

property rights

the pursuit of self-interest

gives direction to the market system

the regulatory mechanism of the market system is:


the division of labor means that:

workers specialize in various production tasks

specialization in production is economically beneficial primarily because it:

permits the production of a larger output with fixed amounts of resources.

what entails the exchange of goods for goods


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



Is Economic Profits considered an economic cost?


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.

what is a market

its an institution that brings together buyers and sellers

the law of demand states that

price and quantity demanded are inversely related

the demand curve shows the relationship between

price and quantity demanded

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 ____.

direct, inverse

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

the income and substitution effects account for

the downward sloping demand curve

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.:


DVD players and DVDs are

complementary goods

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 supply curve shows the relationship between

price and quantity supplied

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.

economists define saving as

that part of after-tax income which is not consumed

households in the aggregate use the largest share of their total income to:


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


in economics, a group of firms that produce identical or similar products is called an


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


which form of business enterprise accounts for the largest proportion of total output


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

an external cost or external benefit is also known as an


when externalities cause substantial positive benefits for third parties, a competitive market:

underallocates resources to the production ofthe good

the main characteristics of a public tgood are

nonrivalry and nonexcludability

as it relates to a public good, nonexcludability means that

free riders cannot be barred rom receiving the benefits

are street lights in a city considered a public good


government's economic role is complicated by the fact that

economic decisions are made in a a political context

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