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Terms in this set (68)
What are economists referring to when they say "choosing is refusing"?
Because of scarcity, every decision involves a...
A basketball coach is performing a cost/benefit analysis in order to determine if more hours of practice would help the team score more points. The coach's action is an example of...
The phrase "guns or butter" expresses the idea that...
Government decisions involve trade-offs between military and domestic needs
An opportunity cost is...
the best alternative that is given up when a decision is made
If Capeland switches from producing 0 watermelons to producing 18 million tons of watermelons, what does it give up?
6 millioin pairs of shoes
In 1991, for a short time, Iraq invaded Kuwait and seized its oil fields. During that time, what impact, if any, did the invasion have on Iraq's production possibilities frontier?
The production possibilities frontier shifted to the right
Which of the following courses of action makes the MOST sense in today's world for manual laborers who have been replaced by robots?
Seek training in the latest technology related to a type of work they enjoy
Which of the following is typical of a centrally planned economy?
Which of the following represents a difference between socialism and communism?
Socialism may allow some free market practices; communism does not
What distinguishes an authoritarian government from a democratic one?
It requires strict obedience from its citizens
How were the Soviet Union and communist China similar?
Both suffered from severe economic problems as a result of central planning
What is a disadvantage of central planning?
Lack of economic efficiency
What are 3 basic economic questions all societies must answer?
What goods and services should be produced, how should they be produced, and who will consume them?
The distribution of income received in the form of rent, wages, or interest is the main factor that determines...
who consumes goods and services
An economy that maximizes its scarce resources and can deliver the right goods in the right quantity to the right people at the right price has achieved which economic goal?
How does innovation promote economic growth?
by introducing new goods and services that create new markets
Which basic economic goal is most easily achieved in a traditional economy?
The profit motive drives business owners to...
make sure their firm is operating at its highest level of efficiency
An entrepreneur can BEST be characterized as someone who...
takes risks in order to acquire profits
The due process clauses of the Constitution...
protect Americans private property rights
Which of the following BEST illustrates the involvement of the U.S. Government in the marketplace today?
The government requires manufactures to issue warnings that come with new microwave ovens
What is the main economic benefit of public disclosure laws?
They ensure that consumers can make informed buying decisions
Why would a federal government decision to increase spending be a matter of macroeconomic policy?
Macroeconomics concerns the overall performance of the economy
How is gross domestic product used to monitor the business cycle?
GDP indicates whether the nation's economy is expanding or contracting
How do patents act as an incentive to technological innovation?
by protecting a patent holder's right to profit from his or her creativity
If the economy were in the contracting phase of the business cycle, how might that affect your ability to find work?
It might be more difficult to find work because businesses would be less likely to hire new employees.
Suppose Congress passed a bill funding research into alternative sources of energy. What best describes this government action?
Promoting innovation and invention to help maintain technological advantage
Which of the following explains why a city fireworks display on the 4th of July is provided as a public good?
Non-payers cannot be prevented from seeing the fireworks.
What might be the economic benefit of the government providing a public good rather than the private sector?
greater efficiency in providing the good
What is critical in determining whether something is produced as a public good?
Whether the benefits to society are greater than the total cost.
Market failure occurs whenever:
free markets fail to distribute resources efficiently.
If a student at a food pantry on Fridays after school, which of the following might be a negative externality?
The student's parents have to drive him or her to the food pantry
In economics, the concept of demand is defined as the desire to own something...
combined with the ability to pay for it
According to the law of demand, when the price of pizza goes up,
consumers will buy less pizza
"Ceteris paribus" means demand will change when price changes
if other market factors remain constant.
In general, a decrease in consumer income will have what effect on demand for normal goods?
It will cause less demand to fall
The increasing age of the American population is an example of how
changing demographics can cause demand shifts
Which of the following is the best example of substitute for movie tickets?
Rentals of on-demand programming
A change in demand for one good will have what effect on its complement?
The same effect
Shana continues to buy a necessary medicine even though prices for the medicine rise sharply. Shana's behavior shows how
demand for necessities is inelastic
Suppose demand for a product is highly elastic. What will likely happen to a company's total revenue if it raises the price of that product?
Total revenue will fall
Suppose the price of a good rises. In general, how does the percentage of your budget you spend on that good affect the elasticity of your demand for goods overall?
The higher the percentage of your budget a good represents, the more elastic your overall demands
Why does demand generally become more elastic over time?
People have time to find substitutes and change behaviors
Do higher prices lead to increased revenues for a company?
The law of supply declares which of the following?
Supply falls as price falls
What does a firm's supply schedule show?
How price changes affect supply for a market
Which of the following typically happens as prices for a good or service rises?
More suppliers enter the market
What does it mean to say that supply is unitary elastic?
The percentage change in price and in supply are the same
Consider each of these business activities. For which do you think supply would be the most elastic in the short term?
Which of the following would be an example of a fixed cost on a farm?
Mortgage on the land
To increase marginal return, a company might consider...
purchasing more machinery
In general, it is a bad move for a company to produce more of a good or service if, by doing so
marginal cost exceeds marginal revenue
In determining the optimal level of output, a firm should aim for the
point of maximum profitability for the company
In which of the following situations would a business be wise to shut its factory?
When fixed costs exceed revenue
What is the effect of lower input costs?
Decreased marginal cost
How do subsidies help producers?
They increase revenues
Which of the following government actions would increase the supply of cars in the U.S.A?
The removal of car mileage regulations
Which factor would shift the supply curve for ethanol in the U.S. to the right?
A trade agreement with Brazil opening U.S. markets to imported ethanol
At the point of equilibrium shown in the graph, how many slices will the pizzeria supply, and at what price?
200 slices at $3.00 apiece
If a business owner becomes aware of a shortage in the market for the good or service he or she produces, he or she is likely to
increase supply more and raise the price
What role does the profit incentive play when there is a surplus of a good?
It encourages producers to lower their prices
Which of the following describes a way that the minimum wage and rent control are similar?
Both involve government intervention in the marketplace
Which of the following explains why agricultural price supports are inconsistent with free-market principles?
They allow government to influence farmers' decisions about what and how much to produce
Which of the following explains what typically happens when a market is thrown into disequilibrium?
It moves toward a new equilibrium point as a result of the laws of supply and demand
How has the internet dramatically reduced search costs?
By eliminating the need to travel to stores to shop
How would a bicycle producer likely react to a shortage of its product?
By raising prices and increasing supply
Which of the following is an example of imperfect information?
A firm receives faulty data from stores on consumer demand for its product.
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