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MICRO EXAM 1 Review

Terms in this set (57)

Which of the following is an example of a normative, as opposed to a positive, statement?
a. The social security system is a good system and it deserves to be preserved as it is.
b. A decrease in the minimum wage would decrease unemployment.
c. The elimination of trade restrictions would increase an economy's standard of living.
d. Following the most recent recession, the economy is recovery is recovering at a slower than usual pace.
a. The social security system is a good system and it deserves to be preserved as it is.
Normative statements are
prescriptive, whereas positive statements are descriptive.
A rational decisionmaker
takes an action only if the marginal benefit of that action exceeds the marginal cost of that action
When computing the opportunity cost of attending a professional football game as a spectator, you should include
the price you pay for the ticket and the value of your time.
Which of the following statements about models is correct?
a. Economic models are built to mirror reality exactly.
b. A model can be accurately described as a simplification of reality.
c. Models cannot be used to explain how the economy functions.
d. Economic models are usually plastic representations of the economy.
b. A model can be accurately described as a simplification of reality.
Which of the following would likely be studied by a macroeconomist rather than a microeconomist?
The effect of changes in money supply on the inflation rate
When a relevant variable that is not named on either axis changes,
the curve will shift
When an economist points out that you and millions of other people are interdependent , she is referring to the fact that we all..
rely upon one another for the goods and services we consume.
For a self-sufficient producer, the production possibilities frontier
is the same as the consumption possibilities frontier.
The most obvious benefit of specialization and trade is that they allow us to
consume more goods than we otherwise would be able to consume
The opportunity cost of an item is
what you give up to get that item
A professor spends 8 hours per day giving lectures and writing papers. For the professor, a graph that shows his various possible mixes of output (lectures given per day and paper written per day) is called his
production possibilites frontier
By definition, exports are
goods produced domestically and sold abroad
If Mike can produce more donuts in one day than Sue can produce in one day, then
Mike has an absolute advantage in the production of donuts
Equilibrium quantity must decrease when demand
decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease
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