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Final Exam- Microeconomics
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Terms in this set (46)
A point on a nation's production possibilities curve represents
The full employment of resources to achieve a particular combination of goods and services.
Of the following, which is the best for illustrating the purpose of the production possibilities curve?
Maximum combinations of goods and services an economy can produce given its available resources and technology.
Which of the following best outlines the market mechanism?
The use of market prices and sales to signal desired output.
factors of production.
land, labor, capital, entrepreneurship
The book tells us that the law of increasing opportunity costs outlines what?
In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods.
How does our production possibilities curve show inefficiency?
All points inside the curve.
The book tells us that the law of increasing opportunity costs outlines what?
In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods.
Markets are a way for available resources to be distributed within a population.
Markets distribute goods and services to those that...
Are willing and able to pay the highest price.
The production possibilities curve can shift inward and outward.
A decrease in the number of laborers.
How does our production possibilities curve show inefficiency?
All points inside the curve.
Say a new machine is invented that allows companies to produce more.
How would this be demonstrated using our production possibilities curve model?
A shift outward of the production possibilities curve.
Say the market signals produce incentives for businesses and consumers to pollute more than society wants.
The market mechanism has failed to achieve efficiency of market priorities and social priorities.
If Sprint decides to convert cell phone factories to computer production but finds that some phone manufacturing facilities are not well suited to computer production, then
Increasing opportunity costs will occur with greater computer production.
The Latin phrase ceteris paribus refers to holding other variables constant.
True
Our book has described the big problem which requires economics as what?
The scarcity of resources relative to human wants.
How have we come to understand opportunity costs in this course?
Goods or services that are forgone in order to obtain something else.
The opportunity cost of going to the beach is...
An activity that is an alternative use of your time.
Say the government passes a law to solve some social ill, but it doesn't produce a better result.
Which of the following describes this?
Government failure.
A linear function can be distinguished by
The same slope throughout the line.
The slope of a curve at any point is given by this formula:
The change in y coordinates between two points divided by the change in their x coordinates.
When the relationship between two variables changes,
The entire curve shifts.
The free-rider dilemma occurs when markets attempt to sell public goods because one individual can obtain the benefits of someone else's purchase (consumption) of the good.
True
Policymakers choose to prioritize different programs all the time given the limited resources available to address social welfare. If policymakers are only looking at the costs and benefits of a government program, they would only implement the program if...
Benefits exceed the opportunity costs.
What is the general opportunity cost of all government spending measured in?
The private sector output sacrificed when the government employs scarce resources.
List the specific sources of market failure described in our book.
Public goods, market power, externalities, and inequity.
Government goods are delivered "free," which means they have no opportunity costs.
False
Illegal re-selling (by a new seller) is more likely to occur when a price is set below the equilibrium price by the original seller or government.
True
People, businesses, and governments attempting to maximize total utility, total profit, and/or total welfare outlines the majority of market activity we study in economics.
True
Consumers purchase goods and services in the...
Produce Market
If gasoline prices are below the equilibrium price, we will witness what follow?
Cause a shortage of gasoline
Opportunity costs are important regarding both the law of supply and the law of demand.
True
At equilibrium, the quantity demanded at that price is greater than the quantity supplied at that price.
False
If the price of pizza goes up the demand for hamburgers will increase if they are considered substitutes in consumption.
True
The law of demand models how the quantity of a good demanded...
Increases as its price falls, ceteris paribus.
Anyone who buys an expensive car or house must also consider the price of the insurance and maintenance because these goods/services are what?
Complements in consumption.
If the market wage for a cook is $15 an hour and the government enforces a minimum wage of $10 an hour, what will happen to the unemployment rate for cooks?
Not be affected by the minimum wage.
Given most of us cannot produce everything we want to consume, we see most people and societies do what?
Specialize
If certain corn products are found to cause cancer, then the most immediate effect will be that the
Demand curve for corn will shift left.
Which of the following has occurred because of an increase in the price of beef in the United States due to an increase in demand for beef?
An increase in the quantity of beef supplied in the United States.
Say the quantity of haircuts demanded is larger than the quantity supplied. What do our models predict will happen in a free haircut market?
Price will increase until it reaches the equilibrium price.
When a surplus exists for a good or service,
Producers reduce the level of output and reduce price.
Historically speaking, states, counties, and cities most frequently paid to build roads and highways. The challenge a company usually faced with making money on roads is how to only allow those who pay to access them! In other words, how can you make money by investing in building a road everyone can use?
What source of market failure does this describe?
Public goods.
The free-rider problem
Reflects the inability to exclude an individual from the benefits of someone else's purchase.
Flood control is an example of a public good? Why is this true?
It is not divisible and therefore cannot be kept from people who do not pay.
When voting mechanisms substitute for the market mechanism in allocating resources and services, what ends up making the decisions of for who, what, and how an economy works?
Ballot box economics.
Which of the following examples produces a positive externality?
College students getting vaccinated against the Covid so they won't pass it on to others..
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