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Macro Test 1 MSSTATE

Terms in this set (69)

economics is a social science concerned with...
the best use of scarce resources to achieve the maximum satisfaction of economic wants
a person should consume more of something when its marginal...
benefit exceeds its marginal cost
the process of developing hypothesis, testing them against facts, and using the results to construct theories is called...
the scientific method
which is an illustration of a microeconomic question?
will a new type of television set increase the number of buyers?
a schedule or curve that shows the various combinations of two products a consumer can purchase with a specific amount of money income is...
a budget line
which of the following is real capital?

a pair of stockings
a construction crane
a savings account
a share of IMB stock
a construction crane
a point inside a production possibilities curve best illustrates...
unemployment
a normative statement is one that...
is based on value judgements
the problems of aggregate inflation and unemployment are...
major topics of economics
on a production possibilities curve, the single optimal or best combination of output for any society...
depends upon the preferences of society
which statement best describes a command economy?
the production and allocation of goods and services is determined primarily through government
which statement is correct?

a. freedom of choice and enterprise are essential elements of the market system.

b. producers are "kings" in a market economy because they determine what is produced

c. the market system is efficient at allocation of resources, but not consumer goods to their most valued uses

d. the operation of a market system eventually results in an equal distribution of income
a. freedom of choice and enterprise are essential elements of the market system.
in a competitive economy, prices...

a. influence consumers in their purchases of goods and services

b. influence businesses in their purchases of economic resources

c. influence workers in making occupational choices

d. do all of these
d. do all of these
the competitive market system...
encourages innovation because successful innovators are rewarded with economic profits
which is not one of the five fundamental questions?

a. how will the goods and services be produced?

b. how should the system accommodate change?

c. who is to receive the output of the system?

d. what goods and services should be produced by government?
d. what goods and services should be produced by government?
the idea that firms and resource suppliers in seeking to further their own self-interests in a competitive market economy also simultaneously promotes the public or social interest is a description of...
the invisible hand
which of the following is a limitation of the simple circular flow model?
the determination of product and resource prices is not explained
households and businesses are...
sellers in the resource and product markets respectively
the circular flow model...
illustrates the interdependence of business and consumers
the law of demand is illustrated by a demand curve that is...
downward sloping
what would cause a decrease in the quantity of computers supplied?
a decrease in the demand for computers
when the price of oil declines significantly, the price of gasoline also declines. the latter occurs because of a(n)...
decrease in the supply of gasoline
a schedule which shows the various amounts of a product producers are willing and able to produce at each price in a series of possible prices during a specified period of time is called...
supply
if the quantity supplied of a product is less than the quantity demanded, then...
there is a shortage of a product
if the market price is above the equilibrium price...
a surplus will occur and producers will produce less and lower
a competitive market will...
achieve an equilibrium price
a product market is in equilibrium...
where the demand and supply curves intersect
a headline reads, "storms destroy half of the lettuce crop." this situation would lead to a(n)...
increase in the price of lettuce and decrease in quantity purchased
government-set prices floors and price ceilings...
interfere with the rationing function of price in a free market
t/f- The wants of consumers are expressed in the product market with "dollar votes."
false
Consumers express self-interest when they:
seek the lowest price for a product
Competition is more likely to exist when:
There is easy entry into and exit out of industries
In the circular flow model of the market system, households:
buy products and sell resources
t/f Freedom of choice and enterprise are essential elements of the market system
true
(Consider This) North Korea's command economy:
is one of the few remaining command economies.
Specialization is beneficial:
At the individual, regional, and even international levels
t/f Selfishness and self-interest are identical concepts.
false
Economic systems differ from one another based on who own the factors of production and:
Who make decisions regarding what to produce and how it is produced
In the circular flow model, households earn their incomes in the:
in the reduced markets
The presence of market failures implies that:
there is an active roles for governments, even in a market system
the competitive market system
encourages innovation because successful innovators are rewarded with economic profits.
5 fundamental questions
1. "What" goods and services will be produced?
2. "How" will the goods and services be
produced?
3. "Who" will get the goods and services?
4. How will the system accommodate change?
5. How will the system promote progress?
households and businesses are?
sellers in the resource and product markets respectively.
Consumer sovereignty and "dollar votes" guide the market system in dealing with which fundamental economic question?
Which output will be produced?
Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the:
incentive problem under communist central planning.
The circular flow model illustrates:
The interdependence of businesses and consumers
The market system is an economic system that:
Gives private individuals the right to own resources used in production
"Creative destruction" in a market system is brought about by:
Entrepreneurship
characteristics of a market system
• Private property
• Freedom of enterprise
• Freedom of choice
• Self-interest
• Competition
• Market and prices
A movement from one point to another along the production possibilities curve would imply that:
Society is producing a different combination of outputs
t/f A reduction in the unemployment rate will cause the nation's production possibilities curve to shift outwards.
false
(Consider This) The assertion by economists that "there is no free lunch":
remains true even for goods given away free by firms.
(Consider This) An exception to the advice "go to college, stay in college, and earn a degree" occurs when:
the opportunity cost of attending college is extraordinarily high.
A nation can increase its production possibilities by:
improving labor productivity
A point outside (to the right of) the production possibilities curve of a nation:
is not attained for this nation
A point inside the production possibilities curve is ____ while a point outside the curve is ____.
attainable; unattainable
A decrease in the price of digital cameras will:
shift the demand curve for memory cards to the right.
If consumer incomes increase, the demand for product X:
may shift either to the right or left.
Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will:
decrease, quantity demanded will increase, and quantity supplied will decrease.
If products A and B are complements and the price of B decreases, the:
demand for A will increase and the quantity of B demanded will increase.
The demand curve shows the relationship between:
price and quantity demanded.
If Z is an inferior good, an increase in money income will shift the:
demand curve for Z to the left.
In which of the following instances is the effect on equilibrium price dependent on the magnitude of the shifts in supply and demand?
Demand rises and supply rises.
If two goods are complements:
a decrease in the price of one will increase the demand for the other.
If products C and D are close substitutes, an increase in the price of C will:
shift the demand curve of D to the right.
Which of the following would most likely increase the demand for gasoline?
The expectation by consumers that gasoline prices will be higher in the future.
Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will:
increase, quantity demanded will decrease, and quantity supplied will increase.
A government tax per unit of output reduces supply.
true
If we say that a price is too high to clear the market, we mean that:
quantity supplied exceeds quantity demanded.
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