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EC 201 Exam 1
EC 201 - Exam 1 - Ballard - MSU Fall '12
| Question | Answer |
|---|---|
| Why do we make economic decisions? | Because we only have a limited amount of time. |
| Economics is fundamentally concerned with what? | Decision Making |
| What are the central disciplines of economics? | The everyday decisions we make. |
| Why we import some goods from other countries and export different goods to other countries. | International Economics |
| Interactions between workers and their employers in labor markets. | Labor Economics |
| How economic principles can be used in ways to efficiently clean up pollution. | Environmental Economics |
| The study of how a society chooses to use its scarce resources to produce, exchange, and consume goods and services. | Economics |
| Resources = ____1____ while Desires = _____2_____ | 1) Scarce/limited 2) Unlimited |
| What are the 3 fundamental choices every society must answer? | 1) What to produce? 2) How to produce? 3) For whom to produce? |
| _____________ is concerned w/ the aggregates for the economy as a whole, such as overall rate of unemployment and overall rate of inflation. | Macroeconomics |
| How do you calculate the unemployment rate? | Unemployment Rate = people who are unemployed / total # of people in labor force |
| How do you calculate the inflation rate? | Inflation Rate = Calculate change in price for thousands of goods/services, then average those indv inflation rates. |
| The actual workings of the economy. | Positive Economics |
| “If minimum wage is raised, there’ll be an increase in unemployment among teenagers.” << Example of? | Statement Fact |
| Statement proven right or wrong through gathering and analyzing of data. | Statement Fact |
| What ought to be in the economy. | Normative Economics |
| “It would be immoral for the minimum wage to be less than $10.” << Example of? | Statement |
| A _______ involves value judgment and therefore cannot be proven right/wrong. | Statement |
| Results of decisions made every day. | Observable Economy |
| A stylized representation of some aspect of the real economy. | Economic Model |
| Assumption applied to models insinuating that all other things in the experiment are being held constant. "All other things equal." | Ceteris Paribus |
| The cost of one activity is the value of the next-best alternative. | Opportunity Cost |
| What are some of the opportunity costs of a concert? | Spending time waiting in line for tix, spending $ on tix, transportation costs, parking costs, spending your time at the concert instead of doing something else. |
| A graphical representation of combinations of outputs that can be produced, if all available resources are used as well as possible. | Production-Possibilities Frontier |
| A Production-Possibilities Frontier represents combinations of ____1____ that can be produced if resources are ________2________. | 1)Outputs 2)Used as well as possible |
| If a company produces 100 pairs of blue shoes (0,100) and wants to produce 2 pairs purple shoes (2,98) what is the OC? | The OC of 2 pairs purple shoes is 2 pairs blue shoes. |
| Can you be above the PPF line? | No, it's impossible. |
| What do curved PPF lines mean? | The goods being produced aren't being produced with similar resources/technologies. |
| Any point that falls below the PPF line is considered ______. | Waste |
| __________: The OC of producing 1 additional unit of a good will increase, as we produce more and more of the good. | Law of Increasing Opportunity Cost |
| The OC of producing 1 ___1___ unit of a good will ___2___, as we produce more and more of the good. | 1) additional 2) increase |
| 3 reasons for increasing PPF: | 1) Tech Improvements 2) Capital Investment 3) Improved Workforce |
| Real, long-lasting, man-made inputs into the production process; factories, equipment, computers. | Capital Investments |
| If someone can produce a given output using fewer resources than another person they have _______. | Absolute Advantage |
| If someone can ___1___ a given ___2___ using fewer __3__ than someone else. | 1)Produce 2)Output 3)Resources |
| An indv has _______ ________ in something if his/her OC of that activity is lower than the OC of that activity for someone else. | Comparative Advantage |
| Organized exchange of a good/service between buyers & sellers. | Market |
| Any institution/mechanism allowing people to interact to buy/sell a good/service. | Market |
| The actions of buyers. | Demand |
| The amount of a good/service buyers are willing/able to buy at a specific price in a given time period. | Quantity of Demand |
| When the price of a good or service increases, the quantity demanded will decrease all else equal. When the price decreases, the quantity demand will increase. | Law of Demand |
| Law of Demand: When the price of a good/service increases the quantity demanded will ____. | Decrease |
| Law of Demand: When the price of a good/service decreases the quantity demanded will _____. | Increase |
| The Law of Demand describes the relationship between: | the price and quantity demanded. |
| Quantity demanded is ______ related to price. | Inversely |
| When the price of apples increases, a smaller quantity is demanded. << Exp of what? | Law of Demand |
| A table showing the quantity of a good/service that would be demanded, @ a number of different prices. | Demand Schedule |
| A demand schedule for a single person. | Individual Demand Schedule |
| Describes the quantities demanded for all buyers in the market. | Market Demand Schedule |
| _____ _____ is a graph of info in a demand schedule. | Demand Curve |
| A demand curve is a graph of a the relationship between ______ and _____ of a good. | Price and quantity demanded |
| A change in ______ of a good will causes movement along the existing demand curve. | Price |
| The willingness to pay of the consumers in the market. | Market Demand Cureve |
| Price decrease >> customers ______ their quantity demanded. | Increase |
| Movements along the existing demand curve are caused by changes in? | The price of the good. |
| Shifts to a new demand curve are caused by changes in? | Other influences on buyers. |
| Refers to movement along the existing demand curve. | Change in Quantity Demanded |
| Refers to a shift to a new demand curve. | Change in Demand |
| Changes in: Incomes/"tastes/preferences" of consumers, prices of other goods, expectations of future prices/incomes, size/composition of the population << cause? | Shifts in demand curves |
| Consumer income increases >> Demand curve..? | Shifts right |
| Goods that consumers have an increased demand for when incomes rise. | Normal Goods |
| Income rises >> demand of normal good ____ shift of demand curve. | Right |
| Income falls >> demand of normal good _____ shift of demand curve. | Left |
| Goods that consumers have a decreased demand for when incomes increase. | Inferior Goods |
| Income increases >> demand of inferior good ____ shift. | Left |
| When an increase in the P of one good leads to increase in demand for a different good, the goods are ______. | Substitutes |
| If goods are substitutes: and increase in price of one good leads to _______ in demand for the substitute. | Increase |
| If an increase in the price of one good leads to a decrease in demand for the other good, the goods are _____. | Complements |
| If the demand of one good decrease when the P of another good increases, what's their relationship? | Complements |
| If the price of a good increases and the demand of another good doesn't change, the goods are _________. | Independent of Demand |
| If demand increases, the ____ curve shifts _____. | Demand, right |
| Increase in the price of a substitute good can cause an _____ in demand. | Increase |
| ________ in the price of a complement good can cause an increase in demand. | Decrease |
| Expectations of lower prices/incomes in the future causes _____ in demand. | Decrease |
| A decrease in the price of a substitute good causes _______ in demand. | Decrease |
| Increase in price of a complement good causes _______ in demand. | Decrease |
| Describes the actions of sellers. | Supply |
| Amount of some good/service that sellers are willing/able to sell at a specific price, in a given period of time. | Quantity Supplied |
| When the price of a good/service increases, the quantity supplied will increase. When the P decreases, the quantity supplied will decrease. | Law of Supply |
| Price of good increases >> what happens to the quantity supplied? | It increases |
| Price of good decreases >> what happens to quantity supplied? | It decreases |
| According to Law of Supply, sellers have a ______ _______ relationship between price and quantity supplied. | Direct positive |
| When production of goods increases, costs of _____ ______ will _____. | Additional production, increase |
| Table that lists different prices for a good/service & shows quantity supplied at each price. | Supply Schedule |
| When making a supply schedule, the only variant is the ______ __ ___ ____. | Price of the good |
| Graph of info in a supply schedule. | Supply Curve |
| A supply curve shows the relationship between the ______ of a good and the quantity supplied. | Price |
| Change in ________: refers to movement along existing supply curve. | Quantity Supplied |
| Change in ________: refers to a shift to a new supply curve. | Supply |
| If input price of a good increases, the supply curve for the good will shift _____. | Left |
| If the price of diamonds increases, the supply curve for diamond rings will shift ____. | Left |
| Improved tech >> supply curve shifts _____. | Right. |
| An increase in taxes on a good acts as an increase in the price of what? | Input |
| If another fast-food restaurant joins the market, what will happen to the supply curve? | Supply curve will shift right. |
| When quantity demanded = less than quantity supplied. | Surplus |
| When quantity demanded = greater than the quantity supplied. | Shortage |
| When quantity demanded ='s quantity supplied. | Equilibrium |
| What lead to equilibrium? | Powerful Market Forces |
| Term used to describe beauty of equilibrium. Even though no one sets out to achieve E, an _______ ______ leads markets in that direction. | Invisible Hand |
| Prices are determined by the interaction between: | Supply and Demand |
| When demand increases: which way does it shift. | Right |
| When demand increases: E price will _____. | Increase |
| When demand increases: E Q will _____. | Increase |
| When demand decreases: which way does it shift. | Left |
| When demand decreases: E price will _____. | Decrease |
| Change in D = E P & E Q move in _____ direction(s). | Same |
| Change in S = E P & E Q move in ______ direction(s). | Opposite |
| When supply curve shifts left, EP will _____ and EQ will ______. | Increase, Decrease |
| When supply curve shifts right, EP will _____ and EQ will _______. | Decrease, Increase |
| People became ______ before housing market crashed. As Ps escalated, people bought houses to make quick profits. | Speculators |
| NINJA Mortgages | No income, no job, or assets |
| Halt of P increase in housing market >> speculators dropped out of market >> demand curve _________. | Began to shift left |
| Make it illegal to buy and sell at some prices. | Price-Control Laws |
| Can prevent market from finding E. | Price-Control Laws |
| Minimum price that must be paid. (Can't buy/sell for less) | Price Floor |
| Price floors cause: | surpluses |
| Set maximum legal price. (Can't buy/sell for more) | Price Ceiling |
| Rent Control Laws are examples of | Price Ceiling |
| When quantity supplied is different than quantity demanded. | Disequilibrium |
| Created to deal w/ surpluses caused by price floors. | Import Quota |
| Restriction on the quantity that can be imported from another country. | Import Quota |
| If PF is below EP or isn't enforced by gov't, _____. | PF has no effect |
| If PF is above EP and enforced, creates | Surpluses |
| Rent Control Laws result in ____ in total amount of housing consumed. | Decrease |
| A deliberate attempt to outlaw some prices. | Price Control |
| When people in a country sell goods/services to people in another country. | Export |
| When people in a country buy goods/service from people in another country. | Import |
| Occurs when imports are greater than exports. | Trade Deficit |
| Occurs when exports are greater than imports. | Trade Surplus |
| Taxes on imports. | Tariffs |
| Tariffs _____ prices paid by buyers in importing country and ______ quantities. | Raise, reduce |
| Who are import quotas administered by? | The importing country |
| The beneficiary is the holder of the import license. | Quota Rent |
| Restrictions on quantity of good that can be sold country to country. Administered by exporting country. | Voluntary Export Restraints |
| VERs are administered by ______. | The exporting country. |
| How to calculate tariff revenue: | Tariff Revenue = Amount of tariff per unit x # of units bought and sold. Tariff per unit = (PBuyers-PSellers) |
| Says it's beneficial to give trade protection to a domestic industry during the first few years of its existence. | Infant_Industry Argument |
| Percentage change in one variable, divided by percentage change in another variable. | Elasticity |
| When looking at the change in quantity demanded for a good, caused by a change in its own price. | Own-Price Elasticity of Demand |
| Elasticity calculated: | • Elasticity = [Percentage change in quantity of jogging shorts demanded] / [percentage change in price of jogging shorts] |
| Reference Level of Quantity Demanded: | Use midpoint (average) between beginning quantity demanded and ending quantity demanded. |
| Reference Level of Price Demanded: | Use midpoint (average) between beginning price demanded and ending price demanded. |
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