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Economics Test 1

QuestionAnswer
All economic questions arise because we have? limited resources and unlimited desires
Our inability to satisfy all our wants Scarcity
Money, time, jobs, workers, natural resources, and office space are examples of? Scarcity
Because we face _____, we must make choices Scarcity
The choices we make depend on the _____ we face Incentives
A reward that encourages an action or a penalty that discourages an action Incentive
Prices, fines, jail time, and social pressure are examples of? Incentives
The social science that studies the choices that individuals, businesses, governments, and entire societies make, how they cope with scarcity and the incentives that influence and reconcile those choices Economics
The study of choices that individuals and businesses make, the way those choices interact in markets, and the influence of governments Microeconomics
How much should a firm produce? If a persons wages rises, will they work more or less hours? These questions would be considered what type of economics? Microeconomics
The study of the performance of the national and global economies Macroeconomics
Why is the unemployment rate in the U.S. so high? What happens to prices when the Fed raises interest rates? These questions would be considered what type of economics? Macroeconomics
Objects that people value and produce to satisfy human wants Goods and Services
Goods and services are produced using recources that economist call: Factors of Production
Land, labor, capitol, entrepreneurship are examples of? Factors of Production
Who gets the goods and services depends on the _____ that people earn Incomes
Land earns? Rent
Labor earns? Wages
Capital earns? Interest
Entrepreneurship earns? Profit
A choice is a? Tradeoff
People make ______ by comparing benefits and costs Rational Choices
______ is what you gain from something Benefit
______ is what you must give up to get something Cost
Most choices are how-much choices made at the ______ Margin
Choices respond to ______ Incentives
Giving up one thing to get something else Tradeoff
Compares sots and benefits and achieves the greatest benefit over cost for the person making the choice Rational Choice
Only the wants of the person making a choice are relevant to determine its __________ Rationality
The gain or pleasure that it brings and is determined by preferences Benefit
What a person likes and dislikes and the intensity of those feelings Preference
The highest-valued alternative that must be give up to get it Opportunity Cost
Opportunity cost is a ________, not just a money price Tradeoff
To make a choice at the ______, you evaluate the consequences of making incremental changes in the use of your time or in the consumption of a good Margin
The benefit of pursuing an incremental increase Marginal Benefit
The opportunity cost of pursuing an incremental increase Marginal Cost
If marginal ______ from an incremental increase in an activity exceeds marginal ______, your rational choice is to do more of that activity Benefit, Cost
A change in marginal cost or a change in marginal benefit changes the _______ that we face and leads us to change our choice Incentives
The central idea of economics is that we can predict how choices will change by looking at changes in ________ Incentives
A key to reconciling self-interest and the social interst Incentives
Most common graph economist use? Quantity and Price
Quantity is on the? X-Axis
Price is on the? Y-Axis
Are used in economic models to show the relationship between variables Graphs
A relationship between two variables that move in the same direction Positive Relationship
Positive relationship is also called? Direct Relationship
A line that slopes upwards shows a? Positive Relationship
A relationship shown by a straight line Linear Relationship
A relationship between two variables that move in opposite directions Negative Relationship
Negative relationship is also called? Inverse Relationship
A line that slopes downward Negative Relationship
The boundary between those combinations of goods and services that can be produced and those that cannot Production Possibilities Frontier
Points outside the PPF are Unattainable
Points inside the PPF are Attainable
Any point inside the PPF is Inefficient
Every choice along the PPF involves a Tradeoff
The _______ of a good or service is the benefit received from consuming one more unit of it Marginal Benefit
We measure __________ by the amount that person is willing to par for an additional unit of a good or service Marginal Benefit
The more we have of any good, the smaller is its marginal benefit Principle of Decreasing Marginal Benefit
Shows the relationship between the marginal benefit of a good and the quantity of that good consumed Marginal Benefit Curve
When we cannot produce more of any one good without giving up some other good Production Efficiency
When we cannot produce more of any one good without giving up some other good that we value more highly Allocative Efficiency
A person has a _________ in an activity if that person can perform the activity at a lower opportunity cost than anyone else Comparative Advantage
A person has an __________ if that person is more productive than others Absolute Advantage
________ advantage involve comparing productivities while _________ advantage involves comparing opportunity costs Absolute, Comparative
In a market-based economy, the interaction between _______ and ________ determines the price of goods and services and the quantity produced and consumed Demand, Supply
Change in demand or supply leads to changes in the _____ or _______ produced and consumed Price, Quantities
Any arrangement that enables buyers and sellers to get information and do business with each other Market
A market that has many buyers and sellers so no single buyer or seller can influence the price Competitive Market
Exists for goods, services, money, factors of production and input Competitive Market
The _______ of a good is the amount of money needed to buy it Money Price
The _______ of a good-the ratio of its money price to the money price of the next best alternative good-is its opportunity cost Relative Price
The _________ of a good or service is the amount consumers plan to buy during a particular time and at a particular place Quantity Demanded
The entire relationship between the price of the good and quantity demanded of the good Demand
Shows the relationship between the quantity demanded of a good and its price when all other influences on consumers planned purchases remain the same Demand Curve
Other things remaining the same, the higher the price of a good, the smaller the quantity demanded; and the lower the price of the good, the larger the quantity demanded Law of Demand
The law of demand means a ______ sloping demand curve Downward
Law of demand results from: Substitution Effect and Income Effect
When the relative price (opportunity cost) of a good or service rises, people seek substitutes for it, so the quantity demanded of the good or service decreases Substitution Effect
When the price of a good or service rises relative to income, people cannot afford all the things they previously bought, so the quantity demanded of the good or service decreases Income Effect
Exception to the law of deman Veblen Goods
expensive commodities like diamonds, expensive cars, etc., used as status symbols to display ones wealth. The amount demanded of the commodities increases with an increases in their price because their value status symbol increases Veblen Goods
A demand curve is also a Willingness and Ability to Pay Curve
The smaller the quantity available, the ________ price that someone is willing to pay for another unit Higher
Willingness to pay measures? Marginal Benefit
When demand increases, the demand curve shifts_______ Rightward
When demand decreases, the demand curve shifts_______ Leftward
A good that can be used in the place of another good Substitute
A good that us used in conjunction with another good Complement
When the price of substitute rises or when the price of complement falls, the demand ________ Increases
When income increases,consumers buy more of most goods and the demand curve shifts _______ Rightward
A _____ good is one for which demand increases as income increases Normal
A _______ good is a good for which demand decreases as income increases Inferior
When the price of the good changes and everything else remains the same, the quantity demanded changes and there is a movement ______ the demand curve Along
If the price remains the same but one of the influences on the buyers plans changes, demand changes and there is a shift ______ the demand curve Of
The _________ of a good or service is the amount that producers plan to sell during a given time period at a particular place Quantity Supplied
Other things remaining the same, the higher the price of a good, the greater the quantity supplied, and lower the price of a good, the smaller is the quantity supplied Law of Supply
Refers to the entire relationship between the quantity supplied and the price of a good Supply
Shows the relationship between the quantity supplied of a good and its price when all other influences on producers planned sales remain the same Supply Curve
When some influence on selling plans, other than the price of the good changes, there is a ___________ of that good Change in Supply
The price at which the quantity demanded equals the quantity supplied Equilibrium Price
The quantity bought and sold at the equilibrium price Equilibrium Quantity
At any price above the equilibrium price, a _____ forces the price down Surplus
At any price below the equilibrium price, a _____ shortage forces the price up Shortage
Increase in demand and supply _____ the equilibrium quantity Increases
Decrease in demand and supply _____ the equilibrium quantity Decreases
Decrease in demand and increase in supply _____ the equilibrium supply Lowers
A measure of the responsiveness of one variable to changes in another variable Elasticity
The percentage change in one variable that arises due to a given percentage change in another variable Elasticity
A units-free measure of responsiveness Elasticity
The percentage change in quantity demanded in response to a 1 percent increase in price Price Elasticity of a Demand
When price elasticity is > 1, good is Elastic
When price elasticity is < 1, good is Inelastic
When price elasticity is = 1, good is Unitary
At the midpoint of the demand curve, demand is Unit Elastic
At prices above the mid-point, demand is Elastic
At prices below the mid-point, demand is Inelastic
The ________ from the sale of a good or service equals the price of the good multiplied by the quantity sold Total Revenue
If demand is ________, a 1% price cut increases the quantity sold by more than 1%, and total revenue increases Elastic
If demand is ________, a 1% price cut increases the quantity sold by more than 1%, and total revenue decreases Inelastic
If demand is _______, a 1 percent price cut increases the quantity sold by exactly than 1 percent, and total revenue is unchanged Unit Elastic
A method of estimating the price elasticity of demand by observing the change in total revenues that results from a price change Total Revenue Test
A measure of the responsiveness of the demand for a good to changes in the price of a related good Cross-Price Elasticity
if the goods are ______, the price elasticity > 1 Substitutes
if the goods are ______, the price elasticity < 1 Complements
A measure of the responsiveness of the demand for a good to changes in consumer income Income Elasticity of Demand
Measures the responsiveness of the quantity supplied to a change in the price of a good when all other influences on selling plans remains the same Elasticity of Supply
The relationship between the price of a good and the quantity demanded by one person Individual Demand
The relationship between the price of a good and the quantity demanded by all buyers in the market Market Demand
The excess of the benefit received from a good over the amount paid for it Consumer Surplus
The relationship between the price of a good an d the quantity supplied by one producer Individual Supply
The relationship between the price of a good and the quantity supplied by all producers in the market Market Supply
The principle that states that we should strive to achieve the greatest happiness for the greatest number Utilitarianism
The requirement that people in similar situations be treated similarly Symmetry Principle
A regulation that makes it illegal to charge a price higher than a specified level Price Ceiling
When price ceiling is applied to a housing market it is called _________ Rent Ceiling
A price ceiling set ______ the equilibrium price has no effect Above
A price ceiling set _______ equilibrium price creates a shortage, black market, increased search activity Below
Time spent looking for someone with whom to do business Search Activity
an illegal market that operates alongside a legal market in which a price ceiling or other restriction has been imposed Black Market
A regulation that makes it illegal to trade at a price lower than a specified level Price Floor
If price floor is set ______ the equilibrium price, it has no effect Below
If price floor is set ______ the equilibrium price floor, it creates a surplus and deadweight loss Above
The division of the burden of a tax between buyers and sellers Tax Incidence
An upper limit to the quantity of a good that may be produced during a specified period Production Quota
payment made by the government to a producer Subsidy
Created by: 1322990402
 

 



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