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Macro Ch 1-5
| Question | Answer |
|---|---|
| What role does money play in the circular flow model? | Instead of bartering, people use money to make transactions Money acts as a medium of exchange, enabling the economy to avoid the double-coincidence-of-wants problem. |
| What is Marginal Cost? | Marginal cost is the additional cost or loss of consuming one more unit. |
| "Microeconomics is a great class" Normative or Positive? | Normative |
| If Pepsi goes on sale, what will happen to the demand for Coca-Cola? | the demand for Coca Cola will fall as more customers purchase Pepsi. |
| A demand curve shows the graphical relationship between quantity demanded and what? | price |
| When higher prices result in higher quantity supplied, economists call this relationship | law of supply |
| A decrease in price of inputs would shift the supply to the what? | To the right |
| In general, supply curves slope is | upward |
| An improvement in technology would shift what? | the supply to the right |
| A drought would lead to what? | a decrease in supply |
| Lower product taxes would what? | shift the supply to the right |
| In an efficient market, what will deadweight loss equal? | zero |
| When will deadweight loss will be lower? | Taxing goods or services that have inelastic demand or supply. |
| Deadweight loss can be thought of as surplus that is transferred from producers or consumers and given to whom? | Nobody |
| Why will Some buyers will offer sellers $10 per unit instead of the $6 price ceiling? | Because of shortage, buyers want to increase their chances of buying the product by paying a price higher than the price ceiling, even if it is illegal. |
| black market purchases of the good will occur at what price ? | The black market prices will be above the price ceiling price. |
| In the long run with regard to price ceilings, what can we expect? | Increased elasticity on the part of producers and consumers which magnifies the shortage |
| Rent control is an example of what? | Price ceilings |
| A nonbinding price ceiling in this market will result in a price set at what? | The equilibrium price |
Created by:
v.virgil
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