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MACRO FINAL #1

Exam 1

QuestionAnswer
The cost-benefit principle states that a decision should be pursued only if the benefits are greater than the costs.
Which principle tells you that the true cost of something is the next best alternative you have to give up to get it? The opportunity cost principle.
Sunk costs are costs that are incurred in the past and cannot be reversed.
The __________ suggests, decisions about quantities are best made incrementally. marginal principle
The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle. interdependence
The law of demand refers to he inverse relationship between price and quantity demanded.
Diminishing marginal benefit: is when buying an additional item yields a smaller marginal benefit than the previous item.
(Figure: Graph) Refer to the graph to answer the question. Q.12 The movement from point M to point N represents: an increase in quantity demanded.
(Figure: Graph) Refer to the graph to answer the question. Q.13 In the graph, the movement from point M to point Q represents an increase in demand.
Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are normal goods.
(Figure: Market for Luxury Vehicles) Which graph shows what will happen in the market for luxury vehicles if a recession is imminent? Q.15 Graph A
(Figure: Market for Apple Computers) Dell and Apple are competitors in the computer market. Which graph illustrates the effect of a rise in the price of Dell computers on the demand for Apple computers? Q.17 Graph D
What is quantity supplied? It is the amount of an item that a seller is willing to sell at a particular price.
The law of supply refers to the positive relationship between price and quantity supplied.
(Figure: Graph) In the graph, the movement from point E to point F represents Q.20 a decrease in quantity supplied.
If the price of jet fuel rises, the quantity supplied of jet fuel increases.
(Figure: Market for Drones) If companies frequently start using drones to deliver products, which graph shows the effect this will have on the market for drones. Q.21 Graph A
Due to a decline in demand and popularity, Ford Motor Company is planning to phase out traditional sedans such as 'Fusion' and 'Taurus' to focus on SUVs and trucks. Ford's sedans and trucks/SUVs are substitutes-in-production.
(Figure: Market for Coffee) A coffee shop opens next to an existing coffee shop. Which of the following graphs shows the effect of this new coffee shop on the market supply curve for coffee in this area? Q.24 Graph A
A market is a setting that brings together potential buyers and sellers.
An equilibrium price is a price where the quantity supplied equals the quantity demanded.
When quantity demanded exceeds quantity supplied, _____ exists. a shortage
Graphs Q.31 A major technological advancement occurs in transportation technology, which leads to faster and more efficient train systems. Which graph depicts the effect on the supply of train rides? Graph D
Graphs Q.32 In 2011, Japan suffered a major earthquake and tsunami. Honda parts that were sourced from Japan could no longer be produced, which caused Honda to cut its production of cars. Which graph shows the effect of this shortfall? Graph C
Shifts in demand lead to price and quantity to move in the same direction.
Created by: C_Row
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