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58 Cards in this Set
- Front
- Back
One of its most basic economic problems is that society
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must decide how to allocate available resources
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The process of analyzing the additional or incremental costs or benefits arising from a choice or decision is called
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marginalism
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You purchased a ticket to a concert for $30 a month ago. Last week someone invited you to a party on the same night as the concert. You would much rather go to the party than the concert. You have tried unsuccessfully to sell the concert ticket. Which of the following statements regarding this situation is correct?
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The $30 you paid for the concert ticket should be irrelevant in your decision making, because it is a sunk cost
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You have $100 in savings. You could earn four percent interest if you put the $100 in a bank savings account for a year. What is your opportunity cost if you put the $100 under the pillow of your bed instead?
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$4
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The ________ is NOT an opportunity cost of attending college.
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cost of the food that you consume while you are attending college
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You own The Wizard of Oz on DVD. The opportunity cost of watching this DVD for the second time
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is the value of the alternative use of the time you spend watching the DVD
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A market in which profit opportunities are eliminated almost instantaneously is a(n) ________ market
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efficient
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In an efficient market
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profit opportunities are eliminated almost instantaneously
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________ focuses on the prices of individual goods and services and ________ focuses on the rate of inflation.
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Microeconomics; macroeconomics
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Positive economics is an approach to economics that
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describes the economy and how it works
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If the price of a product falls, then the quantity demanded of that product will rise. This is best described as a ________ statement
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positive
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Which of the following is a positive question?
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Will the level of teenage unemployment increase if the minimum wage is increased?
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An example of descriptive economics is when an economist
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collects data on the wage rates and employment levels in the steel industry
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To isolate the impact of one single factor, economists invoke the assumption of
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ceteris paribus
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Voluntary exchange is efficient when the two trading parties are ________ the exchange than they were ________ the exchange.
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better off after; before
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A government policy that tries to minimize variations in aggregate output can best be described as trying to achieve economic
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stability
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In an efficient economy
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what consumers want is produced at the least possible cost.
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The process by which resources are transformed into useful forms is
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production
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A(n) ________ is an input into the production process while a(n) ________ is a useable product
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factor of production; output
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According to the theory of comparative advantage, specialization and free trade will benefit
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all trading parties, even when some are absolutely more efficient producers than others
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as economists use the term, an act of ʺinvestmentʺ occurs when a(n)
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truck manufacturer builds a new plant to make more trucks
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The process of using resources to produce new capital is
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investment
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The opportunity cost of investment in capital is forgone present consumption because
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resources are scarce
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Production inefficiency occurs when an economy is producing
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either when an economy is producing inside its production possibility frontier or when the economy is producing the wrong combination of goods on its production possibility frontier.
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A society can produce two goods: bread and cookies. The societyʹs production possibility frontier is negatively sloped andʺbowed outwardʺ"from the origin. As this society moves down its production possibility frontier, producing more and more units of cookies, the opportunity cost of producing cookies
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increases
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The marginal rate of transformation is the
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slope of the production possibility frontier
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As an economy produces more of a good, the opportunity costs of producing it increases. This most likely occurs because
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resources are not equally well suited to producing all goods and as more of a good is produced it is necessary to use resources less well suited to the production of that good
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During the war in Iraq some Iraqi oil refineries were destroyed. This would best be represented by a
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shift of Iraq's production possibility frontier toward the origin.
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For an economy to produce at a point beyond its current ppf, the economy must
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increase its resource base
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An economy in which individual people and firms pursue their own self-interest without any central direction or regulation is a(n) ________ economy
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laissez-faire
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In a laissez-faire economy ________ what gets produced, how it is produced, and who gets it.
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buyer and seller behavior determines
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Consumer sovereignty is
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the idea that consumers determine what is produced in the economy through their demands.
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Households are on the ________ side of input (factor) markets and on the ________ side of output (product) markets
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supply; demand
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________ causes a shift in the demand curve for compact discs
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A change in the price of prerecorded cassette tapes
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Which of the following is held constant along a given demand curve?
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income
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The ʺlaw of demandʺ implies that as prices ________ increases
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fall, quantity demanded
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As an individual consumes more of a product within a given period of time, it is likely that each additional unit consumed will yield
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successively less satisfaction.
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As long as households have limited incomes and wealth, all ________ curves will intersect the ________ axis.
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demand; price
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If a buyer's demand for chicken thighs decreases as her income increases, chicken thighs for her are a(n) ________ good
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inferior
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When the decrease in the price of one good causes the demand for another good to decrease, the goods are
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substitutes
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A change in the price of a good or service leads to a change in ________ that leads to a ________ the demand curve.
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quantity demanded; movement along
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A frozen food manufacturer can produce either pizzas or calzones. As the result of a rise in the price of calzones, the firm produces more calzones and fewer pizzas. An economist would explain this by saying
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there has been an increase in the quantity supplied of calzones and a decrease in the supply of pizza
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Presently the tire market is unregulated and characterized by excess supply. You accurately predict that the price of tires will ________, the quantity demanded will ________, and the quantity supplied will ________.
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fall; rise; fall
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Improvements in technology have reduced the cost of producing personal computers. As a result, you accurately predict that in the market for personal computers, there will be a(n)
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increase in the supply of personal computers, a decrease in the price, and an increase in the quantity demanded
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Apples and oranges are substitute goods. A freeze in Florida destroyed a good portion of the orange crop. Ceteris paribus, the price of
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both apples and oranges will rise
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The adjustment of ________ is the rationing mechanism in free markets
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price
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A price ceiling is
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a maximum price set by government that sellers may charge for a good
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If the equilibrium price of gasoline is $2.00 per gallon and the government will not allow oil companies to charge more than $1.00 per gallon of gasoline, which of the following will happen?
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A nonprice rationing system such as ration coupons must be used to ration the available supply of gasoline
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If government sets a price floor below an equilibrium price,
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the floor will have no effect on the market
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People scalping tickets for the Super Bowl will be successful
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when the price set by the National Football League is less than the market equilibrium price
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Consider a market that has many buyers but only one seller. Assume the seller has only one unit of the product to sell. Then the market demand curve will be ________ and the seller's supply curve will be ________.
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downward sloping; vertical
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The difference between the minimum amount a firm is willing to accept for a good and its current market price is known as
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producer surplus
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You would be willing to pay a maximum of $100 to attend a football game, and you can buy a ticket for $30. Your consumer surplus is
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$70
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When the equilibrium price of ginger ale increases while your demand schedule for ginger ale remains unchanged, then your consumer surplus
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decreases
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When buyer and seller trade to the market equilibrium quantity, they
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minimize deadweight loss
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There will be a deadweight loss in a market if
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the actual quantity traded is other than the market equilibrium quantity
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When the government sets a price floor above the equilibrium price in a market, consumer surplus will
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fall
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Assume the government imposes a price ceiling on sugar that is ABOVE the market equilibrium price. You are asked to suggest a rationing scheme that will minimize the misallocation of resources. You suggest
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that no rationing system will be necessary
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