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30 Cards in this Set

  • Front
  • Back
We have to make choices because. . .?
(2 reasons)
1. Resources are scarce
2. Choices involve a trade-off
The "gains from trade" refers to . . .?
the increase in total output that is realized when individuals specialize in particular tasks and trade with each other.
Specialization in production was the starting point for what book in economics that may regard as the beginning of economics?
The Wealth of Nations by Adam Smith
Scarcity in economics means what?
Not having sufficient resources to produce all the goods and services we want.
When markets fail, _________ __________ helps.
government intervention
Economics Models are useless if they are simple, made to duplicate reality, and generally made of plastic, wood, and/or metal.
The economy's factrs of production are not equally suitable for producing different types of goods. This principle generates:
Resource Underutilization
Money flows from households to firms as households offer factors of production for sale in the circular-flow diagram.
Given that pizza is a normal good, if students' income increases at your college substantially, there would be. . .?
an increase in the demand for pizza
An increase in supply is caused by. . ?
A. an increase in input prices
B. suppliers expectations of higher prices in the future increase in the price of the good
None of the above
An increase in demand and a decrease in supply will lead to a(n) ____________________ in equilibrium quantity and a(n) ___________in equilibrium price.
increase; indeterminate change
Suppose that the average cost of a doctor's visit is 100 dollars. If the government imposes a $50 price ceiling, there will be:
an excess demand for doctor's visits
Price Elasticity of Demand:
measures the responsiveness of quantity demanded to a change in a price
In a linear demand curve:
A. Demand is elastic at Low prices
B. Demand is inelastic at high prices
C. Elasticity is the same at all points on a demand curve
D. None of the Above
None of the Above
The cross price elasticity of electricity with respect to the price of natural gas has been estimated as being equal to 0.2. This implies that:
Electricity and natural gas are substitutes
A price floor will cause a larger surplus when demand is _____________and supply is ____________.
elastic; elastic.
Along a given demand curve, an increase in the price of a good will:
decrease consumer surplus
Jacquelyn is a student at a major state university. Which of the following is NOT an example of an explicit cost of her attending college?
A. tuition
B. textbooks
C. salary she could have earned working full time
D. computer lab fees
C. Salary she could have earned working full time
Marginal Benefit
is the addition to total benefit due to undertaking one more unit of activity
Some highways have 1 lane, others have 2, 3, or more. If each lane costs $10 per million mile, an economist would assume that the marginal benefit of a 3-lane highway must be:
$80 million or more per mile
Sunk costs
affect economic profit
Short Run Inputs:
some inputs are fixed and some are variable
There are diminishing returns to an input set when:
all inputs are fixed
In perfect competition, each firm:(3)
is a price taker, produces a tiny fraction of the total industry output, and produces a standardized product.
In perfect competition, the assumption of easy entry and exit implies that:
in the short run, all firms in the industry will earn zero economic profit
The amount by which total utility increases when an additional unit of a good is consumed is called ____________- utility.
A consumer's spending is restricted because of:
a budget constraint
If a consumer purchases a combination of commodities X and Y such that MUx/Px=20 and MUy/Py=10, to maximize utility, consumers should buy:
less of x and more of y (100/5 to 20/5) make MR=MC
If the price of a good falls and the consumer decides to buy more of the good solely because it is relatively less expensive, this describes the:
substitution effect
A monopoly is a market characterized by a:
product with no close substitutes