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48 Cards in this Set

  • Front
  • Back
Which is not a determinant of supply?

A. The existing state of technology used by the firm
B. The cost of resources used in production
C. The level of government taxes and subsidies
D. The market price of the good
The market price of the good
The production possibilities curve for two products is concave because...
As the production of a good increases, there is an increase in opportunity cost.
Suppose there are two economies, Alpha and Beta, which have the same production possibilities curves and are on the same point on each curve. If Beta then devotes more resources to investment goods than consumer goods when compared to Alpha, then in the future...
Beta will experience greater economic growth than Alpha.
A point on a demand curve indicates...
A particular price and the corresponding quantity demanded by consumers.
A schedule which shows the various amounts of a product producers are willing and able to produce at each price in a series of possible prices during a specified period of time is called...
In a competitive market, if the existing price is below the equilibrium price, market forces will drive the price...
Up and quantity supplied up.
Ceteris paribus
the other-things-equal-assumption, used to simplify the complexity of economics
If two goods are close substitutes...
An increase in the price of one will increase the demand for the other.
A headline reads "Storms destroy half of the lettuce crop." This situation would lead to a(n)...
Increase in the price of lettuce and decrease in quantity purchased
At an exchange rate of 1 pound = $2.00, an American product is sold for 50 pounds in Britain. What will be the British price if the exchange rate for a British pound rises to $3?
33.3 pounds
Proponents of the World Trade Organization contend that it...
Liberalizes trade among member nations
If the U.S. dollar depreciates relative to the euro, then...
The euro will appreciate relative to the dollar.
If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will...
Increase quantity demanded by 5 percent
Block's sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs causes price to rise to $9 and Block's only manages to sell 460 bottles of perfume. The price elasticity of demand is...
.33 and inelastic
If the price elasticity of demand for a good is .75, the demand for the good can be described as...
If a business decreased the price of its product from $10 to $9 when the demand for the product was inelastic, then total revenues would...
Suppose the price elasticity of supply for crude oil is 2.5. How much would price have to rise to increase production by 20 percent?
8 percent
A positive cross elasticity of demand coefficient indicates that...
Two products are substitute goods.
If demand for farm crops is inelastic, a good harvest will cause farm revenues to...
Decrease because of a percentage fall in price greater than the percentage increase in quantity sold
Income of land
Income of entrepreneurship
Income of labor
Income of capital
What are the four types of flows that link the U.S. economy with the economies of other nations?
1) Goods and services (trade)
2) Capital and labor (resource)
3) Information and technology
4) Financial
Foreign exchange market
A market in which various national currencies are exchanged for one another
Exchange rate
The rate at which the currency of one nation can be exchanged for the currency of another nation
What are four ways in which governments interfere with free trade among nations?
1) Protective tariffs
2) Import quotas
3) Non-tariff barriers
4) Export subsidies
GATT was based on what three principles?
1) equal, nondiscriminatory trade treatment for all member nations
2) the reduction of tariffs by multilateral negotiation
3) the elimination of import quotas
What is the current round of WTO trade negotiations?
the Doha Round
What is a trade bloc?
A group of countries having common identity, economic interests, and trade rules
Give two examples of trade blocs.
1) The European Union
2) The North American Free Trade Agreement
Price elasticity of demand
The responsiveness (or sensitivity) of consumers to a price change
The midpoint formula for calculating elasticity
(change in quantity)/(sum of quantities)/2
(change in price)/(sum of prices)/2
When is demand elastic?
When a specific percentage change in price results in a larger percentage change in quantity demanded (>1)
When is demand inelastic?
When a specific percentage change in price produces a smaller percentage change in quantity demanded (<1)
What is unit elasticity?
When the price elasticity of demand is exactly 1
What is the graph of perfectly inelastic demand?
A vertical line
What is the graph of perfectly elastic demand?
A horizontal line
Total-revenue test
If total revenue changes in the opposite direction from price, demand is elastic. If total revenue changes in the same direction as price, demand is inelastic. If total revenue doesn't change when price changes, demand is unit-elastic.
List four major determinants of price elasticity of demand.
1) Substitutability
2) Proportion of income
3) Luxuries versus necessities
4) Time
Price elasticity of supply
How easily (and therefore quickly) producers can shift resources between alternative uses
Cross elasticity of demand
How sensitive consumer purchases of one product are to a change in the price of some other product
When cross elasticity is negative, the two compared goods are...
When cross elasticity is positive, the two compared goods are...
Income elasticity of demand
The degree to which consumers respond to a change in their incomes by buying more or less of a particular good
Consumer surplus
The benefit surplus received by a consumer or consumers in a market
Producer surplus
The difference between the actual price a producer receives (or producers receive) and the minimum acceptable price
Efficiency losses
Reductions of combined consumer and producer surplus, associated with underproduction and overproduction of a product