Mr. Mace Ap Econ Final

Front 1

Scarcity in economics means:

Back 1

Not having sufficient resources to produce all the goods and services we want.

Front 2

Suppose people in households decide to spend less. How will this impact an economy?

Back 2

It will decrease the level of income of other people since household spending becomes someone else’s income.

Front 3

(Figure 3-7: Bicycles and Radishes) The country depicted in this figure is currently operating at point M. It could produce at point I only if it:

Back 3

Increased the quantities of resources.

Front 4

Gains from trade arise because of:

Back 4

Specialization in production.

Front 5

The law of demand states that, other things equal:

Back 5

As price increases, the quantity of the product demanded decreases.

Front 6

A shift of a demand curve to the right, all other things unchanged, will:

Back 6

Increase equilibrium price and quantity.

Front 7

A binding price ceiling is designed to:

Back 7

Keep prices low.

Front 8

The price elasticity of demand measures the responsiveness of the change in:

Back 8

Price to the change in quantity demanded.

Front 9

You manage a popular malt shop and lately revenues have been disappointing. Your friend suggests that raising soda prices will increase revenues, but your waitress suggests that decreasing soda prices will increase revenues. You aren't sure who is right, but you do know that:

Back 9

If the price elasticity of demand of the soda is less than one (inelastic) then increasing prices will increase revenue, but if the price elasticity of demand is greater than one (elastic) decreasing prices will increase revenue.

Front 10

If income decreases and the consumption of a certain good increases, that good is considered a(n):

Back 10

Inferior good.

Front 11

(Table 49-2: Consumer Surplus) If the price of a ticket to see The Nutty Nutcracker is $50, then Narum's consumer surplus is:

Back 11

Whatever he was willing to pay minus $50.

Front 12

State governments place excise taxes on cigarettes because:

Back 12

Make money and lower the total quantity demanded of cigarettes.

Front 13

The amount by which an additional unit of a good or service increases a consumer's total utility, all other things unchanged, is:

Back 13

Marginal utility.

Front 14

Profit is the difference between ________ and ________.

Back 14

Revenue, cost.

Front 15

Firms will continue to produce if:

Back 15

Marginal revenue is greater than marginal cost, and stop when equal.

Front 16

The long run is a planning period:

Back 16

Over a long time in which there are no fixed factors and anyone can enter the market, outputs and equilibriums can change.

Front 17

If marginal cost is equal to average total cost, then:

Back 17

The firm is operating on minimum cost output.

Front 18

(Figure 56-1: Long-Run Average Cost) Output per period in the region from 0 to A indicates that a firm is experiencing:

Back 18

Growth in production?

Front 19

If a local California avocado stand operates in a perfectly competitive market, that stand owner will be a:

Back 19

Price taker

Front 20

(Figure 58-2: Marginal Decision Rule) Given the market price P1, B is the ________ curve.

Back 20

Marginal cost?

Front 21

A decrease in production costs for firms in a perfectly competitive market will cause a(n):

Back 21

economic profit for firms in the short run.

Front 22

Because of monopoly, consumers typically have:

Back 22

increase in price.

Front 23

A natural monopoly exists whenever a single firm:

Back 23

possesses economies of scale over the output that is relevant for the industry.

Front 24

The practice of charging different prices to different customers for the same good or service even though the cost of supplying those customers is the same is:

Back 24

price discrimination.

Front 25

The market structure that is characterized by only a small number of producers is referred to as:

Back 25

an oligopoly.

Front 26

In the classic prisoners' dilemma with two accomplices in crime, the dominant strategy for each individual is to:

Back 26

confess.

Front 27

Attempts by the federal government to prevent the exercise of monopoly power in the United States are called ________ policy.

Back 27

antitrust

Front 28

The monopolistic competitor in the figure is producing at the output level that maximizes profits (minimizes losses). The shaded rectangle depicts the level of:

Back 28

profit.

Front 29

Firms use _____ to provide information about their product or to convince consumers to buy it. And when a company does a good job of this, its product develops a ____ name.

Back 29

advertising, brand

Front 30

A decrease in the quantity of labor demanded will occur if:

Back 30

there is a change in prices of goods, a change in the supply of other factors or a change in technology.

Front 31

In the factor market for land, one will find equilibrium rental prices will be ________ the value of marginal product of land.

Back 31

equal

Front 32

A factory produces gadgets that have two key parts. The factory can employ workers to attach those parts, or it can employ robotic machines to attach them. In this case, the labor and capital are considered:

Back 32

to be substitutes.

Front 33

A new teacher often earns less than a teacher with 20 years experience because of:

Back 33

human capital.

Front 34

Which of the following is an example of an activity generating a negative externality?

Back 34

A cost that is suffered by a third party as a result of an economic transaction.

Front 35

Suppose that the federal government determines the total level of municipal sewage that can be discharged by cities located along a river. If the cities are able to exchange rights to this total discharge level among themselves, this would be an environmental policy of:

Back 35

tradable emissions permits.

Front 36

Which of the following is an example of a nonexcludable good?

Back 36

A nonexcludable good cannot prevent the consumption of the good Ex: dirt, biodiversity, public sanitation.

Front 37

Which of the following goods is most likely an artificially scarce good?

Back 37

Ex: pay-per-view, computer software, any good where the supplier can control the good’s consumption.

Front 38

A field of law that attempts to limit the ability of oligopolists to collude and restrict competition is called:

Back 38

Antitrust law.

Front 39

Which of the following is not a leading cause of poverty in the United States?

Back 39

Leading causes of poverty: lack of education, lack of proficiency in English, racial and gender discrimination, bad luck.

Front 40

Adverse selection death spiral occurs when private insurance companies:

Back 40

Refuse to offer policies because there is no premium at which the company can recover its losses.

Front 41

An indifference curve is a line that shows all the consumption bundles that:

Back 41

yield the same amount of total utility for an individual.

Front 42

Which are the two markets represented in the simplest circular-flow diagram?

Back 42

Product market (physical stuff) and market for factors of production (money market).

Front 43

Real GDP is nominal GDP adjusted for:

Back 43

Inflation

Front 44

You are a college student who is not working or looking for work. You are:

Back 44

Not part of the labor force.

Front 45

Unemployment that occurs because it takes workers and employees time to find each other is called:

Back 45

Frictional unemployment.

Front 46

Inflation is when there is:

Back 46

A rise in the overall price level.

Front 47

The aggregate price level is:

Back 47

the general or aggregate price of the collective goods and services produced in an economy over a period of time.

Front 48

Microeconomics deals with:

Back 48

the effects of individual decisions and single factors.

Front 49

Too little spending in an economy often leads to:

Back 49

Fewer businesses, higher unemployment, and stunted economic growth.

Front 50

Equity means that:

Back 50

Fairness is present, particularly in regard to taxation or welfare economics.

Front 51

Who wrote The Wealth of Nations, a book that many credit with establishing economics as a discipline?

Back 51

Adam Smith.

Front 52

Use the “DVD Market” Figure 6-2. The figure shows the weekend rental market for DVDs in Collegetown. The equilibrium price for DVD rentals is ________ and the equilibrium quantity is ________.

Back 52

$5; 50

Front 53

A quota is essentially a:

Back 53

Government-imposed trade restriction that limits the number, or in certain cases the value, of goods and services that can be imported or exported during a particular time period.

Front 54

The market(s) that channel excess savings of households into investment spending by firms is(are) known as:

Back 54

Financial markets.

Front 55

A fall in the market interest rate makes any investment project:

Back 55

More profitable, regardless of whether the funds were borrowed or came from retained earnings.

Front 56

Fiscal policy refers to:

Back 56

The use of the government budget to influence the economic activity.

Front 57

Government spending and taxation rules that cause fiscal policy to be expansionary when the economy contracts and contractionary when the economy expands are known as:

Back 57

Automatic stabilizers.

Front 58

Money is:

Back 58

Any asset that can easily be used to purchase goods and services. (also debt)

Hint 58

asset that

Front 59

The reserve ratio is the:

Back 59

Fraction of bank deposits that a bank holds as reserves.

Front 60

The Federal Reserve System is the _______ for the United States.

Back 60

Central bank

Front 61

If the Fed increases the discount rate:

Back 61

bank lending falls and so will the money supply via the money multiplier.

Front 62

When an individual decides to hold money instead of other assets:

Back 62

that individual is giving up the interest that could have been earning by holding other types of assets.

Front 63

A business will want to borrow to undertake an investment project when the rate of return on that project is:

Back 63

greater than the interest rate.

Front 64

The government has a budget deficit if:

Back 64

It spends more than it earns.

Front 65

Monetary policy involves:

Back 65

One of the ways the U.S. government attempts to control the economy. If the money supply grows too fast, the rate of inflation will increase; if the growth of the money supply is slowed too much, then economic growth may also slow.

Front 66

When the aggregate price level increases, the purchasing power of many assets falls, causing a decrease in consumer spending. This is known as the _____ effect and is a reason why the _____ curve slopes _____.

Back 66

wealth, aggregate demand, downward.

Front 67

A decrease in aggregate demand will generate _______ in real GDP and _______ in the price level in the short run.

Back 67

a decrease, real GDP, a decrease.

Front 68

An increase in the money supply causes ______ in output in the short run, and _______ in output in the long run.

Back 68

an increase, no change.

Front 69

According to the classical model of the price level, an increase in the money supply will create:

Back 69

inflation with no long-run increase in real GDP.

Front 70

The inflation tax is:

Back 70

a term which refers to the financial loss of value suffered by holders of cash and fixed-rate bonds, as well those on fixed income (not indexed to inflation), due to the effects of inflation.

Front 71

The short-run Phillips curve shows:

Back 71

An inverse relationship between the unemployment rate and inflation rate. As the unemployment rate increases, the inflation rate decreases.

Front 72

Politicians may like moderate inflation in an election year since the:

Back 72

increase in aggregate demand serves to increase employment.

Front 73

In response to the Great Depression, the classical economists:

Back 73

did not advocate any action because of the lack of general consensus about the consequences of policy.

Front 74

Which of the following schools of thought is the MOST likely to advocate the use of fiscal policy in fighting recessions?

Back 74

Keynesians.

Front 75

Discretionary fiscal policy may be counterproductive because:

Back 75

of lags in adjusting fiscal policy; only to be used in special circumstances, so the consensus is to give monetary policy lead role in economic stabilization.

Front 76

A country's living standard is best measured by the:

Back 76

GDP per capita

Front 77

The term “Human capital” describes:

Back 77

the talent training, and education of workers.

Front 78

Physical capital would include:

Back 78

tools and office space that aid the workforce to produce more than that of a century ago.

Front 79

Roads, telephone lines, power facilities, and schools are examples of a nation's:

Back 79

infrastructure.

Front 80

When the value of a nation's imports exceeds the value of that nation's exports, the nation is said to have:

Back 80

a capital inflow.

Front 81

The market in which foreign currencies are traded is known as the:

Back 81

foreign exchange market.

Front 82

A floating exchange rate is:

Back 82

a type of exchange-rate regime in which a currency's value is allowed to fluctuate in response to market mechanisms of the foreign-exchange market. A currency that uses a floating exchange rate is known as a floating currency. A floating currency is contrasted with a fixed currency.

Front 83

All else equal, if the Federal Reserve decreases the money supply, interest rates will _____ and the dollar will _____ against other currencies.

Back 83

increase, appreciate

Front 84

The price elasticity of demand for skiing lessons in New Hampshire is over 1.00. This means that the demand is ________ in New Hampshire.

Back 84

price elastic

Front 85

The long-run average cost curve will be upward sloping when the firm is experiencing:

Back 85

diseconomies of scale.

Front 86

Suppose that some firms in a perfectly competitive industry are earning positive economic profits. In the long run, the:

Back 86

Industry supply curve will shift to the right.

Front 87

A monopoly is likely to ________ units of output and ________ price than a perfectly competitive firm.

Back 87

Produce less, higher.

Front 88

By practicing ________, firms openly agree on price and output, and other decisions in order to achieve monopoly profits.

Back 88

overt collusion.