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51 Cards in this Set
- Front
- Back
Trade-offs arise because wants are unlimited and resources are |
Scarce |
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Economics is the study of |
How society manages its scarce resources |
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A rational person does not act unless |
The action produces marginal benefits that exceed marginal costs |
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In general, raising taxes and increasing welfare payments |
Improves equity at the expense of effciency |
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Since people respond to incentives, we would expect that, if the average salary of accountants increases by 20 per cent, then |
Fewer students will take degree courses in education and more will take accounting courses |
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Which of the following activities is most likely to produce an externality |
A student has a party in her room in the student hall of residence (because the students in the hall of residence are being affected) |
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An increase in the price of beef provides information which |
Tells producers to produce more beef |
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A perfectly competitive market has |
Many buyers and sellers |
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If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are |
Substitutes (one of two goods that replace each other in consumption such that an increase in the price of one good leads to an increase in demand and rightward shift in the demand curve for the other good |
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The law of demand states that an increase in the price of a good |
decrease the quantity demanded for that good |
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The law of supply states that an increase in the price of a good |
Increases the quantity supplied of that good |
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Which of the following shifts the demand for watches to the right? |
A decrease in the price of watch batteries if watch batteries and watches are complements |
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If the price of a good is above the equilibrium price |
There is a surplus and the price will fall |
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If the price of a good is below the equilibrium price |
There is a shortage and the price will rise |
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An increase (rightward shift) in the demand for a good will tend to cause |
An increase in the equilibrium price and quantity |
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A decrease (leftward shift) in the supply for a good will tend to cause |
An increase in the equilibrium price and a decrease in the equilibrium quantity |
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Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect |
The equilibrium quantity to rise and the change in the equilibrium price to be ambiguous |
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Suppose a frost destroys much of the Florida orange crop. At the same time, suppose consumer tastes shift towards orange juice. What would we expect to happen to the equilibrium price and quantity in the market for orange juice? |
Price will increase; quantity is ambiguous |
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Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for wheat today? |
Price will increase, quantity is ambiguous |
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If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is |
Price elastic |
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The price elasticity of demand is defined as |
The percentage change in the quantity demanded of a good divided by the percentage change in the price of that good |
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In general a flatter demand curve is more likely to be |
Price elastic |
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In general, a steeper supply curve is more likely to be |
Price inelastic |
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Which of the following would cause a demand curve for a good to be price inelastic |
The good is a necessity |
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A decrease in supply (shift to the left) will increase total revenue in that market if |
Demand is price inelastic |
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If an increase in the price of good has no impact on the total revenue in that market, demand must be |
Unit price elastic |
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Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to |
Reduce total revenue to farmers as a whole because the demand for food is inelastic |
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If there is excess capacity in a production facility, it is likely that the firms supply curve is |
Price elastic |
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If the income elasticity of a demand for a good is negative, it must be |
An inferior good |
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For a price ceiling to be binding constraint on the market, the government must set it |
Below the equilibrium price |
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A price floor |
Sets a legal minimum on the price at which a good can be sold |
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Which of a following worker would be most likely to find it more difficult to get a job after a rise in the minimum wage rate? |
A teenage worker with few qualifications |
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When a tax is collected from the buyers in a market, |
The tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers |
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The burden of a tax falls more heavily on the sellers in a market when |
Demand is elastic and supply is inelastic |
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A tax placed on a good that is a necessity for consumers will likely generate a tax burden that |
Falls more heavily on buyers |
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The burden of a tax falls more heavily on the buyers in a market when |
Demand is inelastic and supply is elastic |
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Consumer surplus is the area |
Below the demand curve and above the price |
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A buyers willingness to pay is that buyers |
Maximum amount they are willing to pay for a good |
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Producer surplus is the area |
Above the supply curve and below the price |
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The sellers cost of production is |
The minimum amount the seller is willing to accept for a good |
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Total surplus is the area |
Below the demand curve and above the supply curve |
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Adam smith's "invisible hand" concept suggests that a competitve market outcome |
Maximizes total surplus |
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If the MC curve crosses the MR curve twice |
The equilibrium is where the MC crosses MR and the slope of MC is positive |
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The income elasticity of demand for luxury goods is (in absolute value) |
Greater than 1 |
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The law of demand says that, ceteris paribus |
When the price increases, quantity demanded decreases |
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The individual demand faced by a firm in perfect competition |
Is horizontal |
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The long run market supply curve in a perfectly competitive industry |
Can slope upward if more firms in the market shift up the firms cost curves |
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The goods sold by firms operaring in an oligopoly |
Are homogeneous |
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The price of a good in an oligopolistic market is |
Higher than the competitive price but lower than the monopoly pirce |
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The price elasticity of demand is |
The percentage change in the quantity demanded in response to a percentage change in price |
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Non-rivalry in consumption means that |
Different consumers can use the same good at the same time |