Basic Economic Concepts
According to the economic perspective
Scarcity requires that people make choices
Which of the following is a distinguishing feature of a command system?
central planning
Smartphones and SIM cards are:
Complementary Goods
T/F: An increase in quantity supplied might be caused by an increase in resource costs.
False
T/F: Consumer surplus will increase if the price of the product they buy declines.
True
T/F: An economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy.
False
Which of the following is a feature of laissez-faire capitalism?
people are free to interact in markets to buy and sell goods and services
If X is a normal good, a rise in money income will shift the:
demand curve for X to the right.
The demand curve shows the relationship between:
price and quantity demanded.
Society's marginal cost of pollution abatement curve slopes upward because of what law?
The Law of Diminishing Marginal Utility
The process by which economists test hypotheses against facts to develop theories, principles, and models is called:
The Scientific Method
Economic systems differ according to which two main characteristics?
who owns the factors of production and the methods used to coordinate economic activity
If Z is an inferior good, an increase in money income will shift the:
demand curve for Z to the left.
According to the concept of diminishing marginal utility, consumers will purchase more of a good when the price falls because:
the marginal benefit of additional units of the good now outweigh the marginal cost.
Malorie buys a painting for $240 for which she was willing to pay $340. The minimum acceptable price to the seller, Owen, was $140. Malorie experiences:
a consumer surplus of $100, and Owen experiences a producer surplus of $100.
In constructing models, economists:
make simplifying assumptions
Which of the following is a fundamental characteristic of the market system?
property rights
If products C and D are close substitutes, an increase in the price of C will:
shift the demand curve for D to the right.
Emily tells her roommate, "I might as well go to class, I don't have anything better to do right now." Emily's statement suggests that:
the marginal benefits of attending class outweigh the marginal costs.
In a cap-and-trade program:
government fixes the maximum amount of a pollutant that firms can discharge and issues permits that firms can buy from and sell to each other.
Microeconomics is concerned with:
a detailed examination of specific economic units that make up the economic system.
Freedom of enterprise:
allows businesses, within broad limits, to choose what goods to produce.
When the price of Wilson tennis balls decreased, Roger purchased Wilson tennis balls instead of Dunlop tennis balls whose prices had remained the same. Which of the following best explains Roger's decision to buy more Wilson tennis balls?
the substitution effect
John sold gold coins for $2,000 that he bought a year ago for $2,000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $2,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:
opportunity costs.
Darcy and Rachel live down the hall from each other in the same dorm. Darcy likes to play her music loudly down the hall, and Rachel finds the music annoying. A Coase theorem solution for this problem would be for:
Darcy and Rachel to negotiate a mutually agreeable level of volume and/or selection of music.