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Production Possibilities Curve & Comparative Advantage in Trade
Supply/Demand
Economic Terminology & Basics
Monopolies
Miscellaneous
(Hard-ish)
100
Identify if the PPC is straight or bowed: 1. Corn and Wheat 2. Cactus and Pineapples
1. Bowed 2. Straight
100
To be “binding”, a price ceiling must be _____ equilibrium To have an effect, a price floor must be _____ equilibrium
To be “binding”, a price ceiling must be (below) equilibrium. To have an effect, a price floor must be (above) equilibrium.
100
MULTIPLE CHOICE It is most accurate to say: A. Normative statements focus on facts while positive statements involve value judgments. B. Normative statements involve value judgement while positive statements focus on facts. C. Normative and positive statements both focus on facts and neither involve value judgments. D. Normative and positive statements both involve value judgement and neither focuses on facts. E. Normative statements involve value judgements and focus on facts while positive statements only focus on facts.
B
100
In a monopoly graph, MR equals this.
What is MC?
100
12. According to the theory of comparative advantages, a good should be produced where A. Its explicit costs are least. B. Its opportunity costs are least. C. The cost of real resources used is least. D. Production can occur with the greatest increase in employment. E. Production can occur with the lowest increase in employment.
B. Its opportunity costs are least.
200
MULTIPLE CHOICE This would cause a leftward shift of the production possibilities curve: (A) An increase in unemployment (B) An increase in inflation (C) An increase in capital equipment (D) A decrease in consumer demand (E) A decrease in working-age population
E
200
1. Quantity is sensitive to a change in price. Example 2. Quantity is insensitive to a change in price. Example
1. Inelastic Demand: Gasoline. 2. Elastic Demand: Pizza.
200
The four categories of the economy's resources.
What is land, labor, capital, and entrepreneurship.
200
In a monopoly, Total Revenue is at its peak when MR equals this.
What is 0?
200
Two of the four market failures are these.
What are public goods, externalities, monopolies, and unfair distribution of income?
300
Draw a PPC showing changes for each of the following: Pizza and Computers 1. New computer making technology 2. Decrease in the demand for pizza 3. Mad cow disease kills 85% of cows
1. Shift outward only for computers. 2. The curve doesn't shift! A change in demand doesn't shift the curve. 3. Decrease in resources decrease production possibilities for both.
300
There is a DIRECT (or positive) relationship between price and quantity supplied. 5 Shifters
What is the Law of SUPPLY 1. Prices/Availability of inputs (resources). 2. Number of Sellers. 3. Technology. 4. Government Action: Taxes & Subsidies. 5. Expectations of Future Profit.
300
The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses.
What is The Resource (Factor) Market.
300
Two reasons why Monopolies are inefficient are these.
What is charge a higher price, don't produce enough, and produce at a higher price?
300
This is the definition of an excise tax.
What is a per unit tax on producers?
400
Country A and Country B produce the same two products, hammocks and looms. Country A can produce a maximum of 60 hammocks or 40 looms, while Country B can produce a maximum of 40 hammocks or 20 looms. Internationally, if 1 loom is traded for 1.75 hammocks, who will benefit from trading?
Both countries will benefit.
400
1. If the price goes up for a product, consumer buy less of that product and more of another substitute product (and vice versa) 2. If the price goes down for a product, the purchasing power increases for consumers -allowing them to purchase more. 3. As you consume anything, the additional satisfaction that you will receive will eventually start to decrease.
1. What is the Substitution Effect. 2. What is the Income Effect. 3. What is the Law of Diminishing Marginal Utility.
400
A synonym for each of the following terminology: Utility. Marginal. Allocate.
Utility = Satisfaction. Marginal = Additional. Allocate = Distribute.
400
The Socially Optimal Point is where these two lines intersect.
What is MC and D?
400
This formula tells how many employees one should hire.
What is MRP = MFC?
500
Country A and Country B produce the same two products, hammocks and looms. Country A can produce a maximum of 60 hammocks or 40 looms, while Country B can produce a maximum of 40 hammocks or 20 looms. 1. What is the opportunity cost to produce a loom in terms of hammocks in Country A? 2. Which country, if either, has a comparative advantage in producing looms? Explain.
1. 1 loom = (60/40) = 1.5 hammocks. 2. Country A has the comparative advantage b/c it has the lower opportunity cost.
500
5 Shifters of Demand Changes in _____ doesn't shift the curve but only causes movement along the curve.
Tastes and Preferences, Number of Consumers, Price of Related Goods, Income, Future Expectations Changes in (PRICE) doesn't shift the curve but only causes movement along the curve.
500
Karen works part-time at a local convenience store and earns $10 per hour. She wants to spend next Sunday afternoon attending a music concert. The full price of the concert is $75, but Karen was able to get a discounted price of $50 from a friend who purchased the ticket but has become unable to attend. If Karen took 4 hours off from her job to attend the concert, what was her opportunity cost of attending the concert?
What is $90.
500
In a perfectly discriminating monopoly, this sets it apart from a normal monopoly.
What is charge each person differently to maximize profit?
500
These are the five parts of a complete circular flow model.
What are households, the resource market, businesses, the products market, and government.