Incentives, Scarcity, Opportunity Costs, Marginalism
Individuals economize and respond predictably to
a. positive incentives, but not negative incentives
b. negative incentives but not positive incentives
c. both positive and negative incentives
True or False: When two individuals agree to voluntary exchange, one gains while the other must lose.
False - Both value what they receive as more valuable than what they gave up.
Which of the following would most likely decrease the demand for beef?
a. decrease in the price of beef
b. lower prices for chicken, a substitute for beef
c. new medical research suggesting that beef has health benefits over chicken
d. a bird flu wipes out million of chicken eggs.
b. lower prices for chicken, a substitute for beef
True or False: Profits attract businesses to productive projects, while losses discourage them from undertaking unproductive activities.
True
Does voluntary exchange create wealth?
Yes! exchange makes it possible for the trading partners to gain more value from the existing supply of goods and it also makes larger output levels possible.
True or False: The human desire for goods/services is virtually unlimited while the resources required for their production are limited
True.
Define: Specialization in goods and services one can produce at a low cost makes it possible for trading partners to produce a larger joint output. This is called?
What is: Law of comparative advantage.
True or False: Equilibrium is present in the market when there is generally either a shortage or a surplus?
False - Equilibrium is present in the market when supply equals demand.
True or False: A goal in government policy is to create jobs. Economic progress depends on more jobs.
False: Production of goods and services people value, not just jobs, is the key to improving living standards.
True or False: It is more economical to acquire a good through trade than by self-production.
True! It makes sense to trade for it!
True or False: Incentives only matter when people are greedy and selfish.
False - Incentives matter to all human beings regardless of environment.
Given freedom of movement for both goods and resources, if Florida producers specialize in oranges, and Georgia producers specialize in peaches, then it would be reasonable to conclude that
a. Georgia has the comparative advantage in producing peaches
b. Florida has the comparative advantage in producing peaches
c. the opportunity cost of growing oranges is higher in Florida than in Georgia?
a. Georgia has the comparative advantage in producing peaches
A minimum wage that is set above a market's equilibrium wage will result in...
an excess supply of labor
Should the construction of a high speed rail project be undertaken if there is a $20 billion benefit and the cost is indicated at $45 billion?
The job should not be undertaken.
Why do supermarkets stock thousands of items that people enjoy?
Competition, self-interest, and market prices all influence the supermarkets' decisions on which items to stock.
Which of the following rules will encourage workers to work harder and produce more at their jobs?
a. After working at a firm for six months, workers are guaranteed a job in that firm for the rest of their lives
b. Workers receive 50% of all the money made on sales of items produced by the firm
c. Workers receive the same pay no matter how much they work or produce
b. Workers receive 50% of all the money made on sales of items produced by the firm
Define: Buying and selling of goods and services, with compensation paid by a buyer to a seller - or the exchange of goods or services between parties.
What is: TRADE
True or False: When rent controls fix the price of rental housing below the market equilibrium, tenants can expect...?
low rent and/or low quality of housing.
What is the formula for measuring profit?
what is: Total Revenue - Total Cost
Greater economic freedom is associated with...
What is: Greater economic growth.
Define: The second-best alternative people give up in making a choice.
What is: Opportunity Cost
True or False: Both consumers and producers are better off when a government prevents a voluntary exchange.
False
In the Supply & Demand chart, which curve shows the inverse relationship between the price of a good and the quantity consumers are willing to purchase.
What is: The Demand Curve
According to Leonard E. Read, the knowledge necessary to make a pencil can be known by...
What is: No One.
What does "investment in human capital" mean...
What is: High spending on education and training.