The key economic concept that serves as the basis for the study of economics is:

A. Inflation

B. Unemployment

C. Money

D. Scarcity

Tammie makes $150 a day as a bank clerk.  She takes off two days of work without pay to fly to another city to attend the concert of her favorite music group.  The cost of transportation for the trip is $250.  The cost of the concert ticket is $50.  The opportunity cost of Tammie's trip to the concert is:

A. $300   B. $450  C. $500 D. $600

Which expression is another way of saying marginal benefit?

A. Profit

B. Loss

C. Total Benefit

D. Extra Benefit

From an economic perspective, when a student decides to attend another year of college, the student has concluded that the marginal:

A. Costs of attending college has decreased in that year

B. Benefits of attending college has increased that year

C. Benefits of attending college are greater than the marginal costs

D Costs of attending college will be subsidized by someone else such as parents or the government

Economic models do not reflect the full complexity of reality, but instead are based on:

A. Tradeoffs

B. Simplifications

C. Value Judgements

D. The fallacy of composition

The market system is an economic system that:

A. Produces more consumer goods than capital goods

B. Produces more capital goods than consumer goods

C. Gives private individuals and institutions the right to own resources used in production

D. Gives the government the right to tax individuals and corporations for the production of capital goods

Which would not be characteristic of a capitalist economy?

A. Government ownership of the factors of production

B. Competition and unrestricted markets

C. Reliance on the market system

D. Free enterprise of choice

The economy of the former Soviet Union would best be classified as:

A. A market system

B. Pure capitalism

C. laissez-faire capitalism

D. A command system

The maximization of profit and the minimization of losses is the primary factor affecting the economic decision making of:

A. Workers

B. Consumers

C. Public officials

D. Entrepreneurs

Legal and social rules that affect the ownership of property are:

A. Property rights

B. The coincidence of wants

C. The freedom of choice

D. The freedom of enterprise

Which are not generally considered to be complementary goods?

A. Gasoline and motor oil

B. Beef and chicken

C. Beer and pretzels

D. Razors and razor blades

A decrease in the price of product X causes and increase in the demand for product Y.

A. Apples and oranges

B. Butter and margarine

C. Hamburgers and pizza

D. Video recorders and video tapes

Which of the following products are not close substitutes?

A. Peanut butter and jelly

B. Margarine and Chicken

C. Beef and chicken

D. Tea and coffee

All of the following would cause an increase in the demand for private airplanes at a given price, except a(n):

A. Decrease in interest rates

B. Increase in consumer goods

C. Decrease in taxes on luxury goods

D. Decease in the costs of constructing private airplanes

Given the relationship between two variables, ask yourself what happens to the dependent variable when I increase the independent variable by one unit?

(If you increase the # of employees by 1, how much more product can be produced?)

Private Property

Includes....

You can receive property......

Encourages......

Has limitations:

Includes copyright, patent, etc. as well as cars, houses...

You can receive property, use it as you wish, control it as you wish, dispose of it as you wish.

Encourages growth, business, etc

Limitations: cannot own drugs, "private property"...

You obtain resources and use them to produce goods and services

The owner of property can use it as he or she see fit (freedom of choice)

Laborers can do any work they like if they are qualified

Individualism and Self Interest

(A primary driving force of Capitalism)

Try to maximize ______ or minimize _______

Try to get _________ for product or ________for rent if you own property

Want to get highest______as a laborer

Try to get _________ as a consumer

As a business, maximize the u____ of a product

Try to maximize profit or minimize losses

Try to get highest price for product or highest price for rent if you own property

Want to get highest income as a laborer

try to get lowest price as a consumer

As a business, maximize the utility of a product

Nobody forces you to buy or not buy

Nobody forces you to produce or not produce

Through interaction of supply/demand, the market dictates the price

In competition you don't have a choice of what the price of your product is - it is decided by supply/demand

Normal Profit

This is a cost not a profit

Land

Labor

Capitalist Goods

Entrepreneurial Ability

Gross Domestic Product

Total output produced within the USA

Gross National Product

Total output produced by the USA, within or without USA

1. Public Transfer Payments

(ie. Social Security, Welfare Payment)

2. Private Transfer Payments

(i.e. gift or support from family to a student)

3. Securities Transactions

(Buying/Selling stocks & bonds)

4. Second-Hand Sales

(used car)