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Microeconomics
Microeconomics pre-midterm set
61
Economics
Undergraduate 2
03/20/2012

Additional Economics Flashcards

 


 

Cards

Term
Which of the following are the four categories of resources?
Definition
labor, entrepreneurial ability, capital, and natural resources
Term
 
Definition
college education
Term
Scarcity is best defined as
Definition
insufficient resources to satisfy unlimited wants
Term
Economics is best defined as the study of how
Definition
individuals decide to use scarce resources in an attempt to satisfy their unlimited wants
Term
When economists refer to capital, they might mean
Definition
human skills used in production
Term
Which of the four types of decision makers in the U.S. economy plays the largest role?
Definition
U.S. households, as buyers in product markets and sellers in resource markets
Term
Which of the following is a normative statement?
Definition
Congress must recognize that the growing national debt is the most serious problem that the country faces.
Term
Someone who committed the association-is-causation fallacy might conclude that
Definition
event B, which follows event A, was caused by the event A
Term
Someone who commits the fallacy of composition is likely to assume that
Definition
what is true for the individual is also true for the group
Term
Opportunity cost exists because
Definition
resources are scarce but wants are unlimited
Term
Opportunity cost is defined
Definition
as the value of the best alternative not chosen
Term
The opportunity cost of a particular activity
Definition
varies from person to person
Term
Sunk costs
Definition
should not be considered when making economic decisions
Term
John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct?
Definition
Harry has a comparative advantage in ironing.
Term
Society's production possibilities frontier
Definition
is based on simplifying assumptions, but is still useful for illustrating scarcity, opportunity cost, and economic growth
Term
If all resources are used efficiently to produce goods and services, a nation will find itself producing
Definition
somewhere on its production possibilities frontier
Term
A point outside the production possibilities frontier
Definition
cannot be reached using the available technology
Term
The mixed economy is the dominant economic system in the world because
Definition
there is private ownership of property but government regulation of individuals reduces some of the flaws of pure capitalism
Term
Which of the four types of economic decision makers is most important?
Definition
households, because they demand goods and services and supply resources
Term
Households act as demanders when they demand
Definition
goods and services from firms and the government
Term
Which of the following is one of the chief reasons for the increased number of married women in the U.S. work force?
Definition
The opportunity cost of household work has increased.
Term
Utility
Definition
satisfaction
Term
The statement "Households maximize utility" means that households
Definition
are assumed to do what they think will increase their satisfaction
Term
Which of the following is a major advantage of the sole proprietorship?
Definition
ease of start-up
Term
Firms are organized in one of three ways:
Definition
As a sole proprietorship, as a partnership, as a corporation
Term
The term "fiscal policy" refers to
Definition
spending and taxing by governments
Term
The main source of revenue for the U.S. federal government is
Definition
personal income taxes
Term
Whether we look at marginal tax rates or average tax rates, the U.S. incometax is
Definition
progressive
Term
The law of demand says that the lower the price of a good, other things constant,
Definition
the larger the quantity demanded of that good
Term
Movements along a demand curve are called changes in
Definition
quantity demanded
Term
Suppose you drink more tea because the price of coffee has increased. Which of the following best explains your action?
Definition
The substitution effect
Term
If we say that demand has increased, we mean that there has been
Definition
rightward shift of the demand curve
Term
 
Definition
used clothing
Term
Which of the following is most likely to be a normal good?
Definition
tickets to a major league baseball game
Term
Which of the following is the best example of substitutes?
Definition
hiking boots & sneakers
Term
An increase in the price of butter, a substitute good, would be most likely to cause
Definition
a rightward shift of the demand curve for margarine
Term
As the baby boom ended, fewer families had young children and, as a consequence, the
Definition
demand curve for preschool services shifted inward
Term
Which of the following would not shift the demand curve for pork?
Definition
an increase in the price of pork
Term
When quantity demanded of a good is less than the quantity supplied at the prevailing market price,
Definition
The price of the good tends to fall
Term
The most important characteristic of the equilibrium price is that it
Definition
Clears the market leaving neither a surplus or shortage
Term
A price floor set below the equilibrium price will result in a surplus.
Definition
False
Term
A price ceiling set below the equilibrium price will result in a shortage.
Definition
True
Term
If the government imposes a ceiling price on apartment rents, what wouldn't happen?
Definition
an increase in the number of new apartment complexes being built
Term
Elasticity measures
Definition
the responsiveness of decision makers to changes in prices, income, or other variables
Term
"More elastic" means
Definition
more responsive
Term
Price elasticity of demand is defined as
Definition
the percentage change in quantity demanded divided by the percentage change in price
Term
A perfectly elastic demand curve is
Definition
a horizontal straight line
Term
If a firm facing a perfectly elastic demand curve raises its price,
Definition
its sales will decrease to zero
Term
A perfectly inelastic demand curve is
Definition
a vertical straight line
Term
The greater the availability of close substitutes for a product, the greater the price elasticity of demand for that product.
Definition
True
Term
For which of the following is demand most likely to be perfectly inelastic?
Definition
Insulin (a medical necessity versus an optional product)
Term
The cross-price elasticity of demand between milk and soft drinks is likely to be
Definition
Positive, because the items are substitutes
Term
Cross-price elasticity of demand is used to determine whether
Definition
two products are substitutes or complements
Term
Which of the following is true of units of utility?
Definition
They cannot be compared across consumers.
Term
Utility is
Definition
hard to measure because it is a subjective concept
Term
Utility is
Definition
the sense of pleasure or satisfaction derived from consuming goods and services
Term
Marginal utility is a measure
Definition
of the total utility gained from consuming an extra unit of a good
Term
If a good is offered to you free of charge, then you
Definition
stop consuming it when its marginal utility equals 0
Term
Assuming the price of bananas is zero, Mike will eat bananas until:
Definition
His marginal utility of the last banana consumed is 0
Term
The difference between the maximum amount a person is willing to pay for a given quantity of a good and the amount actually paid for that quantity is called
Definition
consumer surplus
Term
A measure of consumer surplus in any market is
Definition
the area beneath the demand curve and above the price
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