Test 1

Question 0

Property rights

Answer 0

Ability of an individual to own and exercise control over scarce resources

Question 1

Opportunity cost

Answer 1

Whatever must be given to obtain one item

Question 2

Business cycle

Answer 2

Fluctuations in economic activity such as employment and production

Question 3

Study of economics

Answer 3

How society manages it’s scarce resources
How people make decisions
How people interact with one another
Analyze forces and trends that affect the economy as a whole

Question 4

Production possibilities frontier

Answer 4

Graph depicting combinations of output that the economy can possibly produce given the available factors of production and production technology.

Question 5

Positive statements

Answer 5

Attempt to describe the world as it is
Descriptive
Confirm or refute by examining evidence

Question 6

Normative statements

Answer 6

Attempt to prescribe how the world should be

Prescriptive

Question 7

Microeconomics

Answer 7

The study of how households and firms make decisions and how they interact in markets

Question 8

Macroeconomics

Answer 8

The study of economy-wide phenomena, including inflation, unemployment, and economic growth

Question 9

Absolute advantage

Answer 9

Produce a good using fewer inputs than another producer

Question 10

Comparative advantage

Answer 10

Produce a good at a lower opportunity cost than another producer

Question 11

Law of demand

Answer 11

With stable conditions

When the price of the good rises, the quantity demanded of a good falls

Question 12

Law of supply

Answer 12

Conditions normal

When the price of the good rises, the quantity supplied of a good rises

Question 13

Normal good

Answer 13

An increase in income leads to an increase in demand

Question 14

Inferior good

Answer 14

An increase in income leads to a decrease in demand

Question 15

Factors that shift demand curve

Answer 15

Related goods
Income prices
Tastes
Expectations
Number of buyers

Question 16

Factors that shift supply curve

Answer 16

Input prices
Technology
Expectations about future
Number of sellers

Question 18

Substitutes

Answer 18

Increase of price of one

Leads to an increase in demand for the the other

Question 19

Competitive market

Answer 19

Market with many buyers and sellers
Each has negligible impact on market price
Price and quantity determined by all buyers and sellers

Question 20

Surplus

Answer 20

Quantity supplied > quantity demanded

Question 21

Shortage

Answer 21

Quantity demanded > quantity supplied

Question 22

Supply schedule

Answer 22

Relationship between the price of a good and the quantity supplied

Question 23

Demand schedule

Answer 23

Relationship between the price of a good and quantity demanded

Question 24

Complements

Answer 24

An increase in the price of one

Leads to a decrease in the demand for the other

Question 25

Elasticity

Answer 25

Measure of the responsiveness of quantity demanded or quantity supplied

Question 26

Price elasticity of demand

Answer 26

How much the quantity demanded of a good responds to a change in the price of that good

Question 27

Price elasticity of supply

Answer 27

How much the quantity supplied of a good responds to a change in the price of that good

Question 28

Income elasticity of demand

Answer 28

How much the quantity demanded of a good responds to a change in consumers’ income