economics 76-150 Flashcards Preview

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Flashcards in economics 76-150 Deck (75):
1

what is commodity money

a form of money that people value both because it serves as a medium of exchange and because of its intrinsic quality

2

what is the relative price of a good

the opportunity cost of producing it, expressed in units of the next best alternative good

3

what is the major reason that an assembly line can produce an automobile faster than a group of individuals who work in a small garage

In the assembly line, each worker is a specialist in a particular part of the production process

4

what conditions must be met in order for the barter to occur

all participating parties must expect to gain and there must be a double coincidence of wants

5

what is a subsidy

a payment from the government to an individual or group to encourage or support production but without any anticipation of production in return

6

what is a quota

a limit on the quantity of a good that may be imported or exported

7

what are complementary goods

goods that are purchased together such that the demand for one can directly affect the demand for the other. the classic example: hot dogs and hot dog buns

8

what is a tariff

a tax on an imported good

9

what is token money

money whose face value is greater than the cost of producing it

10

What happens to total world output if every nation specializes in the goods in which it has a comparative advantage

total world output increases

11

The (supply/demand) curve for a profit-maximizing firm is equal to its rising marginal cost curve.

supply

12

The law of demand states that quantity demanded is (directly/inversely) related to price.

inversely

13

How are exchange rates determined?

Supply and demand for both currencies naturally sets an equilibrium price.

14

The Paris Conference of 1867 set most of the world on a ____ exchange rate system based on the ____ gold standard.

fixed, gold

15

One ice cream cone may be very satisfying. The next ice cream cone will probably be less so. Ten ice cream cones would probably make a person sick. This example illustrates what economic law?

the law of diminishing marginal utility

16

Complementary goods have a (positive/negative) cross-price elasticity.

negative

17

You can sell 10 hockey pucks at $5 each or 9 hockey pucks at $6 each. Demand in this price range is (elastic/inelastic).

inelastic; $54 is more than $50

18

Suppose that the price elasticity of demand of bread is 0.2, and the price of bread increases by 10%. What will happen to the quantity demanded of bread?

It will decrease by 2%.

19

If the cross-price elasticity between two products is negative, what can be said about the two products?

They are complements.

20

If the cross-price elasticity between two products is positive, what can be said about the two products?

They are substitutes.

21

If a change in price has no effect on the quantity demanded, demand is completely (elastic/inelastic).

inelastic

22

What type of elasticity represents the relationship between the demand for one product and the price of another?

Cross-price elasticity.

23

If demand is elastic, what does this mean for the price elasticity of demand?

The price elasticity of demand is greater than one.

24

What is marginal utility?

the value of consuming an additional unit of a good or service

25

Why can't a supply curve extend infinitely to the right?

At some point, producers will not have enough resources to produce additional units of a good or service, no matter how high the price.

26

The downward slope of the demand curve is explained by the law of ______ marginal utility.

diminishing (or decreasing)

27

In a graph of supply and demand, what does the vertical axis represent?

price

28

True or false: Supply and demand curves are always straight lines.

False (but they are usually drawn as straight lines in economics textbooks)

29

The law of diminishing marginal utility helps to explain the law of (supply/demand).

demand

30

Spaghetti and tomato sauces are (complements/substitutes).

complements

31

What factors affect the supply of a good or service?

productivity changes, taxes, subsidies, expectations, regulation. the number of sellers

32

What factors affect the demand of a good or service?

the number of buyers, consumer, income, tastes and preferences, consumer expectations, the prices of complements and substitute

33

You can sell 10 hockey pucks at $5 each or 9 hockey pucks at $6 each. Demand in this price range is (elastic/inelastic).

inelastic; $54 is more than $50

34

what is the balance of trade

the difference in value between a nation's exports and imports

35

how does the concept of absolute advantage apply to international trade

it doesn't. international trade is based on comparative advantage.

36

what is a resource market

a market in which resources are bought and sold

37

how does the division of labor save time in the production process

workers do not spend any time moving from one task to another, and each worker becomes a specialist in his particular part of the production process

38

when is the best time for two countries to set an exchange rate for an international transaction

at the time of the trade (in order to avoid changes in the exchange rate before the transactions occurs)

39

in general, what happens to people and countries who specialize and trade?

they become independent

40

what is an unfavorable balance of trade

a condition in which a nation imports more than it exports

41

what are three reasons why the division of labor is effective

tasks are assigned according to each worker's preference and abilities, more sophisticated technology can be used, and each worker can become very good at one isolated part of the production process.

42

what is an embargo

a restriction on exports intended for sale in another country

43

what happens to total production for two nations who specialize according to their comparative advantages and then trade?

total production increases

44

how did many Asian economies achieve rapid economic growth in the 1970s and 1980s

their goods were competitively priced because their wage rates and capital costs were low

45

what is money

anything that is generally accepted in return for resources, goods. or services, or for the repayment of debts

46

what is a favorable balance of trade

a condition in which a nation exports more than it imports

47

what is the main reason that a fast food restaurant produces a meal faster than the average person can produce it in his/her kitchen

a fast food restaurant has division of labor, so large scale production machinery is practical

48

what is an exchange

a reciprocal transfer of money or a resource, good, or service in return for a resource, good or service

49

how do people and nations become economically interdependent

by specializing in the production of some goods and trading to obtain others

50

what is an export

a good that is produced domestically but sold to consumers in a foreign country

51

what is a comparative advantage

the position of an individual or a nation that can produce a good for the lowest opportunity cost

52

why is the concept of comparative advantage important to international trade

nations specialize in the production of goods in which they have a comparative advantage and this gives them an incentive to trade with other nations that specialize in the production of other goods

53

why is a barter system inefficient

finding a double coincidence of wants for every transaction is costly and time consuming

54

what condition must be met in order for voluntary exchange to occur

all participating parties must expect to gain

55

what is a trade barrier

a government imposed restriction that prevents or inhibits free trade between countries

56

what good was the subject of an embargo that devastated the US economy in the 1970s

oil ( the embargo was imposed by OPEC)

57

quantity demanded decreases as price increases because higher prices provide a (positive/negative) incentive for consumers

negative

58

on a graph of the supply and demand for a particular god, where is the equilibrium price found

at the intersection of the supply and demand curves

59

what happens to exchange quantity if there is a decrease in demand

exchange quantity decreases

60

as the price of a good increases what typically happens to the quantity supplied

quantity supplied increases

61

what is quantity supplied

the amount of a good that producers are willing and able to sell at a particular price

62

what is the equilibrium price of a good or service

the price at which the quantity demanded equals the quantity supplied

63

what happens to exchange quantity if there is a simultaneous decrease in demand and increase in supply

we cannot tell exactly

64

how is quantity demanded related to demand

demand is the quantity demanded at each price within a range of prices

65

what happens to exchange quantity if there is an increase in demand

exchange quantity increases

66

what area of economics explores how a firm decides what price to charge for its product

microeconomics

67

how do prices act as signals to consumers

they help consumers decide how best to allocate their incomes

68

what happens to the equilibrium price of a good if there is a decrease in supply, ceteris paribus

the price increases

69

as the price of a good decreases, what typically happens to the quantity supplied

quantity supplied decreases

70

how is an internet website an example of a market

a website may be used to bring buyers and sellers together to make an exchange

71

what happens to exchange quantity if there is a simultaneous increase in both supply and demand

exchange quantity increases

72

what happens to exchange quantity if there is a simultaneous decrease in both supply and demand

exchange quantity decreases

73

what is supply

the relationship between the price of a good and the quantity of it that sellers are willing and able to produce and sell

74

what is market demand

the sum of individual demand for every consumer in a market

75

what happens to equilibrium price if there is a simultaneous decrease in both supply and demand

we cannot tell exactly