Exam 1 Flashcards

1
Q

An increase in the price of an input will cause supply to increase T/F?

A

False

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2
Q

In a MARKET system, the ultimate decision about what to produce is left to

A

sellers

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3
Q

A situation where limited resources make it impossible to fulfill all of our wants is known as

A

scarcity

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4
Q

Tobacco companies did not resist the advertising can instituted in 1970 because they actually increased profits by not being allowed to advertise. This ban forced these companies to abondon their dominant strategy of advertising and wind up at a cooperative outcome of not advertising. Prior to the ban, the tobacco companies were involved in playing

A

a prisoner’s dilemma game

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5
Q

Incentives

A

can be used to either encourage or discourage particular behaviors

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6
Q

Incentives work by changing the trade-offs faced by individuals T/F?

A

True

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7
Q

If a company could spend $3 per bicycle on a safety device that would prevent $2,000 worth of harm for every 1,000 bicycles sold, spending the $3 would be a cost-justified precaution. T/F?

A

False

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8
Q

Taxes can be adversely affect free exchange T/F?

A

True

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9
Q

Ultimately, quotas ______ prices for imported goods and ______ prices for domestic goods.

A

raise; raise

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10
Q

If supply is elastic, the supply curve is relatively _______, and if demand is elastic, the demand curve is relatively _______.

A

flat; flat

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11
Q

The amount Jacqueline recieves for selling cupcakes beyond the minimum she would be willing to sell the cupcakes for is called

A

producer surplus

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12
Q

Markets are forums where buyers and sellers conduct transactions T/F?

A

True

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13
Q

Gerald is deciding what kind of light bulbs to install in the light fixtures in his new home. He has it narrowed down to compact fluorescent bulbs (CFLs) or LED bulbs. The CFLs will cost $350 and the LEDs will cost $900. Gerald estimates that the energy-saving benefits from the CFLs will be $750 and the energy-saving benefits from the LEDs will be $1,250. Based on these numbers, Gerald should purchase the

A

CFLs because the net benefit is greater

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14
Q

Andrea: one bracelet takes 2 hrs, 1 tiara takes 12 hrs

What is Andrea’s opportunity cost of producing one bracelet?

A

1/6 of a tiara

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15
Q

If a product is a normal good, an increase in your income will

A

increase your demand for the product

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16
Q

You decide to spend time studying for a philosophy exam, even though you have offers to go to see a movie, go out to dinner, or go to a poetry reading. This is a difficult choice for you because you really want to go to the poetry reading and would choose that overseeing the movie or going out to dinner. Your opportunity cost of spending time studying for your philosophy exam is

A

going to the poetry reading

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17
Q

Prices help coordinate all phases of production, so producers have the right quantities of resources they need, in the right place, to operate. T/F?

A

True

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18
Q

All of the following are factors that will shift the demand curve EXCEPT

A

a change in the price of inputs

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19
Q

A supply schedule is a table that reports:

A

the different quantities of a good that producers are willing to sell at different prices

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20
Q

Globalization has given U.S. consumers a wider variety of gourmet food products from which to choose and has lowered the prices of these products in general. This, in turn, has encouraged consumers to buy more gourmet food items, which has ________ the amount of cooperative surplus for the buyers and sellers of gourmet food products.

A

increased

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21
Q

According to the U.S. National Safety Council, a person has a better chance of being killed in which of the following situations?

A

while walking

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22
Q

In a COMMAND economy, the ultimate decision about what to produce is left to

A

the government

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23
Q

Who faces trade-offs?

A

all of the above

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24
Q

If Carla can pick more oranges in one hour than Benjamin, then Carla definitely has a comparative advantage in picking oranges. T/F?

A

False

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25
Q

An economy’s resources include

A

all of the above

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26
Q

Which of the following is not a characteristic of a battle of the sexes game?

A

each player has a dominant strategy

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27
Q

Claudia’s Copy Shop is deciding which 3-D printer to purchase, and it only has room for one printer. It can purchase the “Mini-Me” small-object printer, which would generate benefits of $50,000 at a cost of $5,000, or it can purchase the “Gargantuan” large-object printer which would generate benefits of $250,000 at a cost of $25,000. Based on these numbers, Claudia’s Copy Shop should purchase

A

the “Gargsntuan” printer

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28
Q

A chain saw manufacturer can make its chain saws safer by adding a titanium chain guard to its products. Adding the titanium chain guard costs $35 per chain saw. The manufacturer estimates that this will prevent 10 injuries for every 5,000 chain saws sold and that, on average, each injury causes $15,000 of harm. The injury cost per chain saw is

A

$30.00.

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29
Q

Property rights connect effort with reward T/F?

A

True

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30
Q

Your opportunity cost of attending a lecture on the number of brain cells lost by binge-watching episodes of Tiger King is

A

the value of attending a meditation class, which is your next-best alternative.

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31
Q

Which of the following is not a characteristic of a chicken game?

A

When both players play their tough strategy, they can receive their best possible payout.

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32
Q

Economies can be organizations such as

A

households, states, and countries

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33
Q

Which of the following is likely to use the concepts of game theory?

A

International trade negotiation

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34
Q

Human beings are generally very good at accurately estimating probabilities T/F?

A

False

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35
Q

Which of the following is a key question that must be addressed by an economy?

A

How will we distribute our products?

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36
Q

The process of making the best of our limited resources by doing the things we are best at and hiring other people to do the things we are not particularly good at is called

A

specialization

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37
Q

In 2009, Samoa changed from everyone driving on the right side of the road to everyone driving on the left side of the road. Although everyone agreed that it was important to drive on the same side of the road, some Samoans were not happy about the change. This created a disagreement about which Nash equilibrium was the best equilibrium, and therefore represented

A

a battle of the sexes game

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38
Q

Which of the following is a key question that must be addressed by an economy?

A

What will be made with our resources?

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39
Q

If Jacqueline is willing to accept $1 for a cupcake and Jameson is willing to pay $3 for a cupcake, the cooperative surplus will ________ if the negotiated price is $1.50 as opposed to $2.00.

A

not change

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40
Q

The quantity supplied of a good

A

is the amount of the good that sellers are ready to supply at a given price

41
Q

With respect to the Ford Pinto, comparing the cost of the modification to the fuel tank with the lives the modification would save was the best way Ford could reflect its customers views about the value of safety in the design of its products. T/F?

A

True

42
Q

The tobacco industry is an example of an oligopoly market structure. T/F?

A

True

43
Q

Property rights are limited to tangible items such as land and machinery. T/F?

A

False

44
Q

A market structure where many sellers offer differentiated products is called perfect competition. T/F?

A

False

45
Q

All of the following are factors that will shift the supply curve except

A

changing tastes and preferences

46
Q

Inducements to act in particular ways are called

A

Incentives

47
Q

A game in which both players want to coordinate, but each player prefers coordinating on a different equilibrium outcome is called

A

a battle of the sexes game

48
Q

If Jacqueline is willing to accept $1 for a cupcake and Jameson is willing to pay $3 for a cupcake, the producer surplus will ________ if the negotiated price is $1.50 as opposed to $2.00.

A

decrease

49
Q

A tax on an imported good is a(n)

A

tariff

50
Q

A game in which players want to coordinate on an outcome and in which both agree that coordinating on one particular outcome is preferred to coordinating on the other is called

A

an assurance game

51
Q

Governments,

A

like individuals, face opportunity costs.

52
Q

Tariffs create deadweight losses and destroy wealth, whereas quotas increase cooperative surplus and create wealth. T/F?

A

False

53
Q

The opportunity cost of an activity is

A

what you sacrifice to engage in the activity

54
Q

You are trying to decide if you should take a day off from work to go to a casino. In making your decision, you compare what you would sacrifice to go to the casino (lost wages for the day, potential losses at the casino, the amount of work you will have to make up, etc.) with the enjoyment you would receive from the day off (relaxation, potential winnings, etc.). The analysis you have just conducted is called

A

cost-benefit analysis

55
Q

Homer and Marge have been accused of committing a crime, and the payoff matrix below represents the payoffs associated with confessing to the crime and denying having committed the crime.

What is the number of outcomes which represent Nash equilibria in this game?

A

1

56
Q

A deadweight loss occurs when the market is functioning efficiently. T/F?

A

False

57
Q

A game in which players want to coordinate on an outcome and in which both agree that coordinating on one particular outcome is preferred to coordinating on the other is called

A

an assurance game

58
Q

Arriving at a decision by comparing total costs and total benefits is called marginal analysis. T/F?

A

False

59
Q

It is possible to have a comparative advantage in producing a good or service without having an absolute advantage. T/F?

A

True

60
Q

If Jacqueline is willing to accept $1 for a cupcake and Jameson is willing to pay $3 for a cupcake, the consumer surplus will ________ if the negotiated price is $1.50 as opposed to $2.00.

A

increase

61
Q

An American farmer buys an irrigation system from a Norwegian irrigation company based in Oslo. To Americans, the irrigation system is a(n)

A

import

62
Q

Patents and copyrights are granted for a period of 20 years from the date of creation. T/F?

A

False

63
Q

Which of the following is not a characteristic of a prisoner’s dilemma game?

A

The Nash equilibrium is the best outcome for each individual and for the group.

64
Q

Does either Andrea and Hector have an absolute advantage and if so, in what product?

A

Andrea has an absolute advantage in producing both products.

65
Q

Resources are items that a society uses to create goods and services. T/F?

A

True

66
Q

You paid $145 for an iPod Nano. The cash you sacrificed is a(n)

A

explicit cost

67
Q

Assume that the graph in this figure represents the demand and supply curves for orange juice. An increase in the price of apple juice, which is a substitute for orange juice, would be represented by a shift from

A

Demand 1 to Demand 2

68
Q

The quantity supplied of a good:

A

is the amount of the good that sellers are ready to supply at a given price.

69
Q

Assume that the graph in this figure represents the demand and supply curves for used cars, which are inferior goods. An increase in income would be represented by a shift from

A

Demand 2 to Demand 1

70
Q

If, as a consumer, Jeannine is very sensitive to changes in the price of pineapples,

A

her DEMAND is price eleastic

71
Q

All of the following are characteristics of a battle of the sexes game except

A

each player prefers the same Nash equilibrium

72
Q

Economics is the study of how ________ manages its ________ resources to satisfy its wants.

A

society; scarce

73
Q

In 2014, tire industry lobbyists pressured the United States government to consider imposing an additional tariff of up to 86% on top of the current 4% tariff on imported Chinese-made tires. The loss that is associated with fewer transactions occurring because of the tariff is called

A

deadweight loss

74
Q

Economists should consider ________ when evaluating options.

A

both explicit and implicit costs and benefits

75
Q

In a society where government mandates that everyone shares the product of one’s hard work with everyone else, people will tend to work harder than they would if they could keep the full product of their work. T/F?

A

False

76
Q

The quantity supplied of a good:

A

is the amount of the good that sellers are ready to supply at a given price.

77
Q

Assume that the graph in this figure represents the demand and supply curves for walnuts. An advance in production technology which makes harvesting walnuts less time consuming would be represented by a shift from
Correct answer:

A

Supply 1 to Supply 2

78
Q

Prices serve as a key means of communication between buyers and sellers. T/F?

A

True

79
Q

A white paper on elasticity of demand for postage stamps in the U.S. found that the demand for stamps is relatively inelastic. Therefore, if the U.S. Postal Service decreased the price of stamps:

A

Revenue would decrease

80
Q

According to cost–benefit analysis, where safety is concerned

A

All of the above are possible.

81
Q

What is the marginal benefit of the fifth gallon of gas?

A

3

82
Q

The price elasticity of demand is calculated as the

A

percentage change in quantity demanded divided by the percentage change in price.

83
Q

The ground rules, customs, and conventions that govern the behavior of market participants are often referred to as institutions.

A

True

84
Q

Assume that the graph in this figure represents the demand and supply curves for women’s clothing. An increase in the wage rate for seamstresses would be represented by a shift from

A

Supply 2 to Supply 1

85
Q

The ability to produce a good using fewer resources than someone else is called

A

absolute advantage

86
Q

At what number of pearls harvested should the diver stop diving for more pearls?

A

3

87
Q

A white paper on elasticity of demand for postage stamps in the U.S. found that the demand for stamps is relatively inelastic. Therefore, if the U.S. Postal Service increased the price of stamps:

A

Revenue would increase

88
Q

When conducting cost–benefit analysis, it is important to ignore previously incurred costs and previously received benefits. T/F?

A

True

89
Q

A decrease in the price of an input will

A

increase supply of the product

90
Q

Which of the following is not a characteristic of an assurance game?

A

Each of the Nash equilibria offers identical payoffs to any particular player.

91
Q

What is the marginal benefit of the fourth gallon of gas?

A

4

92
Q

Information facilitates exchange by fostering competition. T/F?

A

True

93
Q

There is no single market structure where firms offer either differentiated or identical products. T/F?

A

False

94
Q

How do you calculate Marginal cost?

A

profit of each pearl times the quantity then subtract it from the effort money amount. If the marginal cost is grater than the time and effort it is good.

95
Q

Jeff Brown says that he feels he has to buy his wife roses on Valentine’s Day, even if the price is very high on that day, because no other gift will be acceptable to her. Based on his statement, how would you describe his elasticity of demand for roses on Valentine’s Day?

A

Own-price unit elastic

96
Q

Hector has a comparative advantage in the production of

A

tiaras

97
Q

Ultimately, quotas ________ the ability of foreign countries to buy the domestic country’s exports and therefore ________ wealth.

A

reduce; destroy

98
Q

Consumer surplus is the difference between the maximum amount a buyer is willing to pay for a product and the price he actually pays. T/F?

A

True

99
Q
A