exam 1

Question 1

Positive statement addresses

Answer 1

What is

Question 2

Normative statement addresses

Answer 2

What should be

Question 3

Opportunity cost

Answer 3

Value of thing sacrificed when a choice is made

Question 4

Fallacy of Composition

Answer 4

Error of assuming that what is true of a member of a group is the truth for the group as a whole

Question 5

Fallacy of Division

Answer 5

Occurs when one reasons that something is true for a whole must also be the for all or some of its parts

Question 6

Post Hoc Fallacy (Fallacy of False Cause)

Answer 6

One event seems to be the cause of a later event because it occurred earlier

Question 7

Sunk Cost Fallacy

Answer 7

A cost that had already been incurred and can’t be recovered

Question 8

Any point on PPF

Answer 8

Efficiency

Question 9

Points inside PPF

Answer 9

Inefficiency

Question 10

Points outside PPF

Answer 10

Unattainable at present

Question 11

Absolute advantage

Answer 11

Ability to produce more of a good using a given quantity of resources

Question 12

Comparative advantage

Answer 12

Ability to produce a good at a lower opportunity cost compared to other producers

Question 13

Law of Demand

Answer 13

There is a negative or inverse relationship between the price of a good and the quantity demanded of that good, ceteris paribus

Question 14

Normal good

Answer 14

A good for which income and demand are POSITIVELY related

Question 15

Inferior good

Answer 15

A good for which income and demand are NEGATIVELY related

Question 16

Substitutes

Answer 16

Goods for which there is a POSITIVELY related relationship between the price of a good and the demand for some related good

Question 17

Complements

Answer 17

Goods for which there is a NEGATIVE relationship between the price of a good and the demand for some related good

Question 18

Movement along Demand curve

Answer 18

Caused by change in price of good itself. Change in QUANTITY demanded

Question 19

Shift along Demand curve

Answer 19

Caused by change in any non price determinant of demand. Change in demand

Question 20

Movement along Supply curve

Answer 20

Caused by change in price of good itself. Change in QUANTITY supplied

Question 20

Law of Supply

Answer 20

There is a positive or direct relationship between the price of a good and the quantity supplied of that good, ceteris paribus

Question 21

Shift along Supply curve

Answer 21

Caused by change in any non price determinant of supply. Change in supply

Question 22

To find surplus

Answer 22

Quantity supplied minus quantity demanded

Question 23

Price elasticity of demand

Answer 23

Measures the responsiveness in quantity demanded of a good due to some percentage change in price

Question 24

Demand is elastic

Answer 24

Much responsiveness, many substitutes

Question 25

Demand is inelastic

Answer 25

Little responsiveness, few substitutes

Question 26

On a graph, elastic is

Answer 26

Flatter

Question 27

On a graph, inelastic is

Answer 27

Steeper

Question 28

To find Total Revenue

Answer 28

Price times Quantity Demanded

Question 29

When demand is elastic..

Answer 29

There is a negative relationship between price and total revenue

Question 30

When demand is inelastic..

Answer 30

There is a positive relationship between price and total revenue

Question 31

Income elasticity of demand

Answer 31

Measures the responsiveness in the demand of a good due to some percentage change in income

Question 32

Income elasticity of demand is positive

Answer 32

Normal good

Question 33

Income elasticity of demand is negative

Answer 33

Inferior good

Question 34

Cross elasticity of demand

Answer 34

Measures the responsiveness in the demand for a good due to some percentage change in the price of a related good

Question 35

Cross elasticity of demand is positive

Answer 35

Substitutes

Question 36

Cross elasticity of demand is negative

Answer 36

Complementary