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Microeconomics 201 > Exam #1 > Flashcards

Exam #1 Flashcards

0
Q

There are 3 types of resources. What are they?

A

Human- Skill, Knowledge, and Strength
Natural- Land, Minerals, Oceans, etc.
Physical/Capital- Made by Man (Buildings, Tools, Machinery)

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1
Q

In Adam Smith’s book, “The Wealth of Nations”, he stated that if individuals pursued their own selfish interests, then….

A

Society will operate efficiently because the ‘invisible hand’ will cause them to behave in a way that leads to coordination, order and efficiency.

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2
Q

Which one of the 3 resources is referred to as “Physical”?

A

Resources Made by Man. Things such as Machinery, Tools, and Buildings.

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3
Q

Economics is the study of _____ with focus on _____ because of _____.

A

human behavior/making choices/scarcity

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4
Q

All of the following were discussed as problems that can occur when studying economics EXCEPT:

  • fallacy of composition
  • good intentions
  • association not causation
  • competitive behavior leads to scarcity
  • violation of ceterus paribus can lead one to draw the wrong conclusions
A

competitive behavior leads to scarcity

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5
Q

There are three basic decisions that must be made by all economies. What are they?

A

What will be produced, how they will be produced, and for who will they be produced.
(What, How, and Who)

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6
Q

We studied different methods of allocating goods and services in a community. One method of allocating goods and services is to have the Gov’t ration things. Another is ‘first come first serve’. Another is to have a ____ Economy where ____ rations these goods and resources.

A

Market/Price

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7
Q

Private Property rights will cause private property owners to:

  • gain by employing their resources in ways that are beneficial to others
  • have an incentive to lower the chance that their property will cause damage to the property of others
  • have an incentive to conserve for the future
  • have a strong incentive to care for and properly manage what they own.
  • do all these things
A

do all these things

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8
Q

The Law of Comparative Advantage, developed by ____ explains that “…the total output of a person, group, country.. will be greatest when the output of each good is produced by the person (or group or country) with the ___ for producing that good.

  • Adam Smith/Absolute Advantage
  • Adam Smith/ Lowest OpportunityCost
  • David Ricardo/ Absolute Advantage
  • Adam Smith/Comparative Advantage
  • David Ricardo/ Lowest Opportunity Cost
A

Adam Smith/Comparative Advantage

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9
Q

A point inside (under) the production possibilities curve represents a combination of goods that is ___ and a point outside (above) the production possibilities curve represents a combination of goods that is ___.

  • attainable/efficient -inefficient/unattainable
  • unattainable/inefficient -efficient/attainable
A

inefficient/unattainable

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10
Q

Refer to table 2-1. ____ has an Absolute Advantage in FOOD production and ___ has an Absolute Advantage in CLOTHING production.

  • UK/UK
  • United Lands/UK
  • UK/United Lands
  • United Lands/United Lands
A

United Lands/United Lands

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11
Q

Refer to table 2-1.The Opportunity Cost for United Lands to produce ONE UNIT OF FOOD equals ___ of ____.

  • 1/2 a unit/clothing -2 units/clothing
  • 2 units/food
  • 1/2 a unit/food
  • 3 units/clothing
A

2 units/clothing

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12
Q

Refer to table 2-1. The opportunity cost for UK to produce ONE UNIT OF FOOD equals ____ of ____.

  • 1/3 of a unit/clothing -1/3 of a unit/food
  • 2/3 of a unit/clothing
  • 3 units/food
  • 3 units/clothing
A

3 units/clothing

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13
Q

Refer to table 2-1. The ___ has a Comparative Advantage in the production of Clothing and the ____ has a Comparative Advantage in the Production of Food.

A

UK/United Lands

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14
Q

Refer to Table 2-1. If the each SPECIALIZE AND TRADE, according to the Law of Comparative Advantage, overall production ‘totals’ should increase. Look at the table above reflecting the ‘Current Levels of Production’ Now write out a new table of numbers if they each specialize. the ‘total production numbers for FOOD will no longer be 58 units, it will increase by ____ ADDITIONAL units of food. The ‘total’ production numbers for CLOTHING will no longer be 58 units, it will increase by ____ ADDITIONAL units of clothing.

A

2/14

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15
Q

A Production Possibilities Curve (PPC) that is BOWED OUT has ____.

A

specialized resources with changing opportunity costs

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16
Q

Specialization in production is beneficial because of all the following reasons EXCEPT

  • it allows people to specialize in whatever they like best
  • mass production is made possible
  • people will always produce whatever they have an Absolute Advantage in producing
  • specialized workers will become more skilled with time
A

people will always produce whatever they have an Absolute Advantage in producing.

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17
Q

All of the following statements help to explain why ‘Trade Creates Value’ EXCEPT

  • when the exchange is voluntary, both parties are better off
  • goods and resources are channeled to those who value them most
  • trade allows the seller to earn a profit
  • material things are not wealth until they are in the hands of someone who values them
A

trade allows the seller to earn a profit

18
Q

All of the following will cause a PPC to shift outward except

  • give up leisure time
  • specialize in production and trade
  • technological advancements in production
  • increase in the quantity of resources needed to produce the goods
A

specialize in production and trade

19
Q

The Law of Demand says that there is a(n) ____ relationship between Price and Quantity. The Law of Supply says that there is a(n) ____ relationship between Price and Quanitity.

A

inverse/direct

20
Q

Refer to figure 4-1. If the government imposed a Price Control at $110 this would be called a Price____.

A

floor

21
Q

Refer to figure 4-1. This price control at $110 would create a ____.

A

surplus

22
Q

Refer to Figure 4-1. Based upon your answer to the previous question, this price control at $110 would create a surplus or shortage of ____ units.

A

10

23
Q

Refer to Figure 4-1. After this Price Control is lifted, the Market forces will eventually cause many changes. One of the changes that will be noticed in the market is the Quantity Supplied will eventually ____ by____.

A

decrease/4 units

24
Q

Refer to Figure 4-1. Assuming that there is no longer a Price Control, use the S and D curves on this same graph above to answer the following question: If supply shifts by 5 units for every possible Price because firms have exited/left this industry, the new equilibrium Price will be equal to

A

90

25
Q

Economists have argued that Minimum Wage Laws, known as Price ___, while Rent Controls, known as Price______.

A

Floors cause surpluses/ceilings cause shortages

26
Q

Rent Control applies to about 2/3’s of the private rental housing in NYC. Economic theory suggests that the prices established by rent controls would

  • reduce black market rental housing
  • promote rapid increase in future supply of housing
  • result in poor service and quality deterioration
  • all are true
  • reduction in housing discrimination against minorities.
A

result in poor service and quality deterioration of many rental units.

27
Q

Which of the statements is true?

  • in both black markets and legal markets, supply and demand determine price.
  • the rate of violence is similar in black markets and legal markets.
  • the price of products in black markets tends to be the same as those in legal markets for otherwise identical products.
  • the quality of products sold in both markets are similar.
  • all are true.
A

In both black markets and legal markets, supply and demand determine price.

28
Q

If consumer purchases of a good are not very sensitive to the price of the good, this is illustrated by a ____ curve that is relatively _____.

A

demand curve that is relatively steep (more vertical)

29
Q

Refer to figure 3.1 What would happen in the market for TARC in Louisville(an inferior good) if there was an increase in Consumer Income in Louisville?
Answer: graph ____

A

F

30
Q

Refer to Figure 3.1. What would happen in the Market for Cars if the Price of steel ( a resource/input) increased?
Answer: graph____

A

R

31
Q

Refer to figure 3.1 What would happen in the Market for McDonalds cheeseburgers if the the price of Burger King cheeseburgers increased?
Answer: graph____

A

G

32
Q

Refer to figure 3.1. What would happen in the market for beer if the price decreased in the market for beer?
Answer: Graph____

A

W

33
Q

Sketch a graph reflecting the following: If there is a simultaneous increase (shift) of Supply and decrease (shift) of demand. According to what we studied, we can conclude that eventually the Pe (Equilibrium Price)____ and the Qe(equilibrium Quantity)____.

A

will decrease/ cannot be accurately determined.

34
Q

The ‘____’ incidence of a tax describes how the burden of the tax is shared and the ‘____’ incidence of a tax describes which party is assigned the tax.

A

Acual/Statutory

35
Q

Refer to figure 4.2. After the tax is implemented, the new equilibrium Price is $___

A

$2.00

36
Q

Refer to figure 4.2. After the tax is implemented, the new equilibrium Quantity is ____

A

100

37
Q

Refer to Figure 4.2. The total revenue derived from the Seller (absorbed by the seller) is equal to $____

A

$25.00

38
Q

Refer to figure 4.2. The Government actually collects $____ in Total Revenue.

A

$75.00

39
Q

Refer to Figure 4.2. The Deadweight Loss created from this tax = $____

A

$7.50

40
Q

The Deadweight Loss that is attributed to just the loss of Consumer Surplus is equal to $____

A

$5.00

41
Q

An Excise Tax is imposed on the Suppliers of Automobile tires. If the Supply Curve for automobile tires is more Inelastic and the Demand Curve for automobile tires is relatively more Elastic, then the ____.

A

Suppliers will pay the majority of the tax.

42
Q

Deadweight Loss can be minimized when the good or service that is being taxed is in a market where the Demand is relatively ____. An example of this would be in the Market for ___.

A

inelastic/cigarettes

43
Q

The excess burden or deadweight loss of a tax often refers to the:

A

reduction in gains from mutually beneficial exchanges that are eliminated as a result of the tax.

Microeconomics 201 (3 decks)

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