Final Flashcards

(75 cards)

1
Q

The cost-benefit principle states that a decision should be pursued only if the

A

benefits are greater than the costs.

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2
Q

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it?

A

The opportunity cost principle.

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3
Q

Sunk costs are costs that

A

are incurred in the past and cannot be reversed.

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4
Q

The __________ suggests, decisions about quantities are best made incrementally.

A

marginal principle

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5
Q

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle.

A

interdependence

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6
Q

The law of demand refers to

A

the inverse relationship between price and quantity demanded.

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7
Q

Diminishing marginal benefit

A

is when buying an additional item yields a smaller marginal benefit than the previous item

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8
Q

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are

A

normal goods.

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9
Q

What is quantity supplied

A

It is the amount of an item that a seller is willing to sell at a particular price

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10
Q

The law of supply refers to

A

the positive relationship between price and quantity supplied

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11
Q

Due to a decline in demand and popularity, Ford Motor Company is planning to phase out traditional sedans such as ‘Fusion’ and ‘Taurus’ to focus on SUVs and trucks. Ford’s sedans and trucks/SUVs are

A

substitutes-in-production

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12
Q

If the price of jet fuel rises, the

A

quantity supplied of jet fuel increases

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13
Q

A market is a

A

setting that brings together potential buyers and sellers

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14
Q

An equilibrium price is a price where the

A

quantity supplied equals the quantity demanded

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15
Q

When quantity demanded exceeds quantity supplied, _____ exists

A

a shortage

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16
Q

Shifts in demand

A

lead to price and quantity to move in the same direction

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17
Q

Analysis based on value judgments is called _____ analysis

A

normative

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18
Q

The concept of equity focuses on

A

fairness

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19
Q

In a market graph, consumer surplus is the area

A

above the price and below the demand curve

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20
Q

On a market graph, producer surplus is the area that is

A

above the supply curve and below the price

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21
Q

A market’s deadweight loss is calculated as

A

the economic surplus at the efficient quantity minus the economic surplus at the actual quantity

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22
Q

Market failure occurs when market forces lead to

A

an inefficient outcome

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23
Q

To maximize production, people should

A

focus on the task in which they have a comparative advantage

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24
Q

The person who has an absolute advantage in a task

A

is the one who is best at the task

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25
Comparative advantage explains why people
specialize and trade
26
When a manager uses comparative advantage to assign tasks in a workplace, then each
task is assigned to the worker with the lowest opportunity cost for performing the task
27
Which of the following is a source of comparative advantage?
abundant inputs
28
A tariff is a
tax on imported products
29
What is social insurance
It is government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings
30
Which of the following is a social insurance program in the United States?
Social Security
31
Government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving your savings is known as a
social insurance system
32
Intergenerational mobility is the extent to which
the economic status of children is independent of the economic status of their parents
33
What is the difference between microeconomics and macroeconomics?
Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.
34
GDP is defined as the
market value of all final goods and services produced within a country in a given year
35
You just bought two used textbooks for $25 each. How much does GDP change because of your purchase?
GDP does not change
36
The "market value" of a good or service refers to the
current dollar value of that good or service
37
A "final" good or service is one that is
finished and ready for the final user
38
When a U.S. consumer buys Canadian maple syrup at the grocery store, this purchase is
an import
39
A production function is
a method through which inputs can be turned into outputs, given the available resources
40
Human capital refers to
worker skills and knowledge
41
A government can promote the development of human capital by
subsidizing secondary school education
42
The law of diminishing returns states that
when one input is held constant, while other inputs are increased, eventually output will increase by smaller and smaller amounts
43
The U.S. Department of Education sponsors the i3 program (Investing in Innovation), which provides grants to educational institutions and schools that have a proven track record of high student achievement. This is an example of a government program designed to build
human capital
44
Enforceable property rights encourage economic growth by encouraging
investment
45
The working age population includes people who are
age 16 or older who are not in the military or institutionalized
46
The labor force participation rate is the
percentage of the working age population that is either employed or unemployed
47
An underemployed person is one who is
working but whose skills are not fully utilized
48
Frictional unemployment is unemployment
due to the time it takes for employers to search for workers and for workers to search for jobs
49
The consumer price index is an index that tracks the
average price that consumers pay over time for a representative basket of goods and services
50
The Producer Price Index is an index that tracks the
price that businesses pay over time for the inputs used in the production process
51
Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away from avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is
substitution bias
52
Menu costs are the
marginal costs of adjusting prices
53
If you see that the consumer price index this year is lower than the consumer price index last year, this means that
on average, prices went down across the economy
54
Which of the scenarios represents consumption spending
You eat at a fancy restaurant for Valentine's Day
55
The slope of the consumption function is the
marginal propensity to consume
56
Credit constraints limit the
amount of money that people can borrow
57
Investment refers to
spending on physical capital
58
Depreciation refers to the
decline in capital due to wear and tear, obsolescence, accidental damage, and aging
59
Which of the following is an investment
Marios builds a new house
60
Future value is the
amount that your money will grow into by a future date as a result of earning interest
61
The loanable funds market is the market for
funds used to buy, rent, or build capital
62
Equilibrium in the loanable funds market determines the
equilibrium real interest rate
63
The three major pillars of the financial sector are the
stock market, the bond market, and the banks
64
A bank can make money by
giving you a particular interest return on your savings and then loaning out the same money at a higher rate of interest
65
An initial public offering occurs when a company
first sells stock directly to the public
66
A mutual fund is a fund that
buys a portfolio of stocks and bonds on your behalf
67
The liquidity of an asset is defined as the
ability to quickly and easily convert the asset to cash, with little or no loss in value
68
How is monetary policy different from fiscal policy
Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes
69
What is the Federal Reserve's mandate
to ensure maximum employment while maintaining stable prices
70
The federal funds rate is the
nominal interest rate that banks pay on overnight interbank loans
71
Forward guidance occurs when the Federal Reserve
provides information about the future course of monetary policy in order to influence expectations about future interest rates
72
In Canada, all the provinces provide health care to all citizens and permanent residents. This is an example of
social insurance
73
Mandatory spending is spending that
supports programs that do not get determined annually but instead are set in law
74
Discretionary spending is spending that
is appropriated by Congress annually
75
An excise tax is a tax on
a specific product