Midterm 1-6

Question 1

Economics deals primarily with the concept of

Answer 1

Scarcity

Question 2

In most societies, resources are allocated by

Answer 2

the combined actions of millions of households and firms

Question 3

Efficiency means that

Answer 3

society is getting the maximum benefits from its scarce resources

Question 4

For most students, the largest single cost of a college education is

Answer 4

the wages given up to attend school

Question 5

A marginal change is a

Answer 5

small, incremental adjustment

Question 6

Trade between countries tends to

Answer 6

increase both competition and specialization

Question 7

The “invisible hand” refers to

Answer 7

how the decisions of households and firms lead to desirable market outcomes

Question 8

What is the most important factor that explains differences in living standards among countries?

Answer 8

productivity

Question 9

Productivity is defined as the

Answer 9

amount of goods and services produced from each unit of labor input

Question 10

Factors of production are

Answer 10

inputs into the production process

Question 11

Where can an economy not produce?

Answer 11

outside its production possibilities frontier

Question 12

Microeconomics is the study of

Answer 12

how individual households and firms make decisions

Question 13

Macroeconomics is the study of

Answer 13

how the economy as a whole works

Question 14

When can two countries gain from trading two goods?

Answer 14

Two countries could gain from trading two goods under all of the above conditions

*Quiz Question

Question 15

The most obvious benefit of specialization and trade is that they allow us to

Answer 15

consume more goods than we otherwise would be able to consume

Question 16

The opportunity cost of an item is

Answer 16

what you give up to get that item

Question 17

Absolute advantage is found by comparing different producers’

Answer 17

input requirements per unit of output

Question 18

Goods produced abroad and sold domestically are called

Answer 18

imports

Question 19

Tom Brady should probably not mow his own lawn because

Answer 19

his opportunity cost of mowing his lawn is higher than the cost of paying someone to mow it for him

Question 20

The forces that make market economies work are

Answer 20

supply and demand

Question 21

In a market economy,

Answer 21

supply and demand determine prices and prices, in turn, allocate the economy’s scarce resources

Question 22

A group of buyers and sellers of a particular good or service is called a(n)

Answer 22

market

Question 23

Which of the following changes would not shift the demand curve for a good or service? A change in income, change in the price of a good or service, a change in expectations about the future price of the good or service, or a change in the price of a related good or service?

Answer 23

change in the price of a good or service

*Quiz Question

Question 24

A decrease in quantity demanded

Answer 24

results in a movement upward and to the left along a demand curve

Question 25

When we move along a given demand curve,

Answer 25

all nonprice determinants of demand are held constant

Question 26

If buyers today become more willing and able than before to purchase larger quantities of stand up paddle boards (SUPs) at each price of SUPs, then

Answer 26

the demand curve for SUPs will shift to the right

Question 27

A decrease in the price of a good will

Answer 27

decrease quantity supplied

Question 28

When quantity supplied decreases at every possible price, we know that the supply curve has

Answer 28

shifted to the left

Question 29

The unique point at which the supply and demand curves intersect is called

Answer 29

equilibrium

Question 30

If the demand for a product decreases, then we would expect equilibrium price

Answer 30

and equilibrium quantity to both decrease

Question 31

If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quantity of lattés if the price of cappuccinos rises?

Answer 31

Both the equilibrium price and quantity would decrease

Question 32

The signals that guide the allocation of resources in a market economy are

Answer 32

prices

Question 33

John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both cost $120, so he can only buy one. This illustrates the principle that

Answer 33

people face trade-offs

Question 34

The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that

Answer 34

equality refers to the uniform distribution and efficiency refers to maximizing benefits from scarce resources

Question 35

The opportunity cost of going to college is

Answer 35

the value of the best opportunity a student gives up to attend college

Question 36

One advantage market economies have over centrally-planned economies is that market economies

Answer 36

are more efficient

Question 37

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Answer 37

Households and firms interacting in markets are guided by an “invisible hand” that leads them to desirable market outcomes

Question 38

Economics is the study of

Answer 38

how a society manages its scarce resources

Question 39

A supply curve slopes upward because

Answer 39

an increase in price gives producers an incentive to supply a larger quantity

Question 40

Factors of production are

Answer 40

inputs into the production process

Question 41

What is the most important factor that explains differences in living standards across countries?

Answer 41

productivity

Question 42

Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves and baseball bats, but Tom is better at producing both. In this case, trade could

Answer 42

benefit both Steve and Tom

Question 43

A production possibilities frontier is:

Answer 43

also the consumption possibilities frontier without trade

Question 44

When a country has a comparative advantage in producing a certain good,

Answer 44

the country’s opportunity cost of that good is low relative to other countries’ opportunity costs of that same good