Economics 1

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1. 
economics can be best defined by
 
the social science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic wants
 
2. 
opportunity costs may be defined as the
 
the amount of one product that must be given up to produce one or more unit of another product
 
3. 
production possibilities curve shows
 
the maximum amounts of two goods that can be produced assuming the full and efficient use of available resources
 
4. 
which of the following will not produce an outward shift of the production possibilities curve?
 
the reduction of unemployment or the inefficient use of resources
 
5. 
the market mechanism can be defined as
 
the use of market prices to signal desired output
 
6. 
two kinds of markets found in the circular flow model are
 
product and factor markets
 
7. 
the gdp
 
the market value of all final goods and services produced within a nation in a specific year
 
8. 
Adam Smith wrote
 
The Wealth Of nations, which described the virtues of market based economies
 
9. 
the factors of production are
 
land labor capital and entrepreneurship
 
10. 
an economy that uses the market signals and government directives to allocate resources and coordinate economic activity is characteristic of a
 
mixed economy
 
11. 
according to the law of demand, the quantity of a good demanded in a given time period
 
decreases as its price rises
 
12. 
a change in demand means there has been a shift in the demand curve and a change in the quantity demanded
 
corresponds to a movement along the demand curve
 
13. 
a decrease in the price of one good can cause an increase in the demand for another good if the goods are
 
complements
 
14. 
a market is said to be in equilibrium when
 
the quantity demanded equals the quantity supplied
 
15. 
a shortage of a product will arise when price is
 
below equilibrium with the result that quantity demanded exceeds quantity supplied
 
16. 
what can cause a decrease in consumer demand for product x?
 
a decrease in consumer income
 
17. 
when the production or consumption of a good of a good involves an externality
 
someone not involved in buying or selling the good is affected
 
18. 
transfer payments include
 
social security benefits welfareunemployment benefits
 
19. 
two major virtues of the market system are that it
 
allocates resources efficiently and allows economic freedom
 
20. 
in general income taxes
 
tend to be progressive
 
21. 
in the market economy the distribution of income would be determined primarily by
 
the quantities and qualities of the resources which households supply
 
22. 
one reason why the quantity of a good demanded increases when its price falls is that the
 
lower price increases the real income of buyers enabling them to by more
 
23. 
the problems of aggregate inflation and unemployment are
 
major topics of macro economics
 
24. 
a right ward shift of the market supply curve ceteris paribus causes equilibrium
 
price to decrease and quantity to increase
 
25. 
which of the following can change without shifting either demand or supply ,ceteris paribus
 
the price of the good itself
 
26. 
which factor will increase the demand for a product
 
a favorable change in consumer taste
 
27. 
an increase in the supply of a product would most likely be caused by
 
an increase in consumer income
 
28. 
the demand for a product might shift as the result of a change in
 
consumer tastethe price of related goodsconsumer incomes
 
29. 
which of the following is a determinant of supply
 
taxes and subsidies
 
30. 
graphically the market demand curve is
 
steeper than any individual demand curves compromising it
 
31. 
the law of supply states that the quantity of a good supplied ceteris paribus ,increases
 
as its price increases
 
32. 
all economic systems must answer which of the following questions
 
what to produce for whom to producehow to produce

 
33. 
the location of the supply curve of a product depends on
 
the technology use to produce itthe prices of resources used in its productionthe number of sellers
 
34. 
a regressive tax is such that
 
tax rates are higher the smaller ones income
 
35. 
specialization in production is important primarily because it
 
results in greater total output

 
36. 
real GDP
 
gdp data that has been adjusted for changes in the price level
 
37. 
the per capita GDP
 
a measure of output divided by the total population
 
38. 
economists define investment as
 
an increase in business inventories spending on plant and equipment and new construction
 
39. 
the law of diminishing marginal utility states that
 
beyond some point additional units of a product will yield less and less extra satisfaction to a consumer
 
40. 
microeconomics
 
is concerned with individual economic units and specific markets
 
41. 
price elasticity of a demand shows how
 
quantity demanded responds to price changes

 
42. 
when demand is inelastic ceteris paribus
 
an increase in price leads to greater revenue
 
43. 
a price cut will increase the total revenue a firm receives ceteris paribus only if the demand for its product is
 
elastic
 
44. 
ceteris paribus as the number of substitutes for a good increases
 
the price elasticity of demand should become larger
 
45. 
which of the following causes the demand to be more elastic in respect to price.
 
longer periods of time to adjust to a change in pricei
 
46. 
if demand for a product is elastic the value of the price elasticity coefficient is
 
greater than 1
 
47. 
the demand for gasoline is
 
inelastic
 
48. 
in which of the following instances will total revenue decline
 
price rises and demand is elastic
 
49. 
utility refers to the
 
satisfaction that a consumer derives from a good or service
 
50. 
the law of diminishing marginal utility suggests that
 
people are willing to buy additional quantities of a good only if its price falls
 
51. 
marginal utility is the
 
change in total utility realized by consuming one or more unit of a goodd
 
52. 
productivity is
 
output per unit of input
 
53. 
list the determinants of price elasticity
 
necessities vs. luxuries-goods that are crucial to every day life( toothpaste, food, gas)luxuries-vacation, traveling, new car
availability of substitutes- if a price of a particular good increases, the consumer will look for other options at a cheaper price
price relative to income-if the price of a product exceeds an individuals income, then price changes will be important
 
54. 
list the determinants of demand
 
tastes incomeother goodsexpectations number of buyers
 
55. 
determinants of supply
 
technology factor costtaxes and subsidies expectationsother goods number of sellers
 
56. 
a price cut reduces total revenue if demand is
 
inelastic
 
57. 
a price cut does not change total revenue if demand is
 
unitary elastic (E=1)
 
58. 
the major uses of total output include
 
household consumption; business investment;government services;exports
 
59. 
price ceiling
 
upper limit imposed on the price of a good or service
 
60. 
price ceiling have three predictable effects
 
increase the quantity demanded; decrease the quantity supplied; create market shortage
 
61. 
price floor
 
lower limit imposed on the price of a good
 
62. 
price floor has three predictable effects
 
increases supply needed;decrease in demand;creates market surplus