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