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What is the primary purpose of protectionism?
What is the primary purpose of protectionism?
Which of the following is NOT a consequence of free trade?
Which of the following is NOT a consequence of free trade?
What is the current account a record of?
What is the current account a record of?
What does a trade deficit indicate?
What does a trade deficit indicate?
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What happens to a currency during appreciation?
What happens to a currency during appreciation?
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What happens to the marginal cost (MC) if a per-unit tax is imposed on a firm?
What happens to the marginal cost (MC) if a per-unit tax is imposed on a firm?
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Which characteristic distinguishes a monopoly from perfect competition?
Which characteristic distinguishes a monopoly from perfect competition?
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What is the significance of the shut down rule in the short run?
What is the significance of the shut down rule in the short run?
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In monopolistic competition, firms typically engage in which behavior?
In monopolistic competition, firms typically engage in which behavior?
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How does a lump-sum tax affect a firm's average total cost (ATC)?
How does a lump-sum tax affect a firm's average total cost (ATC)?
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What is a key feature of an oligopoly market structure?
What is a key feature of an oligopoly market structure?
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Why are monopolies considered inefficient?
Why are monopolies considered inefficient?
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What best defines scarcity in economics?
What best defines scarcity in economics?
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What distinguishes consumer goods from capital goods?
What distinguishes consumer goods from capital goods?
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In which economic system does the government have total control over the economy?
In which economic system does the government have total control over the economy?
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What does a point on the production possibilities curve (PPC) represent?
What does a point on the production possibilities curve (PPC) represent?
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What is the opportunity cost when moving from point B to point C on the PPC, where one must give up 4 shoes?
What is the opportunity cost when moving from point B to point C on the PPC, where one must give up 4 shoes?
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What typically leads to constant opportunity cost in a PPC context?
What typically leads to constant opportunity cost in a PPC context?
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What does allocative efficiency ensure in an economic context?
What does allocative efficiency ensure in an economic context?
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Which of the following is NOT considered a shifter of the PPC?
Which of the following is NOT considered a shifter of the PPC?
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Which type of tax is characterized by a higher rate for higher income earners?
Which type of tax is characterized by a higher rate for higher income earners?
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What is indicated by a Gini coefficient of 0?
What is indicated by a Gini coefficient of 0?
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In which situation do consumers pay the majority of the tax burden?
In which situation do consumers pay the majority of the tax burden?
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How do externalities contribute to market failure?
How do externalities contribute to market failure?
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What does the tragedy of the commons refer to?
What does the tragedy of the commons refer to?
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Which of the following is a benefit of comparative advantage in international trade?
Which of the following is a benefit of comparative advantage in international trade?
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An increase in job training for low-skilled workers is likely to result in what effect on income inequality?
An increase in job training for low-skilled workers is likely to result in what effect on income inequality?
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Which of the following outcomes results from the presence of negative externalities?
Which of the following outcomes results from the presence of negative externalities?
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What happens to the wages and quantity of dentists when the government removes all regulations for becoming a dentist?
What happens to the wages and quantity of dentists when the government removes all regulations for becoming a dentist?
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When the demand for labor is inelastic, how does a binding minimum wage affect unemployment?
When the demand for labor is inelastic, how does a binding minimum wage affect unemployment?
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What is the condition for a firm to continue hiring workers in a perfectly competitive labor market?
What is the condition for a firm to continue hiring workers in a perfectly competitive labor market?
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How should public goods be produced according to the maximizing rule?
How should public goods be produced according to the maximizing rule?
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What is one method to correct a negative externality?
What is one method to correct a negative externality?
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What happens to the wage and quantity of accountants when demand falls and supply increases simultaneously?
What happens to the wage and quantity of accountants when demand falls and supply increases simultaneously?
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What is one of the main goals of advertising?
What is one of the main goals of advertising?
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What characterizes public goods in terms of market failure?
What characterizes public goods in terms of market failure?
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Which barrier to entry is characterized by the ability to produce goods at a lower average cost due to high production volume?
Which barrier to entry is characterized by the ability to produce goods at a lower average cost due to high production volume?
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What is a natural monopoly?
What is a natural monopoly?
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Which condition is NOT necessary for a firm to engage in price discrimination?
Which condition is NOT necessary for a firm to engage in price discrimination?
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How does a certification process for plumbers affect the labor market for plumbing services?
How does a certification process for plumbers affect the labor market for plumbing services?
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If the equilibrium wage for electricians is $15 an hour, and a minimum wage of $10 an hour is established, what happens to the wage and quantity of electricians?
If the equilibrium wage for electricians is $15 an hour, and a minimum wage of $10 an hour is established, what happens to the wage and quantity of electricians?
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Which of the following is NOT a shifter of labor demand?
Which of the following is NOT a shifter of labor demand?
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What happens to consumer surplus and deadweight loss if a monopoly starts perfectly price discriminating?
What happens to consumer surplus and deadweight loss if a monopoly starts perfectly price discriminating?
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Which of the following defines derived demand?
Which of the following defines derived demand?
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Study Notes
Basic Economic Concepts
- Scarcity: Unlimited wants but limited resources. Individuals, businesses, and governments all experience scarcity.
- Consumer Goods: Goods directly consumed (e.g., pizza).
- Capital Goods: Goods used to produce other goods (e.g., a restaurant oven).
- Trade-offs: All possible alternatives given up when making a choice.
- Opportunity Cost: The best alternative given up when making a choice. This includes money, time, and forgone opportunities.
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Economic Systems:
- Centrally Planned Economies: Government owns resources, decides production, and who receives goods.
- Free-Market Economies (Capitalism): Individuals own resources and decide production. Little government involvement.
- Mixed Economies: Combine elements of centrally planned and free-market economies. Most economies are mixed.
Production Possibilities Curve (PPC)
- Shows possible combinations of two goods that can be produced given resources and technology.
- Points on the curve are efficient (using all resources).
- Points inside the curve are inefficient (not using all resources).
- Points outside the curve are impossible (with current resources and technology).
- Constant Opportunity Cost: Resources easily adaptable between goods. PPC is a straight line.
- Increasing Opportunity Cost: Resources not easily adaptable between goods. PPC curves outward.
Efficiency
- Productive Efficiency: Products are produced at the least costly way (on the PPC).
- Allocative Efficiency: The most desired products are produced (depends on society's desires).
Shifting the PPC
- Change in resource quantity or quality: More or better resources shift the curve outwards.
- Change in technology: Technological advances shift the curve outwards.
- Change in trade: Trade doesn't change the production possibility but impact what is available for consumption.
Demand and Supply
- Law of Demand: Inverse relationship between price and quantity demanded (Price ↑, Quantity Demanded ↓).
- Law of Supply: Direct relationship between price and quantity supplied (Price ↑, Quantity Supplied ↑).
- Shifters of demand include tastes and preferences, number of consumers, price of related goods (substitutes and complements), income, and future expectations.
- Shifters of supply include prices/availability of inputs, number of producers, technology, government actions (taxes and subsidies), and expectations of future profit.
- Equilibrium: Where supply and demand curves intersect; quantity demanded equals quantity supplied.
- Shortage: Quantity demanded exceeds quantity supplied.
- Surplus: Quantity supplied exceeds quantity demanded.
Elasticity
- Elasticity of Demand: Measure of responsiveness of quantity demanded to a change in price.
- Elastic Demand: Quantity demanded changes significantly with a change in price (coefficient > 1).
- Inelastic Demand: Quantity demanded changes less significantly with a change in price (coefficient < 1).
- Perfectly Inelastic Demand: Quantity demanded does not change with changes in price (coefficient = 0).
- Perfectly Elastic Demand: Any price change results in a complete change in quantity demanded(coefficient = ∞).
Cost Curves
- ATC: Average total cost.
- AVC: Average variable cost.
- AFC: Average fixed cost.
- MC: Marginal cost (additional cost to produce one more unit).
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Description
Test your knowledge on fundamental economic concepts such as scarcity, consumer and capital goods, trade-offs, and opportunity cost. Explore different economic systems and understand the production possibilities curve. This quiz is perfect for students learning the basics of economics.
