Economics Exam 1 Flashcards
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Economics Exam 1 Flashcards

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Questions and Answers

A student will decide to attend class when?

the marginal benefit of attending exceeds the marginal cost of attending

Which of the following is not a key element of the scientific method?

  • Designing Data (correct)
  • Observations
  • Hypothesis
  • Experiments

    • The scientific method is the technique used by economists to determine?

    economic principles

    Economic resources are the?

    <p>natural, human, and manufactured inputs used to produce goods and services</p> Signup and view all the answers

    Economists classify resources as?

    <p>labor, land, real capital, and entrepreneurs</p> Signup and view all the answers

    Because economic resources are used to produce goods and services, they are called?

    <p>factors of production or inputs</p> Signup and view all the answers

    What is the next-best thing that must be forgone in order to produce one more unit of a given product?

    <p>opportunity cost</p> Signup and view all the answers

    The pleasure, happiness, or satisfaction obtained from consuming a good or service is called?

    <p>utility</p> Signup and view all the answers

    The social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity is?

    <p>economics</p> Signup and view all the answers

    Making choices based on comparing marginal benefits with marginal costs is called?

    <p>marginal analysis</p> Signup and view all the answers

    In a market system, scarce goods are allocated through the operation of?

    <p>market prices that are determined by consumers and producers acting in their own self-interest</p> Signup and view all the answers

    In a command economy, scarce goods are allocated by?

    <p>a government-appointed planning board based on the board's long-term priorities</p> Signup and view all the answers

    Self-interest helps achieve society's economic goals because?

    <p>as consumers and producers exercise their freedom to act in their own self-interest, markets will produce the desired goods at the lowest possible cost</p> Signup and view all the answers

    There is a wide variety of desired goods and services in a market system because?

    <p>individual wants are diverse</p> Signup and view all the answers

    What is produced is ultimately determined by?

    <p>consumers, because if the goods offered are not what consumers want, consumers will not buy them</p> Signup and view all the answers

    The market system depends on private property ownership and the protection of private property rights to?

    <p>provide an incentive to maintain property and allow for the orderly transfer of property ownership</p> Signup and view all the answers

    The phrase 'invisible hand' means that?

    <p>market prices provide information to consumers regarding products they wish to purchase, and to producers regarding products they wish to produce</p> Signup and view all the answers

    In the circular flow model, resource markets provide for the exchange of labor and product markets provide for the exchange of?

    <p>goods and services</p> Signup and view all the answers

    In the circular flow model, businesses sell goods and buy labor; households buy goods and?

    <p>sell labor</p> Signup and view all the answers

    In the goods and services portion of the circular flow model, there is a flow of?

    <p>real goods and services and a flow of money</p> Signup and view all the answers

    Which statement is consistent with the law of demand?

    <p>A reduction in market price will lead to an increase in quantity demanded</p> Signup and view all the answers

    Which of the following characteristics lead to a downward-sloping demand curve?

    <p>Diminishing marginal utility</p> Signup and view all the answers

    How is a market demand curve derived from individual demand curves?

    <p>Add up quantities demanded by all individual consumers for each price</p> Signup and view all the answers

    Which statement is consistent with the law of supply?

    <p>An increase in market price will lead to an increase in quantity supplied</p> Signup and view all the answers

    Which of the following characteristics leads to an upward-sloping supply curve?

    <p>Increasing opportunity costs</p> Signup and view all the answers

    How do you derive a market supply curve from individual supply curves?

    <p>Add up quantities supplied by all individual producers for each price</p> Signup and view all the answers

    What are the determinants of supply?

    <p>Price of other goods, technology, resource prices, number of producers</p> Signup and view all the answers

    Change in market price results in a ______

    <p>movement along the supply curve and movement along demand curve</p> Signup and view all the answers

    Change in factor productivity results in a ______

    <p>shift in the supply curve</p> Signup and view all the answers

    Change in producer expectations results in a ______

    <p>shift in the supply curve</p> Signup and view all the answers

    Change in the price of other goods results in a ______

    <p>shift in the supply curve</p> Signup and view all the answers

    Change in technology results in a ______

    <p>shift in the supply curve</p> Signup and view all the answers

    Change in resource prices results in a ______

    <p>shift in the supply curve</p> Signup and view all the answers

    Change in taxes results in a ______

    <p>shift in the supply curve</p> Signup and view all the answers

    What are the determinants of demand?

    <p>Income, price of related goods, tastes and preferences, number of consumers</p> Signup and view all the answers

    Change in income results in a ______

    <p>shift in demand curve</p> Signup and view all the answers

    Change in consumer expectations results in a ______

    <p>shift in demand curve</p> Signup and view all the answers

    Change in the price of a related good results in a ______

    <p>shift in demand curve</p> Signup and view all the answers

    Change in the price of an unrelated good results in a ______

    <p>no change</p> Signup and view all the answers

    Change in preferences for this good results in a ______

    <p>shift in demand curve</p> Signup and view all the answers

    The supply of cattle hides will?

    <p>decrease</p> Signup and view all the answers

    Hide prices will?

    <p>increase</p> Signup and view all the answers

    The supply of leather goods will?

    <p>decrease</p> Signup and view all the answers

    The price of leather goods will?

    <p>increase</p> Signup and view all the answers

    What are running shoes considered?

    <p>final good</p> Signup and view all the answers

    What are cotton fibers considered?

    <p>intermediate good</p> Signup and view all the answers

    What are watches considered?

    <p>final good</p> Signup and view all the answers

    What are coal considered?

    <p>intermediate good</p> Signup and view all the answers

    What is sunscreen lotion considered?

    <p>final good</p> Signup and view all the answers

    What is lumber considered?

    <p>intermediate good</p> Signup and view all the answers

    Why do economists include only final goods and services when measuring GDP for a particular year?

    <p>If intermediate goods were counted, then multiple counting would occur</p> Signup and view all the answers

    Gross domestic product does not include the value of stocks and bonds bought and sold because these sales and purchases are not?

    <p>economic investment and should not be counted as production of final goods and services</p> Signup and view all the answers

    When measuring GDP for a particular year, why do economists exclude the value of used furniture bought and sold?

    <p>it was counted in GDP in some previous year</p> Signup and view all the answers

    Why is an economy's output, in essence, also equal to its income?

    <p>the value of everything that is produced is also the value of everything sold</p> Signup and view all the answers

    Why are changes in inventories included as part of investment spending?

    <p>anything produced by a business that has not been sold during the accounting period is something in which the business has invested</p> Signup and view all the answers

    If inventories declined by $1 billion during 2014, then $1 billion would be?

    <p>subtracted from both gross private domestic investment and gross domestic product</p> Signup and view all the answers

    Which of the following statements is true?

    <p>Gross private domestic investment less depreciation is net private domestic investment</p> Signup and view all the answers

    Study Notes

    Key Economic Concepts

    • Decision-making in Class Attendance: Students attend class when the marginal benefit of attendance surpasses its marginal cost.
    • Scientific Method: Economists utilize this method to establish economic principles, omitting "Designing Data" as a key element.
    • Economic Resources: Classified as natural, human, and manufactured inputs essential for producing goods and services.

    Factors of Production

    • Resource Classification: Includes labor, land, real capital, and entrepreneurship, labeled collectively as factors of production or inputs.
    • Opportunity Cost: The next-best alternative forfeited to produce more of a good; illustrated by examples like selling personal items to cover expenses.

    Utility and Economics

    • Utility: Refers to the satisfaction gained from consuming goods or services.
    • Economics Defined: The social science focused on optimal decision-making under scarcity conditions.

    Analyzing Choices

    • Marginal Analysis: Involves comparing marginal benefits with marginal costs to make informed choices.

    Market Systems

    • Resource Allocation in Markets: Scarce goods distributed through prices formed by consumer and producer self-interest.
    • Command vs. Market Economy: In a command economy, allocation is managed by a government planning board, contrasting with market systems driven by consumer demand.

    Consumer Choices

    • Determination of Production: Ultimately driven by consumer preferences; if products aren’t desired, consumers won’t purchase.

    Property Rights and Market Functioning

    • Private Property Importance: Ownership and protection of property rights incentivize maintenance and orderly ownership transfers.

    Invisible Hand Concept

    • Market Prices: Act as signals to consumers about desired goods while guiding producers on what to manufacture, embodying the “invisible hand” principle.

    Circular Flow Model

    • Resource and Product Markets: Resource markets allow labor exchange, while product markets facilitate the exchange of goods and services.
    • Household and Business Dynamics: Businesses sell goods and procure labor; households purchase goods and provide labor.

    Demand and Supply Laws

    • Law of Demand: A decrease in market price typically leads to a higher quantity demanded.
    • Law of Supply: An increase in market price generally results in an increased quantity supplied.

    Demand Characteristics

    • Downward-Sloping Demand Curve: Influenced by diminishing marginal utility and increased purchasing power as prices drop.
    • Market Demand Curve: Formed by aggregating individual demands at various prices.

    Supply Determinants

    • Determinants of Supply: Include prices of related goods, technology, resource prices, and number of producers.
    • Shifts and Movements: Changes in factors like productivity or expectations shift the supply curve, whereas price changes result in movements along the curve.

    Demand Determinants

    • Determinants of Demand: Consist of income, related goods' prices, consumer preferences, and the number of consumers.

    Goods Classification

    • Final vs. Intermediate Goods: Economists differentiate between these to prevent double counting in GDP measurements. Final goods are sold to end-users, while intermediate goods are used in production.

    GDP Measurement

    • Exclusions in GDP Calculation: Used goods, stocks, and bonds are omitted to avoid duplicating value that has been previously counted.
    • Inventory Changes: Accounted as investments; unsold inventory is included as business investment.

    Investment and Economic Health

    • Private Domestic Investment: Gross private domestic investment minus depreciation equates to net private domestic investment, indicating economic health.

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    Test your knowledge on essential economics concepts with these flashcards. This quiz covers key terms such as marginal benefit, scientific method elements, and economic principles. Perfect for preparing for your Economics Exam 1.

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