Economics Exam Revision Flashcards

Questions and Answers

It costs Cool Clothes Company $15 to produce one pair of jeans, but they needed to discontinue production of shirts to focus on jeans. For this company, the $15 is the _ and discontinuation of shirt production is considered their ____.

production cost; opportunity cost (correct)

resource cost; production cost

production cost; resource cost

opportunity cost; production cost

Which occurs during disequilibrium? (Check all that apply)

Supply and demand set production

Supply and demand set prices

Supply is less than demand (correct)

Supply is greater than demand (correct)

Supply and demand meet

Which is the best definition of hyperinflation?

a gradual decrease in the price of goods and services

an exponential decrease in the price of goods and services

a gradual increase in the price of goods and services (correct)

an exponential increase in the price of goods and services

How do trade agreements help the countries involved?

by decreasing trade barriers Signup and view all the answers

Look at the following chart. Producer A's opportunity cost would be

choosing to grow both fruit varieties or only apples Signup and view all the answers

Which are affected by the factors of production? (Check all that apply)

the availability of the item Signup and view all the answers

When it spends money on education, a government is trying to

meet a social need and improve the economy Signup and view all the answers

If expansionary taxation policies are left unchecked, which is the most likely result?

high inflation Signup and view all the answers

Businesses can use globalization to their advantage by

finding customers in other countries Signup and view all the answers

People who oppose labor unions believe that unions

keep more qualified workers from being hired Signup and view all the answers

Demand-pull inflation occurs when

consumers begin purchasing more goods Signup and view all the answers

What is an example of scarcity?

limited resources Signup and view all the answers

How does a socialist government with a command economy manage its economy?

The government controls factories and other forms of production Signup and view all the answers

What is the role of the three questions of economics?

to aid in production decisions Signup and view all the answers

What new laws did the New York Factory Investigating Commission request? (Check all that apply)

fire alarms and sprinkler systems Signup and view all the answers

Which economic indicators are used to measure the global economy? (Choose four answers)

trade volumes Signup and view all the answers

Why is the slow growth that can result from a contractionary policy a positive effect?

It can decrease inflation Signup and view all the answers

The graph shows a point of equilibrium. What is the price at which equilibrium is achieved?

$9 Signup and view all the answers

The chart shows the marginal cost of producing apple pies. This chart demonstrates that the marginal cost

initially increases as production increases Signup and view all the answers

In a free market system, price controls can include both floors and _______.

ceilings Signup and view all the answers

Corporate taxes are a type of

income tax Signup and view all the answers

The graph shows the market for graphic T-shirts. What does the graph show about the relationship between a product and its price?

As the amount of a product goes up, the price goes up Signup and view all the answers

A company that makes mobile phones introduces a new, faster model that has strong consumer interest. However, the old model is still available. What will most likely happen to the price of the old model, and why?

The price will fall to encourage consumers to continue to purchase it Signup and view all the answers

Economists can use new technology to

study data and patterns Signup and view all the answers

In a competitive market, a computer store offers customers a warranty to help pay for any future damages. This is an example of

reducing the risk for consumers Signup and view all the answers

What is one example of a closed economy?

a restricted system that blocks trade with international partners Signup and view all the answers

A regulatory agency that attempts to limit risk in the banking system is

the OCC Signup and view all the answers

If Country A is an agricultural country and Country B has many cities and factories, it would make sense for

Country A to specialize in growing corn while Country B specializes in making cars Signup and view all the answers

What is one way that technology can improve the production of goods?

Container ships can transport a number of goods at once Signup and view all the answers

Which organization created a shared economy?

European Union Signup and view all the answers

Which best describes why governments enact tariffs?

to discourage consumers from purchasing foreign goods Signup and view all the answers

If it becomes less expensive to travel overseas from the United States, American tourists will benefit from the fact that

the US dollar has declined in value Signup and view all the answers

The graph shows the price of a good compared to the quantity demanded. This graph demonstrates how

the quantity demanded changes slightly with the price Signup and view all the answers

What is one reason why the government would provide financial assistance to an entrepreneur?

to encourage the invention and development of products Signup and view all the answers

What is the best definition of profit?

Profit is the financial gain from business activity minus expenses Signup and view all the answers

When entrepreneurs develop new products, other companies also experience growth because they

create many companion products Signup and view all the answers

Jacob is considering buying a new car. Which nonrenewable resource should influence the decision?

petroleum Signup and view all the answers

Which are indicators that economists use to measure how an economy grows? (Select all that apply)

measuring how much the economy produces Signup and view all the answers

When the government injects money into the economy, consumers may have more disposable income, which may lead to

higher production Signup and view all the answers

The Fed may respond to a recession by

decreasing interest rates Signup and view all the answers

Who was Adam Smith?

He was a philosopher who promoted the idea of free enterprise Signup and view all the answers

In a mixed market economy, what is a typical way the government can reduce unemployment?

The government can pay for projects to create work Signup and view all the answers

Public property is land or goods

owned by the government Signup and view all the answers

Embargoes, quotas, and standards are tools that countries use

to punish other countries Signup and view all the answers

The graph below shows the value of the US dollar versus the Canadian dollar. According to the graph, the American dollar was the strongest during which month?

March 2013 Signup and view all the answers

Which situation is an example of comparative advantage in an international market?

Factories in Country A can produce the same number of tablets as factories in Country B, or the factories in Country A could be used to build more laptops than the factories in Country B Signup and view all the answers

When does government regulate producers in a mixed-market economy?

as needed Signup and view all the answers

Economists use changes in GDP to measure

any economic growth or shrinkage Signup and view all the answers

Which of these practices describe how producers in oligopolies generally try to create competition? (Check all that apply)

by advertising Signup and view all the answers

Which best describes how advertising influences consumer choice in an oligopoly?

Advertising coaxes people to buy new products Signup and view all the answers

Study Notes

Production Costs and Opportunity Costs

Cool Clothes Company incurs a production cost of $15 per pair of jeans, with opportunity cost being the discontinued shirt production.
Opportunity cost refers to the benefits missed when choosing one alternative over another.

Disequilibrium in Supply and Demand

During disequilibrium, supply may be less than or greater than demand, affecting pricing and production decisions.
Balance in the market occurs when supply meets demand.

Hyperinflation

Defined as an exponential increase in the price of goods and services, indicating severe economic instability.

Trade Agreements

Essential for reducing trade barriers between countries, stimulating economic growth and cooperation.

Opportunity Cost in Production

Producer A’s opportunity cost involves the decision between growing different fruit varieties, highlighting the trade-offs in production choices.

Factors of Production

Demand, availability, and quality of items are influenced by the factors of production, shaping market dynamics.

Government Spending on Education

Government expenditure in education serves dual purposes: meeting social needs and bolstering the economy.

Impact of Expansionary Tax Policies

Unchecked expansionary tax policies likely result in high inflation, affecting economic stability.

Globalization and Business Expansion

Businesses leverage globalization to access new markets by finding customers overseas, increasing sales potential.

Labor Unions

Opposition to labor unions often centers around the belief that they hinder the hiring of more qualified workers.

Demand-Pull Inflation

Occurs when consumer purchasing increases, leading to rising prices for goods.

Scarcity

Defined by the existence of limited resources, emphasizing the need for prioritization in resource allocation.

Command Economy in Socialism

The government controls production factors and decision-making, centralizing economic management.

Economic Decision-Making Framework

The three fundamental questions of economics guide resource allocation and production strategies.

New York Factory Investigating Commission

Advocated for enhanced sanitation standards and improved safety regulations within factories.

Global Economic Indicators

Purchasing power parity, trade volumes, and GDP are critical indicators for measuring global economic health.

Contractionary Policy Effects

Slow economic growth from contractionary policies can positively decrease inflation rates.

Equilibrium Price

Point of equilibrium in a market is represented by the price of $9, where supply and demand are balanced.

Marginal Cost of Production

As illustrated, marginal costs initially increase with production, affecting pricing strategies.

Price Controls in Free Market

Price controls can include both ceilings and floors, impacting market equilibrium.

Corporate Taxes

Considered a form of income tax, affecting business profitability and government revenue.

Price-Quantity Relationship

An inverse relationship usually exists where an increase in product quantity can lead to price variations.

Pricing Dynamics of New Products

New product introductions typically lead to decreased prices for older models, encouraging continued consumer purchases.

Technology's Role in Economics

New technology enhances data analysis, improving decision-making and efficiencies in production.

Warranty Offers in Competitive Markets

Providing warranties reduces consumer risk, enhancing customer trust and potentially influencing sales.

Closed Economy Example

A closed economy represents systems that restrict international trade, affecting market access and growth.

Regulatory Agency Functions

The Office of the Comptroller of the Currency (OCC) aims to limit risks within the banking system.

Comparative Advantage

It is advantageous for countries to specialize in producing goods they can create most efficiently, enhancing trade benefits.

Mixed Market Economy

Government measures may include funding projects to create jobs, aimed at reducing unemployment.

Public Property

Defined as assets owned by the government, providing public resources and services.

Trade Regulations

Tools such as embargoes and quotas are utilized by countries to impose trade restrictions for various reasons, including punishment.

Value of Currency

The strength of the US dollar has fluctuated, with peak valuation noted in March 2013.

Economic Growth Measurement

GDP changes are a primary indicator reflecting economic growth or decline.

Oligopoly Practices

Producers maintain competition through low pricing, promotions, advertising, and fostering brand loyalty.

Advertising Influence in Oligopoly

Advertising serves to entice consumers towards new products while influencing brand perceptions.

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Description

Prepare for your economics exam with these flashcards that cover key concepts such as production and opportunity costs. Test your understanding of the trade-offs that companies face when making production decisions. These flashcards are an essential tool for mastering economics principles.