Microeconomics Overview Quiz
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Questions and Answers

What is the primary focus of microeconomics?

  • The impact of decisions on supply and demand within specific markets. (correct)
  • The overall economic performance of a country.
  • The behaviors of international trade and finance.
  • The study of large-scale economic systems.

How does scarcity influence economic decision-making?

  • It eliminates the need for choices.
  • It guarantees that all needs can be met without choice.
  • It prompts individuals, businesses, and governments to make decisions about resource use. (correct)
  • It increases the availability of all resources.

Which of the following is an example of a renewable resource?

  • Coal
  • Oil
  • Copper
  • Wind (correct)

What defines non-renewable resources?

<p>Resources that cannot be replenished within a human lifetime. (A)</p> Signup and view all the answers

What is meant by 'human resources' in economics?

<p>Labor and skills provided by individuals. (C)</p> Signup and view all the answers

Which of the following statements about microeconomics is incorrect?

<p>Microeconomics only studies large corporations. (D)</p> Signup and view all the answers

What role does economics play in everyday decision-making?

<p>It provides tools to think critically about our options. (B)</p> Signup and view all the answers

Which type of labor is typically associated with specialized skills and training?

<p>Skilled labor. (A)</p> Signup and view all the answers

What is the opportunity cost in decision-making?

<p>The value of the next best alternative that is given up (A)</p> Signup and view all the answers

How does scarcity generally affect prices?

<p>The price tends to rise due to competition for scarce resources (C)</p> Signup and view all the answers

Which of the following is NOT a type of resource mentioned?

<p>Financial Resources (A)</p> Signup and view all the answers

What is the main role of scarcity in economics?

<p>To compel careful decision-making about resource allocation (A)</p> Signup and view all the answers

What type of resources does 'capital' refer to in the factors of production?

<p>Goods and tools used in production (C)</p> Signup and view all the answers

Which scenario best illustrates the concept of scarcity impacting marketing strategies?

<p>A retailer advertising a 'limited-time' sale to stimulate purchases (A)</p> Signup and view all the answers

Which category of resources includes the ideas and risk-taking of entrepreneurs?

<p>Entrepreneurial Resources (B)</p> Signup and view all the answers

In capitalist economies, who primarily controls the factors of production?

<p>Business owners and investors (A)</p> Signup and view all the answers

What does the Phillips Curve suggest about the relationship between unemployment and inflation?

<p>Lower unemployment leads to higher inflation. (B)</p> Signup and view all the answers

Which event in the 1970s challenged the stability of the Phillips Curve?

<p>Stagflation (C)</p> Signup and view all the answers

What is one way governments might respond to high inflation?

<p>Raise interest rates. (D)</p> Signup and view all the answers

What happens when there is too much supply in the market?

<p>Prices drop, encouraging more consumers to buy. (D)</p> Signup and view all the answers

What defines economic equilibrium?

<p>The balance where supply equals demand. (C)</p> Signup and view all the answers

What is the first phase of the business cycle?

<p>Expansion (A)</p> Signup and view all the answers

In what situation does a recession officially begin?

<p>When the economy shrinks for two consecutive quarters. (C)</p> Signup and view all the answers

Which of the following describes Nash equilibrium?

<p>A situation in game theory where players adapt to others' strategies. (C)</p> Signup and view all the answers

Which of the following impacts daily life due to economic conditions?

<p>High inflation reduces purchasing power. (C)</p> Signup and view all the answers

How might government policies impact market equilibrium?

<p>They can create disequilibrium by altering supply or demand. (A)</p> Signup and view all the answers

During which phase of the business cycle are companies likely to hire more workers?

<p>Expansion (C)</p> Signup and view all the answers

What typically happens in a market experiencing disequilibrium?

<p>The market adjusts as supply and demand seek balance. (D)</p> Signup and view all the answers

What typically triggers a recession?

<p>Economic shock (A)</p> Signup and view all the answers

In the context of the Irish Potato Famine, what was a negative aspect of equilibrium?

<p>Prices rose to a level where people could not afford food. (C)</p> Signup and view all the answers

What characterizes a market structure with perfect competition?

<p>Many buyers and sellers with identical products. (A)</p> Signup and view all the answers

What is the equilibrium price in a market?

<p>The price point where the amount supplied equals the amount demanded. (B)</p> Signup and view all the answers

What was one of the primary reasons for establishing the Federal Reserve?

<p>To stabilize the banking system (D)</p> Signup and view all the answers

Which of the following was NOT a challenge faced by the U.S. economy before the Federal Reserve was established?

<p>Excessive government intervention (C)</p> Signup and view all the answers

How does the Federal Reserve help control inflation?

<p>By managing the money supply (A)</p> Signup and view all the answers

Which entity oversees the Federal Reserve System?

<p>The Board of Governors (C)</p> Signup and view all the answers

What was the main purpose of the Federal Reserve Act passed in 1913?

<p>To establish a central bank for economic stabilization (A)</p> Signup and view all the answers

What role does the Federal Reserve play as a 'lender of last resort'?

<p>It provides funds to struggling banks to prevent failures (D)</p> Signup and view all the answers

What are the 12 Regional Federal Reserve Banks responsible for?

<p>Implementing Fed's policies in various regions (C)</p> Signup and view all the answers

Which of the following does the Federal Reserve NOT oversee?

<p>Private equity companies (B)</p> Signup and view all the answers

What is a primary function of subsidies in trade policy?

<p>To provide financial support to local businesses (D)</p> Signup and view all the answers

How do tariffs generally affect the prices of foreign goods?

<p>They raise the prices of foreign goods for consumers (C)</p> Signup and view all the answers

Which statement best describes quotas in trade policy?

<p>They limit the amount of a product that can be imported (C)</p> Signup and view all the answers

What is the impact of free trade agreements (FTAs) on tariffs?

<p>FTAs eliminate tariffs between participating countries (D)</p> Signup and view all the answers

Which is a potential downside of implementing trade policies such as tariffs?

<p>They can lead to higher prices for consumers (B)</p> Signup and view all the answers

How do exchange rates influence the prices of imported goods?

<p>A lower exchange rate raises prices of imports (D)</p> Signup and view all the answers

What is a key benefit of using trade policies like quotas?

<p>They encourage consumers to buy more domestic products (D)</p> Signup and view all the answers

What is one consequence of increased tariffs on agricultural products?

<p>It may reduce the availability of imported agricultural goods (C)</p> Signup and view all the answers

Flashcards

Microeconomics

The study of how individuals and businesses make choices about how to use limited resources to satisfy their unlimited wants. For example, a company may use microeconomics to set the optimal price for its products.

Scarcity

Resources are limited and choices must be made about how to use them due to scarcity.

Natural Resources

Raw materials originating from the Earth, used to produce goods and services. They can be renewable (naturally replenished) or non-renewable (not easily replenished).

Renewable Resources

Resources that can be naturally replaced over a short period of time, such as sunlight, wind, or forests.

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Non-Renewable Resources

Resources that cannot be easily replaced within a human lifetime, such as fossil fuels, minerals, and metals.

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Human Resources (Labor)

The people who provide labor and skills to produce goods and services. They are essential for economic activity.

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Human Capital

The skill and knowledge that individuals possess, which is essential for a productive workforce.

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Decision Making

The process of choosing the best alternative from a set of options, considering the potential costs and benefits of each option.

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Opportunity Cost

The value of the next best alternative that is given up when making a choice.

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Supply and Demand

Economic forces that determine the price of goods and services.

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Economics

The study of how people make choices to allocate scarce resources.

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Resource Allocation

The process of making choices about how to allocate scarce resources efficiently and fairly.

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Factors of Production

Resources used to produce goods and services.

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Capital Resources

Tools or equipment that are used to produce goods and services.

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Entrepreneurs

Individuals who take risks and combine resources to start businesses.

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Market Equilibrium

The point where the quantity of a good or service supplied equals the quantity demanded, resulting in a stable price.

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How price affects supply and demand

Prices fall when supply is high because more people are willing to buy. Prices rise when supply is low because demand increases.

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Equilibrium price

The price at which the quantity supplied and quantity demanded are equal.

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Disequilibrium

A situation where supply and demand are not balanced, leading to fluctuations in prices or shortages.

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Perfect Competition

The market structure where there is a large number of buyers and sellers, a homogeneous product, and free entry and exit.

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Monopoly

The market structure where there is only one seller of a product with no close substitutes.

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Oligopoly

The market structure where there are a few large firms dominating the industry, and products may be differentiated.

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Competitive Equilibrium

The market structure where there is intense competition, numerous buyers and sellers, and free entry and exit.

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Federal Reserve

A central bank in the U.S. responsible for stabilizing the economy and overseeing the financial system.

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What economic problem led to the creation of the Fed?

Bank failures were common in the late 1800s and early 1900s, causing people to lose their savings and trust in the banking system.

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What was another economic problem in the US before the Fed?

The US experienced frequent economic recessions where there was not enough money to go around.

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What aspect of the economy was unregulated before the Fed?

The amount of money in circulation was not well-regulated, leading to unpredictable inflation and deflation.

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What is the Fed's role in stabilizing the banking system?

The Fed acts as a lender of last resort to support struggling banks and prevent bank failures.

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How does the Fed control the money supply?

The Fed manages the money supply through monetary policy, aiming to control inflation and prevent economic instability.

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What role does the Fed play in regulating the financial system?

The Fed oversees banks and financial institutions to guarantee safe practices and protect both the banks and their customers.

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What are the main components of the Federal Reserve?

The Fed's structure includes the Board of Governors, responsible for overall policy, and 12 Regional Federal Reserve Banks, implementing the Fed's policies across the country.

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What is a subsidy?

A government payment that supports local businesses to compete with foreign products, reducing their production costs or prices.

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What are tariffs?

Taxes on imported goods that make them more expensive, protecting local industries. Consumers pay more for these goods.

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What are quotas?

Limits on the amount of a product that can be imported, used to protect domestic industries by controlling the supply of foreign goods.

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What are Free Trade Agreements (FTAs)?

Agreements between countries to remove tariffs and quotas, making trade easier and cheaper.

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What are Trade Policies?

Government policies used to regulate the flow of goods and services between countries, aiming to protect local industries, ensure competition, and maintain a healthy economy.

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How do exchange rates affect you?

Changes in exchange rates can lead to price fluctuations for imported goods, affecting consumers.

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How do trade policies affect product availability?

Trade policies can influence the availability and price of products. Tariffs, for example, may make local products more common but prices could be higher.

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What are the pros and cons of trade policies?

Trade policies can protect local jobs and encourage domestic production, but they can also lead to higher prices for consumers due to import taxes.

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What is the Phillips Curve?

A theory suggesting that lower unemployment leads to higher inflation. This happens because increased job opportunities boost demand, prompting companies to raise wages to attract workers, which in turn increases production costs and drives up prices.

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What happened to challenge the Phillips Curve?

In the 1970s, the relationship between inflation and unemployment was proven to not always be stable. This challenged the Phillips Curve theory, as both factors could be high simultaneously, a condition known as stagflation.

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What is a Recession?

The economic downturn characterized by a decline in economic output, production, and employment, often marked by a fall in consumer and business spending.

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What is Economic Expansion?

A period of rapid economic growth, characterized by increased production, employment, and higher consumer spending. It's the first stage of the business cycle.

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What is the Peak of the Business Cycle?

The highest point of economic activity in the business cycle, where growth slows down before a downturn.

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What is the Trough of the Business Cycle?

The lowest point of economic activity in the business cycle, marking the end of the economic downturn and the beginning of the next expansion.

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What is an Economic Shock?

An unexpected event that can disrupt economic growth and lead to a recession, such as a financial crisis, war, or natural disaster.

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What is the Business Cycle?

The process of the economy going through cycles of expansion, contraction, and recovery, with fluctuations in economic activity.

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Study Notes

Economics Study Guide

  • This study guide provides information about economics
  • Students should record their answers on separate paper or printouts
  • Contact teacher for questions or review

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Economics Study Guide PDF

Description

Test your knowledge on the key concepts of microeconomics, including the effects of scarcity, the classification of resources, and the decision-making process in economics. This quiz covers fundamental principles that shape microeconomic theory and everyday economic choices.

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