question
Economics is the study of how societies ___ their ___ resources.
answer
manage, scarce
question
Roy is deciding between two movies to download. Both movies are $4.99. However, Movie A takes up 6 "slots" on his device while Movie B takes up 3. Which of the following statements is most accurate?
answer
Movie A has a higher opportunity cost than Movie B
question
Governments can sometimes improve market outcomes.
answer
True
question
Which of the following is a role of households in the circular-flow diagram?
answer
Buy and consume goods and services
question
One salesperson is paid by the hour. Another is paid a commission on each sale. Which one has the stronger incentive to sell more merchandise?
answer
The one paid on commission
question
What happens when the government prints too much money?
answer
Inflation
question
Trade can make everyone involved better off.
answer
True
question
Rational people do not make decisions at the margin.
answer
False
question
In the long run, there is a trade-off between inflation and unemployment.
answer
False
question
Normal people face trade-offs, but someone that's very rich like Bill Gates doesn't.
answer
False
question
Central planning is superior to free markets as a method for economic growth.
answer
False
question
In a month, Dean can produce 300 pounds of cheese or 480 pints of yogurt or any linear combination of the two. His brother Sam can produce 120 pounds of cheese or 600 pints of yogurt or any linear combination of the two in the same time.
True or False: These brothers can benefit by trading with each other.
True or False: These brothers can benefit by trading with each other.
answer
True
question
In a month, Dean can produce 300 pounds of cheese or 480 pints of yogurt or any linear combination of the two. His brother Sam can produce 120 pounds of cheese or 600 pints of yogurt or any linear combination of the two in the same time.
When not trading, each brother spent half their effort on producing one good and half their effort on producing the other good. How much of each good did each brother produce?
When not trading, each brother spent half their effort on producing one good and half their effort on producing the other good. How much of each good did each brother produce?
answer
Dean produced 150 pounds of cheese and 240 pints of yogurt; Sam produced 60 pounds of cheese and 300 pints of yogurt.
question
In a month, Dean can produce 300 pounds of cheese or 480 pints of yogurt or any linear combination of the two. His brother Sam can produce 120 pounds of cheese or 600 pints of yogurt or any linear combination of the two in the same time.
Which brother has the absolute advantage in cheese and which one has the absolute advantage in yogurt?
Which brother has the absolute advantage in cheese and which one has the absolute advantage in yogurt?
answer
Dean has the absolute advantage in cheese; Sam has the absolute advantage in yogurt.
question
In a month, Dean can produce 300 pounds of cheese or 480 pints of yogurt or any linear combination of the two. His brother Sam can produce 120 pounds of cheese or 600 pints of yogurt or any linear combination of the two in the same time.
Which brother has the comparative advantage in cheese, and which one has the comparative advantage in yogurt?
Which brother has the comparative advantage in cheese, and which one has the comparative advantage in yogurt?
answer
Dean has the comparative advantage in cheese; Sam has the comparative advantage in yogurt.
question
In a month, Dean can produce 300 pounds of cheese or 480 pints of yogurt or any linear combination of the two. His brother Sam can produce 120 pounds of cheese or 600 pints of yogurt or any linear combination of the two in the same time.
If the brothers decide to trade, which one should specialize in cheese?
If the brothers decide to trade, which one should specialize in cheese?
answer
Dean
question
In a month, Dean can produce 300 pounds of cheese or 480 pints of yogurt or any linear combination of the two. His brother Sam can produce 120 pounds of cheese or 600 pints of yogurt or any linear combination of the two in the same time.
If these brothers decide to trade, which one should specialize in yogurt?
If these brothers decide to trade, which one should specialize in yogurt?
answer
Sam
question
In a month, Dean can produce 300 pounds of cheese or 480 pints of yogurt or any linear combination of the two. His brother Sam can produce 120 pounds of cheese or 600 pints of yogurt or any linear combination of the two in the same time.
Recall that when they were not trading, each brother spent half of his effort on each good. Now, suppose that they decide to specialize in producing only one good and agree to trade 90 pounds of cheese for 270 pints of yogurt. What would the gains from trade be for Dean?
Recall that when they were not trading, each brother spent half of his effort on each good. Now, suppose that they decide to specialize in producing only one good and agree to trade 90 pounds of cheese for 270 pints of yogurt. What would the gains from trade be for Dean?
answer
60 pounds of cheese and 30 pints of yogurt
question
In a month, Dean can produce 300 pounds of cheese or 480 pints of yogurt or any linear combination of the two. His brother Sam can produce 120 pounds of cheese or 600 pints of yogurt or any linear combination of the two in the same time.
Recall that when they were not trading, each brother spent half of his effort on each good. Now, suppose that they decide to specialize in producing only one good and agree to trade 90 pounds of cheese for 270 pints of yogurt. What would the gains from trade be for Sam?
Recall that when they were not trading, each brother spent half of his effort on each good. Now, suppose that they decide to specialize in producing only one good and agree to trade 90 pounds of cheese for 270 pints of yogurt. What would the gains from trade be for Sam?
answer
30 pounds of cheese and 30 pints of yogurt
question
What is the only creature known to naturally exchange one good for another?
answer
Humans
question
How many individuals are there in the world who can, completely on his/her own, produce a computer mouse from raw materials?
answer
None
question
How many people does it take to make a computer mouse?
answer
Millions
question
The law of demand states that, all else equal,
answer
As price increases, quantity demanded decreases
question
The law of supply states that, all else equal,
answer
As price increases, quantity supplied increases
question
What effect would a decrease in the price of SUVs have on the market for cars?
answer
Decrease demand
question
What effect would the government increasing the legal driving age from 16 to 18 have on the market for cars?
answer
Decrease demand
question
What effect would consumers on Tuesday expecting an increase in the price of gas on Friday have on the market for gas on Tuesday?
answer
Increase demand
question
What effect would a new, more efficient drilling technology have on the market for oil?
answer
Increase supply
question
What effect would a war in the Middle East have on the market for oil?
answer
Decrease supply
question
If the demand for computers increased and the supply remained the same, what would happen to the equilibrium price and quantity?
answer
Both price and quantity would increase
question
What effect would a new technology to extract oil from shale have on the market for oil?
answer
Increase supply
question
If the supply of wheat increases and demand remained the same, what would happen to the equilibrium price and quantity for wheat?
answer
Price would decrease, quantity would increase
question
Suppose that a drought destroys a large portion of the US corn crop. What would happen to the price and quantity of movie popcorn?
answer
Price would increase, quantity would decrease
question
Which component of the US GDP is the largest?
answer
Consumption
question
Identify which component of the US GDP the following transaction belongs in:
A Kentucky family purchases movie tickets at a local theater.
A Kentucky family purchases movie tickets at a local theater.
answer
Consumption
question
Identify which component of the US GDP the following transaction belongs in:
The state government purchases some new police cars for their state police.
The state government purchases some new police cars for their state police.
answer
Government purchases
question
Identify which component of the US GDP the following transaction belongs in:
A British restaurant purchases fish from an American fishing company.
A British restaurant purchases fish from an American fishing company.
answer
Net Exports
question
Identify which component of the US GDP the following transaction belongs in:
An American car company expands their factory in Detroit.
An American car company expands their factory in Detroit.
answer
Investment
question
Honda operates a car factory in Ohio. Nike operates a shoe factory in Thailand. Which one belongs in the US GDP and which one belongs in the US GNP?
answer
The Honda factory in Ohio belongs in the US GDP; the Nike factory in Thailand belongs in the US GNP.
question
1920 = 20
1930 = 25
1940 = 40
1950 = 60
1960 = 80
1970 = 100
1980 = 140
1999 = 180
2000 = 200
Suppose a manager made $40,000 in 1920. How much would this be in year 2000 dollars?
1930 = 25
1940 = 40
1950 = 60
1960 = 80
1970 = 100
1980 = 140
1999 = 180
2000 = 200
Suppose a manager made $40,000 in 1920. How much would this be in year 2000 dollars?
answer
$400,000
question
1920 = 20
1930 = 25
1940 = 40
1950 = 60
1960 = 80
1970 = 100
1980 = 140
1999 = 180
2000 = 200
A movie released in 1930 had a $10 million box office, a movie release in 1980 had a $50 million box office, and a movie release in 2000 had a $60 million box office. Which one has the bigger box office?
1930 = 25
1940 = 40
1950 = 60
1960 = 80
1970 = 100
1980 = 140
1999 = 180
2000 = 200
A movie released in 1930 had a $10 million box office, a movie release in 1980 had a $50 million box office, and a movie release in 2000 had a $60 million box office. Which one has the bigger box office?
answer
The 1930 movie did better
question
1920 = 20
1930 = 25
1940 = 40
1950 = 60
1960 = 80
1970 = 100
1980 = 140
1999 = 180
2000 = 200
Suppose the minimum wage was $5/hr in 1979 and automatically adjusted for inflation. How much would the minimum wage be in 2000?
1930 = 25
1940 = 40
1950 = 60
1960 = 80
1970 = 100
1980 = 140
1999 = 180
2000 = 200
Suppose the minimum wage was $5/hr in 1979 and automatically adjusted for inflation. How much would the minimum wage be in 2000?
answer
$10/hr
question
1920 = 20
1930 = 25
1940 = 40
1950 = 60
1960 = 80
1970 = 100
1980 = 140
1999 = 180
2000 = 200
A classic 1950 sci-fi film got a $90 million dollar box office. Studio execs tried to turn it into a TV series in 1970, but it never aired and they decided to turn the pilot episode into a movie, which made $20 million. Eventually, the classic was remade in 2000 with a bigger budget, high-tech computerized special effects, and edgy writing. It was almost universally disliked by critics, but it did make $400 million. Which one had the bigger box office?
1930 = 25
1940 = 40
1950 = 60
1960 = 80
1970 = 100
1980 = 140
1999 = 180
2000 = 200
A classic 1950 sci-fi film got a $90 million dollar box office. Studio execs tried to turn it into a TV series in 1970, but it never aired and they decided to turn the pilot episode into a movie, which made $20 million. Eventually, the classic was remade in 2000 with a bigger budget, high-tech computerized special effects, and edgy writing. It was almost universally disliked by critics, but it did make $400 million. Which one had the bigger box office?
answer
The 2000 remake
question
Which of the following are problems in measuring the CPI?
answer
Introduction of new goods
question
A point inside the production possibilities frontier is
answer
Possible but not efficient
question
Movie tickets and film streaming services are substitutes. If the price of film streaming increases, what happens in the market for movie tickets?
answer
The demand curve shifts to the right
question
The discovery of a large new reserve of crude oil will shift the ___ curve for gasoline, leading to a ___ equilibrium price.
answer
supply, lower
question
If the economy goes into a recession and incomes fall, what happens in the markets for inferior goods?
answer
Prices and quantities both rise
question
If the price of a hot dog is $2 and the price of a hamburger is $4, then 30 hot dogs contribute as much to the GDP as ___ hamburgers.
answer
15
question
Angus the sheep farmer sells wool to Barnaby the knitter for $20. Barnaby makes 2 sweaters, each of which has a market price of $40. Collette buys one of them, while the other remains on the shelf of Barnaby's store to be sold later. What is the GDP here?
answer
$80
question
Which of the following does NOT add to the US GDP?
answer
The federal government sends a Social Security check to an elderly resident of Bowling Green.
question
Scarcity
answer
the limited nature of society's resources
question
10 principles
answer
1. People face trade-offs
2. The cost of something is what you give up to get it
3. Rational people think at the margin
4. People respond to incentives
5. Trade can make everyone better off
6. Markets are usually a good way to organize economic activity
7. Governments can sometimes improve market outcomes
8. A country's standard of living depends on its ability to produce goods and services
9. Prices rise when the government prints too much money
10. Society faces a short-run trade-off between inflation and unemployment
2. The cost of something is what you give up to get it
3. Rational people think at the margin
4. People respond to incentives
5. Trade can make everyone better off
6. Markets are usually a good way to organize economic activity
7. Governments can sometimes improve market outcomes
8. A country's standard of living depends on its ability to produce goods and services
9. Prices rise when the government prints too much money
10. Society faces a short-run trade-off between inflation and unemployment
question
Efficiency
answer
the property of society getting the most it can from its scarce resources
question
Equality
answer
the property of distributing economic prosperity uniformly among the members of society
question
opportunity cost
answer
whatever must be given up to obtain some item
question
marginal change
answer
a small incremental adjustment to a plan of action
question
incentive
answer
something that induces a person to act
question
market economy
answer
an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
question
property rights
answer
the ability of an individual to own and exercise control over scarce resources
question
market failure
answer
a situation in which a market left on its own fails to allocate resources efficiently
question
externality
answer
the impact of one person's actions on the well-being of a bystander
question
market power
answer
the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
question
Productivity
answer
the quantity of goods and services produced from each unit of labor input
question
inflation
answer
increase in the overall level of prices in the economy
question
business cycle
answer
Fluctuations in economic activity, such as employment and production
question
circular flow diagram
answer
a visual model of the economy that shows how dollars flow through markets among households and firms
question
production possibilities frontier
answer
a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
question
microeconomics
answer
the study of how households and firms make decisions and how they interact in markets
question
positive statements
answer
claims that attempt to describe the world as it is
question
normative statements
answer
claims that attempt to prescribe how the world should be
question
federal reserve
answer
institution that sets the nation's monetary policy
question
absolute advantage
answer
the ability to produce a good using fewer inputs than another producer
question
comparative advantage
answer
the ability to produce a good at a lower opportunity cost than another producer
question
imports
answer
goods produced abroad and sold domestically
question
exports
answer
goods produced domestically and sold abroad
question
inferior good
answer
a good that consumers demand less of when their incomes increase
question
normal & inferior goods
answer
income ⬆️: demand for normal goods ⬆️ demand for inferior goods ⬇️
income ⬇️: demand for normal goods ⬇️ demand for inferior goods ⬆️
income ⬇️: demand for normal goods ⬇️ demand for inferior goods ⬆️
question
substitutes or complements
answer
substitute price ⬆️ demand ⬆️
substitute price ⬇️ demand ⬇️
complement price ⬆️ demand ⬇️
complement price ⬇️ demand ⬆️
substitute price ⬇️ demand ⬇️
complement price ⬆️ demand ⬇️
complement price ⬇️ demand ⬆️
question
good news & bad news
answer
good news: demand ⬆️
bad news: demand ⬇️
bad news: demand ⬇️
question
future price
answer
future price ⬆️ demand ⬆️
future price ⬇️ demand ⬇️
# of buyers ⬆️ demand ⬆️
# of buyers ⬇️ demand ⬇️
future price ⬇️ demand ⬇️
# of buyers ⬆️ demand ⬆️
# of buyers ⬇️ demand ⬇️
question
input prices
answer
input prices ⬆️ supply ⬇️
input prices ⬇️ supply ⬆️
input prices ⬇️ supply ⬆️
question
technology
answer
supply ⬆️
future price ⬆️ supply ⬇️
future price ⬇️ supply ⬆️
# of sellers ⬆️ supply ⬆️
# of sellers ⬇️ supply ⬇️
future price ⬆️ supply ⬇️
future price ⬇️ supply ⬆️
# of sellers ⬆️ supply ⬆️
# of sellers ⬇️ supply ⬇️
question
disruption
answer
supply ⬇️
question
supply & demand
answer
demand ⬆️ price ⬆️ q ⬆️
supply ⬆️ price ⬇️ q ⬆️
supply ⬆️ price ⬇️ q ⬆️
question
capital goods
answer
goods that make other goods
question
underground economy
answer
when you pay someone, but it's not recorded
question
recession
answer
when GDP shrinks
question
Physical capital per worker
answer
the stock of equipment and structures that are used to produce goods and services
question
Human capital per worker
answer
the knowledge and skills that workers acquire through education, training, and experience
question
Natural resources per worker
answer
inputs into production that are provided by nature, such as land, rivers, and mineral deposits
question
Technological knowledge
answer
Best way to produce goods and services
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