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Exam 1: Fundamental Concepts in Economics

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Question 41

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Most economists analyze economic issues from a normative approach.

A) True
B) False

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Question 42

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Governments,

A) like individuals, face opportunity costs.
B) unlike individuals, do not face opportunity costs.
C) only if they are relatively poor, face opportunity costs.
D) only if they are running budget deficits, face opportunity costs.

E) B) and C)
F) A) and C)

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Question 43

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What are explicit costs? What are implicit costs?

You decide to quit your $40,000 a year job to go back to school. Your rent is $9,600 per year, you spend $6,000 per year on food, your tuition costs $24,000 per year, and textbooks cost $3,000 per year. Based on these numbers, what are your yearly explicit and implicit costs of going back to school?

The branch of economics that examines the self-interested behavior of politicians, lobbyists, agencies, bureaucrats, and voters is called

________ are inducements to act in certain ways.

In a market system, the ultimate decision about what to produce is left to

Figure 1A.1 : -Refer to Figure 1A.1. Assume that the graph in this figure represents the demand and supply curves for walnuts. An advance in production technology which makes harvesting walnuts less time consuming would be represented by a shift from

A decrease in demand will cause the equilibrium price to ________ and the equilibrium quantity to ________.

An increase in the amount of a product offered for sale at every price is called an increase in supply.

The New York Yankees are playing the Boston Red Sox at Fenway Park. It is the bottom of the ninth inning, the score is tied 4-4, the bases are loaded, and there are no outs. Starting in the seats closest to the field, the crowd begins to stand and cheer , hoping that the Red Sox can drive in one more run and win the game. Describe the collective action problem that has developed in this situation.

Explain the differences between a market system, a command economy, and a mixed economy with respect to production and distribution decisions.

A condition in a market where there is no upward or downward pressure on price is called

Implicit costs are usually easier to measure than explicit costs.

While falling prey to the seductive ways of Catwoman, Batman sacrifices the opportunity of protecting Gotham City from a crime spree initiated by the Joker. That foregone opportunity is a(n) ________ cost of (yet again) falling prey to Catwoman.

If a product is a normal good, an increase in your income will

Incentives work by changing the trade-offs faced by individuals.

If the quantity of a good or service demanded at the existing price is greater than the quantity supplied, ________ exists.

Figure 1A.1 : -Refer to Figure 1A.1. Assume that the graph in this figure represents the demand and supply curves for used cars, which are inferior goods. An increase in income would be represented by a shift from

An economy is an organization that produces goods and services and then allocates those goods and services to its members.