Economics Spring 2014 Final Exam Review

QUESTION People’s wants are unlimited. This fact means that which of the following is always present? scarcity shortages marginal utility costs of production

ANSWER People’s wants are unlimited. This fact means that which of the following is always present? scarcity

QUESTION Name the four stages of the business cycle.

ANSWER Name the four stages of the business cycle. EXPANSION PEAK CONTRACTION TROUGH

QUESTION What are the factors of production? goods and services risk and opportunity land, labor, and capital wages, salaries, and profits

ANSWER What are the factors of production? land, labor, and capital

QUESTION Which of the following would be included in the study of macroeconomics? Salaries of college professors Computer prices Unemployment in the nation Silver prices

ANSWER Which of the following would be included in the study of macroeconomics? Unemployment in the nation

QUESTION "Taxes ought to be lowered.” is an example of what kind of economic language? Positive Normative

ANSWER "Taxes ought to be lowered.” is an example of what kind of economic language? Normative

QUESTION Provide an example of specialization.

ANSWER Specialization is when individual workers become highly skilled at a specific task and focus their efforts on that task, leaving other jobs to be done by other highly skilled workers. EX: An assistant in a tailoring shop only replaces zippers.

QUESTION What is the law of unintended consequences? Attempts to intervene always backfire. Actions often have unforeseen effects. Markets are always influenced by emotional factors. Economic booms are always followed by downturns.

ANSWER What is the law of unintended consequences? Actions often have unforeseen effects.

QUESTION Consumer sovereignty means…

ANSWER Consumer sovereignty means… customers decide whether any business succeeds or fails

QUESTION Which kind of economy is most common today?

ANSWER Which kind of economy is most common today? Mixed Economy

QUESTION Human-made goods that are used to produce other goods and services are which type of resource?

ANSWER Human-made goods that are used to produce other goods and services are which type of resource? Capital

QUESTION The three fundamental economic questions are what to produce, ______________, and for whom to produce.

ANSWER The three fundamental economic questions are what to produce, how to produce, and for whom to produce.

QUESTION Provide an example of the law of diminishing marginal utility. (Bonus points for acting out or illustrating your example)

ANSWER Provide an example of the law of diminishing marginal utility. (Bonus points for acting out or illustrating your example) A new toy is less exciting to a child with many toys than to a child with just a few. Someone who has one bicycle will have less use for another.

QUESTION The branch of economics that studies decision making by individuals, families and businesses is called what?

ANSWER The branch of economics that studies decision making by individuals, families and businesses is called what? Microeconomics

QUESTION The act of transforming a private enterprise into a government enterprise, is called what?

ANSWER The act of transforming a private enterprise into a government enterprise, is called what? NATIONALIZATION

QUESTION What is an example of thinking at the margin? (Bonus points for acting out or illustrating your example)

ANSWER What is an example of thinking at the margin? (Bonus points for acting out or illustrating your example) John has six shirts and is trying to decide whether to buy a seventh.

QUESTION The quantity supplied exceeds the quantity demanded at the current price; this results in what condition?

ANSWER The quantity supplied exceeds the quantity demanded at the current price; this results in what condition? Surplus

QUESTION The amount of soap made matches the amount of soap that people want to buy; this results in what condition?

ANSWER The amount of soap made matches the amount of soap that people want to buy; this results in what condition? MARKET EQUILIBRIUM

QUESTION What is a price ceiling?

ANSWER What is a price ceiling? When a government or other agency sets a minimum price of a good. Often below the equilibrium price.

QUESTION What is the result of a price ceiling set below the equilibrium?

ANSWER What is the result of a price ceiling set below the equilibrium? SHORTAGE

QUESTION Illustrate the law of demand

ANSWER Illustrate the law of demand

QUESTION Illustrate the law of supply

ANSWER Illustrate the law of supply

QUESTION If the demand for a good increases because consumer income increases, the good is called what? Inferior good Normal good Necessity good Luxury good

ANSWER If the demand for a good increases because consumer income increases, the good is called what? Normal good

QUESTION What causes the demand curve to shift left?

ANSWER What causes the demand curve to shift left? A decrease in overall demand.

QUESTION A measure of the degree to which the quantity demanded or supplied of a good or service changes in response to a change in price is called what?

ANSWER A measure of the degree to which the quantity demanded or supplied of a good or service changes in response to a change in price is called what? Elasticity

QUESTION In which market structure do producers have the most market power? monopolistic competition monopoly oligopoly perfect competition

ANSWER In which market structure do producers have the most market power? monopoly

QUESTION Name three categories of economic activity NOT included in the GDP.

ANSWER Name three categories of economic activity NOT included in the GDP. Secondhand Transactions Transfer Payments Stock Market Transactions Nonmarket Activities The Underground Economy

QUESTION ______________ is valued at prices in a base year. Real GDP Nominal GDP

ANSWER ______________ is valued at prices in a base year. Real GDP

QUESTION What are Adam Smith’s Four Maxims regarding taxation?

ANSWER What are Adam Smith’s Four Maxims regarding taxation? Equity Certainty Convenience Efficiency

QUESTION What are the four types of unemployment?

ANSWER What are the four types of unemployment? frictional unemployment structural unemployment seasonal unemployment cyclical unemployment

FINAL QUESTION

Label the stages of the business cycle