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Which of the following is the best definition of economics?

The study of how individuals and societies choose to use the


scarce resources that nature and previous generations have
provided.
Sunk costs are...
costs that cannot be avoided because they have already been
incurred.
Opportunity cost is...
that which we forgo, or give up, when we make a choice or
decision.
An efficient market is...
a market in which profit opportunities are eliminated almost
instantaneously.
Microeconomics is...
the branch of economics that examines the functioning of
individual industries and the behavior or individual decisionmaking units.
What is the focus of macroeconomics?
inflation and unemployment
Ockham's Razor
the principle that irrelevant detail should not be included in a
model
Ceteris paribus"
all else equal
The fallacy of composition...
is the belief that what is true for a part is necessarily true for the
whole.
The four criteria that are frequently used in judging the
outcome of economic policy are...
efficiency, equity, stability, and economic growth
The slope of a horizontal line is...
zero

The slope of a vertical line is...


infinite..
The opportunity cost of investment in capital is forgone present
consumption because...
resources are scarce
The ppf is a graph that shows...
all the combinations of goods and services that can be produced
if all society's resources are used efficiently.
The value of the slope of a society's ppf is called...
its marginal rate of transformation
For an economy to produce at a point beyond its current ppf,
the economy must...
increase its resource base
An improvement in technology will cause the ppf to shift...
outward
The economic problem can be best stated as:
given scarce resources, how exactly do societies go about
deciding what to produce, how to produce it, and for whom to
produce?
Which of the following is an element of a command economy?
Production decision are centralized
An economy in which individual people and firms pursue their
own self-interest without any central direction or regulation is
a...
laissez-faire economy
In a laissez-faire economy, who determines what gets
produced, how it is produced, and who gets it?
the behavior of buyers and sellers
The basic coordinating mechanism in a free market system is...
price
The distinguishing characteristic of a public good is that...

once the good is produced, everyone gets to enjoy the benefits,


whether they have paid for the good or not.
According to the law of demand, as prices rise, ceteris paribus
quantity demanded...
decreases
According to the law of demand, there is what kind of
relationship between price and quantity?
negative
If the demand for tortillas increases as income increases,
tortillas are a...
normal good
If the demand for coffee decreases as income decreases, coffee
is a...
normal good
Suppose the demand for newspapers goes up when the price of
coffee goes down. We can say that the two goods are...
complements
A good whose demand is inversely related to income is an...
inferior good
When the decrease in the price of one good causes the demand
for another good to decrease, the goods are...
substitutes
A change in price of a good or service leads to a...
change in quantity demanded; movement along the demand
curve
A change in income, preferences, or prices of other goods or
services leads to a ____ that causes a ___
change in demand, shift of the demand curve
According to the law of supply, there is what kind of
relationship between price and the quantity of a good supplied?
positive
Equilibrium is...

the condition that exists when quantity demanded equals


quantity supplied
Cross-price elasticity of demand measures...
the response in the quantity of one good demanded to a change
in the price of another good.
Price ceiling...
a maximum price, set by the government, that sellers may charge
for a good
If the price ceiling is set below the equilibrium price, there will
be a...
shortage
A perfectly inelastic demand curve is shown as a...
vertical line
When the price of radios increases 5%, quantity demanded
decreases 5%. The elasticity for radios is...
price unitary
When the price of fresh fish increases 5%, quantity demanded
decreases 10%, the elasticity for fresh fish is...
price elastic
When the price of coffee increases 5%, quantity demanded
decreases 3%. The elasticity for fresh fish is...
price inelastic
Total revenue will increase if price falls and demand is...
elastic
It is necessary to ration a good whenever what exists?
excess demand
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