ECON-1006EL Quiz: questuons

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Wednesday, October 25, 2017
Microeconomics — Midterm Review
1. What is a scare good? When not enough of it is available for all needs.
2. What is a resource? A resource is anything that can be used in production
3. Opportunity cost?
4. Economic way of thinking uses? Making choices at the margin
5. The economic concept “How much’?
6. What are the four principles of individual choice?
7. Equilibrium exists when? No individual has an incentive to change his or her
behaviour
8. Economists use the term equilibrium to describe? When no individual Ould be
better off taking a different action or when no individual has an incentive to change
his or her behaviour.
9. An economy is efficient when? All opportunities to make some people better off
without making other people worse off have been taken.
10. Market failure may occur because? Individual actions have side effects that are
not properly taken into account by the market.
11. A trade off includes? Weighing the costs and the benefits.
12. Markets usually lead to efficiency? True
13. If two variables are positively related, on a graph they will be represented by?
A line or curve that slopes upward.
14. If two variable are negatively related, they will always be represented by? A
line or curve that slopes downward.
15. The ratio of the change in the variable on the vertical axis to the change in the
variable on the horizontal axis measure between 2 points on the curve? Slope
16. Law of demand? If price increases, demand decreases vice versa.
I. Example: consumers buy more personal computers because prices have fallen.
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Wednesday, October 25, 2017
17. A good is normal if? When income increases, demand increases.
18. An inferior good is? A good for which an increase in buyers’ income causes a
decrease in demand.
19. The primary difference between a change in supply and a change in quantity
supplied is that? A change in quantity supplied is a movement along the supply
curve, while a change in supply is a shift in the supply curve.
20. What always results in an increase in price and quantity? An increase in
demand with no change in supply.
21. An increase in demand and a decrease in supply will lead to _______ in
equilibrium quantity and _______ in equilibrium price. An intermediate change;
an increase.
22. Equilibrium quantity will fall when? Supply shifts to the left and demand stays the
same.
23. What will result if an increased price of a product occurs? A shift to the right of
the demand curve.
24. What is a substitute? If the price of good X increases the demand for good Y will
increase also.
25. Complements in production?
II. Example: When a farmer produces more corn, he notices that he has more corn
stalks to sell as decorations.
26. The price of elasticity of demand measures? Responsiveness to the quantity
demanded to a change in the price.
27. Inelasticity? Inelasticity occurs when the price elasticity is lower than 1.
28. On a linear demand curve, what is the elasticity when prices are high? Elastic
29. If a good has an inelastic demand, then which is not likely to be a
characteristic of this good? Name the characteristics of the good? There are
many substitutes of the good; The good is a necessity, Consumers spend a small
percentage of their income on the good, consumers do not have much time to adjust
to market changes.
30. An important determination of the price elasticity of demand is the? Availability
of substitutes.
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Document Summary

If price increases, demand decreases vice versa: example: consumers buy more personal computers because prices have fallen. An increase in demand with no change in supply: an increase in demand and a decrease in supply will lead to _______ in equilibrium quantity and _______ in equilibrium price. Goods whose quantity demanded decreases when consumer income rises or vice versa. The additional utility that a person revives from consuming an additional unit of a good or service. Is the quantity that generates the highest possible total pro t (where the mc & mb curve intersect on the x axis). Analyzes the additional bene ts of an activity compared to the additional costs incurred by that same activity. Also known as the 6 common mistakes in economic decision making. Irrationality is one whom chooses an option that leaves him or her worse off than choosing another option available. Being overcon dent: having unrealistic expectations about future behaviour.

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