ECN 2025 Lecture Notes - Lecture 1: Marginalism, Allocative Efficiency, Marginal Utility

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yellowcattle191

14 Jun 2017

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A situation in which unlimited wants exceed the limited resources availabe to fulfill those wants. The study of the choices people make to attain their goals, given their scarce resources. A simplified version of reality used to analyze real world economic situations. A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade. 3 key economic ideas: people are rational, people respond to economic incentives, optimal decisions are made at the margin. Analysis that involves comparing marginal benefits and marginal costs. The idea that because of scarcity, producing more of more than one good or service means producing less of another good or service. The highest valued alternative that must be given up to engage in an activity. 3 fundamental questions: what goods and services will be produced, how will the goods and services be produced, who will receive the goods and services produced.

Related Questions

1. The marginal product of labor is:

A. equal to the demand for labor.

B. the payment made to workers for their contribution to the output they produce.

C. the change in a firm's revenue as a result of hiring one more worker.

D. the additional output a firm produces as a result of hiring one more worker.

2. What does the phrase "internalizing an external cost" mean?

A. limiting the extent to which domestic firms can outsource production

B. prohibiting economic activities that create externalities

C. finding a way to address cross-border pollution

D. forcing producers to factor into their production costs the cost of the externalities created in the production of their output

3. The highest-valued alternative that must be given up to engage in an activity is the definition of

A. implicit cost

B. opportunity cost.

C. utility.

D. economic sacrifice.

4. What is market failure?

A. It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost.

B. It refers to a situation where an entire sector of the economy (for example, the airline industry) collapses because of some unforeseen event.

C. It refers to a breakdown in a market economy because of widespread corruption in government.

D. It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost.

5. Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If the last worker hired increases output by three units per hour, then to maximize profits the firm should

A. lay off some of its workers.

B. does not change the number of workers it currently hires.

C. hire additional workers.

D. There is not enough information to answer the question.

6. When the price of summer tank tops falls and you buy more of them because they are relatively less expensive, this is called

A. the deadweight loss effect.

B. the income effect.

C. the substitution effect.

D. the elasticity effect.

7. An externality is

A. a benefit realized by the purchaser of a good or service.

B. a benefit or cost experienced by someone who is not a producer or consumer of a good or service.

C. a cost paid for by the producer of a good or service.

D. anything that is external or not relevant to the production of a good or service.

8. Firms pay famous individuals to endorse their products because

A. apparently demand is affected not just by the number of people who use a product but also by the type of person that uses the product. '

B. famous people only consume high-quality products.

C. famous people obviously know what are the best goods and services.

D. the firms are irrational and are wasting advertising expenditures.

9. If a consumer receives 20 units of utility from consuming two candy bars, and 25 units of utility from consuming three candy bars, the marginal utility of the second candy bar is

A. 25 utility units.

B. 20 utility units.

C. 5 utility units.

D. unknown as more information is needed to determine the answer.

10. When there is a negative externality, the private cost of production ________ the social cost of production.

A. is less than

B. is greater than

C. eliminates

D. is equal to

pinkmink286

A bowed out PPF reflects which of the following ideas?

i.increasing opportunity cost

ii. resources are not equally productive in all activities

iii. prices of goods increase over time

		I only
		I and iii
		ii and iii
		I and ii

1 point

QUESTION 2

With no international trade, a country ________ consume at a point outside of its PPF; with international trade, a country ________ consume at a point outside of its PPF.

		can; cannot
		cannot; can
		cannot; cannot
		can; can

1 point

QUESTION 3

If the production possibilities frontier between two goods is a straight line, then the

		the line does not qualify as a production possibilities frontier because the unattainable production points are too close to the inefficient production points.
		opportunity cost is not a ratio.
		increasing opportunity costs.
		resources are equally productive in both goods.

1 point

QUESTION 4

As an economy produces more of one of the goods on a bowed out production possibilities frontier, what happens to the opportunity cost of producing the good?

		It might increase, decrease, or remain constant depending on how much people value the additional units of the good.
		It decreases.
		It increases.
		It remains constant.

1 point

QUESTION 5

"Comparative advantage" is defined as a situation in which one person can produce

		more of a good than another person.
		a good for a lower dollar cost than another person.
		a good for a lower opportunity cost than another person.
		more of all goods than another person.

1 point

QUESTION 6

When a production possibilities frontier is bowed outward, as more of one good is produced, its opportunity cost

		increases.
		decreases.
		might increase, decrease, or remain constant depending on how much people value the additional units of the good.
		remains constant.

1 point

QUESTION 7

A bowed out production possibility frontier shows that the

		opportunity cost relationship is linear.
		the opportunity cost of a good is constant as more of the good is produced.
		the opportunity cost of a good increase as more of the good is produced.
		the opportunity cost of a good decrease as more of the good is produced.

1 point

QUESTION 8

Which of the following statements is correct?

		The production possibilities frontier shows that there are no limits to production.
		Any point on or within the PPF is production efficient.
		If capital is idle, the economy is producing at its full potential.
		A tradeoff is a limit that forces an exchange or a substitution of one thing for something else.

1 point

QUESTION 9

A major earthquake occurs in the central part of the United States. What impact would this have on the nation's production possibilities frontier and why?

		A tradeoff would occur to replace the resources and goods destroyed.
		It would shift inward because some of the nation's resources, such as capital and labor, would be destroyed.
		It would shift outward because unemployment would be reduced.
		Nothing would happen because the nation would still have the same capabilities.

1 point

QUESTION 10

When a nation is producing on its production possibilities frontier, if more resources are used to produce one good, then the production of other goods

		must increase.
		must decrease.
		must remain the same.
		must change but they might increase or decrease.

1 point

QUESTION 11

Moving along a country's PPF, a reasonable opportunity costs increase is that

		unemployment increases as a country produce more and more of one good.
		unemployment decreases as a country produces more and more of one good.
		some resources are better suited for producing one good rather than the other.
		technology declines as a country produce more and more of one good.

1 point

QUESTION 12

A reason the production possibilities frontier exists is

		scarcity of resources and unlimited technology.
		unemployment.
		scarcity of resources.
		unlimited resources and technology.

1 point

QUESTION 13

Moving from one point to another on a production possibilities frontier implies

		increasing the production of one good and decreasing the production of another.
		increasing the production of both goods.
		decreasing the production of both goods.
		holding the production levels of both goods constant.

1 point

QUESTION 14

Specialization and trade make a country better off because with trade the country can consume at a point

		outside its production possibilities frontier.
		on its trading partner's production possibilities frontier.
		inside its production possibilities frontier.
		on its production possibilities frontier.

1 point

QUESTION 15

The production possibilities frontier is the

		the boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced when technology is changing.
		the minimum output that can be produced when resources are used inefficiently.
		the boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and the state of technology.
		maximum output that can be produced at an opportunity cost of zero.

1 point

QUESTION 16

The opportunity cost of economic growth is ________ and the benefit of economic growth is ________.

		decreased current consumption; decreased future consumption
		decreased current consumption; increased future consumption
		increased current consumption; increased future consumption
		increased current consumption; decreased future consumption

1 point

QUESTION 17

In terms of a nation's production possibilities frontier, what impact does international trade have?

		International trade shifts the nation's production possibilities frontier outward.
		International trade shifts the production possibilities frontier outward for the goods that are exported and inward for the goods that are imported.
		International trade shifts the nation's production possibilities frontier inward.
		International trade allows the nation to consume at a point outside its production possibilities frontier.

1 point

QUESTION 18

The production possibilities frontier illustrates the

		goods and services that people want.
		limits to people's wants.
		resources the economy possesses, but not it is the level of technology.
		maximum combinations of goods and services that can be produced.

1 point

QUESTION 19

As we move along the production possibilities frontier,

		the possibilities of tradeoffs diminish.
		the production of one good increases as the production of the other good decreases.
		more of both goods can be produced.
		a tradeoff is not possible because nations need all goods.

1 point

QUESTION 20

What is the opportunity cost of economic growth?

		Eliminate scarcity
		Land.
		Capital goods.
		Consumption of goods.

1 point

QUESTION 21

Which of the following statements is correct?

i.As the economy grows, the opportunity costs of economic growth decrease.

ii. Economic growth has no opportunity cost.

iii. The opportunity cost of economic growth is current consumption forgone.

		ii only
		iii only
		I only
		I and iii

1 point

QUESTION 22

Does economic growth depend upon which of the following?

i. Increasing the quantity of labor.

ii. Lowering the prices of goods and services.

iii. Advancing technology.

		ii only.
		I only.
		I and iii.
		iii only.

1 point

QUESTION 23

When drawing a production possibilities frontier, which of the following is held constant?

		the amount of money in the economy
		the prices of goods and services
		the quantity of the goods and services that are produced
		the available factors of production and the state of technology

1 point

QUESTION 24

To increase its economic growth, a nation should

		encourage spending on goods and services.
		increase in current consumption.
		encourage education because that increases the quality of labor.
		limit the number of people in college because they produce nothing.

1 point

QUESTION 25

The opportunity cost of one more slice of pizza in terms of sodas is the

		some pizza slices we have to give up to get one extra soda.
		the total number of sodas that we have divided by the total number of pizza slices that we have.
		the total number of pizza slices that we have divided by the total number of sodas that we have.
		the number of sodas we have to give up to get one extra pizza slice.

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ECN 2025 Lecture Notes - Lecture 1: Marginalism, Allocative Efficiency, Marginal Utility

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