Economics Grade Flashcards

If the unemployment rate falls below the natural rate of unemployment, economists typically expect:

Answer: Inflation due to upward wage pressure

When unemployment falls below the natural rate, labor markets tighten, giving workers bargaining power to demand higher wages, which can fuel inflation.

A musician spends $500 recording an album and sells 100 copies at $8 each. What is the musician's profit?

Answer: $300

Profit = total revenue minus total cost: (100 × $8) − $500 = $800 − $500 = $300.

The Federal Reserve raises interest rates. Which of the following is the most likely direct effect?

Answer: Borrowing becomes more expensive, slowing spending

Higher interest rates increase the cost of borrowing, which discourages consumer and business spending and slows economic activity.

Which factor of production refers to the natural resources used in producing goods?

Answer: Land

Land as a factor of production includes all natural resources — minerals, water, forests, and agricultural soil.

A store sells its last unit of a product for $15 more than it cost to produce. This $15 represents the store's:

Answer: Marginal profit

Marginal profit is the additional profit earned from selling one more unit, calculated as marginal revenue minus marginal cost.

Which scenario best illustrates specialization leading to greater efficiency?

Answer: Assembly-line workers each master one specific task

Specialization, as seen in assembly-line production, increases efficiency because workers become highly skilled at their specific task.

A city builds a new park that benefits all residents whether or not they contributed taxes. The park is best described as a:

Answer: Public good

A public good is non-excludable (no one can be prevented from using it) and non-rival (one person's use doesn't reduce availability to others).