Chapter 1 Concept Quiz – Flashcards
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Economics is the study of how people allocate their ______ resources to satisfy their nearly _______ wants. A. limited; limited B. limited; unlimited C. unlimited; unlimited D. unlimited; limited
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B. limited; unlimited The basic question economists seek to answer is how individuals and societies make decisions about scarce resources, given the fact that there are nearly unlimited wants.
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Opportunity cost is the ________ alternative that must be scarified in order to get something else. A. lowest-valued B. middle-valued C. highest-valued D. median-valued
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C. highest-valued No matter what choice you make, there is an opportunity cost, or next-best alternative option, that must be sacrificed. Every time we make a choice, we experience an opportunity cost. An example of an opportunity cost. An example of an opportunity cost is the income you give up when you choose to spend time in school that you could have spent working.
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Sam has two options this weekend. He could work at his job and earn $9/hour for three hours, or he could got o a show at the theater for that three hours. A ticket to the theater costs $30. What is the opportunity cost of going to the theater? A. $27 B. $57 C. $47 D. $90
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B. $57 The opportunity cost will contain both the price of the ticket ($30) and the lost wages (3 hours x $9/hours = $27). Therefore, the opportunity cost is $57.
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Scarcity refers to the _______ nature of society's resources. A. limited B. unlimited C. sometimes limited and sometimes unlimited D. destructive
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A. limited Even the most abundant physical resources, like the water we drink and the air we breathe, are finite. A cup of water or breath of air can only be put to one use, such as farming or washing, at a time. Scarcity refers to the limited nature of society's resources.
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Suppose that government officials want to increase the population, so they offer a $1,000 payment to the parents of each child born. Which of the five foundations of economics best describes the thinking of these government officials? A. opportunity cost B. incentives C. trade creates value D. marginal thinking
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B. incentives The government payment is an incentive. These government officials understand that by offering a payment for having a child, parents have an additional incentive to have children.
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Suppose that Marie is buying bananas. She decides that she would like to purchase three bananas at the price of $0.25/banana but not a fourth banana. Which of the five foundations of economics best describes Marie's thinking? A. opportunity cost B. incentives C. trade creates value D. marginal thinking
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D. marginal thinking Marie is thinking about the extra benefit and cost of purchasing each additional banana. This is what economists would describe as "thinking on the margin," or marginal thinking.
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Suppose there is a country where factory production creates a lot of the air pollution. What could be a possible trade-off if the country wanted to lower the levels of pollution? A. higher national income B. lower national income C. more factory jobs D. heavily polluted air
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B. lower national income To decrease pollution, the factories could cut production, which would lower income, The country might be able to change the production process to reduce pollution, which would likely come at a higher production cost, decreasing incomes
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Suppose your friend can obtain concert tickets for $100 but you can't get them for less than $300. Your friend sells the tickets to you for $200. Which of the five foundations of economics best describes this activity. A. opportunity cost B. incentives C. trade creates value D. marginal thinking
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C. trade creates value Your friend receives $200 for the ticket when the cost to him for the tickets was $100; so, he gains $100 in value. You would have paid $300 for the ticket, but you obtain the ticket for $200; so, you also gain $100 in value. This is an example of how trade creates value.
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The circular flow model shows how resources and final goods and services flow through the economy. There are two groups in the circular flow model. Which of the following make up the two groups? A. government and households B. government and firms C. households and firms D. households and the rest of the world
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C. households and firms There are two groups in the circular flow model, households and firms, that want to trade with each other. Households are consumers. Firms are businesses. Households want the goods and services produced by the firms, and firms want the resources owned by the households in order to make goods and provide services.
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The field of economics that studies the decisions of individuals and firms is called A. macroeconomics. B. macroeconomics and microeconomics, depending on the economists you ask. C. microeconomics. D. normative economics.
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C. microeconomics Microeconomics deals with the decisions on an individual level, such as how much a firm should price a certain product or the behavior of a particular market segment. Macroeconomics deals with aggregate economies, and studies economy-wide ideas, such as the unemployment rate.
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The opportunity cost of attending college is likely to be highest for a high school graduate A. who has access to student loans. B. whose family is extremely wealthy. C. who is very intelligent. D. who is capable of playing a well-paid professional sport.
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The opportunity cost of going to college is highest for the person who can make the most money without a college education. Opportunity cost is the highest-valued alternative that must be scarified in order to get something else, such as the scarified of having a full-time job or going to college full-time.
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What is the term for the voluntary exchange of goods and services between two or more parties? A. trade B. trade-offs C. specialization D. opportunity cost
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A. trade Trade is the voluntary exchange of goods and services between two or more parties.
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Which of the following is a type of incentive? A. scarce B. direct C. limited D. unconditional
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B. direct Incentives can be classified as positive or negative and direct or indirect. All incentives encourage action. Positive incentives are rewards for taking actions, while negative incentives are an unpleasant consequence to taking actions. Direct incentives are often easier to see than indirect incentives.
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Which of the following statements refers to a macroeconomic issue? A. John was recently hired at a new job and starts next week. B. H&M decided to open 50 new stores. C. The national unemployment rate is currently 7.7%. D. Sears and Kmart are closing stores nationwide.
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C. The national unemployment rate is currently 7.7%. The national unemployment rate is a statistic based on the number of unemployment workers in the United States and the total number of people in the U.S. labor force. This is a broad measure of employment, which is one of the major concerns of macroeconomics. Information about specific companies, even if they are large, does not give us a picture of the state of the macroeconomy because we do not know all the relevant information.
