Economics Quiz 1 Answers – Flashcards

For economists, the word "utility" means: a. versatility and flexibility. b. rationality. c. pleasure or satisfaction. d. purposefulness.

According to economists, economic self-interest: a. is a reality that underlies economic behavior. b. has the same meaning as selfishness. c. means that people never make wrong decisions. d. is usually self-defeating.

The economic perspective entails: a. irrational behavior by individuals and institutions. b. a comparison of marginal benefits and marginal costs in decision making. c. short-term but not long-term thinking. d. rejection of the scientific method.

Economics involves marginal analysis because: a. most decisions involve changes from the present situation. b. marginal benefits always exceed marginal costs. c. marginal costs always exceed marginal benefits. d. much economic behavior is irrational.

The assertion that "there is no free lunch" means that: a. there are always trade-offs between economic goals. b. all production involves the use of scarce resources and thus the sacrifice of alternative goods. c. marginal analysis is used in economic reasoning. d. choices need not be made if behavior is rational.

The Latin term "ceteris paribus" means: a. that if event A precedes event B, A has caused B. b. that economics deals with facts, not values. c. other things equal. d. prosperity inevitably follows recession.

Kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from day to day. For a couple of weeks she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the scientific method to better understand ice cream buying habits, her next step is to: a. conclude definitively that people buy more ice cream when the temperature rises. b. state her findings as a well-tested economic principle. c. use the observed data to form a hypothesis about ice cream buying behavior. d. throw out the data if it does not show a perfect relationship between buying habits and the other information she has collected.

Suppose that an economy is producing on its production possibilities curve but is not producing quantities of each good where the marginal benefit equals the marginal cost for each good. This economy: a. should not change its production because it cannot improve its allocation by shifting resources. b. can improve its allocation by lowering the unemployment rate. c. can improve its allocation by producing more of one good and less of the other. d. can improve its allocation by producing more of both goods.

The optimal allocation of resources is found: a. where MB = MC. b. at every point along a production possibilities curve. c. where the marginal benefit is at its greatest. d. where the marginal cost is at its lowest.

Other things equal, which of the following would shift an economy's production possibilities curve to the left? a. The discovery of a low-cost means of generating and storing solar energy. b. The entrance of more women into the labor force. c. A law requiring mandatory retirement from the labor force at age 55 d. An increase in the proportion of total output that consists of capital or investment goods.