ECON 2106 Optional Quiz 1 – Flashcards
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True
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Scarcity forces us to choose, and choices are costly because we must give up other opportunities that we value Question 1 options: True False
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True
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Microeconomics explores the allocation of scarce resources from the perspective of small economic units such as consumers and firms. Question 2 options: True False
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False
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Since it is possible to grow coffee in the United States, we should clearly create a U.S. coffee industry and no longer import coffee from Brazil. Question 3 options: False True
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False
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The market mechanism assures full employment and stable prices Question 4 options: False True
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False
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An increase in population, ceteris paribus, will raise the standard of living. Question 5 options: False True
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True
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The production possibilities curve marks the boundary between attainable and unattainable combinations of output. Question 6 options: True False
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False
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Any output combination outside the production possibilities curve is attainable in the current period only if prices decrease. Question 7 options: False True
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Scarcity
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Which of the following forces us to choose among alternatives? Question 8 options: Value Scarcity Rarity Market mechanism
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wants that exceed the resources necessary to provide them.
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Scarcity is the result of: Question 9 options: government decision making. inappropriate normative judgments. positive economics. wants that exceed the resources necessary to provide them.
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how limited resources are allocated to satisfy unlimited wants.
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Economics is primarily the study of: Question 10 options: human greed. how firms compete for profits in the marketplace. how limited resources are allocated to satisfy unlimited wants. how successful investors make money in the stock market.
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how choices are made because of scarcity.
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Economics is primarily the study of: Question 11 options: how choices are made because of scarcity. corporate balance sheets and income statements. how to operate a business. how to make money in the stock market.
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is a science concerned with reaching generalizations about human behavior, not unlike sociology or psychology.
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Economics: Question 12 options: is a natural science like biology and chemistry. is a science built on survey data and declared preferences (what people say they are going to do) not on revealed preferences (how people actually behave). is a science concerned with reaching generalizations about human behavior, not unlike sociology or psychology. is concerned with predicting business conditions in the future, not with the current state of the stock market.
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a study of supply and demand conditions in the market for orange juice
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Which of the following lies primarily within the realm of microeconomics? Question 13 options: an empirical analysis of the relationship between the growth of the money supply and the rate of inflation an economic model forecasting the impact of a tax increase on consumer spending and national output a study of supply and demand conditions in the market for orange juice a model forecasting the impact of a change in interest rates on the level of investment in the economy
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macroeconomics
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The branch of economics that focuses on outcomes in highly aggregated markets, such as the markets for labor or consumption goods, is called: Question 14 options: macroeconomics. positive economics. normative economics. microeconomics.
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microeconomics.
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The branch of economics that focuses on the conduct of affairs within narrowly defined units, such as households or business firms, is called: Question 15 options: macroeconomics. microeconomics. socioeconomics. applied economics.
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microeconomics
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The determination of prices in the market for automobiles is primarily a concern of: Question 16 options: positive economics. normative economics. microeconomics. macroeconomics.
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make decisions based on what they believe is best for themselves using available information.
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When economists assume that people act rationally, it means they: Question 17 options: make decisions based on complete and accurate information. make decisions that will not be regretted later on. make decisions based on what they believe is best for themselves using available information. make decisions based solely on what is best for society.
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motivated by self-interest.
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Most of economic analysis assumes that people's actions are: Question 18 options: motivated by submerged emotional needs. driven by magnetic forces generated by planetary movements. motivated primarily by concern for the well-being of others. motivated by self-interest.
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try to anticipate future consequences and seek to improve their own situations.
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When making decisions, economists believe that individuals act rationally if they: Question 19 options: seek to improve their own situations and not try to anticipate future consequences of their actions. only pursue the goals of the community. try to anticipate future consequences and seek to improve their own situations. always choose alternatives that offer the greatest financial reward.
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Values and information
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What according to an economist, forms the basis of rational human behavior under current and anticipated future circumstances? Question 20 options: Scarcity and rarity Opportunities and pay-offs Values and information Legal consequences
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economists cannot easily control all the variables that might influence human behavior.
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Economics is different from a "hard" science like physics because: Question 21 options: economists abstract from reality in creating their theories. economics is easier to study than physics. economists must explain their theories to policy makers who lack formal mathematical training. economists cannot easily control all the variables that might influence human behavior.
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do all of the above.
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Economists use theories to: Question 22 options: abstract from the complexities of the world. understand economic behavior. explain and help predict human behavior. do all of the above.
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its ability to explain and predict.
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The best test of an economic theory is: Question 23 options: the rigor of its mathematical formulation. its ability to explain and predict. the accuracy of its assumptions. the level of real-world detail it captures.
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holding other things constant.
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"Ceteris paribus" means: Question 24 options: if events A and B occur together, one must cause the other. all relevant details are included. what is true for the individual must be true for the whole. holding other things constant.
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If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods.
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Which of the following best illustrates the fallacy of composition? Question 25 options: If Mr. Smith had more money, he could buy more scarce goods; if the Adams family had more money, it could buy additional goods. If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods. If other variables are not held constant, economists may not observe the relationship between price and quantity demanded that is expected. Aggregate consumption may not behave in the same manner as the consumption of a particular individual.
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I hate driving to work when the traffic is so heavy, so I decide to leave 30 minutes earlier than in the past. If everyone were to leave 30 minutes earlier for work, we'd all get to work faster.
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Which of the following best illustrates the fallacy of composition? Question 26 options: I hate driving to work when the traffic is so heavy, so I decide to leave 30 minutes earlier than in the past. If everyone were to leave 30 minutes earlier for work, we'd all get to work faster. A great many people have been immunized against polio because it can be such a devastating disease. As a result, I probably do not personally need to be immunized against polio. Whenever I attend a baseball game at the local stadium, the home team wins. Therefore, if I attend all of the team's local games, they will achieve a perfect winning record at home. The parking at Ohio State University is in short supply on the main campus. It would be better for more people to ride the bus to school.
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descriptive, making claims about how the world is.
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Positive statements are: Question 27 options: prescriptive, making claims about how the world ought to be. descriptive, making claims about how the world is. optimistic, putting the best possible interpretation on things. affirmative, justifying existing economic policy.
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a normative economic statement.
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"The government should levy higher taxes on the rich and use the additional revenues to provide better housing for the poor." This statement illustrates: Question 28 options: the fallacy of composition. the basic principle of economics. a normative economic statement. a positive economic statement.
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a normative economic statement.
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"The minimum wage should be increased so that low-income workers can afford to feed their families." This is an example of: Question 29 options: a positive economic statement. a negative economic statement. the fallacy of composition. a normative economic statement.
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do all of the above.
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Graphs are useful because of the way they: Question 30 options: facilitate interpretation and analysis of data. clarify interpretation and analysis of ideas. permit a person to more easily see relationships. do all of the above.
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a pie chart
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Which of the following graphs or charts must add up to one hundred percent? Question 31 options: a labor graph a pie chart a time-series graph a scatter diagram
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Each time I eat a chili dog and drink a beer before a game, my teams wins.
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Which of the following is most likely an example of correlation but not an example of causation? Question 34 options: In the U.S., more pizza is consumed on Super Bowl Sunday than any other day of the year. consumed The cost of advertising during the first half of the Super Bowl is greater than the cost of advertising in the second half. Each time I eat a chili dog and drink a beer before a game, my teams wins. Generally speaking winning football team tend to average more rushing yards than losing football teams.
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If I have more money, I will be better off; therefore if we all had more money, we all would be better off.
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Which of the following best illustrates the fallacy of composition? Question 35 options: If I have more money, I will be better off; therefore if we all had more money, we all would be better off. If I buy more gas each week, my gas consumption increases; therefore, if all gas consumers buy more gas each week, total gas consumption will increase. If I spend more time studying, I will learn more; therefore, if all students spend more time studying, they will learn more. If women's hemlines are higher this year, the Dow Jones Industrials average will fall.
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All of the above are positive statements.
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Which of the following is a positive statement? Question 37 options: Increased money supply growth will lead to a higher rate of inflation. There are more millionaires in Uganda than in the United States. People watch more TV during finals week than during the rest of the term. All of the above are positive statements.
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it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
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Scarcity implies that: Question 38 options: consumers are too poor to afford the goods and services available. at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. consumers would be willing to purchase the same quantity of a good at a higher price.
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will never be eradicated because humans develop new wants as productive capabilities improve.
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Scarcity: Question 39 options: is only a problem in communist countries. is a problem in both communist and socialist countries, but not in market economies. does not exist in wealthy countries. will never be eradicated because humans develop new wants as productive capabilities improve.
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the resource that organizes the other factors of production in order to produce goods and/or services.
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Entrepreneurship is: Question 40 options: human capital. another word for the financial capital that can be used to start a business. the resource that organizes the other factors of production in order to produce goods and/or services. another word for physical capital that is used to produce goods and services.
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are made from scarce resources and are subject to economic analysis.
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The similarity between all goods and services, whether tangible or intangible, is that they: Question 41 options: are not subject to economic analysis. require technical expertise. have no price tags. are made from scarce resources and are subject to economic analysis.
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the value of the best foregone alternative.
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"Opportunity cost" refers to: Question 42 options: the dollar price paid for a good. the value of the best foregone alternative. the finder's fee paid to a job placement agency for locating employment for workers. the membership fee paid to join a health club.
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comparing the additional benefit from an action to the additional cost.
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Marginal analysis involves: Question 43 options: comparing the total benefits of all actions to the total costs incurred as a result of those actions. abstract thinking, which is never actually utilized by consumers when making purchasing decisions. holding all other variables constant when isolating the relationship between two variables. comparing the additional benefit from an action to the additional cost.
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the expected marginal benefit of an additional course must exceed the expected marginal cost of the course.
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If a student enrolls in an additional course at the university, an economist would conclude that: Question 44 options: the total benefit that the student expects to receive as a result of completing her college degree exceeds the total cost of her college education. the student is not following the rule of rational choice. the student must not be involved in extracurricular campus activities. the expected marginal benefit of an additional course must exceed the expected marginal cost of the course.
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Druscilla will experience a net gain of $300 if she vacations in the south of France.
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The marginal cost of a vacation in the south of France is $4,500. The marginal benefit to Druscilla of a vacation in the south of France is $4,800. Question 47 options: Druscilla will lose $300 if she vacations in the south of France. Druscilla will experience a net gain of $300 if she vacations in the south of France. Druscilla will be worse off if she vacations in the south of France. Druscilla will enjoy a net gain of $4,800 if she vacations in the south of France.
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in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage.
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You lose $20 from your wallet and decide to miss an hour from work in order to search for it. To an economist, this means that: Question 48 options: you estimate the expected cost of searching for one hour to be greater than $20. you must earn more than $20 per hour. in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage. you are irrational, since it is always a waste of time to search for lost money.
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reduce the after-tax cost of raising children and therefore increase the birth rate.
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Several political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they parent. The economic way of thinking indicates that legislation of this type would: Question 49 options: make it more expensive for parents to provide for their children. reduce the value of children to their parents and therefore lead to a reduction in the birth rate. reduce the after-tax cost of raising children and therefore increase the birth rate. exert no impact on either the cost of raising children or the birth rate since parenting children is a non-economic activity.
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The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.
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Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes? Question 50 options: He has already made all the clothes he will need for a few years. The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career. Sergei just can't find the material he likes in the United States. Sergei has a comparative advantage in tailoring clothes.
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exceed
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The rule of rational choice is that in trying to make themselves better off, people alter their behavior if the expected marginal benefits to them from doing so ____ the expected marginal costs they will bear. Question 51 options: exceed. equal. are less than. Either a. or b.
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In terms of the rule of rational choice, zero levels of pollution would be far too costly in terms of what we would have to give up to achieve them.
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Which of the following is true? Question 52 options: The actual result of changing behavior following the rule of rational choice will always make people better off. The actual result of changing behavior following the rule of rational choice will never make people better off. In terms of the rule of rational choice, zero levels of pollution would be far too costly in terms of what we would have to give up to achieve them. The rule of rational choice implies that it is impossible to be too safe.
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all of the above
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Which of the following would be an example of market failure? Question 53 options: second hand cigarette smoke lack of funding for education underproduction of a good by a monopoly all of the above
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producers and consumers better coordinating their decisions through markets.
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A stable monetary environment will typically lead to Question 54 options: inflation. producers and consumers better coordinating their decisions through markets. independence of central banks. increased trade deficits and limited budgets deficits.
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fiscal policy.
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Government policies that use taxes and government spending in an attempt to stabilize the economy are known as Question 55 options: fluctuation policy. cyclical policy. monetary policy. fiscal policy.
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produces answers to a society's "what," "how," and "for whom" questions.
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A market system: Question 56 options: produces answers to a society's "what" and "who" questions, but not the "for whom" question. produces answers to a society's "what" and "for whom" questions, but not the "how" question. produces answers to a society's "how" and "for whom" questions, but not the "what" question. produces answers to a society's "what," "how," and "for whom" questions.
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have sufficient income and are willing to pay the price asked for those goods.
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In a market economy, the goods produced go to those who(m): Question 57 options: have sufficient income and are willing to pay the price asked for those goods. the government views as best suited for consumption. business firms choose to favor. desire the goods the least.
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flow of goods, services, and payments between households and firms.
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The circular flow of economic activity is a model of the: Question 58 options: flow of goods, services, and payments between households and firms. influence of government on business behavior. role of unions and government in the economy. interaction among taxes, prices, and profits.
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producing less of another good.
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When resources are used efficiently, you can produce more of one good, ceteris paribus, only by: Question 64 options: printing more money. charging a lower price for output. charging a higher price for output. producing less of another good.
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the maximization of output from available resources.
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An economist defines efficiency as: Question 66 options: the maximization of output from available resources. the maximization of revenue from available resources. the maximization of inputs using available resources. the creation of a surplus using available resources.
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the law of increasing opportunity cost.
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The concavity (bowed-out shape) of the production possibilities curve is the result of: Question 67 options: the law of demand. the law of supply. the law of increasing opportunity cost. complementarily in consumption.
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A straight-line production possibilities curve exhibits constant opportunity costs, whereas a bowed production possibilities curve does not.
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Which of the following distinguishes a "straight-line" production possibilities curve from one that is "bowed out"? Question 69 options: A straight-line production possibilities curve exhibits increasing opportunity costs, whereas a bowed production possibilities curve does not. A straight-line production possibilities curve exhibits decreasing opportunity costs, whereas a bowed production possibilities curve does not. A straight-line production possibilities curve exhibits constant opportunity costs, whereas a bowed production possibilities curve does not. A straight-line production possibilities curve is upward sloping, whereas a bowed production possibilities curve is not.
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remains the same.
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Ming-Na must write a political science term paper and prepare for an economics exam. The production possibilities curve between political science and economics preparation is a straight line. As time spent studying economics increases, the opportunity cost of studying for economics: Question 70 options: increases. remains the same. decreases. first increases then decreases.
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none of the above
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Which of the following would be likely to expand a production possibilities curve? Question 71 options: a decrease in unemployment a decrease in price levels an increase in price levels none of the above
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a straight line with a negative slope.
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If additional units of output could be produced at constant opportunity cost, the production possibilities curve would be: Question 72 options: bowed inward toward the origin. bowed outward away from the origin. positively sloped. a straight line with a negative slope.
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Prices and outputs of most goods and services are stable over time.
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Which of the following does not describe a pure market economy? Question 73 options: The choices of buyers and sellers determine the market prices of goods and services. Prices serve as signals to buyers and sellers. Prices and outputs of most goods and services are stable over time. Owners of resources in greater demand by others tend to have higher incomes.
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mechanisms that coordinate actions of buyers and sellers.
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When economists speak of markets, they primarily mean: Question 74 options: places where production of goods and services take place. those locations where stocks and bonds of corporations take place. mechanisms that coordinate actions of buyers and sellers. the trillions of dollars that change hands in the foreign exchange markets.
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labor
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Workers in the 1800s building railroads by hand was an example of a(n) ____ intensive form of production. Question 75 options: capital labor entrepreneurial working
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the production possibilities curve for Freeland will shift out more rapidly than that of Liberty Nation.
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Suppose Freeland produces few consumption goods and many investment goods while Liberty Nation produces few investment goods and many consumption goods. Other things equal, you would expect Question 76 options: per capita income to grow more rapidly in Liberty Nation. population to grow faster in Liberty Nation. the production possibilities curve for Freeland will shift out more rapidly than that of Liberty Nation. that if both countries started with identical production possibilities curves, in twenty years, people in Liberty Nation will be able to produce more consumer goods than people in Freeland.
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price
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Which of the following is NOT illustrated by a production possibility curve? Question 77 options: scarcity opportunity cost necessity for choice price
