Chapter 1&2 Quiz Answers – Flashcards
Unlock all answers in this set
Unlock answers
question
Scarcity can be eliminated if:
answer
people satisfy needs rather than wants. sufficient new resources were discovered. output of goods and services were increased. none of these.
question
Scarcity is a(n):
answer
subjective concept that human wants can never be satisfied.
question
The perpetual problem in economics is:
answer
our inability to satisfy everyone's wants with the available resources.
question
Which of the following is true of resources?
answer
Resources are inputs used to produce goods and services. Labor is the mental and physical capacity of workers to produce goods and services. Entrepreneurship organizes resources to produce goods and services. All of these are true.
question
Which one of the following is the most accurate definition of economics?
answer
Economics is the study of how society chooses to allocate scarce resources.
question
The central question in economics is how to:
answer
deal with the problem of scarcity.
question
The most fundamental concepts underlying the discipline of economics are:
answer
scarcity and choice.
question
The basic difference between macroeconomics and microeconomics is:
answer
microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.
question
Which of the following is a macroeconomics topic?
answer
The economy's annual growth rate.
question
A model is defined as a:
answer
simplified description of reality to understand and predict an economic event.
question
An economic model is useful only if it:
answer
yields accurate predictions.
question
An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, Ceteris paribus. The phrase "Ceteris paribus" means that:
answer
other relevant factors like consumer incomes must be held constant.
question
When building a model, an economist must:
answer
make simplifying assumptions.
question
To abstract from reality in an economic model means that:
answer
we include only a few of the essential aspects of reality.
question
When economists use the term Ceteris paribus, they are indicating that:
answer
all other variables except the ones specified are assumed to be constant.
question
The term Ceteris paribus means that:
answer
all other things remain unchanged.
question
Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has:
answer
confused association and causation.
question
If individuals who sit in the back of the classroom receive lower grades on average than the rest of the class, does that mean that sitting in the back of a classroom causes one to perform poorly on exams?
answer
Not necessarily. The reoccurrence of a certain relationship between two variables does not necessarily imply causation.
question
The statement, "Violent crime has decreased in the last five years," is:
answer
positive because it is testable.
question
Which one of the following is a positive economic statement?
answer
An increase in the minimum wage will reduce employment for teenagers.
question
What type of economic analysis is limited to testable, verifiable statements?
answer
Positive economics.
question
Which of the following is a normative statement?
answer
People would be better off if government expenditures were higher.
question
Which of the following is a normative economic statement?
answer
The inflation rate in the United States is too high.
question
Economists use ____ economic analysis to understand an individual market. They then use ____ economic analysis to guide future national economic policy.
answer
positive; normative
question
A direct relationship exists when:
answer
one variable increases and the other variable increases.
question
An upward-sloping line or curve is used to illustrate:
answer
a direct relationship.
question
A direct relationship is expressed graphically as a:
answer
positively sloped line or curve.
question
An inverse relationship exists when:
answer
one variable increases and the other variable decreases.
question
Which of the following pairs is the most likely to exhibit an inverse relationship?
answer
The price of a concert and the number of tickets people purchase.
question
When an inverse relationship is graphed, the resulting line or curve is:
answer
downward-sloping.
question
Measured between two points on a curve, the ratio of the change in the variable on the vertical axis to the change in the variable on the horizontal axis is the:
answer
slope.
question
Which of the following statements is correct?
answer
Slope is the ratio of the vertical change (the rise or fall) to the horizontal change (the run). A direct relationship is one in which two variables change in the same direction. An inverse relationship is one in which two variables change in opposite directions. An independent relationship is one in which two variables are unrelated. All of these.
question
Which of the following is used to illustrate an independent relationship between two variables?
answer
A horizontal or vertical line
question
In Exhibit 1A-1, as X increases along the horizontal axis, corresponding to points A-B on the line, the Y values increase. The relationship between the X and Y variables is:
answer
direct.
question
In Exhibit 1A-1, the slope of straight line AB is:
answer
positive.
question
In Exhibit 1A-1, the slope of straight line AB is:
answer
1/2.
question
As shown in Exhibit 1A-1, the slope of straight line AB:
answer
remains constant with changes in X.
question
Straight line AB in Exhibit 1A-3 shows that:
answer
increasing values for X reduces the value of Y. decreasing values for X increases the value of Y. there is an inverse relationship between X and Y. all of these.
question
As shown in Exhibit 1A-3, the slope of straight line AB:
answer
remains constant with changes in X.
question
In Exhibit 1A-3, the slope for straight line AB is:
answer
-1.
question
Straight line A-D in Exhibit 1A-4 shows that:
answer
increasing values for X do not affect the value of Y.
question
In a graphic relationship, shifts in a curve are caused by a change in:
answer
a factor not measured on the axes of the graph.
question
A change in a third variable not on either axis of a graph is illustrated with a:
answer
shift of a curve.
question
Exhibit 1A-9 represents a three-variable relationship. As the annual income of consumers falls from $50,000 (line A) to $30,000 (line B), the result is a:
answer
leftward shift in curve A to curve B.
question
Exhibit 1A-10 represents a three-variable relationship. As the annual income of consumers rises from $20,000 (line A) to $40,000 (line B), the result is a:
answer
rightward shift in curve A to curve B.
question
According to Exhibit 1A-7, the relationship between annual income and air-travel expenditures is:
answer
direct.
question
What is the slope of the line shown in Exhibit 1A-7?
answer
1/20.
question
Which of the following would cause a shift in the relationship shown in Exhibit 1A-7?
answer
A rise in the price of air travel.
question
Which of the following would cause a shift in the relationship shown in Exhibit 1A-8?
answer
A fall in household incomes.
question
Which of the following correctly lists the three fundamental economic questions?
answer
What to produce? How to produce? For whom to produce?
question
The opportunity cost of an action is:
answer
the value of the best opportunity that must be sacrificed in order to take the action.
question
Which of the following sayings best reflects the concept of opportunity cost?
answer
"There is no such thing as a free lunch."
question
On a production possibilities curve, the opportunity cost of good X, in terms of good Y, is represented by the:
answer
movement along the curve.
question
Which of the following statements is true?
answer
An opportunity cost is what must be given up in order to get something else.
question
Mikki decides to work five hours the night before her economics exam. She earns an extra $75, but her exam score is 10 points lower than it would have been had she stayed home and studied. Her opportunity cost is the:
answer
10 points she lost on her exam.
question
The opportunity cost of your college education is:
answer
d and e. your best alternative use of the money you spend for a college education. money you could have earned working instead of going to college.
question
The law of increasing costs indicates that the opportunity cost of producing a good:
answer
increases as more of the good is produced.
question
In Exhibit 2-1, according to the information, the opportunity cost of producing 3 units of capital is:
answer
6 units of consumption goods.
question
In Exhibit 2-1, the opportunity cost of producing the fourth unit of capital is:
answer
4 units of consumption goods.
question
The production possibilities in Exhibit 2-2 indicates that the opportunity cost of corn is:
answer
constant.
question
In Exhibit 2-2, the slope of the production possibilities curve indicates that the opportunity cost of:
answer
coffee is constant.
question
In Exhibit 2-2, the opportunity cost of coffee when moving from A to B is:
answer
2 million bushels of corn.
question
In Exhibit 2-2, the opportunity cost of coffee when moving from A to B is:
answer
the same as moving from B to C.
question
A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than:
answer
$20 per pound.
question
In economics, the term marginal refers to:
answer
the change or difference from a current situation.
question
When deciding whether to buy a second car, marginal analysis indicates that the purchaser should compare the:
answer
additional benefits of the second car with the additional cost of the second car.
question
According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study:
answer
outweighs the extra cost.
question
If an economy is operating at a point inside the production possibilities curve,
answer
its resources are not being used efficiently.
question
Which of the following most accurately indicates the implications of an economy's production possibilities curve?
answer
If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
question
Which of the following is true of the production possibilities curve?
answer
It assumes a fixed level of technology. It assumes resources are fixed. It assumes resources are fully employed. All of these are correct.
question
After the terrorist attacks on September 11, 2001, the United States began devoting substantial resources toward the War on Terrorism, homeland security, and relief efforts. As long as our resources were being used efficiently, the production possibilities curve would suggest that:
answer
we will have to give up the production of other goods that could have been produced with these resources.
question
A point outside the production possibilities curve represents a combination of goods that is:
answer
unattainable.
question
Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?
answer
a decrease in the stock of physical capital
question
In Europe during the 14th century, the Black Plague killed 24 million people or close to 37 percent of the population. How would this affect the production possibilities curves for the countries of Europe at that time?
answer
The production possibilities curves for these countries would have shifted inward.
question
Which of the following would be least likely to cause the production possibilities curve to shift outward?
answer
a shift in consumer preferences that causes expansion in the output of one product and a decline in output of other products.
question
Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a(n):
answer
outward shift of the curve.
question
The production possibilities curve shows that:
answer
some of one good must be given up to get more of another good in an economy that is operating efficiently.
question
Any point on the production possibilities curve illustrates:
answer
maximum production combinations.
question
Production possibilities curve analysis includes the idea of:
answer
opportunity cost. scarcity. maximum production choices. all of these.
question
An efficient economy:
answer
uses available resources fully. uses the best division of labor. produces an output combination at some point along the production possibility curve. all of these.
question
A production possibility graph slopes down because of:
answer
nonhomogeneous resources.
question
The production possibility curve is bowed outward from the origin because of:
answer
the law of increasing opportunity costs.
question
According to the data given in Exhibit 2-3, the production of 1 unit of capital goods and 14 units of consumer goods:
answer
is possible but would be inefficient. may be a result of unemployment. may be a result of unused natural resources. all of these.
question
In Exhibit 2-5, movement between which of the following points represents an increase in economic efficiency?
answer
C to D.
question
For the economy shown in Exhibit 2-7, which of the following is true when the economy is at point A?
answer
Some car production must be forgone in order to produce more grain in the same period.
question
For the economy shown in Exhibit 2-7 to operate at point C, it must:
answer
experience an increase in its resources and/or an improvement in its technology.
question
In Exhibit 2-11, which of the following could have caused the production possibilities curve of an economy to shift from the one labeled A to the one labeled B?
answer
An advance in technology
question
In Exhibit 2-11, which of the following could have caused the production possibilities curve to shift from the one labeled B to the one labeled A?
answer
A major natural disaster.
question
In Exhibit 2-13, in terms of efficiency:
answer
point A is preferred to point D.
question
In Exhibit 2-13, the combination of goods given by point H could:
answer
not be achieved today.
question
In Exhibit 2-13, which of the following is not true regarding point H? Point H:
answer
could be achieved today if the economy only achieved full employment.
question
In Exhibit 2-15, if the economy moves from point L to point M, the opportunity cost of producing 10 more capital goods is:
answer
15 less consumer goods.
question
In Exhibit 2-15, if the economy produces no capital goods, what is the maximum number of consumer goods that can be produced?
answer
50
question
In Exhibit 2-15, the production possibilities curve demonstrates:
answer
changing technology.
question
In Exhibit 2-15, the economy will experience the most future economic growth if it chooses what point now?
answer
P.
question
Over time, an increase in a nation's stock of physical capital will:
answer
shift the production possibilities curve outward.
question
Which of the following would not lead to a shift in an economy's production possibilities curve?
answer
Change in the composition of current output.
question
Compare two economies A and B that start out with identical production possibilities curves. Economy A chooses an efficient point with 6 consumption goods and 3 capital goods, while economy B also chooses an efficient point, but with 4 consumption goods and 5 capital goods. In the future we can predict:
answer
economy B will grow faster than economy A.
question
An analysis of production possibilities curves indicates that the reason why underdeveloped nations have difficulties increasing their economic growth rates is because:
answer
they must cut back their already meager consumption levels to increase capital production.
