Test Questions on Chapter 1 – Flashcard

Flashcard maker : Lily Taylor
In every economic system, choices must be made because resources are ________ and our wants are _____
limited; unlimited

2) The problem of “scarcity” applies
to all economic systems, regardless of their level of development

3) Economics is best defined as
making choices with unlimited wants but facing a scarcity of resources.

4) In part, microeconomics is concerned with
how a business firm decides upon the amount it produces and the price it sets.

5) Which of the following questions is a topic that would be studied by microeconomics?
How will a lower price of digital cameras affect the quantity of cameras sold?

6) Which of the following is a macroeconomic issue?
the effect of increasing the money supply on inflation

7) Factors of production include
land, labor, capital and entrepreneurship.

8) Factors of production include all of the following EXCEPT ________.

9) Overtime worked by a JCPenney associate is considered ________ and earns ________.
labor; wage

10) The term human capital refers to
persons knowledge and skills

11) Samantha goes to college to become an engineer. This is an example of an
investment in human capital

12) Because we face scarcity, every choice involves
an opportunity cost

On Saturday morning, you rank your choices for activities in the following order: go to the library,
work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the
library. Your opportunity cost is
work out at the gym

Today, Julie attended her 12:30 Economics class. If she hadn’t gone to class, Julie would have gone
out to lunch with friends. She had other options; she could have worked or slept in. Julie’s
opportunity cost of going to class is the
lunch with friends

15) Opportunity cost is best defined as
the highest-valued alternative that is given up to get something

John has two hours of free time this evening. He ranked his alternatives, first go to a concert,
second go to a movie, third study for an economics exam, and fourth answer his e-mail. What is
the opportunity cost of attending the concert for John?

17) A benefit from an increase in activity is called the
marginal benefit

18) If the marginal cost of an activity exceeds the marginal benefit, then
an alternative will be selected

19) Making a choice at the margin means
deciding to do a little bit more or a little bit less of an activity

Suppose that for the past two months, you have studied economics one hour a day. You now
decide to study economics two hours a day. For the past two months
your marginal benefit from studying economics an hour must have been greater than its
marginal cost

21) Which of the following is a positive statement?
Low rents decrease the amount of housing landlords make available for rent

22) The statement “Unemployment should be below 6 percent” is
a normative statemen

23) Which of the following is a normative statement?
The main reason why the United States has a trade deficit with China is because China’s trade
practices are unfair.

24) Microeconomics is the study of topics such as national production and unemployment.

true or false


The tools, instruments, machines, and buildings that people use to produce goods and services are
called human capital.

true or false


As long as the marginal benefit from a good is greater than its marginal cost, an economy is
operating efficiently.

true or false


50) Specialization and trade allow countries to consume beyond their PPFs

true or false


Suppose that the government is trying to decide between allocating its resources to build more
dams or to build more freeways. In terms of forgone dams, as more freeways are constructed, the
marginal benefit of additional freeways ________ and the marginal cost of additional freeways
decreases; increases

A country produces only pencils and erasers. Pencil production is allocatively efficient if the
marginal ________ of a pencil equals the marginal ________ of ________.
benefit; cost; pencil

Technological progress makes the production possibilities frontier
shift outward from origin

A person has a comparative advantage in producing a particular good if that person
can produce it at lower opportunity cost than anyone else can

Suppose that in an hour Joe can prepare 10 sandwiches or 5 pizzas. The opportunity cost of Joe
producing one sandwich is
1/2 pizza

Suppose Joe can prepare 20 sandwiches or 10 pizzas in an hour and Beth can produce 36
sandwiches or 27 pizzas. The concept of comparative advantage concludes that
Beth should produce pizza and Joe should produce sandwiches.

A person who has an absolute advantage in the production of all goods will
have a comparative advantage in the production of some goods but not in the production of

In one day, Brandon can either plow 10 acres or plant 20 acres. In one day, Christopher can either
plow 14 acres or plant 14 acres. Which of the following statements about comparative advantage is
Brandon has a comparative advantage only in planting

In one day, Brandon can either plow 10 acres or plant 20 acres. In one day, Christopher can either
plow 14 acres or plant 14 acres. Brandon and Christopher can
gain from exchange if Brandon specializes in planting and Christopher specializes in

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