Flashcard Answers on Chapter 1 – Flashcard
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1) When an economist talks of scarcity, the economist is referring to the A) inability of society to satisfy all human wants because of limited resources. B) ability of society to continually make technological breakthroughs and increase production. C) ability of society to employ all of its resources. D) ability of society to consume all that it produces.
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A
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2) Economics is best defined as A) controlling a budget for a household. B) how people make money and profits in the stock market. C) making choices with unlimited wants but facing a scarcity of resources. D) making choices from an unlimited supply of goods and services.
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C
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3) Macroeconomics differs from microeconomics in that: A) macroeconomics studies the decisions of individuals. B) macroeconomics focuses on the national economy and the global economy. C) macroeconomics studies the behavior of government while mi
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B
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4) Economics can be defined as the social science that explains the ________. A) choices we make when we trade in markets B) choices that we make as we cope with scarcity C) choices made by households D) choices made by politicians
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B
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5) The study of the choices made by individuals is part of the definition of A) positive economics. B) microeconomics. C) macroeconomics. D) normative economics.
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B
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6) Which of the following is a microeconomic topic? A) The effect of the government budget deficit on inflation. B) The reasons for a decline in average prices. C) The reasons why Kathy buys less orange juice. D) The reasons why total employment decreases.
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C
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7) The problem of "scarcity" applies A) only in underdeveloped countries because there are few productive resources in these countries. B) to all economic systems, regardless of their level of development. C) only in industrially developed countries because resources are scarce in these countries. D) only in economic systems that are just beginning to develop because specialized resources are scarce.
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B
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8) Which of the following is a microeconomic topic? A) Comparing inflation rates across countries. B) How a trade agreement between the United States and Mexico affects both nations' unemployment rates. C) How a tax rate increase will impact total production. D) How rent ceilings impact the supply of apartments. 9) Economics is best defined as the science of choice and how people cope with A) scarcity. B) different economic systems. C) differences in needs. D) differences in wants.
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D
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9) Economics is best defined as the science of choice and how people cope with A) scarcity. B) different economic systems. C) differences in needs. D) differences in wants.
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A
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10) Macroeconomic topics include A) studying what factors influence the price and quantity of automobiles. B) the impact of government regulation of markets. C) total, nationwide employment. D) studying the determination of wages and production costs in the software indust
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C
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11) In economics, the term "capital" refers to A) buildings and equipment. B) the money in one's pocket. C) mineral resources. D) consumer goods.
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A
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12) Which of the following is NOT a factor of production? A) the effort of farmers raising cattle B) the wages paid to workers C) the management skill of a small business owner D) the water used to cool a nuclear power plant
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B
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13) Which of the following statements is correct? A) The United States produces more goods than services. B) The percentage of people producing goods in the United States has steadily increased over the last 60 years. C) The United States produces more services than goods. D) The United States produces an equal amount of goods and services.
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C
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14) When an economy produces more houses and fewer typewriters, it is answering the ________ part of one of the two big economic questions. A) "how" B) "where" C) "what" D) "for whom"
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C
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15) A natural resource, such as fishing territories, is considered an example of A) land only. B) only capital. C) land, labor, capital and entrepreneurship. D) both land and labor.
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A
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16) According to Adam Smith, (for this answer see Chapter 1 "At Issue: The Protest Against Market Capitalism" on page 8) A) politicians are well-equipped to regulate corporations and intervene in markets to improve market outcomes. B) when big corporations pursue their self-interest of maximum profit, they will inevitably conflict with social interest. C) government intervention in markets is not desirable because an invisible hand leads decisions made in pursuit of self-interest to unintentionally promote the social interest. D) in a market transaction buyers can either get what they want for less than they would be willing to pay or sellers can earn a profit, but both buyers and sellers can't gain simultaneously.
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C
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17) Which of the following best defines capital as a factor of production? A) Financial assets used by businesses. B) Instruments, machines, and buildings used in production. C) The gifts of nature that businesses use to produce goods and services. D) The knowledge and skills that people obtain from education and use in production of goods and services. 18) The "gifts of nature" are included as part of which factor of production? A) land B) entrepreneurship C) capital D) labor
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B
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18) The "gifts of nature" are included as part of which factor of production? A) land B) entrepreneurship C) capital D) labor
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A
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19) When a country decides to produce fewer bombers and more public housing projects, it is answering the ________ part of one of the two big economic questions. A) "for whom" B) "how" C) "what" D) "defense"
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C
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20) Which of the following are considered factors of production used to produce goods and services? I. Land II. Labor III. Capital IV. Entrepreneurship A) I, II and III only B) I and III only C) I, II, III and IV D) I and II only
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C
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21) A cost due to an increase in activity is called A) an incentive loss. B) a negative marginal benefit C) the total cost. D) a marginal cost.
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D
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22) Opportunity cost means the A) highest-valued alternative forgone. B) monetary costs of an activity. C) accounting cost minus the marginal cost. D) accounting cost minus the marginal benefit.
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A
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23) Because we face scarcity, every choice involves A) giving up something for nothing. B) money. C) an opportunity cost. D) the question "what."
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C
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24) 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, ________. A) your marginal benefit from studying economics an hour must have been greater than its marginal cost B) your marginal cost of studying economics for an hour must have exceeded its marginal benefit C) the opportunity cost of studying economics must have risen. D) the marginal cost of studying economics must have fallen
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A
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25) When the government chooses to use resources to build a dam, these sources are no longer available to build a highway. This choice illustrates the concept of A) macroeconomics. B) a market mechanism. C) opportunity cost. D) a fallacy of composition.
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C
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26) You have the choice of going to Hawaii for a week, staying at work for the week, or spending the week skiing. If you decide to go to Hawaii, the opportunity cost is A) the value of working and skiing. B) working, because you would be giving up a week's pay. C) the value of working or skiing, depending on which you would have done rather than go to Hawaii. D) None of the above if you enjoy the time spent in Hawaii.
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C
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27) The opportunity cost of attending college includes the cost of A) tuition, books, and the lost wages for the hours spent studying. B) the highest valued alternative to attending college plus the cost of tuition. C) the highest valued alternative to attending college. D) the tuition but not the job at which you would otherwise have worked.
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B
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28) Suppose that the government of New York state promises to decrease taxes to a firm if it decides to stay in New York instead of moving to another state. This policy on the part of the state constitutes ________, to make the ________ of the firm remaining in New York. A) an incentive; marginal cost exceed the marginal benefit B) a command; marginal benefit exceed the marginal cost C) a command; marginal cost exceed the marginal benefit D) an incentive; marginal benefit exceed the marginal cost
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D
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29) The marginal benefit is the A) additional gain from one more unit of an activity minus the additional cost from one more unit of the activity. B) additional gain from one more unit of an activity. C) loss of the highest-valued alternative. D) additional cost from one more unit of an activity.
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B
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30) Making a choice at the margin means ________. A) letting someone else choose for you B) making a choice by comparing the total benefit and the total cost C) waiting until the last minute to make a choice D) deciding to do a little bit more or a little bit less of an activity
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D
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31) "Government should act to reduce poverty levels." A) This statement is a positive statement. B) This statement is an example of the fallacy of composition. C) This statement is a normative statement. D) This statement is an example of the post hoc fallacy.
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C
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32) Which of the following is a positive statement? A) The government should spend more on education. B) The government must provide health insurance so that the poor can obtain decent medical treatment. C) An increase in the price of pizza will lead fewer students to buy pizza. D) My favorite dinner is pizza and soda.
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C
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33) An economic model is A) a statement that describes how the world should be. B) a collection of facts that describe the real world. C) a description of some aspect of the economic world that includes only those features of the world that are needed for the purpose at hand. D) a generalization that summarizes all the normative assumptions we make about a particular issue.
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C
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34) Which of the following is NOT a normative statement? A) The distribution of income is fair. B) The government ought to provide health care to everyone. C) Corporations should be more socially responsible. D) People buy more of a good or service when its price falls.
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D
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35) The statement that ________ is a positive statement. A) too many people in the United States have no health care insurance B) more students should study economics C) the price of sugar in the United States is higher than the price in Australia D) the price of gasoline is too high
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C
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36) Which of the following is a normative statement? A) Consumers will buy more gasoline over the Christmas holiday even if the price of gas is 10 cents higher than it was during the Thanksgiving holiday. B) The current butter surplus is the result of federal policies. C) The government's cuts in welfare spending impose an unfair hardship on the poor. D) Next year's inflation rate will be under 4 percent.
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C
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37) Positive economic statements A) are related only to microeconomics. B) cannot be tested against the facts. C) prescribe what should be. D) can be tested against the facts.
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D
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38) Economic models A) include all relevant facts. B) simplify reality. C) always use graphs. D) are essentially different from those used in other sciences.
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B
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39) Which of the following is a normative statement? A) Owners of apartment buildings are free to charge whatever rent they want. B) Low rents are good because they make apartments more affordable. C) Low rents will restrict the supply of housing. D) Housing costs are rising.
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B
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40) An economic model includes A) only details considered essential. B) no use of marginal concepts. C) all known details in order to increase its accuracy. D) only normative statements.
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A
