Chapter 1 and 2 review for quiz – Flashcards
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1) By definition, economics is the study of A) how to make money in the stock market. B) how to make money in a market economy. C) the choices people make to attain their goals, given their scarce resources. D) supply and demand.
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C
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2) Microeconomics is the study of A) how households and firms make choices. B) the economy as a whole. C) the global economy. D) topics such as unemployment, inflation, and economic growth
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A
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3) Scarcity can best be defined as a situation in which A) there are no buyers willing to purchase what sellers have produced. B) there are not enough goods to satisfy all of the buyers' demand. C) the resources we use to produce goods and services are limited. D) there is more than enough money to satisfy consumers' wants.
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C
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4) Economists assume that individuals A) behave in unpredictable ways. B) will never take actions to help others. C) prefer to live in a society that values fairness above all else. D) are rational and respond to incentives.
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D
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5) Economists reason that the optimal decision is to continue any activity up to the point where the A) marginal benefit is zero. B) marginal benefit is greater than the marginal cost. C) marginal cost is zero. D) marginal benefit equals the marginal cost.
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D
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6) The three fundamental questions that any economy must address are: A) What will be the prices of goods and services; how will these goods and services be produced; and who will receive them? B) What goods and services to produce; how will these goods and services be produced; and who receives them? C) Who gets jobs; what wages do workers earn; and who owns what property? D) How much will be saved; what will be produced; and how can these goods and services be fairly distributed?
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B
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7) The highest valued alternative that must be given up to engage in an activity is the definition of A) economic equity B) marginal benefit C) opportunity cost D) marginal cost
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C
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8) The decision about what goods and services will be produced made in a market economy is made by A) lawmakers in the government voting on what will be produced. B) workers deciding to produce only what the boss says must be produced. C) producers deciding what society wants most. D) consumers and firms choosing which goods and services E) consumers dictating to firms what they need most.
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D
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9) Which of the following is a positive economic statement? A) The standard of living in the United States should be higher. B) If the price of iPhones falls, a larger quantity of iPhones will be purchased. C) The government should revamp the health care system. D) The U.S. government should not have bailed out U.S. auto manufacturers.
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B
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10) In economics, the accumulated skills and training that workers have is known as A) human capital B) entrepreneurship C) physical capital D) innovation.
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A
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11) Which of the following is an example of an activity undertaken by an entrepreneur? A) designing your landscaping for your new home B) holding a position as the president of a liberal arts college C) running for the president of the United States D) starting your own pet sitting business
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D
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12) The machines workers have to work with are considered A) human capital B) physical capital C) entrepreneurship D) financial capital
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B
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13) If society decides it wants more of one good and all resources are fully utilized, then A) it is unable to do this unless technology advances. B) additional resource supplies will have to be found. C) it has to give up some of another good and incur some opportunity costs. D) more unemployment will occur.
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C
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14) The production possibilities frontier itself illustrates A) all goods that can be produced by an economy B) the combination of two goods or services that can be produced efficiently C) all goods and services that are desired but cannot D) all possible production of capital goods
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B
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15) Any production point outside the production possibilities frontier is A) unattainable. B) associated with unused resources. C) attainable only if prices fall. D) attainable only if prices rise.
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A
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16) Any point on a production possibilities frontier (PPF) itself is A) production efficient B) unattainable C) inefficient D) equitable.
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A
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17) A situation in which some resources are NOT fully utilized is represented in a production possibilities frontier diagram by A) any point on either the horizontal or the vertical axis. B) the midpoint of the production possibilities frontier. C) a point outside the production possibilities frontier. D) a point inside the production possibilities frontier.
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D
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18) Opportunity cost is best defined as A) the amount of money that an individual is willing to pay to purchase a good that means a great deal to that person. B) the amount of money lost by one individual in an exchange process so that another individual might gain. C) the highest-valued alternative that is forgone when choosing among various alternatives. D) a situation in which one individual cannot have an absolute advantage over another individual in the production of all goods.
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C
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19) Opportunity cost is illustrated in a production possibilities frontier (PPF) by a movement A) from the region within the PPF to a point on the PPF. B) from the region within the PPF to the region outside of the PPF. C) from the region outside of the PPF to a point on the PPF. D) along the PPF where to gain more of one good it is necessary to give some of another good.
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D
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20) Marginal cost is the opportunity cost A) that your activity imposes on someone else. B) that arises from producing one more unit of a good or service. C) of a good or service that exceeds its benefit. D) of a good or service divided by the number of units produced.
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B
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21) In the figure above, the marginal cost of the second computer is A) 2 television sets per computer. B) 3 television sets per computer. C) 5 television sets per computer. D) 30 television sets per computer.
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B
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22) In the figure above, the marginal cost of the fifth computer is A) 0 television sets per computer. B) 4 television sets per computer. C) 20 television sets per computer. D) 35 television sets per computer.
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C
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23) The marginal benefit of a good or service A) increases as more is consumed. B) decreases as more is consumed C) remains constant as more is consumed. D) decreases as less is consumed
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B
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24) Resource use is allocatively efficient if the A) total cost of what the resource produces is less than the total benefit of what is produced. B) total cost of what the resource produces is equal to the total benefit of what is produced. C) marginal benefit of what the resource produces has diminished to zero. D) marginal cost of what the resource produces is equal to the marginal benefit of what is produced.
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D
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25) Economic growth A) leads to less consumption in the present and increased consumption in the future. B) is free. C) is the major reason we face scarcity. D) allows us to increase our consumption in the present and in the future.
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D
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26) Because of the existence of comparative advantage, the total output of goods is higher when each producer A) produces many different goods. B) produces at the midpoint of its PPF. C) specializes in the production of one good or a few goods. D) makes both intermediate and final goods.
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C
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27) A person has a comparative advantage in producing a particular good if that person A) has higher productivity in producing it than anyone else has. B) can produce it at lower opportunity cost than anyone else can. C) has less desire to consume that good than anyone else has. D) has more human capital related to that good than anyone else has.
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B
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28) Country A can produce 1 cello by giving up the production of 5 guitars. Country B can produce 1 guitar by giving up the production of 4 cellos. In which good does country A have a comparative advantage? A) guitars B) cellos C) both goods D) neither good
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A
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29) A country that has an absolute advantage in producing all goods will ________. A) have a comparative advantage in some goods but not all B) produce all goods at lowest opportunity cost C) have a comparative advantage in all goods D) not gain from specialization and trade
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A
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30) By specialization and trade, two individuals can A) produce and consume at a point beyond their individual production possibilities frontiers. B) increase their comparative advantage. C) increase their absolute advantage. D) shift their individual production possibilities frontiers outward.
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A
