Chapter 1 Economics Test Questions – Flashcards
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Economists assert that our needs are fairly limited even though
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our wants are unlimited.
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True or False... We live with unlimited wants in a world of limited resources.
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True
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What is measured along the vertical axis of a graph depicting a production possibilities curve?
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The quantity of one good produced in the economy.
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What role does rational self-interest play in economic analysis?
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It is assumed that individuals act as if they are motivated by self-interest and respond predictably to opportunities for gain.
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Economic growth can be depicted as
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an outward shift of the production possibilities curve.
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The production possibilities curve shows the maximum combination of two outputs, given
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a fixed amount of resources.
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If you intentionally did something to make yourself worse off, you would be violating the
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rationality assumption
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Things of value that are used to produce other things to satisfy wants are called
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resources
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You incur an opportunity cost
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whenever you make a choice.
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True or False... Eliminating poverty will eliminate scarcity.
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False
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Economists assume that
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individuals are rational and respond predictably to incentives.
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True or False... Opportunity cost arises from scarcity.
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True
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When you make a choice to do something, the opportunity cost you incur is
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the best alternative forgone.
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For any choice, the cost is always
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a forgone opportunity.
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A trade-off is
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the sacrifice of one good or service to purchase or produce more of another.
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Economics is
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the study of how limited resources are allocated to satisfy unlimited wants.
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Are Opportunity cost and scarcity naturally linked?
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Yes
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True or False... Economists believe that people are motivated only by money.
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False
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In looking at the choices you make in your life, an economist would assume that
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they all were made in accordance with what you believed to be in your best interest at the time.
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What is the relationship between wants and resources?
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Resources are used to produce things that satisfy people's wants.
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Economics is the study of how
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people make choices.
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A friend recommends a movie and you go see it, expecting that you will like it. However, you think it is the worst movie you have seen in years, and wish you hadn't wasted your time and money on it. This situation
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is consistent with rational behavior, because you had thought that you were going to like the movie.
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True or False... The goal of economics is to eliminate scarcity.
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False
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What does each point on the production possibilities curve indicate?
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The combination of two outputs a society can produce by using all of its resources.
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Economic growth is an increase in
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the production possibilities of a nation.
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Economists assume that
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people are motivated by rational self-interest.
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True or False... Because scarcity exists, choices must be made.
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True
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The assumption of rational self-interest implies that
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business owners will make choices that are in their own best interest.
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Are wants unlimited?
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Yes
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The focus of economic theory is to study how people
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allocate limited resources in order to satisfy unlimited wants.
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The science of economics attempts to explain
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how individuals make choices so as to satisfy their unlimited wants with limited resources.
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True or False... While wants are unlimited, needs are relatively few.
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True
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Which of the following is not an example of behavior that exhibits self interest? -All are examples of self-interest behavior as used by economists. -A mother quits a job she likes to take care of her new baby. -A man lights up a cigarette. -Albert Schweitzer gave up both an academic career and a musical career to be a missionary in Africa.
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All are examples of self-interest behavior as used by economists.
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Any action serves self-interest if the person has some reason for the action. Is this a true statement about self-interest used in economics?
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Yes
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The rationality assumption used in economics
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asserts that people respond to incentives.
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Economists use the concept of scarcity to describe the fact that
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there are not enough resources to satisfy all possible wants.
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What is shown in a rightward shift of the production possibilities curve?
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Economic growth has occurred.
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True or False... Economic growth will eliminate scarcity.
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False
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What is measured along the horizontal axis of a graph depicting a production possibilities curve?
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The amount of a good produced.
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True or False... The slope of the production possibilities curve reflects the choices society faces in deciding how to allocate resources between alternative uses.
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True
