ECO2013 Ch. 1

Which expression is another way of saying “marginal benefit”?
Extra benefit

The economizing problem is essentially one of deciding how to make the best use of:
Limited resources to satisfy unlimited economic wants

Economists would classify all of the following as land except:
A hydroelectric dam

Which is not a factor of production?
Money

The observation that people compare the marginal benefits with the marginal costs in making such decisions as how to spend time, which products to buy, whether or not to work, and which goods to produce and sell, is most closely associated with:
The economic perspective

The role of an assumption in an economic theory is to:
Simplify the theory

The idea in economics that “there is no free lunch” means that:
There are opportunity costs involved when scarce resources are used up for free lunches.

Assume that a consumer has $12 in income and she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75.

If the consumer spent all of her money on either apples or bananas, how many apples or how many bananas would she be able to buy?

8 apples or 16 bananas

From an economic perspective, when a student decides to attend another year of college, the student has concluded that the marginal:
Benefits of attending college are greater than the marginal costs

Which of the following is considered to be an entrepreneur?
A self-employed person

Suppose that a consumer purchases just two goods, good X and good Y. The ratio of the price of good Y to good X is the:
Slope of the budget line

Assume that a consumer purchases only two products. Suppose that the consumer’s money income doubles, and the prices of the two products also double. These changes in income and prices will result in
No change in the budget line

In a graph of the marginal benefit (MB) and marginal cost (MC) of national defense goods, a rightward shift or increase in the MB curve will:
Increase the allocation of resources to national defense

A point to the left of a budget line is:
Attainable, but a point to the right is unattainable

The statement that “the unemployment rate will increase as the economy moves into a recession” is an example of:
A generalization

A U.S. senator states: “The minimum wage should be raised to give people a decent living wage.” This quote is an example of:
A normative economic statement

A schedule or curve that shows the various combinations of two products a consumer can purchase with a specific amount of money income is:
A budget line

Refer to the above table. A change from possibility B to C means that:
15 units of wheat are given up to get one more unit of steel

In every society, choices must be made because resources are:
Finite, but economic wants are insatiable

Refer to the above table. In moving stepwise from possibility A to B to C … to F, the cost of a unit of steel in terms of wheat:
Increases

When studying human behavior, economists assume rational self-interest. This means that:
People make decisions based on some desired results

A recurring theme in economics is that people:
Have unlimited economic wants, but limited resources

A point outside the production possibilities curve is:
Unattainable because of limited resources

Which would be a normative economic statement?
This administration needs to raise taxes to pay for childcare programs

On a production possibilities curve, the single optimal or best combination of output for any society:
Depends upon the preferences of society

Refer to the above table. In moving from possibility C to D, the opportunity cost of a unit of steel in terms of a unit of wheat is:
20

After graduating from high school, Ron Willis plans to go to college. The college tuition is $15,000 a year. Instead of going to college, Ron could take a full-time job that pays $20,000. If Ron decides to go to college, what is his opportunity cost of attending for one year?
$35,000

Which of the following is a factor of production?
Capital

Henry wants to buy a book. The economic perspective suggests that Henry will buy the book if:
The marginal benefit of the book is greater than its marginal cost

All of the following would affect the position of a country’s production possibilities curve, except:
The level of unemployment.

A basic assumption used in most economic theories is that:
All other things besides the focal factor remain constant

(The following economy produces two products.)

Picture

Refer to the above table. The marginal opportunity cost of the third unit of steel is:

20 units of wheat

Developing economic principles or explanations about how individuals behave or institutions act is referred to as:
Economic theory

Economic models do not reflect the full complexity of reality, but instead are based on:
Simplifications

Economists have difficulty applying the scientific method because:
Controlled laboratory experiments are impossible or often infeasible

From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the:
Marginal benefits of more insurance coverage are greater than the marginal costs

One major assumption of the economic perspective is:
That individuals’ behavior reflect rational self-interest

Which question is an example of a microeconomic question?
Will the merger of two airlines likely lead to higher airline ticket prices?

The concept of “rational behavior” suggests that:
Different people make different choices because their circumstances and information differ

The production possibilities curve bows outward from the origin because:
Opportunity costs increase as the production of a good increases

Which would be a positive economic statement?
Stock prices rose to a new record last month for the fourth month in a row

The opportunity cost of constructing a new public highway is the:
Value of other goods and services that must be sacrificed to construct the new highway

Money is not considered to be an economic resource because:
As such it is not productive

What is the economic meaning of the expression that “there is no such thing as a free lunch”?
It means that scarce resources are used up to provide freebies and giveaways

The production possibilities curve represents:
The maximum combinations of products that can be produced with fixed resources and technology

(The following economy produces two products.)

Picture

Refer to the above table. In moving from possibility C to D, the cost of a tank in terms of autos is:

200

Which question is an illustration of a macroeconomic question?
Is the level of employment in the economy sensitive to the quantity of consumer spending?

Tammie makes $150 a day as a bank clerk. She takes off two days off work without pay to fly to another city to attend the concert of her favorite music group. The cost of transportation for the trip is $250. The cost of the concert ticket is $50. The opportunity cost of Tammie’s attending the concert is:
$600

Which is an illustration of a microeconomic question?
Will a new type of television set increase the number of buyers?

The study of how a firm sets its prices in different regions of the nation would fall under:
Microeconomics

Assume that a consumer has $12 in income and she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75.

For this consumer, the opportunity cost of buying two bananas is

1 apple

(The following economy produces two products.)

Picture

Refer to the above table. The total opportunity cost of the three units of steel is:

45 units of wheat

The process of developing hypotheses, testing them against facts, and using the results to construct theories is called:
The scientific method

The opportunity cost to a consumer who smokes cigarettes is the:
Products that the consumer could have bought instead of cigarettes

The ceterisparibus assumption is employed in economic analysis to:
…Simplify the complex world

The purpose of the ceteris paribus assumption used in economic analysis is to:
… Focus on the effect of a single factor on a certain variable

Refer to the above graph. The marginal opportunity cost of the fourth unit of bread is:
…4 units of drill presses

Clara states that “there is a high correlation between the level of people’s education and the level of their income.” Ellie replies that the correlation occurs because “more education is the best way to earn more income in this country.”
… Clara’s statement is positive and Ellie’s statement is normative

(The following economy produces two products.)

Picture

Refer to the above table. The opportunity cost of each additional tank in terms of autos:

Increases as more tanks are produced

The economizing problem for society is:
Due to the fact that productive resources are scarce relative to economic wants

Which is considered a factor of production?
An auto plant.

Which one of the following would be a normative economic statement?
The worsening balance of trade must be corrected if this nation is to remain competitive in the world economy

Microeconomics focuses on:
The individual units that make up the economy

Which of the following is considered as an economic resource?
An auto plant

Assume that a consumer has $12 in income and she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75.

What is the slope of the budget line for apples and bananas if apples were graphed on the horizontal axis and bananas were graphed on the vertical axis?

-2.00

Which of the following is one of the four simplifying assumptions made in constructing the production possibilities model?
A) More than two products are produced
B) The economy is fully employed and is using least-cost methods of production

The individual who brings together economic resources and assumes the risk of business ventures in a capitalist economy is called the:
Entrepreneur

(The following economy produces two products.)

Picture

Refer to the above table. The total opportunity cost of the three units of tanks is:

350 units of autos

Which of the following is considered as an economic resource?
The land that are designated as national parks by the government

(The following economy produces two products.)

Refer to the above table. The marginal opportunity cost of the fourth unit of tanks is:

…A) 300
B) 650 (Wrong)
C) 200 (Try this)
D) 350WRONG

Another description for ceteris paribus is:
Other things equal

Opportunity cost is best defined as:
The value of the best forgone alternative

Which would not be considered as a capital resource by an economist?
A van used by a mother to transport the family around

The economizing problem for individuals is a consequence of the fact that:
A) Economic means or incomes are greater than economic wants WRONG
B) Normative economics is more important than positive economics
C) Positive economics is more important than normative economics
D) Economic wants are greater than economic means or incomes

When an economist says that there is “too much of a good thing,” the economist is suggesting that:
A) The marginal benefit of the thing is less than the marginal cost
B) Economic goals are complementary
C) Economic goals are conflicting
D) The marginal cost of the thing is less than the marginal benefit WRING

Which of the following is a normative economic statement?
A trade deficit of 20 billion dollars will harm the economy

Which question is an illustration of a microeconomic question?
Is the quantity of wine purchased in one year dependent upon the price of wine?

The statement in a newspaper that “consumer prices rose last month by 1 percent, and if this trend continues, the annual rate of inflation will be 12 percent for the year” is an example of:
A positive economic statement

Assume that a consumer purchases only two products and there is a decrease in the consumer’s income. The prices of the two products stay the same. The change in income will result in a:
Shift of the budget line inward to the left

Macroeconomics focuses on:
Total output and the general level of prices in the economy

As a consequence of the problem of scarcity:
Individuals have to make choices from among alternatives

Which is an illustration of a macroeconomic question?
A) Should the salaries of financial executives be regulated by the government?
C) Are increasing wage demands by workers contributing to price inflation?

When a state government chooses to build more roads, the required resources are no longer available for spending on public education. This dilemma illustrates the concept of:
Opportunity cost

Which question is an example of a macroeconomic question?
What policies would be recommended for stimulating national economic growth?

The role of the entrepreneur in society is to:
Bring the factors of production together and take the risks of producing

Assume that a consumer has $12 in income and she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75.

For this consumer, the opportunity cost of buying one more apple is

2 bananas

Refer to the above table. A change from combination C to B means that:
1 unit of steel is given up to get 15 more units of wheat

If the production possibilities curve is a straight line, then:
A) The society can produce more of both goods simultaneously WRONG
B) The opportunity cost of producing one good is zero
C) The society is capable of producing only one of the goods and not the other
D) The law of increasing opportunity costs does not apply

Assume that a consumer has $12 in income and she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75.

If the consumer decides to buy 4 apples, how many bananas can she also buy with the rest of her income?

8 bananas.

Which expression is another way of saying “marginal cost”?
Additional cost