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Economics is mostly concerned with

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studying how we allocate scarce resources to satisfy unlimited wants.

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Economic choices or tradeoffs are the result of

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scarcity

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Economics is conserned with

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the choices people must make because resources are scarce, human decision makers and the factors that influence their choices, the allocation of limited resources to satisfy virtually unlimited desires

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tWhich of the following is an example of market failure? sources are also known as

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factors of production

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Which of the following is not an example of a resource?

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The forest, the river, the tractor, and the chef are examples of resources. Resources=inputs used to produce goods and services

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Human capital is

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the expertise or knowledge possessed by workers.

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Which of the following is true?

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Poverty can be eliminated but scarcity can not

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which of the following true of a resource?

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they are inputs used to create goods and services

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an example of a capital resource is:

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a dump truck (it is a piece of equipment)

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Entrepreneurship is

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the resource that organizes the other factors of production in order to produce goods and/or services.

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Which of the following is an example of a an individual motivated by self interest:

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a student volunteering at a soup kitchen an attorney providing free legal service to low income families a young person volunteering for the Peace Corps a man buying a new Camaro

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Economists believe that individuals act as if they are motivated by self-interest and:

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respond in predictable ways to changing circumstances.

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From an economists' perspective, which of the following observations is not true?

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Self-interest is purely monetary in nature. *also emotional and personal satisfaction

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When economists refer to economic behavior, they mean that:

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rational people try to anticipate the likely consequences of their actions.

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What according to an economist, forms the basis of rational human behavior under current and anticipated future circumstances?

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Values and information

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"As a rational person, you would expect individuals to always avoid actions that are illegal."

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This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway.

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When economists speak of markets, they primarily mean:

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mechanisms that coordinate actions of buyers and sellers.

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Which of the following serve as the language of the market system?

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market prices

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Which of the following is an example of market failure?

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Overuse of highways that leads to traffic congestion Reduced levels of vaccinations which increase illness and disease Substantial foreclosures caused by sub-prime lending

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Market failure occurs when:

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the economy fails to allocate resources efficiently on its own.

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a hypothesis is

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a testable proposition

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a theory can be defined as

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a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work.

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The importance of the ceteris paribus assumption is that it:

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allows one to analyze the relationship between two variables apart from the influence of other variables.

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Economics is different from a "hard" science like physics because:

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economists cannot easily control all the variables that might influence human behavior.

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Macroeconomic topics do not usually include:

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the profit maximizing decisions of an individual manufacturer.

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Which of the following lies primarily within the realm of microeconomics?

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study of supply and demand for orange juice

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Which of the following best illustrates the fallacy of composition?

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If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods.

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Which of the following is a statement of positive economics?

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Tax rates ought to be reduced so that people will work more

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Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy?

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Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments.

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Which of the following is not an example of the use of the problem solving perspective provided by economics?

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The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember.

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Because of scarcity

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we must sacrifice valuable alternatives to obtain more goods and services we desire.

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Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is:

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the benefit to his grades from studying for an hour.

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The opportunity cost of an item is:

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the highest valued alternative you give up to get that item.

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The opportunity cost of going to college includes:

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both tuition and the value of the student's time.

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Opportunity cost includes:

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both monetary and non-monetary costs.

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Economists believe that in regards to criminal behavior:

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those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs.

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Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that:

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in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.

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Which of the following best defines rational behavior?

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undertaking activities whenever the marginal benefit exceeds the marginal cost

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If people are self-interested,

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as their preferences for leisure time increase, they are likely to work less. as the wages they are offered increase, they are likely to work more.

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Pollution damages the environment we live in. An economist would advise that we reduce air pollution:

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as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.

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In free market economics:

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most market exchanges will result in all parties winning.

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Effective free market ethical systems must provide for all of the following EXCEPT:

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a clearly defined moral foundation.

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Cost-benefit analysis can determine the optimal amount of all the following EXCEPT

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fairness of rules

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Which of the following does not specify positive ethical rules?

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Webster's Dictionary

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More efficient positive market ethics will generally help improve all of the following challenges EXCEPT:

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moral externalities of a market

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Ethics

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can be defined in any of the ways above. A. are moral rules or standards governing human conduct. B. is a branch of philosophy. C. the moral principles of an individual person. D. are rules or standards governing human conduct, but not necessarily moral rules.

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In order for a market's ethics to be effective, all of the following must occur, EXCEPT

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everyone must agree to take part in the market.

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Ethical rules based on morals or concepts of fairness are called

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normative ethics

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A market economy without any ethics would have:

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no value

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If we know someone pays all their taxes and gives money to charity, we know that

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only that they pay their taxes and give money to charity

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capital

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the equipment and structures used to goods and services

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economics

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the study of choices we make among our many wants and desires given our limited resources

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human capital

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the productive knowledge and skill people receive from education, on-the-job training, health, and other factors that increase productivity

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labor

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the physical and human effort used in the production of goods and services

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land

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the natural resources used in the production of goods and services

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resources

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inputs used to produce goods and services

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scarcity

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exists when human wants (material and nonmaterial) exceed available resources

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the economic problem

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scarcity forces us to choose, and choices are costly because we must give up other opportunities that we value

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economic goods

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scarce goods created from scarce resources—goods that are desirable but limited in supply

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entrepreneurship

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the process of combining labor, land, and capital to produce goods and services

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goods

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items we value or desire

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intangible goods

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goods that we cannot reach out and touch, such as friendship and knowledge

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services

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intangible items of value provided to consumers, such as education

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tangible goods

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items we value or desire that we can reach out and touch

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bads

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items that we do not desire or want, where less is preferred to more, such as terrorism, smog, or poison oak

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rational behavior

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people do the best they can, based on their values and information, under current and anticipated future circumstances

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market

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the process of buyers and sellers exchanging goods and services

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efficiency

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when an economy gets the most out of its scarce resources

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market failure

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when the economy fails to allocate resources efficiently on its own

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FACTOR (OR INPUT) MARKETS

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markets in which households sell the use of their inputs (capital, land, labor, and entrepreneurship) to firms

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product markets

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markets in which households are buyers and firms are sellers of goods and services

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simple circulation flow model

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an illustration of the continuous flow of goods, services, inputs, and payments between firms and households

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hypotheis

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a testable proposition

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theory

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a statement or proposition used to explain and predict behavior in the real world

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ceteris paribus

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holding all other things constant

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empirical analysis

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the use of data to test a hypothesis

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microeconomics

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the study of household and firm behavior and how they interact in the marketplace

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aggregate

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the total amount—such as the aggregate level of output

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causation

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when one event brings about another event

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correlation

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when two events occur together

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macroeconomics

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the study of the whole economy, including the topics of inflation, unemployment, and economic growth

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fallacy of composition

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the incorrect view that what is true for the individual is always true for the group

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positive statement

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an objective, testable statement that describes what happens and why it happens

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normative statement

answer

a subjective, contestable statement that attempts to describe what should be done

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