A. governments allocate resources in the face of constraints.
B. government policies can be used to meet individuals’ wants and desires.
C. human beings coordinate their wants and desires in the face of constraints.
D. scarce resources are allocated to their most productive uses.
According to the text, economics “is the study of how human beings coordinate their wants and desires given a society’s decision-making mechanisms, social customs, and political realities.”
A. it becomes an economic problem.
B. it becomes a political problem but not an economic problem.
C. it becomes a social problem but not an economic problem.
D. the allocation problem is still an economic problem.
The economic problem arises when limited resources must be allocated among individuals. The problem existed before any allocation mechanism was chosen.
A. is fixed.
B. depends on human action.
C. is not of economic importance.
D. will always grow to meet individuals’ wants and desires.
The quantity of goods and services available depends on the incentives to work.
A. total cost and total benefit.
B. marginal cost, sunk cost, and total benefit.
C. sunk cost and marginal cost.
D. marginal cost and marginal benefit.
Such a comparison makes it possible to determine whether the marginal benefit of an action exceeds the marginal cost.
A. are essential parts of economic reasoning.
B. are irrelevant to economic reasoning.
C. should be considered, but only when marginal cost is less than marginal benefit.
D. should be considered only when there is no information about marginal cost and marginal benefit.
Sunk costs are costs that have already been incurred and cannot be recaptured. They are in essence “water under the bridge” and as such, they do not influence economic decisions.
A. total benefit of the activity is less than the total cost.
B. additional benefit from the activity exceeds the additional cost.
C. total benefit from the activity exceeds the total cost.
D. additional cost of the activity exceeds the additional benefit.
The economic decision rule is to do more of something if the marginal benefit exceeds the marginal cost.
A. the tuition you paid for the course.
B. the net benefit of the activity you would have chosen if you had not taken the course.
C. the net benefit of taking this course.
D. the cost of the activity you would have chosen if you had not taken the course.
A. invisible market force.
B. invisible hand.
C. invisible handshake.
D. invisible foot.
A. an economic force.
B. a social force.
C. a political force.
D. a market force.
A. a naturally occurring event that approximates a controlled experiment.
B. not possible given that economists study real-world events.
C. a branch of economics that studies the economy through controlled lab experiments.
D. what all economists do when they develop their models.
A. Rationality and self-interest.
B. Duplicity and self-interest.
C. Predictable irrationality and purposeful self-interest.
D. Predictiable irrationality and efficiency.
C. Predictable irrationality.
A. microeconomic research.
B. macroeconomic research.
C. theoretical research because there is no data on these variables.
D. empirical research because there is no economic theory related to these variables.
A. The decision by a nurse to change professions.
B. When the next recession will arrive.
C. Why unemployment is so low and inflation has not accelerated.
D. How the presidential candidates’ tax plans might affect economic growth.
Microeconomics is the study of individual choice.
A. positive economics.
B. normative economics.
C. the art of economics.
D. Marshallian economics.
“Should” statements are always normative, or based upon opinion.
A. because their income increases at the same time.
B. only if their income increases at the same time.
C. even if other demand determinants change at the same time.
D. provided all else remains constant.
The law of demand states that more of a good will be demanded the lower its price, other things constant, and less of a good will be demanded the higher its price, other things constant.
A. an equilibrium price has been reached.
B. an equilibrium quantity has been reached.
C. we are considering changes in just one factor.
D. we are considering all the changes which might take place in actual markets.
Other things constant means that all other factors that could affect the analysis remain constant whether they actually do or not. It does not indicate when equilibrium has been reached.
A. A decrease in the supply of beef.
B. An increase in family incomes.
C. An increase in the price of feed grains for cattle.
D. A decrease in the price of pork.
A decrease in the supply of beef would result in a movement along a demand curve as the market price of beef rose. An increase in family incomes would increase the demand for beef. An increase in the price of feed grains would shift the supply curve for beef to the left, resulting in higher market price for beef and a movement along the demand curve for beef. A decrease in the price of pork would decrease the demand for beef.
A. an increase in the wages earned by nurses will cause the quantity of nurses supplied to increase.
B. a decrease in the wages earned by nurses will cause the quantity of nurses supplied to increase.
C. an increase in the wages earned by nurses will cause the quantity of nurses demanded to increase.
D. a decrease in the wages earned by nurses will cause the quantity of nurses demanded to increase.
The law of supply states that as the price of a good rises, the quantity of it supplied will rise. The law of supply does not address the relationship between price and quantity demanded.
A. the law of demand and supply do not hold in the market.
B. the fallacy of composition is not operative in the market.
C. the invisible hand is the only force at work in the market.
D. social and political forces are likely to exist.
Where the invisible hand is the only force, equilibrium is likely to be where quantity demanded equals quantity supplied. But, in the real world, political and social forces are likely to exist so that equilibrium can be where quantity demanded doesn’t equal quantity supplied.
A. Wages in Britain will fall as the demand for immigrants increases.
B. Cost of living in Britain will increase as the demand for goods increases.
C. Wages in Britain will fall since the quantity of labor supplied is increasing.
D. Wages in Britain will fall since the supply of labor is increasing.
An increase in immigration causes the supply curve to shift to the right, putting downward pressure on wages. Although the cost of living may rise, the fear expressed is based on labor market conditions, not goods market condition.
A. an increase in housing prices, especially in cities with plenty of room for expansion.
B. an increase in housing prices, especially in cities with limited land.
C. a decrease in housing prices, especially in cities with plenty of room for expansion.
D. a decrease in housing prices, especially in cities with limited land.
An increase in demand causes an increase in both equilibrium price and equilibrium quantity. With limited land, the supply is more price-inelastic (steeper), so the increase in equilibrium price is relatively larger in this case.
A. $42, $38, $40
B. $38, $40, $42
C. $42, $40, $38
D. $40, $42, $38
Events in Iraq initially caused the price to rise from $40 to $42; increased production by OPEC then lowered the price to $38.
A. recessions. B. depressions. C. expansions. D. business cycles.
A. government should guarantee each person a satisfying and high-paying job. B. government should eliminate only frictional unemployment. C. each person should have a job commensurate with their training or past job experience. D. individuals should be responsible for finding their own jobs.
A guarantee of a satisfying and high-paying job exceeds the position of Keynesian economists that each person should have a job commensurate with his/her training and past experience.
A. PCE deflator.
C. GDP deflator.
C. net exports.
D. government spending.
Each good is weighted by its market price.
Aggregate income (National Income) equals the total income earned by citizens and businesses in a country.
Changes in business inventories are part of gross private domestic investment.
Real GDP measures market activity, not human happiness, so it is not a good measure of welfare. It also excludes price changes and the underground economy.
Percentage change in real GDP = percentage change in nominal GDP minus the rate of inflation.
Per capita output is obtained by dividing GDP by the population.
Human capital is acquired skill that makes people more productive.
The Soviet Union did invest in capital goods (at the expense of consumer goods) but still did not grow. It lacked institutions with incentives for individuals to work hard.
At 35 percent, technology contributed more to growth than any other factor.
Greater saving permits higher level of investment and capital accumulation, which in turn stimulate growth.
Network externalities increase the value of a technology as the number of users of that technology increases. This can block the use of more efficient technologies because it increases the cost of switching to these technologies.
Since per capita real output equals real GDP divided by the population, it provides a measure of
a society’s average level of personal consumption, unlike real GDP.
Discouraged workers don’t have jobs, but they’d like one. They’re so discouraged that they’ve stopped looking for a job.
22. Based on these numbers, how many people were counted as unemployed? A. 81.0 million. B. 73.0 million. C. 59.9 million. D. 13.1 million.
The unemployed are the labor force minus the employed, or 154.0 – 140.9 = 13.1.
Structural unemployment is unemployment caused by economic restructuring which makes some skills obsolete
The sum of these four components equals total expenditure.
Dividends are the means corporations use to distribute profits to stockholders.
Since Greece has the reportedly largest relative underground economy, official statistics underestimate Greek production the most.
The Rule of 72 says that a country’s income will double in the number of years equal to 72 divided by the country’s growth rate. Dividing 72 by 4 gives us a growth rate of 18 percent.
The coordination definition of economics focuses on the need for the coordination of activities and resources. Even if everyone were selfless, there would still be the need for coordinating the selfless actions so that those actions and resources are allocated efficiently.
The invisible hand theorem is the price mechanism that affects individual decisions.