question

For economists, the word "utility" means

answer

pleasure or satisfaction

question

In economics, the pleasure, happiness, or satisfaction received from a product is called

answer

utility

question

When economists say that people act rationally in their self interest, they mean that individuals

answer

look for and pursue opportunities to increase their utility

question

According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because:

answer

productive resources are limited

question

According to economists, economic self-interest:

answer

is a reality that underlies economic behavior.

question

Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:

answer

opportunity costs

question

A person should consume more of something when its marginal

answer

benefit exceeds its marginal cost

question

Economics may best be defined as the

answer

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

question

The study of economics is primarily concerned with

answer

choices that are made in seeking the best use of resources

question

The economic perspective entails

answer

a comparison of marginal benefits and marginal costs in decision making

question

Purposeful behavior suggests that:

answer

individuals may make different choices because of different desired outcomes

question

Purposeful behavior means that

answer

people weigh costs and benefits to make decisions

question

Economics involves marginal analysis because

answer

most decisions involve changes from the present situation

question

You should decide to go to a movie

answer

if the marginal benefit of the movie exceeds its marginal cost

question

Marginal costs exist because

answer

the decision to engage in one activity means forgoing some other activity

question

The assertion that "There is no free lunch" means that

answer

all production involves the use of scarce resources and thus the sacrifice of alternative goods

question

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of

answer

purposeful behavior

question

If someone produced too much of a good, this would suggest that

answer

the good was produced to the point where its marginal cost exceeded its marginal benefit.

question

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact

answer

implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost

question

In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:

answer

scarcity and opportunity costs

question

Which one of the following expressions best states the idea of opportunity cost?

answer

There is no such thing as a free lunch

question

Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This example illustrates:

answer

opportunity costs.

question

Which of the following most closely relates to the idea of opportunity costs?

answer

tradeoffs

question

Economists contend that most economic decisions are

answer

purposeful

question

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as

answer

rational self-interest, because he attempting to increase his own income by identifying and satisfying someone else's wants

question

Kara was out jogging and despite being tired, decided to run one more mile. Based on her actions, economists would conclude that Kara

answer

decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile

question

An economic hypothesis

answer

is a possible explanation of cause and effect

question

Which of the following terms implies the least degree of confidence in an economic generalization?

answer

a hypothesis

question

Which of the following terms implies the greatest degree of confidence in an economic generalization?

answer

a principle

question

A well-tested economic theory is often called

answer

a principle

question

The scientific method is

answer

. used by economists and other social scientists, as well as by physical scientists and life scientists

question

The process by which economists test hypotheses against facts to develop theories, principles, and models is called

answer

the scientific method

question

Economic theories:

answer

are generalizations based on a careful observation of facts

question

Which of the following is a correct statement?

answer

Although they are generalizations, economic laws are useful because they allow us to predict and therefore control or adjust to events

question

In constructing models, economists

answer

make simplifying assumptions

question

The Latin term "ceteris paribus" means

answer

other things equal

question

The basic purpose of the other-things-equal assumption is to

answer

allow one to reason about the relationship between variables X and Y without the intrusion of variable Z.

question

Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:

answer

all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant

question

The term "other things equal" means that:

answer

a number of relevant variables are assumed to be constant

question

Kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from day to day. For a couple of weeks she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the scientific method to better understand ice cream buying habits, her next step is to:

answer

use the observed data to form an hypothesis about ice cream buying behavior

question

Macroeconomics approaches the study of economics from the viewpoint of

answer

the entire company

question

Which of the following is associated with macroeconomics?

answer

an empirical investigation of the general price level and unemployment rates since 1990

question

The problems of aggregate inflation and unemployment are

answer

major topics of macroeconomics

question

Which of the following statements pertains to macroeconomics?

answer

National income grew by 2.7 percent last year

question

Macroeconomics can best be described as the

answer

study of the large aggregates of the economy or the economy as a whole

question

Microeconomics is concerned with

answer

a detailed examination of specific economic units that make up the economic system

question

Microeconomics

answer

is concerned with individual economic units and specific markets

question

Which of the following is a microeconomic statement?

answer

The price of personal computers declined last year

question

Which of the following statements is true?

answer

Microeconomics focuses on specific decision-making units of the economy; macroeconomics examines the economy as a whole

question

A normative statement is one that

answer

is based on value judgments

question

A positive statement is one which is

answer

objective and is based on facts

question

Which of the following is a positive statement?

answer

The temperature is 92 degrees today

question

Normative statements are concerned primarily with:

answer

what ought to be

question

A positive statement is concerned primarily with:

answer

what is

question

"Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is:

answer

positive and correct

question

Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

answer

Holly's statement is normative, but Ben's is positive

question

"Macroeconomics is the part of economics concerned with individual units such as a person, a household, a firm, or an industry." This statement is

answer

positive, but incorrect

question

Brinley says that "Gas prices are rising because there aren't enough oil refineries." Katie argues that "Gas prices are rising because of the growing demand for gasoline from China and India." We can conclude that:

answer

Both statements are positive

question

The economizing problem is:

answer

the need to make choices because economic wants exceed economic means.

question

The economizing problem is one of deciding how to make the best use of

answer

limited resources to satisfy virtually unlimited wants

question

The scarcity problem

answer

persists because economic wants exceed available productive resources.

question

The alternative combinations of two goods which a consumer can purchase with a given money income is shown by

answer

a budget line

question

The budget line shows

answer

all possible combinations of two goods that can be purchased, given money income and the prices of the goods

question

In moving along a given budget line

answer

the prices of both products and money income are assumed to be constant.

question

An increase in money income:

answer

shifts the consumer's budget line to the right

question

Any combination of goods lying outside of the budget line:

answer

is unattainable, given the consumer's income

question

Other things equal, an increase in a consumer's money income:

answer

shifts her budget line rightward because she can now purchase more of both products

question

The slope of a budget line reflects the

answer

price ratio of the two products

question

Suppose that Julia receives a $20 gift card for the local coffee shop, where she only buys lattes and muffins. If the price of a latte is $4 and the price of a muffin is $2, then we can conclude that Julia

answer

can buy 5 lattes or 10 muffins if she chooses to buy only one of the two goods

question

Camille is at the candy store with her grandmother, who offers to buy her $6 worth of candy. If lollipops are $1 each, and candy bars are $2 each, what combination of candy can Camille's grandmother buy for her?

answer

Two lollipops and two candy bars

question

Which of the following is a labor resource?

answer

a computer programmer

question

Which of the following is a capital resource?

answer

a piece of software used by a firm

question

The four factors of production are

answer

land, labor, capital, and entrepreneurial ability

question

Which of the following is a land resource? A. a farmer B. an oil drilling rig C. a machine for detecting earthquakes D. natural gas

answer

natural gas

question

Which of the following lists includes only capital resources (and therefore no labor or land resources)?

answer

autos owned by a car rental firm; computers at the car rental agency; the vans that shuffle rental customers to and from the airport

question

Money is not an economic resource because

answer

money, as such, does not produce anything

question

Economic resources are also called:

answer

factors of production

question

Which of the following do economists consider to be capital?

answer

a construction crane

question

The main function of the entrepreneur is to

answer

innovate

question

Which of the following is not a main function of the entrepreneur?

answer

make routine pricing decisions

question

The process of producing and accumulating capital goods is called:

answer

investment

question

Which of the following is not considered by economists to be an economic resource?

answer

money

question

Which of the following would not be classified as an economic resource by economists?

answer

money in a business checking account

question

The production possibilities curve illustrates the basic principle that:

answer

if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced

question

Which of the following will not produce an outward shift of the production possibilities curve?

answer

the reduction of unemployment

question

Unemployment

answer

is illustrated by a point inside the production possibilities curve

question

If the production possibilities curve is a straight line

answer

economic resources are perfectly substitutable between the production of the two products.

question

A production possibilities curve illustrates

answer

scarcity

question

A production possibilities curve shows:

answer

the maximum amounts of two goods that can be produced, assuming the full use of available resources

question

A nation's production possibilities curve is bowed out from the origin because

answer

resources are not generally equally efficient in producing every good.

question

When an economy is operating under conditions of full employment, the production of more of commodity A will mean the production of less of commodity B because

answer

resources are limited

question

Assume that a change in government policy results in greater production of both consumer goods and investment goods. We can conclude that

answer

the economy was not employing all of its resources before the policy change

question

The production possibilities curve

answer

is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced

question

Any point inside the production possibilities curve indicates

answer

that more output could be produced with available resources

question

Which of the following is assumed in constructing a typical production possibilities curve?

answer

production technology is fixed

question

The typical production possibilities curve is

answer

a downsloping line that is bowed out from the origin

question

The slope of the typical production possibilities curve:

answer

increases as one moves southeast along the curve

question

Assume an economy is incurring unemployment. The effect of resolving this problem will be to:

answer

move the level of actual output on to the economy's production possibilities curve

question

Which of the following is not correct? A typical production possibilities curve

answer

specifies how much of each product society should produce.

question

The production possibilities curve shows:

answer

the various combinations of two goods that can be produced when society employs all of its scarce resources

question

The negative slope of the production possibilities curve is a graphical way of indicating that:

answer

to produce more of one product we must do with less of another

question

If an economy is operating on its production possibilities curve for consumer goods and capital goods, this means that

answer

more consumer goods can only be produced at the cost of fewer capital goods

question

The construction of a production possibilities curve assumes

answer

technology is fixed

question

A typical concave (bowed out from the origin) production possibilities curve implies:

answer

that society must choose among various attainable combinations of goods

question

The production possibilities curve tells us

answer

the combinations of two goods that can be produced with society's available resources

question

The production possibilities curve has

answer

a negative slope that increases as we move along it from left to right

question

If an economy is operating inside its production possibilities curve for consumer goods and capital goods, it

answer

can produce more of both consumer goods and capital goods by using resources that are currently idle

question

The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve indicates that

answer

the principle of increasing opportunity costs is relevant

question

The law of increasing opportunity costs states that

answer

if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so

question

The concept of opportunity cost

answer

suggests that the use of resources in any particular line of production means that alternative outputs must be forgone

question

The law of increasing opportunity costs is reflected in a production possibilities curve that is:

answer

bowed out from the origin

question

The point on the production possibilities curve that is most desirable can be found by

answer

comparing marginal benefits and marginal costs

question

The optimal point on a production possibilities curve is achieved where

answer

each good is produced at a level where marginal benefits equal marginal costs

question

The marginal benefit curve is

answer

downsloping because successive units of a specific product yield less and less extra benefit.

question

The marginal cost curve is

answer

upsloping because of increasing marginal opportunity costs.

question

The output of MP3 players should be

answer

reduced if marginal costs exceed marginal benefits

question

If the output of product X is such that marginal benefit equals marginal cost

answer

the correct amount of resources is being allocated to X's production

question

Suppose that a fully-employed economy produces only two goods, hamburgers and flat-panel TVs. If the economy is currently producing more than the optimal quantity of hamburgers, then to attain the optimal allocation of resources it should:

answer

produce more TVs and fewer hamburgers

question

Suppose that an economy is producing on its production possibilities curve, but is not producing quantities of each good where the marginal benefit equals the marginal cost for each good. This economy:

answer

can improve its allocation by producing more of one good and less of the other

question

The optimal allocation of resources is found:

answer

where MB = MC

question

The basic difference between consumer goods and capital goods is that

answer

consumer goods satisfy wants directly while capital goods satisfy wants indirectly

question

Which of the following will shift the production possibilities curve to the right?

answer

a technological advance that allows farmers to produce more output from given inputs

question

Other things equal, which of the following would shift an economy's production possibilities curve to the left?

answer

a law requiring mandatory retirement from the labor force at age 55

question

Which of the following statements, if any, is correct for a nation that is producing only consumer and capital goods?

answer

Other things equal, the more capital goods a nation produces, the greater will be its future growth rate.

question

All of the following could immediately or eventually lead to an inward shift of a nation's production possibilities curve, except:

answer

an increase in the average skill level of all occupational groups

question

A nation's production possibilities curve might shift to the left (inward) as a result of:

answer

the depletion of its soil fertility due to overplanting and overgrazing

question

Which of the following will enable a nation to obtain a combination of consumer goods and capital goods outside its production possibilities curve?

answer

international specialization and trade

question

Suppose that Scoobania, which has full employment, can obtain 1 unit of capital goods by sacrificing 2 units of consumer goods domestically, but can obtain 1 unit of capital goods from another country by trading 1 unit of consumer goods for it. This reality illustrates

answer

achieving points beyond the production possibilities curve through international specialization and trade

question

Through specialization and international trade a nation

answer

can attain some combination of goods lying outside its production possibilities curve

question

Some agricultural sub-Saharan nations of Africa have overfarmed and overgrazed their land to the extent that significant portions of it have turned into desert. This suggests that:

answer

the production possibilities curves of such nations have shifted inward.

question

If all discrimination in the United States were eliminated, the economy would

answer

produce at some point closer to its production possibilities curve

question

A country can achieve some combination of goods outside its production possibilities curve by:

answer

specializing and engaging in international trade.

question

In recent years the economy of Japan has grown, despite the fact that the population of Japan has declined. Which of the following would best explain Japan's economic growth despite having a smaller population?

answer

Advancements in technology that make labor more productive

question

Free products offered by firms

answer

may or may not be free to individuals, but are never free to society

question

The assertion by economists that "there is no free lunch":

answer

remains true even for goods given away free by firms

question

The economic perspective used in customer decision making at fast-food restaurants is reflected in:

answer

customers selecting the shortest line.

question

At fast-food restaurants

answer

decisions entail comparisons of marginal costs and marginal benefits

question

Consumers might leave a fast-food restaurant without being served because:

answer

they conclude that the marginal cost (monetary plus time costs) exceeds the marginal benefit

question

A direct cost of going to college is

answer

tuition, while an indirect cost (opportunity cost) is forgone income while in college

question

An exception to the advice "go to college, stay in college, and earn a degree" occurs when:

answer

the opportunity cost of attending college is extraordinarily high

question

In response to the terrorist attacks of September 11, 2001, the government decided to allocate more resources toward defense goods. The government's decision reflects their assessment that:

answer

the marginal benefits of additional defense goods outweighed the marginal cost

question

The fallacy of composition states that:

answer

what is true for the individual must necessarily be true for the group.

question

The "after this, therefore because of this" fallacy states that

answer

because event A precedes event B, A is necessarily the cause of B

question

The safest way for an individual to leave a burning theater is to run for the nearest exit; it is therefore also the best means of escape for a large audience. This assertion illustrates the:

answer

fallacy of composition

question

The post hoc, ergo propter hoc fallacy suggests that

answer

cause and effect can be determined merely by observing the sequence of events

question

Which of the following has to do with the problem of distinguishing cause and effect in economic reasoning?

answer

the post hoc, ergo propter hoc fallacy

question

Which of the following best illustrates the post hoc, ergo propter hoc fallacy?

answer

I took the day off work to go to the beach and that's why it rained

question

The fallacy of composition is essentially the error of

answer

generalizing from the particular to the general.

question

The post hoc fallacy and the correlation problem both relate to

answer

the issue of determining causation

question

If variables X and Y are positively correlated, this means that

answer

causation may or may not exist between X and Y

question

The government deregulated the electricity industry in California and a shortage of electricity soon occurred. It is clear that the deregulation caused the shortage." This statement needs careful analysis because it may reflect the

answer

post hoc, ergo propter hoc fallacy

question

A caller to a radio talk show states that oil companies are "greedy price gougers." This is an example of

answer

loaded terminology

question

A caller to a radio talk show states that protesters against globalization are a collection of "anarchist punks, naïve college students, and trade union radicals." This is an example of:

answer

loaded terminology

question

A study found that the incidence of skin cancer increases along with the amount of time people work under fluorescent light, leading some people to conclude that fluorescent lighting is a cause of skin cancer. But further analysis found that people who work in offices, where fluorescent light is common, suffer more sunburn on their vacations than other workers. The sunburns, not the fluorescent light, were the cause of the higher incidence of skin cancer. The original conclusion illustrates

answer

confusion of correlation and causation

question

True or False: An economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy

answer

False

question

True or False: Because economic generalizations are simplifications from reality, they are impractical and useless.

answer

False

question

True or False: If economic theories are solidly based on relevant facts, then appropriate economic policy becomes obvious and uncontroversial.

answer

False

question

True or False: Normative statements are expressions of facts.

answer

False

question

True or False: Positive statements are expressions of value judgments

answer

False

question

True or False: Macroeconomics explains the behavior of individual households and business firms; microeconomics is concerned with the behavior of aggregates or the economy as a whole.

answer

False

question

True or False: Purposeful behavior implies that everyone will make identical choices

answer

False

question

True or False: Marginal analysis means that decision-makers compare the extra benefits with the extra costs of a specific choice

answer

True

question

True or False: Rational individuals may make different choices because their preferences and circumstances differ

answer

True

question

True or False: Choices entail marginal costs because resources are scarce

answer

True

question

True or False: The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment

answer

True

question

True or False: The entrepreneur's sole function is to combine other resources (land, labor, and capital) in the production of some good or service

answer

False

question

True or False: Products and services are scarce because resources are scarce

answer

True

question

True or False: An economy cannot produce at a point outside of its production possibilities curve because human economic wants are insatiable

answer

False

question

True or False: The process by which capital goods are accumulated is known as investment

answer

True

question

True or False: The present choice of position on the production possibilities curve will not influence the future location of the curve

answer

False

question

True or False: Although sleeping in on a work day or school day has an opportunity cost, sleeping late on the weekend does not.

answer

False

question

True or False: An economy will always operate at some point on its production possibilities curve

answer

False

question

True or False: In drawing a particular budget line, money income and the prices of the two products are fixed.

answer

True

question

True or False: The lower the consumer's income, the higher his or her budget line

answer

False

question

If we say that two variables are directly related, this means that

answer

an increase in one variable is associated with an increase in the other variable.

question

If we say that two variables are inversely related, this means that

answer

an increase in one variable is associated with a decrease in the other

question

Economists

answer

are somewhat arbitrary in assigning independent and dependent variables to the horizontal and vertical axes.

question

Which of the following statements is correct?

answer

The value of the dependent variable is determined by the value of the independent variable

question

If two variables are inversely related, then as the value of one variable

answer

increases, the value of the other decreases

question

If a positive relationship exists between x and y:

answer

the relationship will graph as an upsloping line

question

If price (P) and quantity (Q) are directly related, this means that

answer

if P increases, Q will also increase.

question

The slope of a straight line can be determined by:

answer

comparing the absolute vertical change to the absolute horizontal change between two points on the line

question

Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income. Letting C represent consumption and Y represent income, the equation that summarizes this relationship is:

answer

C = 100 + .8Y

question

If the equation y = 15 - 4x was plotted, the

answer

slope would be -4.

question

If the equation y = -10 + 2.5x was plotted

answer

the vertical intercept would be -10.

question

If we are considering the relationship between two variables and release one of the other-things-equal assumptions, we would expect:

answer

the line representing that relationship on a graph to shift.

question

The amount of pizzas that consumers want to buy per week is reflected in the equation P = 15 - .02Qd, where Qd is the amount of pizzas purchased per week and P is the price of pizzas. On the basis of this information we can say that:

answer

50 fewer pizzas will be purchased per week for every $1 increase in price

question

The slope of a line parallel to the vertical axis is

answer

infinite

question

The slope of a line parallel to the horizontal axis is

answer

zero

question

Slopes of lines are especially important in economics because

answer

they measure marginal changes

Macro Economics Test 1 Test Questions – Flashcards

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