Econ Ch 1 – Flashcard Answers
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Economics is a social science that studies how individuals, institutions, and society may: A. Expand the amount of resources available to them B. Attain a minimum level of production C. Best use resources to maximize satisfaction of economic wants D. Reduce the amount of goods and services they need
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C. Best use resources to maximize satisfaction of economic wants
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The basic truth that underlies the study of economics is the fact that we all face: A. Death B. Taxes C. Risk D. Scarcity
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D. Scarcity
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A recurring theme in economics is that people: A. Have unlimited resources, but limited economic wants B. Can increase resources by limiting their economic wants C. Have limited economic wants and limited resources D. Have unlimited economic wants, but limited resources
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D. Have unlimited economic wants, but limited resources
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As a consequence of the problem of scarcity: A. There is never enough of anything B. Individuals have to make choices from among alternatives C. Only some people can "have it all" D. Things which are plentiful have relatively high prices
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B. Individuals have to make choices from among alternatives
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The idea in economics that "there is no free lunch" means that: A. Businesses would go bankrupt if they offered free lunches B. The thought of a free lunch is often better than the reality of consuming it C. There are opportunity costs involved even in free lunches D. Free lunches used by businesses to attract customers is an inefficient marketing ploy
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C. There are opportunity costs involved even in free lunches
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The opportunity cost of doing or getting something is best and fully defined as: A. The difference between the marginal cost and benefit of doing something B. The materials used in doing or getting something C. The value of the best alternative that is given up in order to do or get something D. The money spent in doing or getting something
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C. The value of the best alternative that is given up in order to do or get something
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Economic analysis assumes "purposeful behavior," which means that people will pursue decisions or actions: A. That will increase their well-being B. Always based on full or complete information C. With minimal consideration for their emotions D. Without any logical faults
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A. That will increase their well being
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In analyzing human decision and action, economists assume that: A. Scarcity is more important than choice B. Costs are more important than benefits C. People's behavior reflects rational self-interest D. There are scarce resources in the economy
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C. Peoples behavior reflects rational self-interest
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When studying human behavior, economists assume rational self-interest. This means that: A. People make decisions based on some desired outcome B. People are quite selfish, and are not concerned about others C. People always make the right decisions D. People have all the information they need to make a decision
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A. People make decisions based on some desired outcome
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When a state government chooses to build more roads, the resources used are no longer available for public education programs. This dilemma illustrates the concept of: A. Production expenses B. Unemployment issues C. Unintended consequences D. Opportunity cost
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D. Opportunity cost
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The opportunity cost of constructing a new public highway is the: A. Money cost of hiring contractors and construction workers for the new highway B. Value of other goods and services that are sacrificed in order to construct the new highway C. Expected cost of constructing the new highway in a future year D. Value of shorter driving times and distances when the new highway is completed
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After graduating from high school, Adam is thinking about going to college. The college tuition in $15,000 a year. Instead of going to college, Adam could take a full-time job that pays $25,000. What is Adams opportunity cost of attending college for one year? A. $10,000 B. $15,000 C. $25,000 D. $40,000
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A. $10,000
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The opportunity cost to a consumer who smokes cigarettes consists of the: A. Costs imposed on others who inhale second-hand smoke B. Products that the consumer could have bought instead of cigarettes C. Amount of cigarette-taxes paid by this consumer D. Cost of complementary products such as lighters, ashtrays, and cigarette holders
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B. Products that the consumer could've bought instead of the cigarettes
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The economic perspective focuses largely on marginal analysis, which means analyzing: A. Peripheral elements of a given issue or action B. The minor aspects of a given issue or decision C. The changes in the situation that would result from a given action D. Emotional and psychological facets of a given action
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C. The changes in the situation that would result from a given action
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What is the best synonym for "marginal" in economics? A. Scarce B. Additional C. Basic D. Minor
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Additional
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What is another way of saying "marginal benefits of an action"? A. Benefits given up, once the action is taken B. Unintended gains from taking the action C. Benefits accruing to others, as a result of one's action D. Extra benefits resulting from the action
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D. Extra benefits resulting from the action
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From an economic perspective, when a student decides to go to the movies instead of studying for a test, it indicates that in the student's thinking the marginal: A. Benefit of studying is greater than the marginal cost of studying B. Cost of going to the movies is less than the marginal benefit of going to the movies C. Benefit of studying are greater than the marginal benefit of going to the movies D. Cost of going to the movies is greater than the marginal cost of studying
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D. Cost of going to the movies is greater than the marginal cost of studying
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The process of observing real-world behavior, developing hypotheses, testing them against facts, then using the results to construct theories is called: A. Opportunity cost estimation B. The scientific method C. Marginal analysis D. Normative analysis
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B. The scientific method
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An economic model is purposeful simplification of reality, whose function includes: A. Understanding the full complexity of the real world B. Predicting the behavior of each and every individual or organization C. Analyzing the behavior of a typical or average consumer or firm D. Forecasting economic random events with a high level of accuracy
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C. Analyzing the behavior of a typical or average consumer or firm
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The economic principle that "unemployment rate will tend to increase as the economy moves into a recession" is an example of: A. A normative statement B. An assumption C. A loaded terminology D. A generalization
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D. A generalization
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Economic models do not reflect the full complexity of reality, but instead are based on: A. Simplifications B. Tradeoffs C. Value judgments D. Predictions
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A. Simplifications
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The role of an assumption in an economic theory is to: A. Add realism B. Prove the theory C. Cover special cases D. Simplify the complex reality
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D. Simplify the complex reality
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The ceteris paribus assumption is employed in economic analysis, in order to: A. State economic goals B. Simplify the complex world C. Evaluate an economic system D. Approximate real-world conditions
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Simplify the complex world
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Another way of saying "ceteris paribus" is: A. Other things equal B. In general C. In reality D. Because of this
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A. Other things equal
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What illustrates a macroeconomic question? A. Should the salaries of financial executives be regulated by the government? B. Are increasing wage demands by workers contributing to price inflation? C. What is the least costly way to produce automobiles and trucks in the United States? D. Will the introduction of a new computer chip change the demand for computers?
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B. Are increasing wage demands by workers contributing to price inflation?
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What illustrates a microeconomics question? A. What is the current national rate of unemployment? B. Is the economy experiencing a decline in the rate of inflation? C. Will a new type of electronic reader or tablet increase the number of buyers? D. Is the aggregate output in the economy greater this year than last year?
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C. Will a new type of electronic reader or tablet increase the number of buyers?
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What illustrates a normative economic statement? A. The Federal budget deficit rose by 120 billion dollars B. The unemployment rate is expected to fall next month C. A trade surplus of 200 billion dollars should be our policy goal D. The federal funds rate was reduced by half a percentage point
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C. A trade surplus of 200 billion dollars should be our policy goal
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Matt observes that "there is a high correlation between educational attainment and the level of income." Joan concurs and adds that "high school graduates should all proceed to college." Are their statements normative or positive?
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Matt's statement is positive, and Jean's statement is normative
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The economizing problem for individuals is a consequence of the fact that: A. Economic means or incomes are greater than economic wants B. Economic wants are greater than economic means or incomes C. Positive economics is more important than normative economics D. Normative economics is more important than positive economics
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B. Economic wants are greater than economic means or incomes
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30. Which of the following statements regarding people's wants is true? A. Over time, people's wants tend to be stable and constant B. As people consume more products, their wants will be reduced C. Intangible serves, like tangible goods, may satisfy people's wants D. People's wants do not include their basic needs
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D. Peoples wants do not include their basic needs
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A budget line is a graph that shows that various combinations of two products that a: A. Consumer can buy with a given amount of money income B. Business firm can produce with a given budget C. Household can produce with a given amount of resources D. Nation can trade with another nation
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A. Consumer can but with a given amount of money income
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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 constant. The decrease in income will result in a: A. Shift of the budget line inward to the left B. Shift of the budget line outward to the right C. A decrease in the slope of the budget line D. An increase in the slope of the budget line
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A. a budget line will shift inward to the left
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The economizing problem faced by a society is: A. To achieve a more equitable distribution of income in the society B. A consequence of the fact that productive resources are scarce relative to economic wants C. To establish prices which are fair for both producers and consumers D. That product prices often rise more rapidly than incomes of consumers
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B. A consequence of the fact that productive resources are scarce relative to economic wants
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The economizing problem is essentially one of deciding how to make the best use of: A. Limited resources to satisfy limited economic wants B. Unlimited resources to satisfy unlimited economic wants C. Unlimited resources to satisfy limited economic wants D. Limited resources to satisfy unlimited economic wants
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D. Limited resources to satisfy unlimited economic wants
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What would not be classified as "land"? A. Two thousand acres of virgin forest B. A hydroelectric dam C. Crude oil reserves D. Iron ore deposits
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B. A hydroelectric dam
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The individual who brings together economic resources and assumes the risk of business ventures in a capitalist economy is called the:
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Entrepreneur
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What would be considered a Capital resource? A. A van used by a mother to transport the family around B. An office computer used by an accountant C. A crane used by a building contractor D. A camera used by a professional photographer
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C. A crane used by a building contractor
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What would be considered an economic resource? A. The ice cream that kids buy at the ice cream parlor B. The HD-TV sets in people's homes C. The land that is designated as national parks by the government D. shoppers buying stuff at the mall
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C. The land that is designated as national parks by the government
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What is not a factor of production? A. Money B. Labor C. Capital D. Entrepreneur
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D. Entrepreneur
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What is one of the simplifying assumptions made in constructing a possibilities curve? A. The state of technology is constantly changing B. A wide variety of products are produced C. Resources are fully employed and are used in least-cost methods of production D. Quantities of available resources in the economy vary from one point to another
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C. Resources are fully employed and are used in least-cost methods of production
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The production possibilities curve is a graph of: A. The maximum amounts of labor and capital resources available for production B. Various combinations of goods and services among which consumers are indifferent C. The maximum combinations of products that can be produced D. The maximum amount of capital and labor that the economy can employ
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A. The maximum amounts of labor and capital resources available for production
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All of the following would affect the position and shape of a nation's production possibilities curve, except: A. The amount of labor available B. The level of unemployment C. The amount of the capital resources D. The rate of technological progress
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B. The level of unemployment
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If a nation produces more consumer goods and less capital goods, then the nation will have A. More consumption now, but less consumption later B. Less consumption now, but more consumption later C. More consumption now, with no effect on consumption later D. Less consumption later, with no effect on consumption now
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A point inside the the production possibilities curve is ___ while a point outside the curve is___.
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Attainable, unattainable
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A point or combination that is on the production possibilities curve is: A. Attainable and resources are fully employed B. Attainable, but some resources are unemployed C. Unattainable, but some resources are unemployed D. Attainable only if we get additional resources
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A. Attainable and resources are fully employed
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A point outside the production possibilities curve of a nation: A. Is not attainable for this nation B. Is easily attainable for this nation C. Implies that there are unemployed resources in this nation D. Implies that this nation is using its resources fully
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A. Is not attainable for this nation
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A movement from one point to another along the possibilities curve would imply that: A. The labor force available to society has grown B. Productivity has increased over time C. Productivity has declined over time D. Society is producing a different combination of outputs
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D. Society is producing a different combination of outputs
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If a nation is initially on its production possibilities curve, then it can increase its production of one good only by: A. Decreasing the production of the other good B. Increasing the production of the other good C. Holding constant the production of the other good D. Decreasing the price of the other good
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A. Decreasing the production of another good
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Because of increasing opportunity costs, the production possibility curve: A. Is bowed out from (or concave to) the origin B. Can be either downward- or upward-sloping C. At first rises, then falls eventually D. Is a straight downward-sloping line
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A. Is bowed out from (or concave to) the origin
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The law of increasing opportunity cost states that: A. Costs of production increase for one good, but costs decrease for the other good B. Increases in wages and other resource costs is what the increasing opportunity costs refer to C. Increases in the production of one good require larger and larger sacrifices of the other good D. Increases in the production of one good make the production of that good and easier
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C. Increases in the production of one good require larger and larger sacrifices of the other good
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Which of the following statements is an explanation for the law of increasing opportunity costs? A. Many economic resources are better at producing one product rather than another B. The economy is employing all of its available resources C. In any economy, the state of technology is changing and resources are variable D. The economy is achieving productive efficiency by producing goods at the least cost
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If the marginal benefit of a good is less than its marginal cost, then the nation should: A. Produce more of that good B. Maintain the current level of production of that good C. Reduce the marginal benefit of that good D. Reduce the production of that good
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A. Produce more of that good
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Consider an economy that is producing inside its production possibilities curve. This economy could move closer towards its production possibilities curve by: A. Distributing incomes more equally B. Employing more of its available resources C. Increasing the levels of wages and prices D. Acquiring additional resources
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B. Employing more of its available resources
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A reduction in the level of unemployment would have which effect with respect to the nation's production possibilities curve? A. It would shift the curve to the right B. It would shift the curve to the left C. It would not shift the curve; it would be represented by a movement from a point inside the curve toward a point on the curve D. It would not shift the curve; it would be represented by a movement from a point on the curve to a point outside the curve
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B. It would shift the curve to the left
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Economic growth may be represented by: A. A movement from one end of the production possibilities curve to the other B. An upward-sloping production possibilities curve C. A movement from a point inside to a point on the production possibilities curve D. A rightward shift of the production possibilities curve
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C. A movement from a point inside to a point on the production possibilities curve
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Economic growth is a result of: A. A reduction in the unemployment ra B. An increase in the opportunity costs of production C. A decrease in the demand for resources D. An increase in the supply of resources
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D. An increase in the supply of resources
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A nation that devotes more of its resources to the production of capital goods is likely to: A. Cause its production possibilities curve to shift outward B. Cause its production possibilities curve to shift inward C. Increase the slope of its production possibilities curve D. Decrease the slope of its production possibilities curve
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D. Decrease the slope of its production possibilities curve
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Specialization and international trade allows a nation to: A. Produce a combination of goods that is beyond (or outside) its production possibilities B. Consume a combination of goods that is beyond (or outside) its production possibilities C. Have an upward-sloping production possibilities curve D. Consume a lot of goods without having to produce any output
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A. Produce a combination of goods that is beyond (or outside) its production possibilities
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Which pitfall to sound economic reasoning is reflected in a person's view that "pharmaceutical and oil companies are price-gouging the consumers"? A. Faulty definition B. Post hoc fallacy C. Loaded terminology D. Confusing correlation and causation
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C. Loaded terminology
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Which pitfall to sound economic reasoning is illustrated when a person comments that "capitalists focus only on profits and don't care about their workers"? A. Abstraction B. Biases C. The fallacy of composition D. Confusing correlation and causation
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B. Biases
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A person observes that consumer prices often fall when a nation experiences economic growth. The person then concludes that falling consumer prices leads to economic growth. This would be an example of: A. The fallacy of composition B. Biases C. Confusing correlation and causation D. The use of loaded terminology
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C. Confusing correlation and causation
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You observe that when stock prices rise, interest rates soon fall, and therefore conclude that higher stock prices lead to lower interest rates. This would be an example of: A. The fallacy of composition B. Tradeoff among economic goals C. The post hoc fallacy D. The use of loaded terminology
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C. The post hoc fallacy
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Increasing the share of your income that you save is good for you. Therefore it would be good for the whole economy if everyone saved more. This exemplifies the: A. Post hoc fallacy B. Fallacy of composition C. Use of loaded terminology D. Confusion between correlation and causation
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B. Fallacy of composition
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Which of the following is the fallacy in the fallacy of composition? A. Whatever goes up must come down B. Facts are more important than theories C. What is true for the part is necessarily also true for the whole D. If event B occurs after event A, event A must have caused event B
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C. What is true for the part is necessarily also true for the whole
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The post hoc, ergo propter hoc fallacy consists of: A. Using an example to "prove" a different point B. Inferring causality from chronological sequence C. Jumping to conclusions from an inadequate number of cases D. Arguing for or against a person's character rather than his view or opinion
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B. Inferring causality from chronological sequence
