ECON Ch. 1 Study Questions, Problems, and Practice Quiz – Flashcards

Explain why both nations with high living standards and nations with low living standards face the problem of scarcity. If you won $1 million in a lottery, would you escape the scarcity problem?

Explain the difference btw macroeconomics and microeconomics. Give examples of the areas of concern to each branch of economics.

A model is defined as...

Explain the importance of the ceteris paribus assumption for an economic model.

Which of the following is an example of a proposition from positive economics? a) If Candidate X has been elected president, taxpayers would have been treated more fairly than they were under President Y b) The average rate of inflation was higher during President X's presidency than during President Y's presidency c) In economic terms, President X is a better than President Y d) President X's policies were more just toward poor people than President Y's

Which of the following illustrates the concept of scarcity? a) More clean air is wanted than is available in large polluted metropolitan areas such as Mexico City b) There is usually more than one use of your "free" time in the evening c) There are many competing uses for the annual budget of your city, country, or state d) All of the answers are correct

Which of the following are factors of production? a) The outputs generated by the production process transforming land, labor, and capital into goods and services b) Restricted to the land resources such as natural resources that are unimproved by human economic activity c) Land (natural resources), labor (human capital, entrepreneurship), and capital (constructed inputs such as factories). d) Just labor and capital in industrialized countries, where natural resources are no longer used to produce goods and services

Which of the following is NOT an example of a capital input? a) A person's skills and abilities, which can be employed to produce valuable goods and services b) Factories and offices where goods and services are produced c) Tools and equipment d) Computers used by a company to record inventory, sales, and payroll

Which of the following is the BEST definition of economics? *ON THE FINAL* a) Economics is the study of how to manage corporations to generate the greatest return on shareholder investment b) Economics is the study of how to manage city and county government to generate the greatest goods to its citizens c) Economics is the study of how society chooses to allocate its scarce resources d) Economics is the study of how to track revenues and costs within a business

Which of the following BEST illustrates the application of the model-building process to economics? a) Two economists with differing political agendas argue about the best way to solve the Social Security problem on a Sunday morning talk show b) A labor economist notices that unemployment tends be higher among teenagers than more experienced workers, develops a model, and gathers data to test the hypotheses in the model c) A Ph.D. student in economics develops a plausible mathematical model for his dissertation, but there is no data to test the model d) Economists come to believe that some economic models are true simply because prominent leading economists say they are true

Which of the following represents causality rather than association? a) In years that fashion dictates wider lapels on men's jackets, the stock market grows by at least 5% b) Interest rates are higher in years ending with a 1 or a 6 c) Unemployment falls when the AFC champion wins the Super Bowl d) Quantity demanded goes up when price falls because lower prices increase consumer purchasing power, and because some consumers of substitute goods switch

Which of the following correctly describes the ceteris paribus assumption? a) If we increase the price of a good, reduce consumer incomes, and lower the price of substitutes, and if quantity demanded is observed to fall, we know that the price increase caused that decline in quantity demanded b) If the federal government increases government spending, and the Federal Reserve Bank lowers interest rates, we know that the increase in government spending caused unemployment to fall c) If a company reduces its labor costs, negotiates lower materials costs from its vendors, and advertises, we know that the reduced labor costs are why profits are higher d) If we decrease the price of a good and observe that there is an increase in the quantity demanded, holding all other factors that influence this relationship constant

The condition of scarcity a) Cannot be eliminated b) Prevails in poor economies c) Prevails in rich economies d) All of the above are correct

Which of the following best describes an entrepreneur? a) A person who works as an office clerk at a major corporation b) A person who combines the factors of production to produce innovative products c) A special type of capital d) Wealthy individuals who provide savings that stimulates the economy

Which of the following is true about renewable natural resources? a) They are a type of land resource such as oil, coal, and natural gas that has a fixed stock b) They are a type of capital resource such as irrigation networks and wastewater treatment plants that utilize water c) They are a type of capital resource such as air filtration systems in buildings that renew and refresh polluted air from the outside d) They are a type of land resource such as forests, rangelands, and marine fisheries that naturally regenerate and thus can tolerate a sustained harvest, but can be depleted from excessive harvest

Because of scarcity, a) It is impossible to satisfy every desirer and choices must be made b) The available supply of time, goods, and resources is greater than human wants c) Every desire is fulfilled d) There are no limits on the economy's ability to satisfy unlimited wants

Which of the following represents positive economics? a) Policy A is fair b) Outcome B is the best objective to achieve c) If policy A is followed, then outcome B results d) All of these choices are positive economic analysis

Which of the following is the last step in the model-building process? a) Collect data and test the model b) Develop a model based on simplified assumptions c) Identify the problem d) Formulate an assumption

Which of the following is not a type of economic analysis? a) Positive b) Resources c) Normative d) None of the above is a type of economic analysis

Which word or phrase indicates that an economist is using positive economics? a) Good b) Bad c) If-then d) Should

Which of the following would eliminate scarcity as an economic problem? a) Moderation of people's competitive instincts b) Discovery of sufficiently large new energy reserves c) Resumption of the steady productivity growth d) None of the above

Which resource is not an example of capital? a) Equipment b) Machinery c) Physical plants d) Stocks or bonds

Which of the following is the second step in the model-building process? a) Collect data and test the model b) Develop a model based on simplified assumptions c) Identify the problem d) Include all possible variables that affect the model

Which of the following is a type of economic analysis? a) Positive b) Resources c) Association d) None of the above is a type of economic analysis

Which of the following is a career that could result from majoring in economics? a) Management b) Banking c) Government d) All of the above

Can you prove there is no trillion-dollar person?: Suppose a theory says no U.S. citizen is worth $1 trillion. You decide to test this theory and send researchers to all corners of the nation to check financial records to see whether someone qualifies by owning assets valued at $1 trillion or more. After years of checking, the researchers return and report that not a single person is worth at least $1 trillion. Do you conclude that the evidence proves the theory?

Should Nebraska State join a Big-Time athletic conference?: Nebraska State (a mythical university) stood by while Penn State, Florida State, the University of Miami, and the University of South Carolina joined big-time athletic conferences. Now Nebraska State officials are pondering whether to remain independent or to pursue membership in a conference noted for high-quality football and basketball programs. An editorial in the newspaper advocates joining and cites a study showing that universities belonging to major athletic conferences have higher graduation rates than nonmembers. Because educating its students is the number one goal in Nebraska State, will this evidence persuade Nebraska State officials to join a big-time conference?