Econ Chapter 1 Test Questions – Flashcards

question
The study of the choices people make to attain their goals, given their scarce resources.
answer
Economics
question
A simplified version of reality used to analyze real-world economic situations.
answer
Economic model.
question
Characterized by extensive government decision making.
answer
centrally planned economy
question
A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade.
answer
Market.
question
An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.
answer
Mixed economy.
question
Analysis concerned with what ought to be.
answer
Normative analysis.
question
Analysis concerned with what is.
answer
Positive analysis.
question
The study of how households and firms make choices, how they interact in markets,and how the government attempts to influence their choices.
answer
Microeconomics
question
The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.
answer
Macroeconomics.
question
An economy in which the decisions of households and firms interacting in markets allocate economic resources.
answer
Market economy.
question
Buyers and sellers use all available information to achieve their goals.
answer
Economists assume people are rational.
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people act in response to economic incentives
answer
Economists assume people respond to economic incentives
question
Something measurable that can have different values, such as the wages of software programmers.
answer
Economic variable.
question
The fair distribution of economic benefits
answer
Equity.
question
Analysis that involves comparing marginal benefits and marginal costs.
answer
Marginal analysis.
question
The highest-valued alternative that must be given up to engage in an activity.
answer
Opportunity cost.
question
The situation in which a good or service is produced at the lowest possible cost.
answer
Productive efficiency.
question
The situation in which unlimited wants exceed the limited resources available to fulfill those wants.
answer
Scarcity.
question
The idea that because of scarcity, producing more of one good or service means producing less of another good or service.
answer
Trade-off.
question
The situation that occurs when both the buyer and the seller of a product are made better off by the transaction.
answer
Voluntary exchange.
question
The study of economics arises due to
answer
Scarcity
question
By definition, economics is the study of
answer
the choices people make to attain their goals, given their scarce resources.
question
What is an economic model?
answer
It is a simplified version of some aspect of economic life used to analyze an economic issue.
question
Economists assume that individuals
answer
are rational and respond to incentives
question
In the first six months of 2003, branches of Commerce Bank in New York City were robbed 14 times. The New York City Police recommended steps the bank could take to deter robberies, including the installation of plastic barriers called "bandit barriers." The police were surprised the bank did not take their advice. According to a deputy commissioner of police, "Commerce does very little of what we recommend. They've told our detectives they have no interest in ever putting in the barriers."
answer
The banks must have weighed the cost of installing bandit barriers against the benefits and decided that they have "no interest in ever putting in the barriers".
question
The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called
answer
macroeconomics.
question
Which of the following is counted as "capital" in economics? a. the wealth people have b. the money people have c. the machines workers have to work with d. the accumulated skills and training workers have
answer
c. the machines workers have to work with
question
Every society faces economic tradeoffs. This means
answer
Who will receive the goods and services produced?
question
Ted quits his $60,000-a-year job to be a stay-at-home dad. What is the opportunity cost of his decision?
answer
at least $60,000
question
The formula for a percentage change of a variable over time (or growth rate) is:
answer
((Value2- Value1) / Value1 ) X100
question
When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of? a. Marginal analysis b. A market c. Scarcity d. Rational behavior
answer
b. A market
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Fill in the blanks. In economics, as well as in life, optimal decisions are made _____________. a. once all costs have been considered b. only when all benefits have been considered c. in their totality d. at the margin
answer
d. at the margin
question
In Solved Problem 1-1: "Should Apple produce an additional 300,000 iPods?" which of the concepts below is most applicable in solving the problem? a. The concept of what a market is b. Rational behavior and how people respond to economic incentives c. Marginal analysis d. The concept of scarcity and tradeoffsWhich of the
answer
c. Marginal analysis
question
Which of the following is not among the fundamental economic questions that every society must solve? a. What goods and services will be produced? b. How will the goods and services be produced? c. What goods and services will be exchanged? d. Who will receive the goods and services produced?
answer
c. What goods and services will be exchanged?
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What types of economies require that we answer the questions of what, how, and for whom to produce goods and services? a. Market economies b. Centrally planned economies c. Mixed economies d. All of the above
answer
d. All of the above
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Which of the following is the best classification for the economies of the United States, Canada, Japan, and Western Europe? a. Market economies b. Mixed economies c. Centrally planned economies d. None of the above
answer
b. Mixed economies
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In what type of economy does the government decide how economic resources will be allocated? a. In a market economy b. In a mixed economy c. In a centrally planned economy d. In none of the above
answer
c. In a centrally planned economy
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Which of the following is achieved when a good or service is produced up to the point where the marginal benefit to consumers is equal to the marginal cost of producing it? a. Productive efficiency b. Allocative efficiency c. Equality d. Equity
answer
b. Allocative efficiency
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Which of the following terms summarizes the situation in which a buyer and a seller exchange a product in a market and, as a result, both are made better off by the transaction? a. Productive efficiency b. Allocative efficiency c. Voluntary exchange d. Equity
answer
c. Voluntary exchange
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What does an economy achieve by producing a good or service at the least possible cost? a. Productive efficiency b. Allocative efficiency c. Voluntary exchange d. Equity
answer
a. Productive efficiency
question
Which of the following best describes the characteristics of models used in economics? a. Models are approximations to reality that capture as many details as possible. b. Models are usually complex abstractions of reality that simulate practical problems. c. Models are demonstrations of how economic concepts and theories accurately predict real situations. d. Models are simplifications of reality that include only essential elements and exclude less relevant details.
answer
d. Models are simplifications of reality that include only essential elements and exclude less relevant details.
question
Which of the following is not an essential component of an economic model? a. Assumptions b. Hypotheses c. Variables d. Normative statements
answer
d. Normative statements
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What is the purpose of an economic hypothesis? a. To establish a behavioral assumption b. To establish a causal relationship c. To make a statement based on fact d. To determine the validity of statistical analyses used in testing a model
answer
b. To establish a causal relationship
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What type of economic analysis is concerned with the way things ought to be? a. Positive analysis b. Marginal analysis c. Normative analysis d. Rational behavior
answer
c. Normative analysis
question
What type of statement would "A minimum wage actually reduces employment" be considered? a. A positive statement b. A marginal statement c. A normative statement d. An irrational conclusion
answer
a. A positive statement
question
Which of the following is an example of a positive question? a. Should the university offer free parking to students? b. Should the university provide more financial aid assistance to students? c. If the college increased tuition, will class sizes decline? d. Should the college cut tuition to stimulate enrollments?
answer
c. If the college increased tuition, will class sizes decline?
question
Which of the following questions can be answered using normative economic reasoning? a. If the college offers free parking, will more students drive to campus? b. If the college provided more financial aid, would more students go to college? c. If the college hires better qualified instructors, will more students attend? d. Should the college cut tuition in order to stimulate enrollments?
answer
d. Should the college cut tuition in order to stimulate enrollments?
question
Which of the following involves an estimation of the benefits and costs of a particular action? a. Positive economics b. Normative economics c. The market mechanism d. An irrational conclusion
answer
a. Positive economics
question
What type of assessment is one where a person's values and political views form part of that assessment? a. A positive assessment b. A normative assessment c. A microeconomic assessment d. A macroeconomic assessment
answer
b. A normative assessment
question
Fill in the blank: ____________ is the study of how households and businesses make choices. a. Microeconomics b. Macroeconomics c. A market mechanism d. Marginal analysis
answer
a. Microeconomics
question
Which of the following covers the study of topics such as inflation or unemployment? a. Microeconomics b. Macroeconomics c. Both microeconomics and macroeconomics give equal emphasis to these problems. d. None of the above
answer
b. Macroeconomics
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What is the name given to the development of a new good or a new process for making a good? a. An invention b. An innovation c. Entrepreneurship d. Capital
answer
a. An invention
question
What is the name given to the practical application of an invention? a. A model b. An innovation c. Voluntary exchange d. Capital
answer
b. An innovation
question
What is the stock of computers, factory buildings, and machine tools used to produce goods better known as? a. Physical capital b. Technology c. Innovation d. Goods and services
answer
a. Physical capital
question
Human capital is similar to physical capital because a. both represent the value of money as a productive resource. b. both are financed by the profits of firms. c. both are productive resources. d. both represent changes in technology.
answer
c. both are productive resources.
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question
The study of the choices people make to attain their goals, given their scarce resources.
answer
Economics
question
A simplified version of reality used to analyze real-world economic situations.
answer
Economic model.
question
Characterized by extensive government decision making.
answer
centrally planned economy
question
A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade.
answer
Market.
question
An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.
answer
Mixed economy.
question
Analysis concerned with what ought to be.
answer
Normative analysis.
question
Analysis concerned with what is.
answer
Positive analysis.
question
The study of how households and firms make choices, how they interact in markets,and how the government attempts to influence their choices.
answer
Microeconomics
question
The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.
answer
Macroeconomics.
question
An economy in which the decisions of households and firms interacting in markets allocate economic resources.
answer
Market economy.
question
Buyers and sellers use all available information to achieve their goals.
answer
Economists assume people are rational.
question
people act in response to economic incentives
answer
Economists assume people respond to economic incentives
question
Something measurable that can have different values, such as the wages of software programmers.
answer
Economic variable.
question
The fair distribution of economic benefits
answer
Equity.
question
Analysis that involves comparing marginal benefits and marginal costs.
answer
Marginal analysis.
question
The highest-valued alternative that must be given up to engage in an activity.
answer
Opportunity cost.
question
The situation in which a good or service is produced at the lowest possible cost.
answer
Productive efficiency.
question
The situation in which unlimited wants exceed the limited resources available to fulfill those wants.
answer
Scarcity.
question
The idea that because of scarcity, producing more of one good or service means producing less of another good or service.
answer
Trade-off.
question
The situation that occurs when both the buyer and the seller of a product are made better off by the transaction.
answer
Voluntary exchange.
question
The study of economics arises due to
answer
Scarcity
question
By definition, economics is the study of
answer
the choices people make to attain their goals, given their scarce resources.
question
What is an economic model?
answer
It is a simplified version of some aspect of economic life used to analyze an economic issue.
question
Economists assume that individuals
answer
are rational and respond to incentives
question
In the first six months of 2003, branches of Commerce Bank in New York City were robbed 14 times. The New York City Police recommended steps the bank could take to deter robberies, including the installation of plastic barriers called "bandit barriers." The police were surprised the bank did not take their advice. According to a deputy commissioner of police, "Commerce does very little of what we recommend. They've told our detectives they have no interest in ever putting in the barriers."
answer
The banks must have weighed the cost of installing bandit barriers against the benefits and decided that they have "no interest in ever putting in the barriers".
question
The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called
answer
macroeconomics.
question
Which of the following is counted as "capital" in economics? a. the wealth people have b. the money people have c. the machines workers have to work with d. the accumulated skills and training workers have
answer
c. the machines workers have to work with
question
Every society faces economic tradeoffs. This means
answer
Who will receive the goods and services produced?
question
Ted quits his $60,000-a-year job to be a stay-at-home dad. What is the opportunity cost of his decision?
answer
at least $60,000
question
The formula for a percentage change of a variable over time (or growth rate) is:
answer
((Value2- Value1) / Value1 ) X100
question
When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of? a. Marginal analysis b. A market c. Scarcity d. Rational behavior
answer
b. A market
question
Fill in the blanks. In economics, as well as in life, optimal decisions are made _____________. a. once all costs have been considered b. only when all benefits have been considered c. in their totality d. at the margin
answer
d. at the margin
question
In Solved Problem 1-1: "Should Apple produce an additional 300,000 iPods?" which of the concepts below is most applicable in solving the problem? a. The concept of what a market is b. Rational behavior and how people respond to economic incentives c. Marginal analysis d. The concept of scarcity and tradeoffsWhich of the
answer
c. Marginal analysis
question
Which of the following is not among the fundamental economic questions that every society must solve? a. What goods and services will be produced? b. How will the goods and services be produced? c. What goods and services will be exchanged? d. Who will receive the goods and services produced?
answer
c. What goods and services will be exchanged?
question
What types of economies require that we answer the questions of what, how, and for whom to produce goods and services? a. Market economies b. Centrally planned economies c. Mixed economies d. All of the above
answer
d. All of the above
question
Which of the following is the best classification for the economies of the United States, Canada, Japan, and Western Europe? a. Market economies b. Mixed economies c. Centrally planned economies d. None of the above
answer
b. Mixed economies
question
In what type of economy does the government decide how economic resources will be allocated? a. In a market economy b. In a mixed economy c. In a centrally planned economy d. In none of the above
answer
c. In a centrally planned economy
question
Which of the following is achieved when a good or service is produced up to the point where the marginal benefit to consumers is equal to the marginal cost of producing it? a. Productive efficiency b. Allocative efficiency c. Equality d. Equity
answer
b. Allocative efficiency
question
Which of the following terms summarizes the situation in which a buyer and a seller exchange a product in a market and, as a result, both are made better off by the transaction? a. Productive efficiency b. Allocative efficiency c. Voluntary exchange d. Equity
answer
c. Voluntary exchange
question
What does an economy achieve by producing a good or service at the least possible cost? a. Productive efficiency b. Allocative efficiency c. Voluntary exchange d. Equity
answer
a. Productive efficiency
question
Which of the following best describes the characteristics of models used in economics? a. Models are approximations to reality that capture as many details as possible. b. Models are usually complex abstractions of reality that simulate practical problems. c. Models are demonstrations of how economic concepts and theories accurately predict real situations. d. Models are simplifications of reality that include only essential elements and exclude less relevant details.
answer
d. Models are simplifications of reality that include only essential elements and exclude less relevant details.
question
Which of the following is not an essential component of an economic model? a. Assumptions b. Hypotheses c. Variables d. Normative statements
answer
d. Normative statements
question
What is the purpose of an economic hypothesis? a. To establish a behavioral assumption b. To establish a causal relationship c. To make a statement based on fact d. To determine the validity of statistical analyses used in testing a model
answer
b. To establish a causal relationship
question
What type of economic analysis is concerned with the way things ought to be? a. Positive analysis b. Marginal analysis c. Normative analysis d. Rational behavior
answer
c. Normative analysis
question
What type of statement would "A minimum wage actually reduces employment" be considered? a. A positive statement b. A marginal statement c. A normative statement d. An irrational conclusion
answer
a. A positive statement
question
Which of the following is an example of a positive question? a. Should the university offer free parking to students? b. Should the university provide more financial aid assistance to students? c. If the college increased tuition, will class sizes decline? d. Should the college cut tuition to stimulate enrollments?
answer
c. If the college increased tuition, will class sizes decline?
question
Which of the following questions can be answered using normative economic reasoning? a. If the college offers free parking, will more students drive to campus? b. If the college provided more financial aid, would more students go to college? c. If the college hires better qualified instructors, will more students attend? d. Should the college cut tuition in order to stimulate enrollments?
answer
d. Should the college cut tuition in order to stimulate enrollments?
question
Which of the following involves an estimation of the benefits and costs of a particular action? a. Positive economics b. Normative economics c. The market mechanism d. An irrational conclusion
answer
a. Positive economics
question
What type of assessment is one where a person's values and political views form part of that assessment? a. A positive assessment b. A normative assessment c. A microeconomic assessment d. A macroeconomic assessment
answer
b. A normative assessment
question
Fill in the blank: ____________ is the study of how households and businesses make choices. a. Microeconomics b. Macroeconomics c. A market mechanism d. Marginal analysis
answer
a. Microeconomics
question
Which of the following covers the study of topics such as inflation or unemployment? a. Microeconomics b. Macroeconomics c. Both microeconomics and macroeconomics give equal emphasis to these problems. d. None of the above
answer
b. Macroeconomics
question
What is the name given to the development of a new good or a new process for making a good? a. An invention b. An innovation c. Entrepreneurship d. Capital
answer
a. An invention
question
What is the name given to the practical application of an invention? a. A model b. An innovation c. Voluntary exchange d. Capital
answer
b. An innovation
question
What is the stock of computers, factory buildings, and machine tools used to produce goods better known as? a. Physical capital b. Technology c. Innovation d. Goods and services
answer
a. Physical capital
question
Human capital is similar to physical capital because a. both represent the value of money as a productive resource. b. both are financed by the profits of firms. c. both are productive resources. d. both represent changes in technology.
answer
c. both are productive resources.