econ quiz 1&2 all questions – Flashcards
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Economists assume people behave rationally, which means that people
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do not intentionally make decisions that make themselves worse off
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Self-interest relates to
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both monetary and nonmonetary objectives
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Economists assume that people are motivated by
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rational self-interest
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A theory or a model
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is a simplified, abstract view of reality.
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John has an economics test tomorrow. He must study and has planned the rest of his day so that he can fit some study time in. He has decided to go to the gym and then study for several hours. Which of the following statements is true?
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John's decision on how to allocate his time is consistent with the rationality assumption since the decision is intended to make him better off.
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Normative economics involves
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a statement of "what should be."
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The decision about what goods and services will be produced made in a market economy is made by
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consumers and firms choosing which goods and services to buy or produce.
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"Wants" as an economic concept includes
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both material and nonmaterial desires
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Consider the following economic agents: a. the government b. consumers c. producers Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?
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the government
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Consider the following economic agents: a. the government b. consumers c. producers Who, in a market economy, decides what goods and services will be produced with the scarce resources available in that economy?
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consumers and producers
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"If A occurs then B will follow" is a
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positive statement
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One major assumption of economics is that people
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act as if they systematically pursue self-interest.
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Scarcity arises because
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resources are finite and are inadequate to meet all human wants and needs.
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In economic analysis, people's resources are
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limited and their wants are unlimited.
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Human beings
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have unlimited wants
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In every economic system, choices must be made because resources
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are limited, but human desires and wants are unlimited.
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According to Adam Smith
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government intervention in markets is not desirable because an invisible hand leads decisions made in pursuit of self-interest to unintentionally promote the social interest.
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When people donate money to a charity, they behave
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rationally if the act gives them satisfaction.
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Which of the following statements is TRUE about scarcity?
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Both rich and poor people face the problem of scarcity.
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In a laissez-faire economy, ________ what gets produced, how it is produced, and who gets it.
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the behavior of buyers and sellers determines
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If real salaries increase but nominal salaries do not, this means that:
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prices have fallen.
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Which of the following statements is a positive economic statement?
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The President's budget included an increase in unemployment insurance payments.
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The threat of a large fine for failure to pay income taxes is an example of
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a negative incentive to get all people to pay taxes.
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"No individual should have less than $20,000 income in the United States in 2010" is an example of
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normative statement
