question

Economics is a social science that studies how individuals, institutions, and society may:

answer

Best use scarce resources to achieve the maximum satisfaction of economic wants

question

As a consequence of the problem of scarcity:

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Individuals have to make choices from among alternatives

question

The economic perspective

answer

The observation that people compare the marginal benefits with the marginal costs in making such decisions as how to spend time, which products to buy, whether or not to work, and which goods to produce and sell, is most closely associated with:

question

The concept of "rational behavior" suggests that:

answer

Different people make different choices because their circumstances and information differ

question

A U.S. senator states: "The minimum wage should be raised to give people a decent living wage." This quote is an example of:

answer

A normative economic statement

question

Which is not a factor of production

answer

Money

question

Which is considered a factor of production?

answer

An auto plant

question

If a production possibilities curve is concave and not a straight line, then:

answer

Resources are not equally suited to producing alternative products

question

A society is limited to consuming only those combinations of outputs within its production possibilities. But this will not hold true anymore if there is

answer

International specialization and trade

question

One element of the command system is

answer

central planning

question

Competition denotes a condition where:

answer

The diffusion of economic power limits its potential abuse

question

The choice of the most efficient production technique is not affected by how much buyers want to buy the product.

answer

True

question

The idea that the desires of resource suppliers and firms to further their own self-interest will automatically further the public interest is known as:

answer

The invisible hand

question

Which of the following is not a reason why specialization and trade are beneficial to society?

answer

Firms and workers become less dependent on others for producing goods and services

question

The construction and use of capital goods to aid in the production of consumer goods illustrates the:

answer

Roundabout but more efficient production

question

The opportunity cost to a consumer who smokes cigarettes is the:

answer

Products that the consumer could have bought instead of cigarettes

question

A basic assumption used in most economic theories is that:

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All other things besides the focal factor remain constant

question

Which would be a normative economic statement?

answer

This administration needs to raise taxes to pay for childcare programs

question

In every society, choices must be made because resources are:

answer

Finite, but economic wants are insatiable

question

A point inside the production possibilities curve is:

answer

Attainable, but the economy is inefficient

question

A nation that devotes more of its resources to capital investment is likely to:

answer

Cause its production possibilities curve to shift outward

question

Economics is the social science concerned with the best use of scarce resources to achieve maximum satisfaction of economic wants.

answer

true

question

When variables A and B are negatively correlated, it implies that:

answer

A and B may or may not be causally related

question

The slope of a graph relating two variables is -5. This indicates that as one variable decreases, the other variable also decreases.

answer

false

question

By free enterprise, we mean that

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Individuals may obtain resources, organize production, and sell the resulting output in any legal way they choose

question

Which of the following statements about the right to private ownership is false?

answer

It weakens the incentive to maintain the property that one already owns

question

Within a market economy, some industries may be declining while other industries may be expanding. This indicates that:

answer

Resources are being reallocated

question

The simple circular flow model shows that workers and capital-owners offer their services to firms through the:

answer

Resource markets

question

If economic profits exist in an industry, resource suppliers will be enticed into expanding the industry.

answer

true

question

In the market system, prices tend to guide resources from less important to more important uses as the market system accommodates change.

answer

true

question

Henry wants to buy a book. The economic perspective suggests that Henry will buy the book if:

answer

The marginal benefit of the book is greater than its marginal cost

question

Which is an illustration of a macroeconomic question?

answer

Are increasing wage demands by workers contributing to price inflation?

question

Clara states that "there is a high correlation between the level of people's education and the level of their income." Ellie replies that the correlation occurs because "more education is the best way to earn more income in this country."

answer

Clara's statement is positive and Ellie's statement is normative

question

In every society, choices must be made because resources are:

answer

Finite, but economic wants are insatiable

question

A point outside the production possibilities curve is:

answer

Unattainable because of limited resources

question

The production possibility curve:

answer

Is the boundary between attainable and unattainable outputs

question

A movement along the production possibilities curve would imply that:

answer

Society is producing a different combination of outputs

question

From an economic perspective, when consumers leave a fast-food restaurant because the lines to be served are too long, they have concluded that the:

answer

Marginal cost of waiting is greater than the marginal benefit of being served

question

A major problem with state ownership of resources is that it does not:

answer

Give incentives for individuals to make the best use of those resources

question

Buy products and resources

answer

In the circular flow model, households:

question

The simple circular flow model shows that workers and capital-owners offer their services to firms through the:

answer

Resource markets

question

Which of the following would be primarily determined in the resource market?

answer

The wage rates for electricians

question

The economy of the United States can best be described as laissez-faire capitalism.

answer

false

question

Firms will choose the production techniques that will give them the maximum price and revenues.

answer

false

question

In a market system, the income earned by owners of natural resources is called interest income.

answer

false

question

What is the economic meaning of the expression that "there is no such thing as a free lunch"?

answer

It means that scarce resources are used up to provide freebies and giveaways

question

The economizing problem for individuals is a consequence of the fact that:

answer

Economic wants are greater than economic means or incomes

question

The role of the entrepreneur in society is to:

answer

Bring the factors of production together and take the risks of producing

question

The production possibilities curve represents:

answer

The maximum combinations of products that can be produced with fixed resources and technology

question

Economic principles are value judgments about what the economy should be like or the way the economic world should be.

answer

False

question

The resource category called "capital" includes forests, mineral deposits, and water resources.

answer

False

question

A nation's consumption is strictly limited by its production possibilities, even with trade.

answer

False

question

In a market system, self-interest is the motivating force that drives the decisions and actions of the following groups, except:

answer

Public Officals

question

Why might a company use barter rather than money to make a transaction?

answer

Barter can enable two firms to trade when their cash flows are limited

question

Consumer sovereignty and "dollar votes" guide the market system in dealing with which fundamental question?

answer

What will be produced?

question

In a market system, which production techniques will be used by firms to produce their output?

answer

Those that would allow firms to maximize their profits

question

The production technique that is most efficient is the one that produces a given amount of output:

answer

at the lowest total cost

question

Within a market economy, some industries may be declining while other industries may be expanding. This indicates that:

answer

Resources are being reallocated

question

Which is true of an economy which operates entirely through central planning?

answer

Individual economic incentive is reduced by the absence of the profit motive

question

The centrally planned system used by the former Soviet Union and pre-reform China lacked:

answer

Entrepreneurship

question

A recurring theme in economics is that people:

answer

Have unlimited economic wants, but limited resources

question

Developing economic principles or explanations about how individuals behave or institutions act is referred to as:

answer

Economic theory

question

Which would be a positive economic statement?

answer

Stock prices rose to a new record last month for the fourth month in a row

question

The economizing problem for society is:

answer

Due to the fact that productive resources are scarce relative to economic wants

question

A point outside (to the right of) the production possibilities curve of a nation:

answer

Is not attainable for this nation

question

If the production possibilities curve is a straight line, then:

answer

The law of increasing opportunity costs does not apply

question

A reduction in the level of unemployment would have which effect with respect to the nation's production possibilities curve?

answer

It would not shift the curve; it would be represented by moving from a point inside the curve toward the curve

question

What is the best economic explanation for why a person would drop out of college to take a job or start a business?

answer

If the expected future benefits from starting a business are greater than the costs

question

Normative economics is concerned with the use of the scientific method to establish well-tested explanations for economic behavior.

answer

False

question

The fundamental economic problem for society is that productive resources are so varied and versatile, that it is hard to decide what to do with them.

answer

False

question

When variables A and B are negatively correlated, it implies that:

answer

A and B may or may not be causally related

question

A required element of specialization is:

answer

Exchange and trade

question

Which of the following would be primarily determined in the resource market?

answer

The wage rates for electricians

question

From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the:

answer

Marginal benefits of more insurance coverage are greater than the marginal costs

question

Suppose that a consumer purchases just two goods, good X and good Y. The ratio of the price of good Y to good X is the:

answer

Slope of the budget line

question

On a production possibilities curve, the single optimal or best combination of output for any society:

answer

Depends upon the preferences of society

question

In a graph of the marginal benefit (MB) and marginal cost (MC) of national defense goods, a rightward shift or increase in the MB curve will:

answer

Increase the allocation of resources to national defense

question

The scientific method does not apply to economics because economics studies human behavior which cannot be generalized.

answer

False

question

The economizing problem for individuals arises from the conflict between having relatively unlimited time and relatively limited jobs to do.

answer

False

question

If two variables are directly related they will always graph as:

answer

An upsloping line

question

The extensive private ownership of property resources in a market system has the following implications, except:

answer

The strong in the society could accumulate property by overpowering the weak

question

Competition is more likely to exist when:

answer

There is easy entry into and exit out of industries

question

Which is assumed to be most limited in scope under a market system?

answer

Government

question

The major "success indicator" for business managers in command economies like the Soviet Union and China in the past was

answer

The quantity of output

question

In product markets:

answer

Businesses earn their revenues from households

question

The economy of the United States can best be described as laissez-faire capitalism.

answer

False

question

Firms will choose the production techniques that will give them the maximum price and revenues.

answer

False

question

Quantitative measures of managerial success, such as production targets or quotas, are highly foolproof and are thus ideal to use.

answer

False

Econ202 Ch. 1-2 – Flashcards

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