ECON221: Chapter 01 Practice – Flashcards
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When economists say that people act rationally in their self interest, they mean that individuals:
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look for and pursue opportunities to increase their utility.
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According to economists, economic self-interest:
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is a reality that underlies economic behavior.
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The study of economics is primarily concerned with:
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choices that are made in seeking the best use of resources.
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Economics involves marginal analysis because:
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most decisions involve changes from the present situation.
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Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact:
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implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.
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Which one of the following expressions best states the idea of opportunity cost?
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"There is no such thing as a free lunch."
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Which of the following most closely relates to the idea of opportunity costs?
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tradeoffs.
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Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as:
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ational self-interest, because he attempting to increase his own income by identifying and satisfying someone else's wants.
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In constructing models, economists:
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make simplifying assumptions.
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Microeconomics:
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is concerned with individual economic units and specific markets.
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A positive statement is one which is:
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objective and is based on facts.
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"Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is:
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positive and correct.
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"Macroeconomics is the part of economics concerned with individual units such as a person, a household, a firm, or an industry." This statement is:
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positive, but incorrect.
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The scarcity problem:
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persists because economic wants exceed available productive resources.
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The shift of the budget line from cd to ab in the above figure is consistent with:
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a decrease in money income.
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Money is not an economic resource because:
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money, as such, does not produce anything.
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The production possibilities curve illustrates the basic principle that:
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if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
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A nation's production possibilities curve is bowed out from the origin because:
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resources are not generally equally efficient in producing every good.
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When an economy is operating under conditions of full employment, the production of more of commodity A will mean the production of less of commodity B because:
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resources are limited.
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A typical concave (bowed out from the origin) production possibilities curve implies:
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that society must choose among various attainable combinations of goods.
