Microeconomics Chapter 1 Questions And Answers

question

An economic model is developed from a set of assumptions about consumer behavior and predicts that people will buy less of a good the higher the price of the good. Empirical testing of this model would involve A. asking a lot of people if they think the model is correct. B. the collection of data to evaluate the usefulness of the model. C. checking the assumptions carefully to make sure that they realistically depict human behavior. D. carefully tracing all steps from the assumptions to the implication to make sure there have been no errors in logic.
answer

B. the collection of data to evaluate the usefulness of the model.
question

One of your​ classmates, Sally, is a hardworking​ student, serious about her​ classes, and conscientious about her grades. Sally is also​ involved, however, in volunteer activities and an extracurricular sport. Is Sally displaying rational ​behavior? A. ​No, leisure time is preferred long dash— she should devote all of her time to sports. B. ​Yes, she is devoting some of her time to the benefit and​ well-being of others even if her grades suffer. C. ​No, if she is serious about​ grades, all of her time should be spent studying. D. ​Yes, she is using her time allocated among​ school, studying, sports and volunteer work in a manner she deems best.
answer

D. ​Yes, she is using her time allocated among​ school, studying, sports and volunteer work in a manner she deems best.
question

The economic way of thinking will A. allow you to make better decisions. B. help you get rich. C. lead a person to think in normative terms. D. have no influence on your decision making.
answer

A. allow you to make better decisions. This is the correct answer.
question

​”We ought to do more for the education of our​ children.” Statements using words like ought or should are A. normative statements. B. positive statements. C. empirical statements. D. irrational statements.
answer

A. normative statements. This is the correct answer.
question

Which of the following statements is​ true? A. Economics is a science since the study of economics uses models and theories that are subject to empirical testing. B. In order for a discipline to be considered a science it must be possible to set up laboratory experiments. C. Economics is not a science since only​ biology, physics and chemistry can be called a science. D. Economics is not a science since the models developed are a simplification of the real world.
answer

A. Economics is a science since the study of economics uses models and theories that are subject to empirical testing. This is the correct answer.
question

The impact of the national debt on the​ economy’s unemployment is an example of A. macroeconomics analysis. B. microeconomic analysis. C. irrational economics. D. behavioral economics.
answer

A. macroeconomics analysis. This is the correct answer.
question

Economics is A. the study of how the stock market works. B. the study of how unlimited resources are allocated to satisfy limited wants. C. the study of how limited resources are allocated to satisfy unlimited wants. D. the study of money.
answer

C. the study of how limited resources are allocated to satisfy unlimited wants.
question

The three fundamental economic questions that a nation addresses in order to allocate​ society’s scarce resources include all of the following ​except: A. How will the items be​ produced? B. Why will the items be​ produced? C. What and how much will be​ produced? D. For whom will the items be​ produced?
answer

B. Why will the items be​ produced?
question

Each country has a unique economic system to allocate its scarce resources.​ However, the economic system of most of the​ world’s nations are a combination of the _______________ system and the __________________ system.
answer

Central Planning; Price
question

Decisions must frequently be made by​ individuals, organizations, and even nations. Facilitating better​ decision-making is a fundamental goal of economics. The analytical framework advocated by economists that enables one to make informed decisions is called A. the science of positive economic analysis. B. survival of the fittest. C. the science of enlightenment. D. the economic way of thinking.
answer

D. the economic way of thinking.
question

Which of the following is a true statement about​ self-interest as used in the study of​ economics? A. ​Self-interest implies that people are selfish. B. Any action can be based on​ self-interest if the person has some reason for the action. C. ​Self-interest means that people want greater levels of wealth more than anything else. D. ​Self-interest means that people will never perform an act of charity.
answer

B. Any action can be based on​ self-interest if the person has some reason for the action.
question

A politician states​ “taxes should be raised to provide more spending on school lunch​ programs.” This is A. a ceteris paribus assumption. B. a positive economic statement. C. a normative economic statement. D. an economic fact.
answer

C. a normative economic statement.
question

What is the relationship between wants and​ resources? A. The wants of an individual determine the amount of money​ (resources) that they will need to earn. B. Wants are developed by an​ individual’s self-interest while resources are developed by empirical analysis. C. Wants are studied in macroeconomics and resources are studied in microeconomics. D. Resources are used to produce things that satisfy​ people’s wants.
answer

D. Resources are used to produce things that satisfy​ people’s wants.
question

Economics is best defined as the study of A. how the government runs the financial system. B. financial markets and making money. C. how people allocate limited resources to satisfy unlimited wants. D. how to budget personal income.
answer

C. how people allocate limited resources to satisfy unlimited wants.
question

Suppose a studenta student is trying to decide whether or not to take another economics classtake another economics class. Which of the following is not an aspect of the economic way of thinking that would apply in this​ decision-making process? A. Flipping a coin. B. Responding to incentives. C. ​Self-interest. D. Rationality.
answer

A. Flipping a coin.
question

The ultimate purpose of economics is A. to enable one to make predictions on what the stock market is going to do. B. to study how individuals make choices. C. to teach us how to make money. D. to motivate people so they work harder.
answer

B. to study how individuals make choices.
question

Which of the following would be a topic of study in microeconomicsmicroeconomics​? A. Federal government spendingFederal government spending. B. The amount of steel purchased by General MotorsThe amount of steel purchased by General Motors. C. UnemploymentUnemployment. D. InflationInflation.
answer

B. The amount of steel purchased by General MotorsThe amount of steel purchased by General Motors.
question

Consider the following statement based on a positive economic analysis that assumes that all other things remain​ constant: Falling gasoline pricesFalling gasoline prices will result in additional vacation traveladditional vacation travel. Which of the following​ (initially assumed​ constant) could occur and thus offset the stated​ outcome? A. Higher employmentHigher employment. B. Lower income taxesLower income taxes. C. Improved highway safetyImproved highway safety. D. An increase in hotel taxes at popular resorts
answer

D. An increase in hotel taxes at popular resorts
question

Which of the following is not true about economic​ models? A. A model is a simplified representation of the real world. B. In comparing two​ models, the simpler one is​ better, other things equal. C. Models are used to explain and predict human behavior. D. A good model must be realistic.
answer

D. A good model must be realistic.
question

incorrect, Concept Question 3.1 Based on the recommendation of a​ friend, you buy a ticket and attend a movie with high expectations. After seeing the​ movie, you think that it is the worst film ever made and that it was a complete waste of money. This situation A. is consistent with rational behavior because you had thought that you were going to like the movie. B. has nothing to do with the rationality assumption. C. demonstrates that the rationality assumption is false because you were worse off for seeing the movie. D. demonstrates that you behaved irrationally because you​ didn’t get enough information prior to attending the movie.
answer

A. is consistent with rational behavior because you had thought that you were going to like the movie.
question

An increase in the price of gasolinegasoline will reduce the amount of gasolinegasoline purchased. This is A. a negative economic statement. B. a normative economic statement. C. a positive economic statement. D. an economic assumption.
answer

C. a positive economic statement.
question

A​ society’s institutional mechanism for determining the way in which scarce resources are used to satisfy human desires refers to its A. economic system. B. macroeconomics. C. economy. D. economic infrastructure.
answer

A. economic system.
question

Which of the following predictions appears to follow from a model LOADING… based on the assumption that​ rational, self-interested individuals respond to​ incentives? For every 10 exam points Myrna must earn in order to pass her economics course and meet her graduation​ requirements, she will study one additional hour for her economics test next week. A. Based on the rationality assumption. B. Not based on the rationality assumption.
answer

A. Based on the rationality assumption.
question

A coin toss will best predict​ Leonardo’s decision about whether to purchase an expensive business suit or an inexpensive casual outfit to wear next week when he interviews for a​ high-paying job he is seeking. A. Based on the rationality assumption. B. Not based on the rationality assumption.
answer

B. Not based on the rationality assumption.
question

Celeste, who uses earnings from her regularly scheduled hours of​ part-time work to pay for her room and board at​ college, will decide to buy a newly released DVD this week only if she is able to work two additional hours. A. Based on the rationality assumption. B. Not based on the rationality assumption.
answer

A. Based on the rationality assumption.
question

The economic way of thinking is best described as A. a set of economic rules handed down from one generation to the next. B. an analytical framework enabling one to reach informed conclusions. .C. the collected writings of the economics Nobel Prize winners. D. the glossary of terms at the back of your textbook.
answer

B. an analytical framework enabling one to reach informed conclusions.
question

The ceteris paribus assumption means A. more is better. B. all people are rational. C. people respond to incentives. D. other things equal.
answer

D. other things equal.
question

Until​ 2008, the people of the fictitious nation of Dor relied mainly on private car companies to determine how many automobiles to produce. After​ 2008, the people of Dor have been relying on the Dor government to determine how many automobiles to produce. This represents a shift in the economic system of Dor from A. Central Planning to Market System. B. Command and Control to Price System. C. Central Planning to Command and Control. D. Market System to Central Planning.
answer

D. Market System to Central Planning.

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