Microeconomics Chapter 1 Quiz and Test – Flashcards

The effect of higher cigarette taxes on the quantity of cigarettes sold. This is a __________ issue.

The effect of high income taxes on the total amount of consumer spending. This is a __________ issue.

The reasons for the economies of East Asian countries growing faster than the economies of sub-Saharan African countries. This is a __________ issue.

The reasons for low rates of profit in the airline industry. This is a __________ issue.

Why are models based on assumptions? A. Because models are very different from theories. B. Because models are only concerned about questions of equity, not question of efficiency. C. Because models are not intended to analyze real-world events. D. Because models have to be simplified to be useful.

Economists assume that the only reason people take the actions they do is in response to economic incentives. A. True B. False

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls A. scarcity B. rationality C. economics D. the market

Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational? A. We cannot assume that this pricing decision was rational because we do not have enough information to make an assumption. B. Microsoft's choice was rational: the price will maximize profit. C. When we assume the managers at Microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationally. D. Microsoft's choice cannot be rational: the price is clearly more than most people are willing and able to pay.

When the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives, A. the policies are likely to be more successful than policies that cost firms more, but they do not recognize economic incentives. B. pollution is likely to increase. C. the policies are futile because where the environment is concerned, it has been repeatedly shown that firms do not respond to economic incentives. D. the policies are consistent with economic incentives.

A hypothesis in an economic model is A. a statement that may be wither correct or incorrect about an economic variable. B. usually about a causal relationship. C. tested before it can be accepted (or not rejected). D. all of the above.

__________, __________, and __________ decide(s) what goods and services will be produced.

Any model is based on making assumptions because A. we cannot analyze an economic issue unless we reduce its complexity. B. models have to be simplified to be useful. C. both a and b. D. neither a nor b.

Which of the following is not a step economists follow when developing an economic model? A. Use economic data to test the hypothesis. B. Formulate a testable hypothesis. C. Decide on the assumptions to use in developing the model. D. Revise the model if ti fails to explain well the economic data. E. Make value judgements to be proven or disproven.

Macroeconomics is most likely to include the study of A. firm interaction. B. religious decisions. C. consumer choices. D. inflation. E. household choices.

In the United States, who receives the goods and services produced depends largely on ____________________________________________________.

Which of the following statements about economics as a social science is correct? A. Economics uses normative analysis but not positive analysis. B. Economics is not useful in analyzing the effects of government policy. C. Economics considers human behavior only in the context of business. D. Economics studies the actions of individuals.

A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payment s by Medicare to nursing homes for short-term stays by patients that require therapy or care upon leaving hospitals. Assume the corporation is considering expanding the number of "beds" it offers at its nursing homes. Given the changes to Medicare, if the marginal benefit of offering an additional bed is $2,000 and the marginal cost is $5,000 per bed, then the corporation _______________________ offer additional beds. A. should not B. should be

Which of the following areas of economics studies issues such as ways to reduce teenage smoking? A. Microeconomics B. Macroeconomcs C. Both microeconomics and macroeconomics give equal emphasis to these problems. D. This cannot be determined by the information given.

Which of the following areas of economics studies issues such as whether government intervention is capable of reducing the severity of recessions? A. Microeconomics B. Macroeconomcs C. Both microeconomics and macroeconomics give equal emphasis to these problems. D. This cannot be determined by the information given.

In a market system, how does society decide who will receive the goods and services produced? A. Who receives the goods and services produced depends largely on how income is distributed. B. Consumers determine who receives the goods and services produced. C. The government determines the goods and services produced. D. Firms determine who receives the goods and services produced.

_________________ is concerned with what is, and ___________________ is concerned with what ought to be. Economics is about ________________, which measures the costs and benefits of different courses of action. Pick from positive analysis, negative analysis, or normative analysis

A ____________ economy is an economy in which most economic decisions result from the interaction of buyers and sellers in market but in which the government plays a significant role in the allocation of resources.

Economists use the word marginal to mean extra or additional benefit or cost of a decision. An optimal decision occurs when A. marginal cost is zero. B. marginal benefit is maximized. C. marginal benefit is greater than marginal cost. D. marginal benefit equals marginal cost.

Firms choose how to produce the goods and services they sell. In many cases, firms face a trade-off between using mortal workers or using more machines. For example, A. many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer machines and more workers and production method in China that uses more machines and fewer workers. B. many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines. C. a local service station has to choose whether to provide car repair services using more diagnostic computers to support their auto mechanics and fewer tools to support their auto mechanics or more tools to support their auto mechanics and fewer diagnostic computers to support their auto mechanics. D. movie studios have to choose whether to produce animated films using more highly skilled animators to draw them by hand or fewer highly skilled animators and more low-skill animators.

What goods and services will be produced, how the goods and services will be produced, and who will receive the goods and services are determined: A. in centrally planned economics by the government. B. in market economies by the decisions of households and firms interacting in markets. C. in mixed economies by the government. D. in market economies partly by the decisions of buyers and sellers and interacting in markets and partly by the government. E. both a and b are true.

Economic models are: A. simplified versions of reality designed to analyze "what is" to explain human decision making in any context. B. complex mathematical formulas designed to identify optimal market outcomes and rude policymakers. C. simplified versions of reality designed to analyze " what ought to be" to help the government improve outcomes. D. simplified versions of reality designed to analyze "what is" to explain human decision making in a business context. E. complex mathematical formula designed to forecast future economic events such as recessions.

Trade-offs force society to answer questions such as what goods and services will be produced, how will the goods and services be produced, and who will receive the goods and services produced. Which of the following countries has an economy where the government makes these decisions? A. The United States B. Japan C. Canada D. North Korea

Germany has a market economy. As such, Germany's economy (relative to centrally planned economies) tends to result in A. produce efficiency but not necessarily allocate efficiency or equity. B. allocative efficiency and equity but not necessarily productive efficiency. C. equity but not necessarily productive efficiency or allocative efficiency. D. allocative efficiency but not necessarily productive efficiency or equity. E. productive efficiency and allocative efficiency but not necessarily equity.

Macroeconomics is most likely to include the study of A. firm interaction. B. economic growth. C. household choices. D. religious decisions. E. consumer choices.

Suppose an analyst estimates the gains to workers from minimum wage law. This is an example of _____________ _____________.

To develop a model that will answer economic questions, economists typically: A. first make simplifying assumptions, then formulate a hypothesis, test the hypothesis, and finally revise the model if necessary. B. firm make a testable hypothesis, then formulate assumptions, test the assumptions, and finally revise the model if necessary. C. first analyze statistics, then identify sources of correlation, and finally build a simplified model to explain this correlation. D. first start with any complex model and then revise as necessary to make the model as simple as possible. E. first formulate a hypothesis that may or may not be correct, then build a simplified model to explain this hypothesis, and finally make simplifying assumptions.

A portion of microeconomics examines: A. the economy as a whole, such as why some economies have grown faster than others. B. the economy as a whole, such as what causes unemployment C. how individual firms make choices, such as how they decide what prices to charge. D. policy issues, such as whether government intervention can reduce the severity of recessions. E. all of the above.

How do market economies ultimately determine what goods and services are produced, how the goods and services will be produced, and who will receive the goods and services? A. Firms determine what goods and services are produced and how to produce them, and markets determine who will receive them. B. Firms determine what goods and services are produced, efficiency determines how to produce them, and markets determine who will receive them. C. Consumer determine what goods and services are produced, firms determine how to produce them, and markets determine who will receive them. D. The government determines what goods and services are produced, how to produce them, and who will receive them. E.Consumer determine what goods and services are produced, firms determine how to produce them, and equity determines who will receive them.

Suppose Dell is currently selling 3,000,000 computers per year. However, managers at Dell are considering whether to increase production by 300,000 computers. One manager explains that after increasing production by this amount, total profit would be $100 million. Given this information, should Dell increase production by 300,000 computers? A. Yes, because Dell would earn a profit. B. No, because increasing production by 300,000 computers would decrease the price of computers. C. Information abut the additional revenue earned and the additional cost incurred from producing 300,000 additional computers is required to answer this question. D. Information about the additional cost incurred from producing 300,000 additional computers is required to answer this question. E. Information about the total revenue earned and the total cost incurred from producing 3,300,000 computers is required to answer this question.

Every society faces trade-offs because we live in a world of scarcity. Suppose a student-athlete has the opportunity to earn $600,000 next year playing for a minor league baseball team, $500,000 next year playing for a European professional football team, or $0 returning to college for another year. The opportunity cost of the student-athlete returning to college next year is $______________. (Enter your response as an integer.)

Macroeconomics examines: A. policy issues, such as how the government can influence the decisions of individual firms. B. how individual households make choices, such as how they react to changes in product prices. C. the economy as a whole, such as how rapidly the economy grows. D. the economy as a whole, such as how much new machinery and equipment an individual firm decides to purchase. E. all of the above.

Examining whether government intervention can reduce the severity of recessions is most likely an issue in ________________.

Economics assumes people and firms: A. know everything, respond to incentives, and make decisions by comparing marginal benefits with marginal costs. B. use all available information to achieve their goals, respond to incentives, and make decisions by comparing total benefits with total costs. C. are rational, respond to incentives, and make all-or-nothing decisions. D. are rational, respond to incentives, and make decisions by comparing marginal benefits with marginal costs. E. use all available information to achieve their goals, respond to incentives, and make decisions by continuing any activity up to the point where the marginal benefit equals zero.

A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payments by Medicare to nursing homes for short-term stays by patients that require therapy or care upon leaving hospitals. Assume the corporation is considering expanding the number of "beds" it offers at its nursing homes. Given the changes to Medicare, if the marginal benefit of offering an additional bed is $9,000 and the marginal cost is $3,000 per bed, then the corporation ____________ offer additional beds. should should not