Econ Chapter 1

Which of the following is not a central focus of the "economic perspective"?

The scientific method.

The basic economic problem is essentially one of deciding how to make the best use of:

limited resources to satisfy unlimited economic wants.

The key economic concept that serves as the basis for the study of economics is:

scarcity.

As a consequence of the condition of scarcity:

individuals and communities have to make choices from among alternatives.

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

It means that there is an opportunity cost when resources are used to provide "free" products.

One major feature of the economic perspective is:

the assumption of purposeful behavior by individuals.

The utility of a specific product:

varies from person to person using the product.

Which expression is another way of saying "marginal cost"?

additional cost

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

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

From an economic perspective, when a student decides to attend another year of college, the student has concluded that the marginal:

benefits of attending college are greater than the marginal costs.

Economic models do not reflect the full complexity of reality and instead are based on:

purposeful simplifications.

The purpose of the ceteris paribus assumption used in economic analysis is to:

restrict the analysis to the effect of a single economic factor.

Which question is an illustration of a macroeconomic question?

How does a cut in the business tax rate increase business investment in the economy?

Which is an illustration of a microeconomic question?

Will a new type of television set increase the number of buyers?

Which question is an example of a microeconomic question?

Will the merger of two airlines likely lead to higher airline ticket prices?

Macroeconomics focuses on:

total output and the general level of prices in the economy.

The study of how one business firm sets its prices would fall under the study of:

microeconomics.

Which would be considered a macroeconomic study? A study of the effect of:

government spending to increase employment.

Which question is an illustration of a macroeconomic question?

Is the level of employment in the economy sensitive to the quantity of consumer spending?

The macroeconomist would most likely study:

the effects of a reduction in income tax rates on the nation’s total output.

Suppose a consumer has an income of $16, the price of A is $2, and the price of B is $1. Which combination is on the consumer’s budget line?

5A and 6B

Assume that a consumer purchases two products and there is an increase in the consumer’s money income. All other things equal, the most likely effect is:

an outward shift in the budget line because the consumer can now purchase more of both products.

The individual who brings together economic resources and assumes the risk in a capitalist economy is called the:

entrepreneur

Which would not be considered as capital (or an economic resource) by an economist?

a share of corporate stock issued by General Motors

Which is a factor of production?

capital

The production possibilities curve represents which of the following?

maximum combinations of goods attainable with fixed resources

A movement along the production possibilities curve would imply that:

society has chosen a different set of outputs.

Which statement is an economic rationale for the law of increasing opportunity cost?

Many economic resources are better at producing one product than another.

The opportunity cost of a new national park is the:

alternative uses for the land and funding for the park.

In a production possibilities table, the most-valued or optimal point for society is determined by:

the equality of marginal benefits and marginal costs.

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

shift outward its production possibilities curve.

The individual who brings together economic resources and assumes the risk in a capitalist economy is called the:

entrepreneur.

The utility of a specific product:

varies from person to person using the product.

If an economy that produces capital and consumer goods is operating at a point on its production possibilities curve, this indicates that:

more capital goods can be produced only at the cost of some consumer goods.

The opportunity cost of a new national park is the:

alternative uses for the land and funding for the park.

If country A has a comparative advantage in the production of good X over country B, then:

The opportunity cost of producing X in country A is lower than in country B

Which is an illustration of a microeconomic question?

Will a new type of television set increase the number of buyers?

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

It means that there is an opportunity cost when resources are used to provide "free" products.

Economic growth may be represented by a:

rightward shift of the production possibilities curve.

Which question is an illustration of a macroeconomic question?

How does a cut in the business tax rate increase business investment in the economy?

The opportunity cost of producing 100 barrels of chemicals in Germany is one ton of steel. In France, the opportunity cost of producing 100 barrels of chemicals is two tons of steel. In this case:

Germany has a comparative advantage in the production of chemicals

Assume that money income decreases and the prices of products X and Y both decrease, then the budget line:

may shift either outward from or inward to the origin.

Money is not considered to be an economic resource because:

as such it is not productive.

Which statement is an economic rationale for the law of increasing opportunity cost?

Many economic resources are better at producing one product than another.

Macroeconomics focuses on:

total output and the general level of prices in the economy.

Opportunity cost is best defined as:

the value of the best foregone alternative.

Microeconomics focuses on:

the individual units that make up the whole of the economy.

30. Economic models do not reflect the full complexity of reality and instead are based on:

purposeful simplifications.

31. The alternative combinations of two goods which a consumer can purchase with a given money income is:

a budget line.

32. A movement along the production possibilities curve would imply that:

society has chosen a different set of outputs.

When an economist says that there is "too much of a good thing," the economist is suggesting that:
wants are not unlimited.

the marginal benefit of the thing is less than the marginal cost.

The production possibilities for country X is either 6,000 bushels of soybeans or 10,000 bushels of wheat. The production possibilities for country Y is 2,000 bushels of soybeans and 4,000 bushels of wheat. Which of the following is true?

Country Y should specialize in the growing of soybeans according to the principle of comparative advantage

How is the economic perspective reflected in lines for fast food?

Customers select the shortest line because they believe it will reduce their time cost of obtaining food.

A point inside the production possibilities curve is:

attainable, but the economy is inefficient.

Which question is an example of a microeconomic question?

Will the merger of two airlines likely lead to higher airline ticket prices?

The production possibilities curve bows outward from the origin because:

opportunity costs increase as the production of a good increases.

The term scarcity in economics refers to the fact that:

no country can produce enough products to satisfy everybody’s economic wants.

From an economic perspective, when a student decides to attend another year of college, the student has concluded that the marginal:

benefits of attending college are greater than the marginal costs.