Macro Economics – Chapter 1 Test

For economists, the word "utility" means:

pleasure or satisfaction

In economics, the pleasure, happiness, or satisfaction received from a product is called:

utility

When economists say that people act rationally in their self-interest, they mean that individuals:

look for and pursue opportunities to increase THEIR utility

Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says "at least I didn’t lose any money on financial investment." His economist friend points out that in effect he did lose money because he could receive 3 percent return on the 1,000 if he had bought a band certificate of deposit instead of the coins. The economist’s analysis in this case incorporates the idea of:

opportunity cost

A person should consume more of something when its marginal:

benefit exceeds its marginal cost

The study of economics is primarily concerned with:

choices that are made in seeking the best use of resources

The economic perspective entails:

a comparison of marginal benefits and marginal costs in decision making

Purposeful behavior suggests that:

individuals may make different choices because of different desired outcomes

Purposeful behavior means that:

people weigh costs and benefits to make decisions

Economics involves marginal analysis because:

most decisions involve changes from the present situation

You should decide to go to a movie:

if the marginal benefit of the movie exceeds the marginal cost

Opportunity costs exists because

the decision to engage in one activity means forgoing some other activity

The assertion that "there is no free lunch" means that:

all production involves the use of scarce resources and thus the sacrifice of alternative goods

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of:

purposeful behavior

If someone produced too much of a good, this would suggest that:

the good was produced past the point where its marginal cost exceeded its marginal benefit

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact:

implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost

In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:

scarcity and opportunity costs

Which of the following expressions best states the idea of opportunity costs?

"There is no such thing as a free lunch."

Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This example illustrates:

opportunity costs

Economists contend that most economic decisions are:

purposeful

Alex sees that his neighbors’ lawns all need mowing. He offers to provide the services 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:

rational self-interest because he is attempting to increase his own income by identifying and satisfying someone else’s wants

Kara was out jogging, despite being tired, decided to run one more mile. Based on her actions, economists would conclude that Kara:

decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile

Marco economics approaches the study of economics from the viewpoint of:

the entire economy

Which of the following is associated with macro economics?

An empirical investigation of general price level and unemployment rates since 1990

The problems of aggregate inflation and unemployment are:

major topics of macro economics

Which of the following statement pertains to macro economics?

National income grew by 2.7 percent last year

Macro economics can be best described as the:

study of the large aggregates of the economy as a whole

A normative statement is one that:

is based on value judgments

A positive statement is one that is:

Objective and is based on facts

Which of the following is a positive statement?

The temperature today is 92 degrees

Normative statements are concerned primarily with:

What ought to be

A positive statement is concerned with primarily with:

What is

"Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is:

Positive and correct

Ben says that "an increase in the tax on beer will raise its price." Holly argues that "taxes should be increased on beer because college students drink too much." We can conclude that:

Holly’s statement is normative, but Ben’s is positive.

Macroeconomics is the part of economics concerned with individual units such as a person, a household, a firm, or an industry. This statement is:

Positive but incorrect

The economizing problem is:

The need to make choices because economic wants exceed economic means

The scarcity problem:

persists because economic wants exceed available productive resources

Which of the following is a labor resource?

A computer programmer

Which of the following is a capital resource?

A piece of software used by a firm

The four factors of production are:

Land, Labor, Capital and Entrepreneurial ability

Which of the following lists includes only capital resources (and therefore no labor or land resources)?

Autos owned by a car rental firm; computers at the car rental agency; the vans that shuttle rental costumers to and from the airport.

Economic resources are also called:

factors of production

Which of the following do economists consider to be a capital?

A construction crane

The main function of the entrepreneur is to:

innovate