CHAP 1 SELF TEST

Which of the following questions could be answered using economics?

"How are the prices of goods and services determined?" "How does pollution affect the economy, and how should government policy deal with these effects?" "Why do firms engage in international trade, and how do government policies affect international trade?"

Fill in the blank: ____________ is the study of how households and businesses make choices, how they interact in markets, and how the government influences their choices.

Microeconomics

Which of the following best describes the characteristics of models used in economics?

Models are simplifications of reality that include only essential elements and exclude less relevant details.

Let V1 equal the value of a variable in period 1, and V2 equal the value of the same variable in period 2. What is the rate of growth between periods 1 and 2?

[(V2 - V1)/V1]×100

In what type of economy does the government decide how economic resources will be allocated?

a centrally planned economy

When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?

a market

What type of assessment is one in which a person's values and political views form part of that assessment?

a normative assessment

Which of the following is achieved when a good or service is produced up to the point where the marginal benefit to consumers is equal to the marginal cost of producing it?

allocative efficiency

What is the name given to the practical application of an invention?

an innovation

Which of the following covers the study of topics such as inflation and unemployment?

macroeconomics

In Solved Problem 1-1: "Apple Computer Makes a Decision at the Margin" which of the concepts below is most applicable in solving the problem?

marginal analysis

What types of economies require that answers be given to the following questions: what goods and services will be produced, how will the goods and services be produced, and who will receive the goods and services produced?

market economies, centrally planned economies, and mixed economies

Which of the following is the best classification for the economies of the United States, Canada, Japan, and Western Europe?

mixed economies

What type of economic analysis is concerned with the way things ought to be?

normative analysis

Which of the following is not an essential component of an economic model?

normative statements

What is the stock of computers, factory buildings, and machine tools used to produce goods better known as?

physical capital

Which of the following involves an estimation of the benefits and costs of a particular action?

positive analysis

What does an economy achieve by producing a good or service at the least possible cost?

productive efficiency

Human capital is

the accumulated training and skills that workers possess.

Which of the following is an example of a positive question?

If the college increased tuition, would class sizes decline?

Which of the following statements best defines scarcity?

Scarcity is a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Which of the following questions can be answered using normative economic reasoning?

Should a college cut tuition to stimulate enrollments?

Which of the following is not among the fundamental economic questions that every society must solve?

What goods and services will be exchanged?

What type of statement would "A minimum wage actually reduces employment" be considered?

a positive statement

What is the name given to the development of a new good or a new process for making a good?

an invention

Fill in the blanks. In economics, as well as in life, optimal decisions are made _____________

at the margin

Which of the following terms best refers to a fair distribution of economic benefits?

equity

What is the purpose of an economic hypothesis?

to establish a causal relationship

Fill in the blanks. The slope of a straight line equals the change in value on the ____________ axis ____________ by the change in the value on the other axis between any two points on the line.

vertical; divided

Which of the following terms summarizes the situation in which a buyer and a seller exchange a product in a market and, as a result, both are made better off by the transaction?

voluntary exchange