Chapter 1 Limits, Alternatives, and Choices

The concept or term that refers to the notion that all variables except those under immediate consideration are held constant for a particular analysis is know as:

The other-things-equal assumption, and ceteris paribus.

True of false: All nations have experienced widespread unemployment and unused production capacity from business downturns at one time or another.

True

Which of the following results from having scarce economic resources? a) The production of limited goods and services. b) Poverty and unequal distribution of wealth. c) The production of unlimited goods and services. d) Deflation. e) Inflation

a) The production of limited goods and services.

A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions is knows as an: a) economic theory. b) economic model. c) economic principle. d) normative economic statement.

a) economic theory and c) economic principle

Which of the following describes a budget line?

A curve showing various combinations of two products a consumer can purchase with a specific amount of income.

Which of the following define positive economics?

A focus on facts and cause-and-effect relationships. A focus on scientific statements about economic behavior. A focus on theory development and testing.

Which of the following best clarifies the "other-things-equal" assumption?

All variables except those under immediate consideration are held constant for a particular analysis.

Which of the following best describes the relationship between trade-offs and opportunity cost?

As you give up consumption or production of one good over another (the trade-off), an opportunity cost is incurred.

Which of the following combinations are unattainable given a consumer's budget line?

Combinations that fall beyond the budget line.

The straight-line budget constraint indicates_____opportunity cost?

Constant

Capital goods differ from consumer goods in that:

Consumer goods satisfy wants directly. And capital goods satisfy consumer wants indirectly through the production of consumer goods.

____goods satisfy wants directly, whereas___goods do so indirectly.

Consumer; Capital

Consumers must forego choices based on a limited budget because:

Consumers spend their limited budget purchasing a combination of goods that maximize their utility.

Normative, value-based policy questions or statements give rise to:

Controversy or disagreement among economists.

True of False: Positive economics encourages value judgments.

False

Even at higher levels of______, people will still face spending trade-offs, choices, and opportunity costs.

Income

An increase in_____will shift the budget line to the right.

Income.

_____economics considers the desirability of certain aspects of the economy and underlies expressions of support for particular economic policies.

Normative

As individuals' incomes rise, they will still be confronted with which of the following?

Opportunity cost, Trade-offs, and Choices.

_____economics focuses on facts and cause-and-effect relationships.

Positive

_____economic analysis concerns what is, whereas _____economic analysis embodies subjective feelings about what ought to be.

Positive, Normative

Arable land, water, machinery and a professional baseball player are all considered scarce economic ______ to production.

Resources

Positive economics______value judgments, tries to establish_____statements about economic behavior, and deals with_____economic events.

avoids; scientific; actual

Factors of production include:

labor, crude oil, land, entrepreneurial ability, capital.

As a result of our ______incomes and _______ wants, it is in our self-interest to economize or pick and choose goods and services that maximize our satisfaction.

limited; insatiable

Trade-offs arising from limited resources give rise to:

opportunity costs