Chapter 1 Quiz
What kind of relationship is shown in the graph?
A direct relationship
To which of the following household-type(s) does the phrase "unlimited wantsLOADING... and limited resourcesLOADING..." apply? I. A low-income household II. A middle-income household III. A high-income household
Above all
"A reduction in income tax rates will result in more people working." Which of the following (initially assumed constant) could occur and this offset the stated outcome?
An increase in the outsourcing of jobs.
Which of the following is a true statement about self-interest as used in the study of economics?
Any action can be based on self-interest if the person has some reason for the action.
Economic models relate to the way people think rather than to the way people act.
FALSE
Suppose a student is trying to decide whether or not to take another economics class. Which of the following is not an aspect of the economic way of thinking that would apply in this decision-making process?
Flipping a coin.
Which of the following statements best demonstrates the concept of bounded rationality?
Individuals make short-run choices that are no consistent with their long-term goals.
Much of human behavior can be explained in terms of how individuals respond to changing incentives over time.
TRUE
The rationality assumption of economics is the assumption that people do not intentionally make decisions that would leave them worse off.
TRUE
Suppose that the U.S. federal government has borrowed $500 billion to expand its total spending on goods and services across the entire economy in an effort to boost by $500 billion the aggregate production by the nation's firms. Would we apply microeconomic or macroeconomic analysis to analyze this policy action?
We would apply macroeconomic analysis because this policy action would affect the behavior of the economy as a whole.
The three fundamental economic questions that a nation addresses in order to allocate society's scarce resources include all of the following except:
Why will the items be produced? Where the items will be produced?
A politician states "taxes should be raised to provide more spending on school lunch programs." This is
a normative economic statement.
An increase in the price of clothing will reduce the amount of clothing purchased. This is
a positive economic statement.
The economic way of thinking is best described as
an analytical framework enabling one to reach informed conclusions.
What kind of relationship is shown in the graph?
an inverse relationship.
Economics
assumes individuals are rational and respond to different incentives.
Economic models
can be used to explain or predict economic phenomena.
During her years of college, Dominique discovered that her three favorite subjects were astronomy, chemistry, and political science. She chose to major in astronomy because she had seen data indicating that science majors earn higher-than-average wages and because she liked astronomy better than both chemistry and political science. Upon graduation, however, she learned that average wages in chemistry fields were 20 percent higher than average wages earned by astronomers. Did Dominique's behavior violate the rationality assumption? Dominique's decision to major in astronomy
did not violate the rationality assumption because she preferred astronomy, and because, at the time she made her decision, data showed science majors earn higher-than-average wages.
Microeconomics is the part of economic analysis that studies decision making undertaken by ________. Macroeconomics is the part of economic analysis that studies the behavior of ________.
individuals and forms; the economy as a whole
The rationality assumption implies that
individuals will not intentionally make decisions that leave them worse off.
Based on the recommendation of a friend, you buy a ticket and attend a movie with high expectations. After seeing the movie, you think that it is the worst film ever made and that it was a complete waste of money. This situation
is consistent with rational behavior because you had thought that you were going to like the movie.
The impact of the national debt on the economy's unemployment is an example of
macroeconomics analysis.
The intersection of the x axis and the y axis is called the
orgin
The ceteris paribus assumption means
other things equal. "other things constant."
An economic model
should capture only the essential relationships that are sufficient to analyze a particular problem or answer a particular question.
Some people claim that the "economic way of thinking" does not apply to issues such as health care. All of the following choices clearly demonstrate how economics applies to this issue, except when
the individual decides against health care as it may make him better off.
The ultimate purpose of economics is
to study how individuals make choices.
One of your classmates, Sally, is a hardworking student, serious about her classes, and conscientious about her grades. Sally is also involved, however, in volunteer activities and an extracurricular sport. Is Sally displaying rationalLOADING... behavior?
Yes, she is using her time allocated among school, studying, sports and volunteer work in a manner she deems best.