Delgado-Econ 201 Chapter 1 Questions

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.

Which one of the following expressions best states the idea of opportunity cost?

"There is no such thing as a free lunch"

The economic perspective entails:

A comparison of marginal benefits and marginal costs in decision making.

A well-tested economic theory is often called:

A principle

In constructing models, economists: A. make simplifying assumptions. B. include all available information. C. must use mathematical equations. D. attempt to duplicate the real world.

A.

The basic purpose of the other-things-equal assumption is to: A. allow one to reason about the relationship between variables X and Y without the intrusion of variable Z. B. allow one to focus upon micro variables by ignoring macro variables. C. allow one to focus upon macro variables by ignoring micro variables. D. determine whether X causes Y or vice versa.

A.

Suppose an economist says that "other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that: the quantity of bananas purchased determines the price of bananas. A. all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant. B. economists can conduct controlled laboratory experiments. C. one cannot generalize about the relationship between D. the price of bananas and the quantity purchased.

B.

Which of the following is a correct statement? A. Economic concepts or laws that are valid during depression are necessarily valid during prosperity. B. Although they are generalizations, economic laws are useful because they allow us to predict and therefore influence or adjust to events. C. Economics is as scientific as are physics and chemistry because economic laws are as quantitatively precise as the laws of physics or chemistry. D. Because economics is concerned with questions of "ought," it is a branch of applied ethics and not scientific.

B.

A person should consume more of something when its marginal:

Benefit exceeds its marginal cost

Kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from day to day. For a couple of weeks she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the scientific method to better understand ice cream buying habits, her next step is to: A. conclude definitively that people buy more ice cream when the temperature rises. B. state her findings as a well-tested economic principle. C. use the observed data to form a hypothesis about ice cream buying behavior. D. throw out the data if it does not show a perfect relationship between buying habits and the other information she has collected.

C.

The Latin term "ceteris paribus" means: A.that if event A precedes event B, A has caused B. B. that economics deals with facts, not values. C. other things equal. D. prosperity inevitably follows recession.

C.

The term "other things equal" means that: A. the associated statement is normative. B. many variables affect the variable under consideration. C. a number of relevant variables are assumed to be constant. D. when variable X increases so does related variable Y.

C.

The study of economics is primarily concerned with:

Choices the are made in seeing the best use of resources.

The process by which economists test hypotheses against facts to develop theories, principles, and models is called:

the scientific method.

The scientific method is:

used by economists and other social scientists, as well as by physical scientists and life scientists, to formulate and test hypotheses.

Kara was out jogging and, 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.

Which of the following terms implies the least degree of confidence in an economic generalization?

Hypothesis

You should decide to go to a movie:

If the marginal benefit of the movie exceeds thee marginal cost.

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.

Purposeful behavior suggests that:

Individuals may make different choices because of different desired outcomes.

An economic hypothesis:

Is a possible explanation of cause and effect.

According to economists, economic self-interest:

Is a reality that underlines economic behavior

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

Look for and pursue opportunities to increase their utility

Economics involves marginal analysis because:

Most decisions involve changes from the present situation.

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 my financial investment." His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:

Opportunity costs

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

Purposeful behavior means that:

People weigh costs and benefits to make decisions.

For economists, the word "utility" means:

Pleasure or satisfaction

Which of the following terms implies the greatest degree of confidence in an economic generalization?

Principle

According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because:

Productive resources are limited

Economists contend that most economic decisions are:

Purposeful

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

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service 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.

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

Economics may best be defined as the:

Social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

Opportunity costs exist because:

The decision to engage in one activity forgoing some other activity.

f 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.

Which of the following most closely relates to the idea of opportunity costs?

Trade-offs

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

Utility

Economic theories:

are generalizations based on a careful observation of facts.