Economics 2301 - Exam 1 Review

Ethics A. is a branch of philosophy. B. are moral rules or standards governing human conduct. C. are rules or standards governing human conduct, but not necessarily moral rules. D. the moral principles of an individual person. E. can be defined in any of the ways above.

can be defined in any of the ways above

Because of scarcity: A. we must sacrifice valuable alternatives to obtain more goods and services we desire. B. the opportunity cost of consumption is zero. C. we can obtain more of a desirable good without sacrificing other goods and services. D. shortages of goods prevail at current market prices. E. both a. and d. are correct.

we must sacrifice valuable alternatives to obtain more goods and services we desire

From an economists' perspective, which of the following observations is not true? a.) Self-interest is purely monetary in nature. b.) Self-interest can include benevolence. c.) Self-interest is a good predictor of human behavior in most situations. d.) Self-interest is not the same as selfishness.

Self-interest is purely monetary in nature.

In a market economy how do we determine who will get the goods and services that have been produced? A. Whoever wants them B. Whoever needs them C. Whoever can afford them D. None of the above.

Whoever can afford them

Which of the following is true? a.) voluntary trades give both parties more in value than what they give up b.) w/o the ability to trade, ppl would not tend to specialize in those areas where they had a comparative advantage c.) ppl can gain by specializing in the production of the good in which they have a comparative advantage. d.) voluntary trade directly increases.... e.) all of the above are true

all of the above are true

Marginal analysis involves: A. comparing the total benefits of all actions to the total costs incurred as a result of those actions. B. abstract thinking, which is never actually utilized by consumers when making purchasing decisions. C. holding all other variables constant when isolating the relationship between two variables. D. comparing the additional benefit from an action to the additional cost.

comparing the additional benefit from an action to the additional cost

Economic goods are: A. only those commodities priced in monetary terms. B. scarce products that are created from scarce resources. C. the opposite of normative economic goods. D. not subject to scarcity. E. only theoretical, not real.

scarce products that are created from scarce resources.

A market economy without any ethics would have: A. no value. B. immorally high prices and profits. C. too much illegal activity. D. only police and the courts to protect consumers. E. maximum free market freedom to achieve maximum productivity.

no value

The completely private ownership of property and the exclusive use of the market system to direct and coordinate economic activity are most characteristic of: A. a command economy. B. a mixed economy. C. a market economy. D. a traditional economy.

a market economy.

"Mandating longer sentences for any criminal's third arrest will lead to a reduction in crime. Less crime will reduce the number of police officers cities will hire." This quotation: A. contains positive statements only. B. contains normative statements only. C. contains both normative and positive statements. D. contains neither normative nor positive statements.

contains positive statements only.

The opportunity cost of going to college includes: A. both tuition and the value of the student's time. B. tuition, but not the value of the student's time, which is a cash cost. C. tuition, but not the value of the student's time, which is a monetary cost. D. neither tuition nor the value of the student's time, since obtaining a college degree makes one's income higher in the future. E. neither tuition nor the value of the student's time, at least at state-supported universities and colleges.

both tuition and the value of the students time

Which of the following is a resource exchanged in the factor markets? A. land B. capital C. labor D. entrepreneurship E. all of the above are traded in the factor markets.

all of the above are traded in the factor markets.

The function of an entrepreneur is to: A. bear the business risks. B. organize the other factors of production. C. innovate. D. do all of the tasks listed.

do all of the tasks listed.

Every time an individual decides to try out new equipment, or finds better ways to manage money, he or she is exhibiting traits of: A. money management. B. entrepreneurship. C. strategic management. D. capital management.

entrepreneurship.

In order for a market's ethics to be effective, all of the following must occur, EXCEPT: A. the ethics must be clearly defined. B. there must be clear penalties for ethics violators. C. everyone must agree to take part in the market. D. there must be enough police or inspectors to find most violations. E. police or inspectors must be unbiased.

everyone must agree to take part in the market

If we know someone pays all their taxes and gives money to charity, we know that

only that they pay their taxes and give money to charity

When economists refer to economic behavior, they mean that: A. from time to time, everyone behaves irrationally. B. changes in incentives influence behavior in unpredictable ways. C. the pursuit of money is the most significant factor influencing decision making. D. rational people try to anticipate the likely consequences of their actions.

rational people try to anticipate the likely consequences of their actions.

A good economic theory: A. includes every detail that affects the economic behavior of interest. B. relies on simplifying assumptions in order to explain economic behavior. C. does not rely on simplifying assumptions. D. is impossible to achieve because of the difficulty of conducting controlled experiments. E. is normative and therefore not testable.

relies on simplifying assumptions in order to explain economic behavior.

Which of the following would break a positive ethic? A. Having lustful daydreams about your best friend's girlfriend (or boyfriend) B. Driving two miles per hour over the speed limit C. Cursing your instructor when you're alone at home at 3 AM answering these stupid questions D. Spending the day sleeping & watching TV instead of studying for your classes E. None of the above

Driving two miles per hour over the speed limit

Which of the following serve as the language of the market system? A. Monetary and fiscal policies B. Morals C. Market prices D. Governments

Market prices

Mike can wash a car in 5 minutes and wax a car in 15 minutes. Tony can wash a car in 10 minutes and wax a car in 20 minutes. Which of the following is true? Mike can wash a car faster and has comparative advantage in washing cars. a.) Mike can wash a car faster and has comparative advantage in washing cars. b.) Mike can wax a car faster and has comparative advantage in waxing cars. c.) Tony can wash a car faster and has comparative advantage in washing cars. d.) Tony can wax a car faster and has comparative advantage in waxing cars. e.) Both a. and b. are true.

Mike can wash a car faster and has comparative advantage in washing cars.

Which of the following is true? A. In the product markets, firms are buyers and households are sellers. B. In the factor markets, firms are sellers and households are buyers. C. Firms receive money payments from households for labor, land, capital, and entrepreneurship. D. All of the above are true. E. None of the above is true.

None of the above is true.

Which of the following is true? A. Poverty could be eliminated but scarcity could not. B. Scarcity could be eliminated but poverty could not. C. Both scarcity and poverty could be eliminated. D. Neither scarcity nor poverty could be eliminated.

Poverty could be eliminated but scarcity could not.

Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy? A. Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments. B. Their positive statements help us understand the good results of a policy change, and their normative statements help us understand the negative results. C. We really do not have to worry about them since trained economists never make normative statements. D. Economists are always making assumptions, and policy should not be based on assumptions. E. Economists are "tricky" by nature, so we need to be able to distinguish truth from political rhetoric.

Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments.

A free market lacking clear ethical rules, adequate oversight and meaningful punishments for rule breakers might suffer: A. decrease in market demand. B. decrease in market supply. C. decrease in equilibrium price. D. total market collapse. E. all of the above.

all of the above

If people are self-interested, A. they will always choose work over leisure. B. they will never choose work over leisure C. as their preferences for leisure time increase, they are likely to work less. D. as the wages they are offered increase, they are likely to work more. E. both c. and d. are true.

both c. and d. are true.

Economic resources are also known as: A. profits B. financial capital. C. factors of production. D. costs.

factors of production

Which of the following policies would be most effective in promoting monthly water conservation? A. A $100 flat fee for any household that uses over 1500 gallons B. A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons C. A $125 fee for all households in addition to a $0.50 per gallon fee for all consumption D. A $200 fee for all households with zero charge per gallon of consumption E. A $50 fee for all households with zero charge per gallon of consumption

A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons

Which of the following are reasons why most owners of companies want their employees to act ethically? A. Because they care about the well-being of their customers B. To enhance productivity C. To maximize public good will toward the company D. To avoid large fines and expensive lawsuits E. All the above are reasons why.

All of the above are reasons why

The marginal benefit to you of drinking bottled iced tea is $1.50. The price of a bottle of iced tea is $1.25. A. If you purchase iced tea you will suffer a net loss of 25 cents per bottle. B. If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents. C. You will not purchase iced tea if you are acting rationally. D. If you are acting rationally, you will purchase iced tea until the marginal benefit falls to 25 cents.

If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents.

Which of the following is true with regard to production possibilities curves? A. Underutilized resources or those not being put to their best uses are illustrated by output combinations along the production possibilities curve. B. Economic growth means a movement along an economy's production possibilities curve in the direction of producing more consumer goods. C. Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future. D. From a point inside the production possibilities curve, in order to get more of one thing, an economy must give up something else.

Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future.

Which of the following is true of resources? A. Their availability is unlimited. B. They are the inputs used to produce goods and services. C. Increasing the amount of resources available could eliminate scarcity. D. They are inputs used to produce goods and services and increasing the amount of resources available could eliminate scarcity.

They are the inputs used to produce goods and services.

The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000. A. If you are acting rationally, you will borrow $2,000 and purchase a new sport utility vehicle. B. You will not purchase the new sport utility vehicle at this time if you are acting rationally. C. If you do not purchase the new sport utility vehicle, your net loss will be $2,000. D. If you are acting rationally, you will purchase sport utility vehicles until the marginal cost of doing so falls to $20,000.

You will not purchase the new sport utility vehicle at this time if you are acting rationally.

Effective free market ethical systems must provide for all of the following EXCEPT: A. Clearly defined rules and regulations. B. meaningful punishments for rule breakers. C. a clearly defined moral foundation. D. adequate market oversight and policing. E. enough freedom for creativity and competition.

a clearly defined moral foundation

A theory can best be defined as: A. an untestable assertion or statement of untestable fact. B. a testable statement that can be definitively proven to be true or false using empirical analysis. C. a normative statement that can be tested empirically through analysis of real-world data. D. a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work.

a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work.

A hypothesis is: A. a normative economic statement. B. a testable proposition. C. a statement that cannot be evaluated using real-world data. D. a model with no connection to the real world.

a testable proposition.

A student has a chance to see Green Day in concert. The student also has a major economics exam the next morning. If the student goes to the concert: A. she may receive a lower grade on the economics exam. B. the opportunity cost of the concert is the value of the time spent studying. C. the decision involves a trade-off. D. all of the above are correct.

all of the above are correct

Which of the following is true? a.) people specialize by concentrating their energies on the activity to which they are best suited, because they incur lower opportunity costs as a result. b.) the primary reason people pursue their comparative advantage is their self-interest c.) one advantage of specialization is that workers acquire greater skill from repetition d.) if a person, a region, or a country.... e.) all of the above

all of the above are true.

Which of the following is an example of an individual motivated be self-interest? A. a student volunteering at a soup kitchen B. an attorney providing free legal service to low income families C. a young person volunteering for the Peace Corps D. a man buying a new Camaro

all of the answers

Which of the following is not an example of a resource? a.) a forest b.) a river c.) a John Deere tractor d.) the chef at the city's best café e.) all of the answers are resources

all of the answers are resources

The term "ceteris paribus" means that: A. everything is variable. B. all variables except those specified are constant. C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole. E. all variables are held constant.

all variables except those specified are constant.

The importance of the ceteris paribus assumption is that it: A. allows one to separate normative economic issues from positive economic ones. B. allows one to generalize from the whole to the individual. C. allows one to analyze the relationship between two variables apart from the influence of other variables. D. allows one to hold all variables constant so the economy can be carefully observed in a suspended state.

allows one to analyze the relationship between two variables apart from the influence of other variables.

Pollution damages the environment we live in. An economist would advise that we reduce air pollution: A. as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction. B. until the total benefit from air pollution reduction just equals the total cost of pollution reduction. C. until air pollution levels reach near-zero levels. D. to the levels experienced in the 1950s when air was much cleaner near big cities.

as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.

Opportunity cost includes A. monetary costs only. B. non-monetary costs only. C. both monetary and non-monetary costs. D. neither monetary nor non-monetary costs.

both monetary and non-monetary costs

Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk: A. equals $6.00. B. equals $4.00. C. equals $3.00. D. equals $2.00. E. equals zero dollars.

equals $2.00.

You lose $20 from your wallet and decide to miss an hour from work in order to search for it. To an economist, this means that: A. you estimate the expected cost of searching for one hour to be greater than $20. B. you must earn more than $20 per hour. C. in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage. D. you are irrational, since it is always a waste of time to search for lost money. E. you place no value on your time.

in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage

The fact that some resources and skills cannot be easily adapted from their current uses to alternative uses is the basic reason for the law of A. increasing opportunity cost. B. decreasing opportunity cost. C. comparative advantage. D. consumer sovereignty.

increasing opportunity cost.

When a person possesses a comparative advantage in the production of one good or service, it: A. means that the person's opportunity cost is higher than for that of other goods. B. discourages specialization. C. promotes greater self-sufficiency. D. permits gains from trade to be realized due to a more efficient use of resources.

permits gain from trade to be realized due to a more efficient use of resources.

Some political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they parent. The economic way of thinking indicates that legislation of this type would: A. make it more expensive for parents to provide for their children. B. reduce the value of children to their parents and therefore lead to a reduction in the birth rate. C. reduce the after-tax cost of raising children and therefore increase the birth rate. D. exert no impact on either the cost of raising children or the birth rate since parenting children is a non-economic activity.

reduce the after-tax cost of raising children and therefore increase the birth rate.

Economics is most importantly concerned with... A. how to profit from trading in the stock market. B. government taxation and spending. C. studying how we allocate scarce resources to satisfy unlimited wants. D. how to reduce inflation. E. how to successfully launch a business.

studying how we allocate scarce resources to satisfy unlimited wants

The opportunity cost of an item is: A. The total value of opportunities you give up to get that item. B. the highest valued alternative you give up to get that item. C. the value of all available alternatives you sacrifice to get that item. D. always equal to the dollar value of the item. E. always less than the dollar value of the item.

the highest valued alternative you give up to get that item.

Human capital is: A. machinery owned by firms, but not by individuals. B. machinery owned by individuals, but not by firms. C. machinery owned by individuals or firms, but not by the government. D. the skill or knowledge of individuals.

the skill or knowledge of individuals.

Economists believe that in regards to criminal behavior: A. people engage in criminal activity because they are genetically predisposed to do so. B. those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs. C. individuals are irrational and don't respond to incentives. D. economics can shed very little light on the subject.

those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs

An example of a capital resource is: A. stock in a computer software company. B. the funds in a CD account at a bank. C. a bond issued by a company selling electric generators. D. a dump truck. E. an employee of a moving company.

A dump truck

Which of the following people are more likely to break ethical rules:

Someone who is ignorant

Which of the following is correct? A. "Theory" and "hypothesis" are interchangeable terms meaning the same thing. B. A hypothesis may result from a tested and confirmed theory. C. A theory may result from a tested and confirmed hypothesis. D. A hypothesis is a theory whose formulation relies on mathematics.

A theory may result from a tested and confirmed hypothesis.

Plagiarism is unethical because A. plagiarism might result in stealing profits from the original writer B. plagiarism can decrease the value of honest students' diplomas C. plagiarism can make it more difficult for instructors to assess the quality of students' writings D. plagiarism is a type of fraud E. all of the above are reasons

All of the above are reasons

Ethics violators like embezzlers, frauds, tax cheats and bank robbers A. usually follow most rules and other ethics most of the time. B. not only injure individuals and companies, but also often hurt entire markets. C. often use rational cost-benefit analysis when deciding whether to cheat. D. may feel so ashamed and guilty of their crimes that they are driven to suicide. E. All of the above may be true of ethics violators.

All of the above may be true of ethics violators.

Which of the following is NOT an example of the use of the problem solving perspective provided by economics? A. An investor considers the tax consequences of selling stocks in order to buy bonds (which she believes offer a better return). B. A rancher recognizes that raising more cattle this year will damage his pasture and limit next year's herd size. C. The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember. D. An economics student considers the scarcity of available study time for studying the other subjects that she should be studying before deciding to study economics this evening.

The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember.

Which of the following is a statement of positive economics? A. The income tax reduces after-tax incomes of the rich. B. A reduction in tax rates makes the after-tax distribution of income fairer. C. Tax rates ought to be reduced so that people will work more. D. All of the above are statements of positive economics. E. None of the above is statements of positive economics.

The income tax reduces after-tax incomes of the rich

Which of the following represents a normative statement? A. A decrease in price leads to an increase in quantity demanded. B. The temperature outside is 90 degrees. C. The study of economics is more important than the study of history. D. People will buy less butter at $1.50 per pound then they will at $1.00 per pound. E. Normally, as an economy develops, the nation's birth rate tends to fall.

The study of economics is more important than the study of history.

"As a rational person, you would expect individuals to always avoid actions that are illegal." T or F A. This is a true statement because most people don't want to suffer the penalties associated with criminal behavior. B. This is a true statement because most individuals are good citizens and prefer not to commit crimes. C. This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway. D. This is a false statement because only people with certain genetic predispositions are likely to commit crimes.

This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway.

Which of the following are NOT very important to maintaining effective market ethics? A. A willingness by the vast majority of market participants to obey the ethics and report violators B. The number of inspectors or police C. The severity of punishments for cheating D. Whether people understand the reasons for the rules or regulations E. Whether the likely penalties for cheating are greater than the rewards

Whether people understand the reasons for the rules or regulations

Which of the following is most likely a topic of discussion in a microeconomics course? A. a decrease in the share of national income paid to the government in taxes B. an increase in the price of lumber used to construct houses C. an increase in the rate of inflation D. an increase in the number of jobless individuals filing unemployment claims E. the size of the national debt

an increase in the price of lumber used to construct houses

An economic hypothesis is tested: A. by assessing the realism of its assumptions. B. by comparing the hypothesis's predictions to real-world data. C. most frequently by using a controlled experiment. D. by assessing the level of descriptive detail. E. by none of the above. Economic hypotheses are theoretical and therefore cannot be tested. Reset Selection

by comparing the hypothesis's predictions to real-world data.

Marginal thinking is best demonstrated by: A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. B. deciding to never purchase a coat made with animal skins or furs. C. acquiring the information relevant to a choice before making that choice. D. measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake. E. choosing to purchase beer until there is no additional enjoyment from the consumption of beer.

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time

Negative incentives: A. increase benefits or reduce costs. B. increase behaviors. C. decrease benefits or increase costs. D. include both cash subsidies and taxes.

decrease benefits or increase costs.

Cost-benefit analysis can determine the optimal amount of all the following EXCEPT: A. regulations B. market inspectors C. severity of punishments D. fairness of rules E. inspections

fairness of rules

Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a date. This offer will likely: A. not affect the opportunity cost of going on the date. B. reduce the opportunity cost of going on the date because giving up the additional work dollars will make his girlfriend feel even more appreciated. C. increase the opportunity cost of going on the date. D. reduce the opportunity cost of working.

increase the opportunity cost of going on the date

The fallacy of composition is: A. the erroneous view that an economic activity can sometimes exceed the sum of its components. B. the erroneous view that what is true for the individual will also be true for the group. C. the view that the aggregation of economic activity will necessarily lead to an outcome that is different than the outcome generated by each individual in the group. D. the idea that association need not imply causation. E. the failure to hold other variables constant when analyzing the relationship between two particular variables.

the erroneous view that what is true for the individual will also be true for the group.

Macroeconomic topics do not usually include: A. the rate of inflation. B. the rate of unemployment. C. economic growth. D. the profit maximizing decisions of an individual manufacturer. E. the control of the money supply by the central bank.

the profit maximizing decisions of an individual manufacturer.

Bill says: "The imposition of a tax on tequila will increase its price." Bob says: "Taxes should be imposed on tequila because college students drink too much." A. Both statements are normative. B. Both statements are positive. C. Bill's statement is normative, and Bob's statement is positive. D. Bill's statement is positive, and Bob's statement is normative.

Bill's statement is positive, and Bob's statement is normative.

Which of the following best illustrates the fallacy of composition? A. If Mr. Smith had more money, he could buy more scarce goods; if the Adams family had more money, it could buy additional goods. B. If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods. C. If other variables are not held constant, economists may not observe the relationship between price and quantity demanded that is expected. D. Aggregate consumption may not behave in the same manner as the consumption of a particular individual.

If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods.

Which of these conditions are most likely to motivate honest people to become corrupt? A. Reading that Bernie Madoff was sentenced to life in prison after stealing billions of dollars B. Having your boyfriend (or girlfriend) elope with someone who is rich C. Seeing a film of Bonnie and Clyde being shot by machine guns D. Seeing your boss and fellow workers get rich by lying and cheating E. None of the above; if you're an honest person, you'll stay that way

Seeing your boss and fellow workers get rich by lying and cheating

Which of the following statements is TRUE? A. The U.S. government specifies all business ethics adopted by American corporations. B. Ethics decisions are for philosophers, churches and individuals, not government. C. The U.S. government insists that foreign trading partners adopt systems of business ethics identical to ours. D. The U.S. government defines and enforces business ethics in order to protect the economy. E. The U.S. government does not define or enforce any ethical rules.

The U.S. government defines and enforces business ethics in order to protect the economy.

Which of the following lies primarily within the realm of microeconomics? A. an empirical analysis of the relationship between the growth of the money supply and the rate of inflation B. an economic model forecasting the impact of a tax increase on consumer spending and national output C. a study of supply and demand conditions in the market for orange juice D. a model forecasting the impact of a change in interest rates on the level of investment in the economy

a study of supply and demand conditions in the market for orange juice

Economics is concerned with: A. the choices people must make because resources are scarce. B. human decision makers and the factors that influence their choices. C. the allocation of limited resources to satisfy virtually unlimited desires. D. all of the answers are correct.

all of the answers are correct

An economy's resources: A. consist of land, labor, capital, and entrepreneurial skills. B. are unlimited in a country like the United States. C. are always efficiently utilized in wealthy nations. D. consist of land, labor, and entrepreneurial skills but not capital.

consist of land, labor, capital, and entrepreneurial skills.

Economics is different from a "hard" science like physics because: A. economists abstract from reality in creating their theories. B. economics is easier to study than physics. C. economists must explain their theories to policy makers who lack formal mathematical training. D. economists cannot easily control all the variables that might influence human behavior. E. research in economics is primarily conducted in a very "social" way via interviews of consumers and corporate leaders.

economists cannot easily control all the variables that might influence human behavior.

The problem of scarcity: A. exists because resources are limited relative to wants. B. exists because resources are unlimited relative to wants. C. is solved by economists using abstract models. D. can be eliminated through appropriate government intervention into markets. E. does not exist in communist societies.

exists because resources are limited relative to wants.

Specialization is a way for: A. individuals to make the best use of resources by devoting themselves to one primary productive activity. B. society to become wealthier while not using their resources. C. people to avoid having to trade. D. increasing one's opportunity cost for an activity.

individuals to make the best use of resources by devoting themselves to one primary productive activity

A nation has a comparative advantage in the production of cars over another nation if: A. it can produce cars with fewer resources than the other country. B. it can produce cars at a lower opportunity cost than the other country. C. it can produce cars at a higher opportunity cost than the other country. D. it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country. E. it is more self-sufficient in all areas of production, including automobile manufacturing.

it can produce cars at a lower opportunity cost than the other country.

Your mother tells you, "Watching ten hours of TV per day will make you stupid." This is a positive statement because: A. your mother says it with a positive tone in her voice. B. your mother is positive that you are stupid. C. it is a proposition that can be tested. D. your mother is only thinking of your best interest. E. you're positive that your mother is stupid.

it is a proposition that can be tested.

The branch of economics that focuses on outcomes in highly aggregated markets, such as the markets for labor or consumer products, is called: A. macroeconomics. B. Marxian economics. C. positive economics. D. normative economics. E. microeconomics.

macroeconomics.

In free markets which allows a high level of unethical corruption: A. Suppliers may be forced to be corrupt or to leave the market. B. Consumers will be forced to be corrupt. C. Firms will always earn large long-term profits. D. the products sold will be worthless. E. there will be more creativity and competition than in highly ethical markets.

suppliers will be forced to be corrupt or to leave the market

Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is: A. nothing because he enjoys playing basketball more than studying. B. the benefit to his grades from studying for an hour. C. the increase in skill he obtains from playing basketball for that hour. D. nothing because he had a free pass into the sports complex to play basketball.

the benefit to his grades from studying for an hour.

Market failure occurs when: A. the stock markets tumble due to heavy selling. B. the economy fails to allocate resources efficiently on its own. C. demand shows signs of slowing down. D. a country cannot produce a good or service at a lower opportunity cost than others.

the economy fails to allocate resources efficiently on its own.

Human capital is: A. the same as labor. B. a term describing the tools and equipment owned by households. C. a worker's physical effort when working with machines. D. the expertise or knowledge possessed by workers. E. the money in checking, savings, or CD accounts at banks.

the expertise or knowledge possessed by workers.

The opportunity cost of an action is equal to: A. the monetary payment the action required. B. the total time spent by all parties in carrying out the action. C. the highest valued opportunity that must be sacrificed in order to take the action. D. the value of all of the alternative actions that could have been taken. E. zero, as only goods cost money.

the highest valued opportunity that must be sacrificed in order to take the action.

Entrepreneurship is: A. human capital. B. another word for the financial capital that can be used to start a business. C. the resource that organizes the other factors of production in order to produce goods and/or services. D. another word for physical capital that is used to produce goods and services.

the resource that organizes the other factors of production in order to produce goods and/or services.

Which of the following best defines rational behavior? A. analyzing the total costs of a decision B. analyzing the total benefits of a decision C. undertaking an activity as long as the total benefit of all activities exceeds the total cost of all activities D. undertaking activities whenever the marginal benefit exceeds the marginal cost E. undertaking activities as long as the marginal benefit exceeds zero

undertaking activities whenever the marginal benefit exceeds the marginal cost

Which of the following is not true? a.) voluntary exchange is expected to be advantageous to both parties to the exchange b.) what one trader gains from a trade, the other must lose c.) if one party to a potential voluntary trade decides it does not advance his interests, he can veto the potential trade. d.) the expectation of gain motivates ppl to engage in trade.

what one trader gains from a trade, the other must lose.

Which of the following statements is most consistent with the rule of rational choice? A. "The Environmental Protection Agency should strive to eliminate virtually all air and water pollution." B. "When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects." C. "Police forces should be enlarged until virtually all crime is eliminated." D. "Manufacturers of automobiles should seek to make cars safer, no matter the costs involved."

"When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."

Which of the following is true? A. By putting unemployed resources to work or by putting already employed resources to better uses, we could expand output in an economy. B. To generate increased economic growth, a society would produce fewer consumer goods and more capital goods in the present. C. If the production possibility curve is concave from below (that is, bowed outward from the origin), it reflects increasing opportunity costs of producing additional amounts of a good. D. Increases in a society's output do not make scarcity disappear. E. All of the above are true.

All of the above are true.

Which of the following would reflect self-interested behavior? A. A worker pursuing a higher paying job and better working conditions. B. A consumer seeking a higher level of satisfaction with her current income. C. Donating a cell phone to a woman's shelter. D. Mother Theresa using her Nobel Prize money to care for the poor. E. All of the answers would reflect self-interested behavior.

All of the answers would reflect self-interested behavior.

Which of the following is true? A. An advanced market economy would tend to use both labor intensive and capital intensive production methods. B. An economy in which labor is relatively scarce would tend to use capital intensive production methods. C. An increase in the availability of labor relative to capital in an economy would tend to increase how labor intensive the production processes in that economy would be. D. All of the above are true. E.Both b. and c. are true.

Both b. and c. are true.

Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes? A. He has already made all the clothes he will need for a few years. B. The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career. C. Sergei just can't find the material he likes in the United States. D. Sergei has a comparative advantage in tailoring clothes. E. The opportunity cost of making clothes instead of playing hockey is relatively low, so he should instead concentrate on his hockey career (for which the opportunity cost is very high).

The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.

Tom is a castaway who washes up on a remote island. He can catch eight birds per day or catch ten fish per day. The natives on the island can catch ten birds per day or catch twenty fish per day. According to comparative advantage, A. Tom should catch more birds and fish less, then trade birds for fish. B. Tom should catch fewer birds and fish more, then trade fish for birds. C. Both should catch more birds and fish less. D. Both should catch fewer birds and fish more.

Tom should catch more birds and fish less, then trade birds for fish.

Which of the following is most likely an example of correlation but not an example of causation? A. In the U.S., more pizza is consumed on Super Bowl Sunday than any other day of the year. B. The cost of advertising during the first half of the Super Bowl is greater than the cost of advertising in the second half. C. Usually, if I eat a chili dog and drink a beer before a game, my teams wins. D. Generally speaking winning football teams tend to average more rushing yards than losing football teams.

Usually, if I eat a chili dog and drink a beer before a game, my teams wins.

What according to an economist, forms the basis of rational human behavior under current and anticipated future circumstances? A. Scarcity and rarity B. Opportunities and pay-offs C. Values and information D. Legal consequences

Values and information

Which of the following does not specify positive ethical rules? A. Webster's Dictionary B. Robert's Rules of Order C. Hoyle's Rules of Games D. The San Marcos Land Development Code E. The Amy Vanderbilt Complete Book of Etiquette

Webster's Dictionary

A downward sloping straight-line production possibilities curve implies: A. an inefficient use of resources. B. an efficient use of resources. C. an increasing opportunity cost. D. a constant opportunity cost.

a constant opportunity cost.

Resources and goods are free to move across state lines. If Oregon producers choose to specialize in producing honey and California producers choose to specialize in growing almonds, then we could reasonable conclude that: A. California has a comparative advantage in producing almonds. B. Oregon has a comparative advantage in producing honey. C. the opportunity cost of growing almonds is lower in California than in Oregon. D. the opportunity cost of producing honey is lower in Oregon than in California. E. all of the above are true.

all of the above are true

The real core of most economic problem is to: A. increase the amount of leisure time available to people. B. guarantee everyone on the planet a minimum level of food, shelter and clean water. C. allocate limited resources among competing uses. D. eliminate scarcity.

allocate limited resources among competing uses.

Which of the following is an example of a capital resource? A. redwood trees B. unskilled labor C. stocks and bonds D. an oil rig

an oil rig

In a market economy, the amount of a good that is produced is primarily decided by the interaction of: A. buyers and sellers. B. all consumers. C. producers and input suppliers. D. producers and government planning committees. E. all producers.

buyers and sellers.

An individual has a comparative advantage in production if that individual: A. can produce at the highest opportunity cost. B. is more self-sufficient than others. C. can produce at the lowest opportunity cost. D. both a. and b. E. both b. and c.

can produce at the lowest opportunity cost.

Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n): A. disincentive to trade with others. B. higher opportunity cost. C. absolute advantage in production. D. comparative advantage in production. E. None of the above. People, regions, and countries should learn to be self-sufficient.

comparative advantage in production.

To obtain the greatest gains from trade, a country should specialize in and ____ those goods for which it has a comparative advantage and ____ those goods for which other countries have a comparative advantage.

export, import

Ethical rules based on morals or concepts of fairness are called

normative ethics

If a student enrolls in an additional course at the university, an economist would conclude that: A. the total benefit that the student expects to receive as a result of completing her college degree exceeds the total cost of her college education. B. the student is not following the rule of rational choice. C. the student must not be involved in extracurricular campus activities. D. the expected marginal benefit of an additional course must exceed the expected marginal cost of the course.

the expected marginal benefit of an additional course must exceed the expected marginal cost of the course

Which of the following is an example of market failure? A. Overuse of highways that leads to traffic congestion B. Reduced levels of vaccinations which increase illness and disease C. Substantial foreclosures caused by sub-prime lending D. All of the above

All of the above

A market economy depends on market mechanisms to: A. determine the most efficient way of using resources. B. determine how large the government's budget deficit should be. C. decide how much government regulation there should be. D. provide everyone with a minimum level of income. E. do all of the outcomes listed.

determine the most efficient way of using resources.

Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that: A. in the man's judgment, the expected marginal cost of smoking the cigarette outweighs the expected marginal benefit. B. the man is behaving irrationally. C. the smoker is unconcerned about his future health. D. in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost. E. smoking should be banned by the government in order to ensure the safety of smokers.

in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.

When economists speak of markets, they primarily mean: A. places where production of goods and services take place. B. those locations where sales of stocks and bonds of corporations take place. C. mechanisms that coordinate actions of buyers and sellers. D. the trillions of dollars that change hands in the foreign exchange markets.

mechanisms that coordinate actions of buyers and sellers.

More efficient positive market ethics will generally help improve all of the following challenges EXCEPT: A. positive externalities of a market B. negative externalities of a market C. moral externalities of a market D. consumer surplus of a market E. producer surplus of a market

moral externalities of a market

In free market economies, A. most market exchanges will result in a "winner" and a "loser." B. most market exchanges will result in all parties winning. C. any market exchange will follow no rules unless government imposes them. D. regulations and other written ethics will generally limit innovation and profitability. E. there is no way to measure the optimal level or type of market ethics.

most market exchanges will result in all parties "winning."

Advantages of specialization do not include: A. reduced interdependence. B. the exploitation of comparative advantage. C. the ability to utilize more complex production processes. D. gains from learning by doing. E. All of the above are advantages of specialization.

reduced interdependence.

Economists believe that individuals act as if they are motivated by self-interest and: A. respond selfishly. B. respond in predictable ways to changing circumstances. C. it leads to inconsistent and unpredictable behavior. D. all of the above.

respond in predictable ways to changing circumstances.

Economic choices or tradeoffs are the result of: A. basic human greed B. scarcity. C. poverty. D. private ownership of resources. E. the fallacy of composition.

scarcity