Economics Chapter 1 Prepare
Which of the following statements is correct?
An innovation is the practical application of an invention. Economists use the terms firm, company, and business interchangeably.
Today, which of the following countries has a centrally planned economy? How are economic resources allocated in a market economy?
North Korea by the decisions of households and firms interacting in markets
What do economists mean by the word "marginal"? Economists believe that an activity should be continued up to the point where
extra or additional the marginal benefit from the activity is equal to the marginal cost.
Suppose that there are three variables involved in the graph to the right: (1) quantity, (2) price, and (3) a third variable. Which of those variables causes the quantity to change from point C to point D in the graph?
3rd variable
Which of the following is a graph of a single variable?
All of the above
Which of the following steps should you follow when using a formula?
All of the above are steps you should follow when using a formula.
Which of the following statements about an economic variable is correct? Which of the following statements about a hypothesis is correct?
An economic variable is something measurable that can have different values. A hypothesis is a statement that could in principle turn out to be incorrect.
Why are models based on assumptions?
Because models have to be simplified to be useful.
Economists assume that the only reason people take the actions they do is in response to economic incentives.
False
In a market system, what determines how goods and services will be produced?
Firms determine how goods and services will be produced.
Which of the following is a correct statement about a mixed economy?
In a mixed economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources.
Which of the following statements about microeconomics and macroeconomics is correct?
Microeconomics involves the study of how households and firms make choices. Macroeconomics is the study of the economy as a whole
Which of the following statements about positive analysis is correct? which of the following statements about normative analysis is correct
Positive analysis is concerned with what is. normative analysis is concerned with what ought to be
When does productive efficiency occur? When does allocative efficiency occur?
Productive efficiency occurs when a good or service is produced at the lowest possible cost. Allocative efficiency occurs when production is in accordance with consumer preferences.
Which of the following statements about the idea that people are rational is correct?
The idea assumes that consumers and firms use all available information as they act to achieve their goals.
Which of the following statements is correct?
The relationship between two variables is linear when it is represented by a straight line and nonlinear when it is represented by a curved line.
The prevalence of Alzheimer's dementia is very high among residents living in nursing homes. A student concludes that it is likely that living in a nursing home causes Alzheimer's dementia. What is the flaw in the student's reasoning? ________ is a problem that occurs when someone concludes that a change in variable X caused a change in variable Y when, in fact, it is a change in variable Y that caused a change in variable X.
The student is drawing a false conclusion; he is making the error of reverse causality. reverse casualty
Refer to the graph to the right. How would you describe the value of the slope of this curve?
The value of the slope is greater between points g and h than between points i and j.
In a market system, how does society decide who will receive the goods and services produced?
Who receives the goods and services produced depends largely on how income is distributed.
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] x 100
Which of the following statements about economics as a social science is correct?
economics studies the actions of individuals
The relationship between two variables is positive when ________, and the relationship between two variables is negative when ________.
one variable increases and the other increases; one variable increases and the other decreases
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. Refer to the graph to the right. What is the value of the slope of this line?
vertical;divided -1/5
Refer to the graph to the right. What is the value of the area of rectangle A? Refer to the new graph to the right. What is the value of the shaded area?
$250,000 $6,250
In a market system, how does society decide what goods and services will be produced?
Consumers, firms, and the government determine what goods and services will be produced by the choices they make.