Macro Economics Hw.2

Which of the following would most likely shift the production possibilities curve inward?

a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display ___________.

allocative efficiency

The opportunity cost of an action

can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action.

Marginal thinking is best demonstrated by

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.

The law of ____ explains why people and societies rarely make all-or-nothing choices.

diminishing marginal utility

Most real-world choices are not about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

marginal analysis

The marginal benefit of a slice of pizza is the:

maximum amount that a consumer is willing to pay for the slice.

Attending college is a case where the ________________ exceeds the monetary cost.

opportunity cost

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible.

opportunity set

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.

positive statements

The lesson of __________ is to forget about the money that is irretrievably gone and instead to focus on the marginal costs and benefits of future options.

sunk costs

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

the benefit to his grades from studying for an hour

The opportunity cost of attending university is likely to include all except which of the following?

the cost of haircuts received during the school term

Scarcity exists because of

unlimited wants and limited resources

In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income.

utility

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:

A. the economy moves along the production possibilities in the direction of a greater quantity of defense. B. the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. C. the production possibilities frontier shifts outward due to an improvement in technology. D. either b) or c) occurs, but not as a result of a).