Microeconomics 102 505 Chapters 1-2

Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is: Point B Point C Point D All points on the production possibilities frontier are equally efficient.

All points on the production possibilities frontier are equally efficient.

The amount of gas being produced is equal to the amount of gas consumers want. Productive efficiency Allocative efficiency Comparative advantage Law of diminishing returns

Allocative efficiency

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 production possibilities frontier trade-offs scarcity

Allocative efficiency

Production and distribution of goods and services are made by the government with little to no regard of the average citizen. Communism/socialism are current structures of command economies. Traditional Command Market

Command

In the ____________, households work and receive payment from firms. financial investment market financial capital market labor market savings market

Labor market

Mario's restaurant has a budget for advertising each month. Each additional ad brings in less new customers than the previous ad. Marginal analysis Law of diminishing marginal utility Sunk costs Opportunity cost

Law of diminishing marginal utility

Which factor corresponds to the curving slope of a production possibilities frontier (PPF) graph? Allocation efficiency Comparative advantage Utility Law of diminishing returns

Law of diminishing returns

Reba is deciding whether she should eat an additional half of a sandwich. Marginal analysis Law of diminishing marginal utility Sunk costs Opportunity cost

Marginal analysis

Which factors contribute to globalization? (Select all that apply.) Cheaper transportation Communism Regulation Traditional economies Innovation in technology

-Cheaper transportation -Innovation in technology

Which are concepts that Adam Smith first introduced in his 1776 book The Wealth of Nations? (Select all that apply.) Economics Fiscal policy Scarcity Division of labor Specialization of labor

-Division of labor -Specialization of labor

As an exercise to understand macroeconomics, an instructor presents her students with the national economy of a fictitious country. She divides the students in her class into two groups. Students in Group A will identify and analyze the spending by the country's government and its taxes. Group B will focus on the country's bank lending policy, interest rates, and financial capital markets. As students in both groups make their analysis, which factors will help them define the overall macroeconomic health of the fictitious country's economy? (Select all that apply.) Price determination of businesses Employment rate Savings rates of families Consumer confidence Standard of living

-Employment rate -Standard of living

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. personal preference utility level budget constraint opportunity set

Budget constraint

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

Buyers and sellers

Specialization: leads to greater self-sufficiency. can lead to an increase in overall production. allows workers to develop skills by working on a large number of tasks is always the result of an inefficient use of resources

Can lead to an increase in overall production

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. deciding to never purchase a coat made with animal skins or furs acquiring the information relevant to a choice before making that choice measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake

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.

Everyone in the Jackson family is equally good at baking, so they have begun selling pies at a local farmer's market. Mr. Jackson realizes they can be more productive if each member of the family does a different task associated with making the pies. Division of labor Specialization of labor Economies of scale

Division of labor

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. division of labor interconnected economy task economy modern economy

Division of labor

Which two primary markets interact in the circular flow diagram? Imports and exports Households and businesses Income and payments Goods and services and labor

Goods and services and labor

n the ______________, households receive goods and services and pay firms for them. labor market financial capital market goods and services market savings market

Goods and services market

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made. government market firm business sector

Government

The best way to describe economics is that it is the study of __________ money and finances. preventing scarcity. maximizing productivity. how decisions are made.

How decisions are made.

Which of the following best describes a monetary policy tool? interest rates taxes household savings government spending

Interest rates

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization? division of labor international trade economies of scale command economy

International trade

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. can be determined by adding up the bills incurred as a result of the action. can be objectively determined only by economists. is a subjective valuation that can be determined only by the individual who chooses the action.

Is a subjective valuation that can be determined only by the individual who chooses the action.

Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy: is not using its resources efficiently. is using its resources efficiently while producing clothing but no food. is using its resources efficiently while producing food but no clothing. is using its resources efficiently to produce both food and clothing.

Is not using its resources efficiently

Scarcity implies that: consumers would be willing to purchase the same quantity of a good at a higher price. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce. consumers are too poor to afford the goods and services available.

It is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

Budget constraint is to the individual, as ________ is to society. allocation efficiency comparative advantage law of diminishing returns production possibilities frontier

Production possibilities frontier

Production and distribution of goods and services are made by traditions. A person's occupation was determined by their family, and the amount of goods and services they received was based on their traditional social status. Traditional Command Market

Traditional

Which of the following is most likely a topic of discussion in macroeconomics? an increase in the price of a hamburger a decrease in the production of DVD players by a consumer electronics company an increase in the wage rate paid to automobile workers a decrease in the unemployment rate

A decrease in the unemployment rate

Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories. financial capital market circular flow diagram financial investment market Specialization Model

Circular flow diagram

What is most likely to encourage underground economies? Globalization Market economies Traditional economies Command economies

Command economies

Due to its climate, India has a lower opportunity cost for producing rice than the United States. Productive efficiency Allocative efficiency Comparative advantage Law of diminishing returns

Comparative advantage

In countries like _____________ the command economy predominates. China and Vietnam Cuba and North Korea South Africa and Kenya Germany and France

Cuba and North Korea

The law of ____________________________ explains why people and societies rarely make all-or-nothing choices. consumption marginal analysis diminishing marginal utility utility

Diminishing marginal utility

In the circular flow diagram, what do households sell to business firms? Goods Labor Benefits Salaries

Labor

Sally has determined that hiring a fifth worker will increase her production of roses in her greenhouse less than the cost of hiring the worker. Productive efficiency Allocative efficiency Comparative advantage Law of diminishing returns

Law of diminishing returns

When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being: balanced budget prudent monetary policy low inflation assuring competition between firms

Low inflation

Production and distribution of goods and services are made by individuals and businesses. Capitalism is the current form of market economies. Traditional Command Market

Market

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. market-oriented economy macroeconomy microeconomy command economy

Market-oriented economy

Opportunity costs involve what factor besides price? Time Utility Slope Tradeoff

Time

Scarcity exists because of: the market mechanism. specialization and division of labor. the allocation of goods by prices. unlimited wants and limited resources.

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. budget constraint opportunity set utility production possibilities frontier

Utility

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern. utility marginal benefit opportunity cost sunk costs

Utility

Which scenario exemplifies the concept of the invisible hand? The combination of approving the new museum and postponing expansion of the airport has been dictated by the city's voters. The city cannot make improvements to its infrastructure without making cuts in another area. Susan feels that despite the economic hardship it will mean to her, all of her children should go to college to achieve their very best. When Carl purchases local products because they are cheaper, he is not thinking of the advantage it has on his area's manufacturing sector.

When Carl purchases local products because they are cheaper, he is not thinking of the advantage it has on his area's manufacturing sector.

Why is there scarcity? Because the opportunity set determines this. Because theory dictates it. Because our unlimited wants exceed our limited resources. Because human wants are limited.

Because our unlimited wants exceed our limited resources.

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. Opportunity cost productive efficiency budget constraint production possibilities frontier

Budget constraint

Sandra took an expensive cruise. In order to pay for it, she stopped her gym membership. Marginal analysis Law of diminishing marginal utility Sunk costs Opportunity cost

Opportunity cost

Jean Paul is a second year university architecture student on a very tight budget. Although a scholarship covers his tuition, books, dormitory and meals, he must budget tightly each week for his school supplies, entertainment, and clothing. His roommate is offering him a drafting table for a remarkably low price and allowing him to make payments over 4 weeks, but this will pinch his budget. However, having a drafting table in his room will save him the time and energy of using the drafting table of a friend who lives off campus, and it will give him more flexibility for completing his assignments. Jean Paul's weekly choice of allotting his budget to a varying combination of school supplies, entertainment, clothing, and other specialty purchases such as the drafting table represent his _________ opportunity set. utility. law of diminishing marginal utility. sunk costs.

Opportunity set

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 consumption choice time value of money risk premium

Opportunity set

Refer to Figure 2-1. The most inefficient point depicted is: Point A Point C Point D Point G

Point G

The marginal benefit of a slice of pizza is the: total amount that a consumer is willing to pay for a whole pizza, divided by the number of slices difference between the value of the slice to the consumer and the price of the slice. maximum amount that a consumer is willing to pay for the slice. price of the slice of pizza

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

Which are normative statements? (Select all that apply.) Health care should be available for everyone in the United States because it is the right thing to do. If the manufacturing plant can add a swing shift, production could increase. The expansion of the shopping mall will attract more shoppers. The development of a new freeway is not feasible, given the existing number of commuters. Although the benefits of the bus tunnel do not immediately exceed the costs, it can be used for a future subway when growth dictates it.

-Health care should be available for everyone in the United States because it is the right thing to do. -Although the benefits of the bus tunnel do not immediately exceed the costs, it can be used for a future subway when growth dictates it.

Which statements are true of the study of microeconomics? (Select all that apply.) It is concerned with how individual households spend their budgets. It has an opposite view of macroeconomics. It analyzes the slowing down or speeding up of a country's economy. It examines how a business decides if and when to borrow money. It focuses on monetary policy.

-It is concerned with how individual households spend their budgets. -It examines how a business decides if and when to borrow money.

Which are factors that both budget constraint diagrams and production possibilities frontier diagrams highlight? (Select all that apply.) Tradeoffs Positive statements Efficiency Scarcity Opportunity cost Utility Law of diminishing returns Normative statements

-Tradeoffs -Efficiency -Scarcity -Opportunity cost

Which of the following best denotes the reason for the existence of substantial black markets? a market-oriented economy a command economy government laws and rules the microeconomy

A command economy

Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is: 10 points on the economics exam 8 points on the history exam 7 points on the economics exam 12 points on the economics exam

7 points on the economics exam

Though it required an increase in workforce, Tiny House Manufacturers has expanded its level of production and can now manufacture each home more affordably and efficiently. Division of labor Specialization of labor Economies of scale

Economies of scale

____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines. Skill Specialization Economies of scale Division of labor

Economies of scale

Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change. market economy production firm

Economy

As an exercise to understand macroeconomics, an instructor presents her students with the national economy of a fictitious country. She divides the students in her class into two groups. Students in Group A will identify and analyze the spending by the country's government and its taxes. Group B will focus on the country's bank lending policy, interest rates, and financial capital markets. Group A is tasked with the country's _______ policy, while group B has the focus of its ______ policy. fiscal/monetary macroeconomic/microeconomic microeconomic/macroeconomic monetary/fiscal

Fiscal/monetary

The circular flow diagram of economic activity is a model of the: flow of goods, services, and payments between households and firms. influence of government on business behaviour. role of unions and government in the economy. interaction among taxes, prices, and profits.

Flow of goods, services, and payments between households and firms.

The basic difference between macroeconomics and microeconomics is: microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms. microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

Microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

The basic difference between macroeconomics and microeconomics is that: microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets). macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). macroeconomics is concerned with generalization while microeconomics is concerned with specialization.

Microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

What is used in economics interchangeably with the term "theory"? Variable Diagram Model Equation

Model

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. normative statement budget constraint trade-off opportunity cost

Normative statement

Jean Paul is a second year university architecture student on a very tight budget. Although a scholarship covers his tuition, books, dormitory and meals, he must budget tightly each week for his school supplies, entertainment, and clothing. His roommate is offering him a drafting table for a remarkably low price and allowing him to make payments over 4 weeks, but this will pinch his budget. However, having a drafting table in his room will save him the time and energy of using the drafting table of a friend who lives off campus, and it will give him more flexibility for completing his assignments. What is Jean Paul considering in the act of adjusting his budget to accommodate the purchase of the drafting table? Opportunity cost Sunk costs Law of diminishing marginal utility Utility

Opporturnity cost

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

Positive statements

A country is producing the maximum amount of education given its fixed amount of resources to produce education. Productive efficiency Allocative efficiency Comparative advantage Law of diminishing returns

Productive efficiency

Which factor drives the study of economics? Scarcity Politics Trade Profit

Scarcity

Within 3 months of starting work at the book publishing company, Shawn has greatly increased his skill and speed at packaging books for shipping. Division of labor Specialization of labor Economies of scale

Specialization of labor

Elijah's car needs expensive repairs. When Elijah was deciding whether to do them, he remembered that the car had cost him $20,000. Marginal analysis Law of diminishing marginal utility Sunk costs Opportunity cost

Sunk costs

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options. marginal utility sunk costs marginal analysis budget constraints

Sunk costs

Macroeconomic topics do not usually include: the profit maximizing decisions of an individual manufacturer. the rate of inflation. the rate of unemployment. economic growth.

The profit maximizing decisions of an individual manufacturer.