Principles of Microeconomics Exam 1 (Chap. 1-4) study guide
Which of the following statements is true about competition in a market?
Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production.
Which of the following is correct about the economic decisions consumers, firms, and the government have to make?
Each faces the problem of scarcity which necessitates trade-offs in making economic decisions.
Which of the following statements about economic resources is false?
Economic resources include financial capital and money.
Which of the following is a normative economic statement?
Fashion designers should be allowed to copyright designs to promote innovation.
Which of the following is a positive economic statement?
If the price of gasoline rises, a smaller quantity of it will be bought.
What is an economic model?
It is a simplified version of some aspect of economic life used to analyze an economic issue.
Opportunity cost is defined as
The highest-valued alternative that must be given up to engage in an activity.
Which of the following best describes an assumption economists make about human behavior?
They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.
The three fundamental questions that any economy must address are
What goods and services to produce; how will these goods and services be produced; and who receives them?
The term "market" in economics refers to
a group of buyers and sellers of a product and the arrangement by which they come together to trade.
What does the term "marginal" mean in economics?
an additional or extra
The production possibilities frontier model assumes all of the following except
any level of the two products that the economy produces is currently possible.
If the marginal cost of producing a television is constant at $200, then a firm should produce this item
as long as the marginal benefit it receives is just equal to or greater than $200.
Which of the following is part of an economic model?
assumptions
Ted quits his $60,000-a-year job to be a stay-at-home dad. What is the opportunity cost of his decision?
at least $60,000
Which of the following generates productive efficiency?
competition among sellers
The basic economic problem of scarcity
has always existed and will continue to exist
The revenue received from the sale of an additional unit of a product
is a marginal benefit to the firm.
The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called
macroeconomics.
The branch of economics which studies how households and firms make choices, interact in markets and how government attempts to influence their choices is called
microeconomics.
Every society faces economic tradeoffs. This means
producing more of one good means less of another good can be produced.
When goods and services are produced at the lowest possible cost, ________ occurs.
productive efficiency
The study of economics arises due to
scarcity
Scarcity
stems from the incompatibility between limited resources and unlimited wants.
Human capital refers to
the accumulated skills and training workers have
By definition, economics is the study of
the choices people make to attain their goals, given their scarce resources
The principle of opportunity cost is that
the economic cost of using a factor of production is the alternative use of that factor that is given up.
Consider the following two factors:a. A study conducted by Forrester Research estimates that between 2000 and 2015, 3.3 million jobs in the United States will have been outsourced.b. Over this same period, the number of jobs expected to be created is more than 450 million and the number of jobs due to all causes is estimated at 430 million. These statements suggest that
the likelihood that the average person will lose her job due to outsourcing is very small compared to losing her job due to other causes.
Which of the following is counted as "capital" in economics?
the machines workers have to work with
The production possibilities frontier shows
the maximum attainable combinations of two products that may be produced in a particular time period with available resources.
Technology is defined as
the processes used to produce goods and services
Marginal analysis involves undertaking an activity
until its marginal benefits equal marginal costs.
Making optimal decisions "at the margin" requires
weighing the costs and benefits of a decision before deciding if it should be pursued
Which of the following is not an example of an economic tradeoff that a firm has to make?
whether or not consumers will buy its products