Test One -- Chapter one
You are given the function y=15−2x. The slope of the equation is
-2
List and discuss the three basic economic questions every society must answer and the two antithetical answers to these questions of which existing societies are a mixture .
1) What and how much will be produced? 2)How will items be produced? 3)For whom will items be produced? - How the society answers these questions depends on the nations economic system.
Consider the following situations. A-- A rational , self-interested student decides whether to purchase a textbook required for a particular class based on all of the following, except: B--Rational, self-interested government officials seeking more funding for mass transit through higher taxes should consider C--A municipality taxing hotel guests to obtain funding for a new sports stadium should consider all of the following, except
A-- whether the textbook has an attractive dust jacket. B--the fact that raising taxes is generally unpopular and may result in a potential loss in a future election. C--the winning potential of the sports team using the stadium.
Each country has a unique economic system to allocate its scarce resources. However, the economic system of most of the world's nations are a combination of the___________system and the________system.
Central planning, price
Define economics and understand the concept of scarcity and limited resources.
Economics- The study of how people allocate their limited resources to satisfy their unlimited wants Scarcity-
Until 2008, the people of the fictitious nation of Dor relied mainly on private car companies to determine how many automobiles to produce. After 2008, the people of Dor have been relying on the Dor government to determine how many automobiles to produce. This represents a shift in the economic system of Dor from
Market System to Central Planning
Distinguish the difference between microeconomics and macroeconomics.
Microeconomics- the study of decision making undertaken by individuals (or households) and by firms Macro- the study of the behavior of the economy as a whole, including such economy wide phenomena as changes in unemployment, the general price level, and national income
Understand the importance of rationality in economic analysis.
Rationality assumption- we assume that individuals do not intentionally make decisions that would leave themselves worse off.
What is the relationship between wants and resources?
Resources are used to produce things that satisfy people's wants.
Which of the following is a normative statement?
Tax cuts ought to be enacted for the good of the economy.
The three fundamental economic questions that a nation addresses in order to allocate society's scarce resources include all of the following except:
Why will the items be produced?
What kind of relationship is shown in the table? Units ProducedUnits Produced: 1 5 9 Total CostTotal Cost: 2 6 9
a direct relationship
An inverse relationship will be graphed as
a line that is downward sloping.
a. For every 10 exam points Myrna must earn in order to pass her economics course and meet her graduation requirements, she will study one additional hour for her economics test next week. b. A coin toss will best predict Leonardo's decision about whether to purchase an expensive business suit or an inexpensive casual outfit to wear next week when he interviews for a high-paying job he is seeking c. Celeste, who uses earnings from her regularly scheduled hours of part-time work to pay for her room and board at college, will decide to buy a newly released DVD this week only if she is able to work two additional hours
a. Based on the rationality assumption. b. Not based on the rationality assumption. c.Based on the rationality assumption.
Consider the following statements, based on a positive economic analysis that assumes that all other things remain constant. For each, list one other thing that might change and thus offset the outcome stated. a. Increased demand for laptop computers will drive up their price. b.Falling gasoline prices will result in additional vacation travel. c.A reduction of income tax rates will result in more people working.
a.An improvement in computer manufacturing technology. b.The economy enters a recession with increased unemployment. c.The foreign exchange value of the dollar increases causing domestic exports to decline.
Categorize each of the following conclusions as being the result of positive analysis or normative analysis a. A higher minimum wage will reduce employment opportunities for minimum wage workers b.Increasing the earnings of minimum wage employees is desirable, and raising the minimum wage is the best way to accomplish this c.Everyone should enjoy open access to healthcare. d.Heathcare subsidies will increase the consumption of health care.
a.Positive economics b.Normative economics c.Normative economics d.Positive economics
State whether each of the following functions implies a positive or negative relationship between x and y. a. y = negative 2−2x b.y = 00 + 1717x c. y = x negative 4−4 :
a.negative b.positive c.positive
The economic way of thinking will
allow you to make better decisions.
The way that a society uses to allocate resources to satisfy human wants is called
an economic system.
Economics
assumes individuals are rational and respond to different incentives.
Understand the role of assumptions in economic models.
assumptions define the array of circumstances in which our model is most likely to be applicable
Microeconomics focuses on
decisions made by individual households and firms
Understand the concept of behavioral economics and bounded rationality.
examines consumer behavior in the face of psychological limitations and complications that may interfere with rational decision making
Understand what economics means by self interest and the important role it plays in economic models
individuals are assumed to want the ability to further their goals by making decisions about how items around them are used.
Which of the following statements best demonstrates the concept of bounded rationality?
individuals make short-run choices that are not consistent with their long term goals
Using the line drawing tool, draw a line showing a direct relationship between total costtotal cost and the units producedunits produced. Label the line 'Direct'.
line shooting diagonally upward from 0,0
"We ought to do more for the education of our children." Statements using words like ought or should are
normative statements
The intersection of the x axis and the y axis is called the
origin.
The ceteris paribus assumption means
other things equal.
The assumption of bounded rationality suggests that people might use rules of thumb to guide their decision making because
people can not examine every possible choice available to them.
The rationality assumption states that
people do not intentionally make decisions that would leave them worse off.
The slope of a nonlinear curve is ________ when the curve is rising, and ________ when the curve is falling.
positive, negative
Distinguish the difference between positive and normative economics.
positive- analysis that is strictly limited to making either purely descriptive statements or scientific predictions; for example, : If A, the B" A statement of what is Negative- analysis involving value judgements about economic policies; relates to whether outcomes are good or bad. a statement of what ought to be
Economists assume that an individual acts as if motivated by
self-interest.
The assumption that nothing changes except the variables being studied is
the ceteris paribus assumption.
Decisions must frequently be made by individuals, organizations, and even nations. Facilitating better decision-making is a fundamental goal of economics. The analytical framework advocated by economists that enables one to make informed decisions is called
the economic way of thinking.
Microeconomics is concerned with the study of
the effects on individual producers of higher wages paid to workers.
The notion that people do not intentionally make decisions that would leave them worse off is known as-- The hypothesis that people are nearly, but not fully, rational, so that they cannot examine every possible choice available to them but instead use simple rules of thumb to sort among the alternatives that happen to occur to them is known as--
the rationality assumption, bounded rationality
If the slope of a curve is 1/5, we know that
the relationship is linear, and the line moves from lower left to upper right.
