Unit 1: Introduction - What is Economics about?

Refer to the below tables. Suppose that technology and the quality of resources are the same in both countries. We can conclude that:

Herbania has more resources than Duckistan.

Refer to the below tables. Suppose that the amount and quality of resources are the same in both countries. We can conclude that:

Herbania is technologically superior to Duckistan in producing civilian goods.

A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?

Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.

In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:

scarcity and opportunity costs.

Refer to the below diagram. The direct economic impact of the destruction and loss of lives caused by the terrorist attacks of September 11, 2001 is illustrated by the:

shift of the production possibilities curve from CD to AB.

Refer to the below tables. Opportunity costs of producing military goods are:

smaller in Duckistan than Herbania.

After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

The marginal benefit of going to Spain increases.

Refer to the below production possibilities curve. At the onset of the Second World War the United States had large amounts of idle human and property resources. Its economic adjustment from peacetime to wartime can best be described by the movement from point:

a to point b

Refer to the below diagram. The movement down the production possibilities curve from point A to point E suggests that the production of:

computers, but not bicycles, is subject to increasing opportunity costs.

Refer to the below diagram. This production possibilities curve is:

concave to the origin because of increasing opportunity costs.

The law of increasing opportunity costs is reflected in a production possibilities curve that is:

concave to the origin.

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact:

implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.

The law of increasing opportunity costs states that:

if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so.

A country can CONSUME some combination of goods outside its production possibilities curve by:

specializing and engaging in international trade.

The concept of opportunity cost:

suggests that the use of resources in any particular line of production means that alternative outputs must be forgone.

The construction of a production possibilities curve assumes:

technology is fixed.

Opportunity cost is best defined as:

the amount of one product that must be given up to produce one more unit of another product.

The production possibilities curve shows:

the various combinations of two goods that can be produced when society employs all of its scarce resources.

A production possibilities frontier can shift outward if

there is a technological improvement.

Consumers might leave a fast-food restaurant without being served because:

they conclude that the marginal cost (monetary plus time costs) exceeds the marginal benefit.

The negative slope of the production possibilities curve is a graphical way of indicating that:

to produce more of one product we must do with less of another.

Refer to Figure 2-16. It is possible for this economy to produce

90 gadgets and 30 widgets.

A person should consume more of something when its marginal:

benefit exceeds its marginal cost.

In drawing a production possibilities curve we hold constant:

both technology and resource supplies.

In recent years the economy of Japan has grown, despite the fact that the population of Japan has declined. Which of the following would best explain Japan's economic growth despite having a smaller population?

Advancements in technology that make labor more productive.

Refer to the below tables. Suppose that Duckistan and Herbania are each producing 14 units of civilian goods and 2 unit of military goods. Then:

Duckistan is fully employing its resources but Herbania is not.

Refer to Figure 2-2. If households are sellers in the markets represented by Box D of this circular-flow diagram, then

Box D must represent the markets for factors of production. Box C must represent the markets for goods and services. Firms are buyers in the markets represented by Box D.

Refer to Figure 2-5. Suppose this economy is producing at point D. Which of the following statements would best explain this situation?

There is widespread unemployment in the economy.

Which of the following most closely relates to the idea of opportunity costs?

Tradeoffs

College-age athletes who drop out of college to play professional sports

are well aware that their opportunity cost of attending college is very high.

Refer to the below production possibilities curve. At the onset of the Second World War the Soviet Union was already at full employment. Its economic adjustment from peacetime to wartime can best be described by the movement from point:

c to point b

Refer to the below diagram. Points A, B, C, D, and E show:

combinations of bicycles and computers that society can produce by using its resources efficiently.

The point on the production possibilities curve that is most desirable can be found by:

comparing marginal benefits and marginal costs.

Kara was out jogging and despite being tired, decided to run one more mile. Based on her actions, economists would conclude that Kara:

decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile.

The optimal point on a production possibilities curve is achieved where:

each good is produced at a level where marginal benefits equal marginal costs.

Refer to the below tables. Opportunity costs are:

increasing in both Duckistan and Herbania.

Refer to the below diagram. The combination of computers and bicycles shown by point F:

is attainable, but implies that the economy is not using all its resources.

A rational decision maker takes an action only if the

marginal benefit is greater than the marginal cost.

Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:

opportunity costs.

Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This example illustrates:

opportunity costs.

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

people face tradeoffs.

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as:

rational self-interest, because he attempting to increase his own income by identifying and satisfying someone else's wants.

The law of increasing opportunity costs exists because:

resources are not equally efficient in producing various goods.

In response to the terrorist attacks of September 11, 2001, the government decided to allocate more resources toward defense goods. The government's decision reflects their assessment that:

the marginal benefits of additional defense goods outweighed the marginal cost.

Which of the following is an economic explanation for why most college-aged movie stars do not attend college.

the opportunity cost in terms of reduced income is too great

An exception to the advice "go to college, stay in college, and earn a degree" occurs when:

the opportunity cost of attending college is extraordinarily high.

Refer to the below diagram. The combination of computers and bicycles shown by point G is:

unattainable, given currently available resources and technology.

Refer to the below diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost:

will be 4 units of bicycles.

Refer to the below diagram. If society is currently producing the combination of bicycles and computers shown by point D, the production of 2 more units of bicycles:

will cost 1 unit of computers.