ABM Microeconomics 1041 Chapter 1

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a

model

Because of scarcity...

people face tradeoffs in nearly every choice they make.

Which statement is a key idea in economic thinking ?

Incentives matter

Rational behavior requires thinking at the margin. Which example represents this type of thinking? A. deciding whether a second burger is worth the extra $2 B. All these examples represent thinking at the margin C. deciding whether the overtime pay is worth working on your day off D. deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery

All of these examples represent thinking at the margin.

the assumption that factors other than those being considered are held constant

Ceteris Paribus

Which of these is NOT an example of market failure? A. Air is polluted by a manufacturing firm. B. Water is polluted by a paper company located by the river. C .Competition leads firms to provide products at the lowest possible price. D. Consumers must buy water from one local water utility.

Competition leads firms to provide products at the lowest possible price.

The opportunity costs of attending college do NOT include A. the forgone wages that could have been earned working B. the cost of textbooks or ebooks C. required student activity fees D. food expenditures

Food expenditures

Which situation(s) may require government intervention? I. A local business has made a profit in each of the last 10 years II. Students are having difficulty deciding whether to go the beach or to go hiking for their class trip. III. A manufacturing firm on a river is dumping production runoff into the water.

III only

When the government chooses to use resources to build tourist centers, the selected resources are no longer available to build highways. This BEST illustrates the concept of... A. Macroeconomics B. Scarcity C. Efficiency D. Opportunity Cost

Opportunity Cost

Faced by all individuals and societies

Scarcity

Which statement is TRUE about specialization and exchange between two individuals? A. They generally benefit neither the poorer individual nor the richer individual B. They generally benefit the poorer individual as well as the richer individual C. They generally benefit the richer individual at the expense of the poorer individual D. They generally benefit the poorer individual at the expense of the richer individual

They generally benefit the poorer individual as well as the richer individual

Paying a salesperson more for increased sales is an example of

an incentive

Supply and demand analysis is used

both microeconomics and macroeconomics.

how well resources are used and allocated

efficiency

the fairness of various issues and policies

equity

In the study of economics, the goals of efficiency and equity are often

in conflict with one another

The economics of uranium mining would be studied in

microeconomics

A business uses ____________ to determine how much of its products it is willing to supply to the market.

marginal analysis

People use _____ to determine how many hours to work, and businesses use _____ to determine how much of their product they are willing to supply to the market.

marginal analysis; marginal analysis

Economics is BEST defined as the study of how

people make rational decisions.

When goods are produced at the lowest possible cost, an economy is said to have achieved

production efficiency

Macroeconomics is concerned with issues such as

unemployment