Chapter 1 & 2: Scarcity and Choice

The ceteris paribus assumption means A. other things equal. B. more is better. C. all people are rational. D. people respond to incentives.

A. other things equal.

The existence of scarcity requires A. that people must make choices and face​ trade-offs in using their resources. B. having unfulfilled wants during times of economic depression. C. greater scientific advancements occur to eliminate it. D. that the government allocates resources.

A. that people must make choices and face​ trade-offs in using their resources.

Economics is A. the study of how limited resources are allocated to satisfy unlimited wants. B. the study of how the stock market works. C. the study of how unlimited resources are allocated to satisfy limited wants. D. the study of money.

A. the study of how limited resources are allocated to satisfy unlimited wants.

The ultimate purpose of economics is A. to study how individuals make choices. B. to motivate people so they work harder. C. to enable one to make predictions on what the stock market is going to do. D. to teach us how to make money.

A. to study how individuals make choices.

What is the difference between microeconomics and​ macroeconomics? A. Microeconomics lends itself to empirical analysis while macroeconomics uses the concept of incentives. B. Microeconomics is the study of decision making undertaken by individuals while macroeconomics looks at the behavior of the economy as a whole. C. Microeconomics deals with positive analysis while macroeconomics deals with normative analysis. D. Microeconomics examines the big picture while macroeconomics examines individual units.

B. Microeconomics is the study of decision making undertaken by individuals while macroeconomics looks at the behavior of the economy as a whole.

Every choice involves giving up an opportunity to produce or consume something else. A. False B. True

B. True

Factors of production include A. land, human​ capital, financial​ capital, and technology. B. land, labor, physical​ capital, human capital and entrepreneurship. C. hydrogen, oxygen and carbon. D. materials, energy and organization.

B. land, labor, physical​ capital, human capital and entrepreneurship.

The impact of the national debt on the​ economy's unemployment is an example of A. microeconomic analysis. B. macroeconomics analysis. C. irrational economics. D. behavioral economics.

B. macroeconomics analysis.

Scarcity A. results from unlimited resources coupled with limited wants. B. is the same thing in economic terminology as a shortage. C. results from unlimited wants coupled with limited resources. D. can be eliminated with improvements in technology.

C. results from unlimited wants coupled with limited resources.

Economists assume that an individual acts as if motivated by A. the good of society. B. financial gain. C. altruism. D. ​self-interest.

D. ​self-interest.

Economics A. assumes individuals are rational and respond to different incentives. B. assumes government involvement in the economy is always beneficial. C. assumes irrationality if people are paid enough. D. assumes individuals really have no choices other than what society imposes on them

A. assumes individuals are rational and respond to different incentives.

A production possibilities curve that is bowed outward​ (from the​ origin) represents the concept that A. production of additional units of one good requires that increasing quantities of the other good be given up. B. greater quantities of one good can be produced without reducing the production of other goods. C. opportunity costs are constant. D. resources are not scarce.

A. production of additional units of one good requires that increasing quantities of the other good be given up.

A point inside the PPC means that A. resources are not being fully utilized due to unemployment or inefficiency. B. economic growth has taken place. C. one good has no opportunity cost relative to another. D. this particular economy has no comparative advantage in production any economic good.

A. resources are not being fully utilized due to unemployment or inefficiency.

Economic growth can be pictured in the accompanying diagram (y=15 [autos], x=30 [machine tools] by A. shifting the PPC upward and outward. Your answer is correct. B. shifting the PPC inward. C. making the PPC less bowed out. D. making the PPC more curved or bowed out.

A. shifting the PPC upward and outward.

Opportunity cost is defined as A. the collection of all alternative goods that could be chosen at any point in time. B. the​ highest-valued, next-best alternative that must be given up to obtain something. C. the monetary cost of making a choice under conditions of scarcity. D. the variety of uses that a society has for all factors of production.

B. the​ highest-valued, next-best alternative that must be given up to obtain something.

A production possibilities curve represents A. all possible combinations of output that could be produced at zero opportunity cost. B. all possible combinations of output that could be produced assuming changing technology. C. all possible combinations of output that could be produced assuming fixed productive resources and their efficient use. D. the notion that greater quantities of all goods may be produced.

C. all possible combinations of output that could be produced assuming fixed productive resources and their efficient use.

The productivity gains achieved by specialization are due to A. lower opportunity costs from switching production from one good to another. B. scarcity. C. comparative advantage. D. absolute advantage.

C. comparative advantage.

Opportunity cost A. only is considered for goods in short supply. B. is the value of all alternatives forgone as a result of choosing some given alternative. C. is the value of the next best alternative as a result of choosing some given alternative. D. either B or C.

C. is the value of the next best alternative as a result of choosing some given alternative.

Economic growth implies A. you can only have more of one good by having less of another. B. opportunity costs are decreasing. C. you can now have more of all goods. D. fewer resources are available.

C. you can now have more of all goods.

Microeconomics focuses on A. all households and firms grouped together and how they interact with the government. B. aggregate economic variables like the rate of unemployment or national income. C. inflation and growth in our overall economy. D. decisions made by individual households and firms.

D. decisions made by individual households and firms.