Chapter 2
As depicted in _________________, it is necessary to give up some of one good to gain more of the other good. A. the production possibilities frontier B. allocative efficiency C. scarcity D. utility
A.
Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. A. normative statement B. budget constraint C. trade-off D. opportunity cost
A.
The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display ___________. A. allocative efficiency B. the production possibilities frontier C. trade-offs D. scarcity
A.
The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern. A. utility B. marginal benefit C. opportunity cost D. sunk costs
A.
6. Economists refer to this pattern, the ___, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines. A. law of trade-offs B. law of diminishing marginal utility C. production possibilities frontier D. law of increasing marginal utility
B.
Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. A. utility B. marginal analysis C. the budget constraint D. consumption
B.
Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is: A. 8 points on the history exam. B. 15 points on the history exam. C. 14 points on the history exam. D. 17 points on the history exam.
B.
Scarcity implies that: A. consumers would be willing to purchase the same quantity of a good at a higher price. B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. C. at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce. D. consumers are too poor to afford the goods and services available.
B.
The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible. A. consumption set B. budget constraint C. original budget D. income cap
B.
As a person receives more of a good, the _______ from each additional unit of the good declines. A. utility B. sunk costs C. marginal utility D. budget constraint
C.
In many cases, it is reasonable to refer to the ________________ as the price. A. budget constraint B. sunk cost C. opportunity cost D. budget constraint
C.
Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: A. A to B B. B to E C. C to F 4 D. G to F
C.
Why is there scarcity? A. Because the opportunity set determines this. B. Because theory dictates it. C. Because our unlimited wants exceed our limited resources D. Because human wants are limited.
C.
"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: A. $0 B. $4 C. $40 D. $44
D.
Refer to Figure 2-2. When the economy moves from Point A to Point B in the diagram above: 6 A. the economy begins using its resources efficiently to produce both food and clothing. B. the economy operates at its productive capacity once it reaches Point B. C. the economy increases production of both clothing and food. D. All of the above occur
D.
The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if: A. the economy moves along the production possibilities in the direction of a greater quantity of defense. B. the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. C. the production possibilities frontier shifts outward due to an improvement in technology. D. either b) or c) occurs, but not as a result of a).
D.
The opportunity cost of an action: A. can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action. B. can be determined by adding up the bills incurred as a result of the action. C. can be objectively determined only by economists. D. is a subjective valuation that can be determined only by the individual who chooses the action.
D.