EC 211 Chapter 01

Which of the following statements is correct? A. Scarcity leads to competitive behavior B. Scarcity leads to poverty C. Scarcity leads to necessity D. Scarcity leads to subjectivity

A. Scarcity leads to competitive behavior

An economic theory is A. a generalization that summarizes what we understand about economic choices. B. a positive statement that cannot use the ceteris paribus clause. C. usually more complex than the real world. D. always a mathematical, or nonverbal, model.

A. a generalization that summarizes what we understand about economic choices.

Economics is best defined as the study of how people, businesses, governments, and societies

make choices to cope with scarcity.

The term used to emphasize that making choices in the face of scarcity involves a cost is

opportunity cost.

In economics, the term "capital" refers to

plants, equipment, and inventories.

The most fundamental economic problem is

scarcity

Marginal benefit is the benefit

that arises from an increase in an activity.

Because total income in the United States has increased over time, everyone's total income has increased as well. This incorrect argument is an example of

the fallacy of composition

Human capital is

the skill and knowledge of workers.

The fallacy of composition is the (false) statement that

what is true of the parts is true of the whole.

the fallacy of composition is the (false) statement that

what is true of the parts is true of the whole.

On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is

working out at the gym.

Which of the following is an example of a positive statement? A. Business firms ought to contribute more to charities. B. Government should not redistribute income. C. The foreign sector should be more tightly controlled. D. Households are the primary source of saving

D. Households are the primary source of saving

Which of the following is a normative statement? A. The price of candy bars is $1.25 each. B. Popcorn and candy are sold in movie theaters. C. Candy bars are more expensive than newspapers. D. You should eat less candy.

D. You should eat less candy.

Which of the following is a normative statement? A. The price of candy bars is $1.25 each. B. Popcorn and candy are sold in movie theaters. C. Candy bars are more expensive than newspapers. D. You should eat less candy.

D. You should eat less candy.

Which of the following topics would be studied in a microeconomics course? A. how a tax rate increase will impact total production B. comparing inflation rates across countries C. how a trade agreement between the United States and Mexico affects both nations'unemployment rates D. how rent ceilings impact the supply of apartments

D. how rent ceilings impact the supply of apartments

The problem of scarcity can be dealt with by A. rationing by price. B. rationing by administrative decisions. C. letting people simply fight for the available resources. D. letting the people vote on who should get the resources. E. All of the above.

E. All of the above.

Ceteris paribus is the Latin expression for

an expression that means "other things being equal."

When economists study the effects of unemployment insurance on the unemployment rate by comparing the United States with Canada, they assume that other conditions in the two economies do not differ significantly. This procedure is an example of

applying the ceteris paribus principle.

An incentive

could be either a reward or a penalty.

Which of the following is a macroeconomic issue? A. how federal government budget deficits affect interest rates B. the cause of a decline in the price of peanut butter C. what determines the amount a firm will produce D. how a rise in the price of sugar affects the market for sodas

A. how federal government budget deficits affect interest rates

Opportunity cost means

he highest-valued alternative forgone.

Which of the following statements is true? A. Scarcity is a subjective concept. B. Poverty is a subjective concept. C. Both scarcity and poverty are subjective concept. D. Both scarcity and poverty are objective concepts.

B. Poverty is a subjective concept.

Entrepreneurs do all of the following EXCEPT A. bear risk from business decisions. B. own all the other resources. C. come up with new ideas about what, how, when and where to produce. D. organize labor, land, and capital.

B. own all the other resources.

Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares A. the total revenue from sales of printers to the total cost of producing all the printers. B. the extra revenue from selling a few additional printers to the extra costs of producing the printers. C. HP's printers to printers from competing companies, such as Lexmark. D. the extra revenue from selling a few additional printers to the average cost of producing the additional printers.

B. the extra revenue from selling a few additional printers to the extra costs of producing the printers.

Which phrase best describes the relationship between the number of miles driven and the amount of gasoline used?

both correlated and causal

Which phrase best describes the relationship between the number of miles driven and the amount of gasoline used? A. causal, but not correlated B. correlated, but not causal C. both correlated and causal D. neither correlated nor causal

both correlated and causal

As an economic concept, scarcity applies to

both money and time