Economics Ch. 1-2

A division of labor enhances society's output by permitting people to take advantage of existing differences in their abilities and skills.

True

A market system is characterized by the private ownership of resources and the use of markets and prices to coordinate and direct economic activity.

True

A point inside the production curve illustrates that resources are not being used as efficiently as possible.

True

Both human specialization and geographic specialization are needed to achieve efficiency in the use of limited resources.

True

Command systems in the Soviet Union and Eastern Europe failed primarily because of coordination and incentive problems.

True

Economic growth is shown by a shift of the production possibilities curve outward and to the right.

True

Economic rivalry, or completion, requires a large number of buyers and sellers in the market.

True

Economics is primarily concerned with marginal changes from the status quo.

True

Economics is the study of the efficient use of scarce resources to achieve maximum satisfaction of economic wants.

True

Exchange by barter requires a coincidence of wants.

True

In a competitive market economy, firms and resources suppliers will seek to further their own self-interest, but at the same time, as if guided by an "invisible hand," they will promote the public interest.

True

In the U.S. economy, corporations account for about 20% of the firms, and about 84% of the total sales revenue.

True

In the U.S. economy, rents are the smallest source of household income.

True

In the U.S. economy, services account for over half of all consumer expenditures.

True

In the circular flow model, households fiction on the selling side of the resources market and the buying side of product markets.

True

It is generally agreed that a major advantage of the competitive price system is the achievement of greater efficiency.

True

Macroeconomics is concerned with the whole economy or it's major sectors.

True

Marginal analysis is the comparison of additional benefits with the additional costs.

True

More specialization in a market economy generally leads to the more efficient use of its resources.

True

Property rights have a positive effect in a market economy because they encourage owners to maintain their property.

True

Specialization in production can occur based on geographic advantages.

True

The concave, or bowed-out, shape of the production possibilities curve illustrates the law of increasing opportunity costs.

True

The fundamental economic problem is that productive resources are scarce in relation to the demand for them.

True

The implied production possibilities curve between work time and grades suggests that more hours spent working will mean income, but also less study time and a lower grade average.

True

The institution of private property is sustained over time by the right to bequeath to heirs.

True

The marginal cost curve for a product slopes upward as more units are produced because of the law of increasing costs.

True

The scientific method involves developing hypotheses from factual observations, and then testing the hypotheses.

True

An important part of the market system is that producers and consumers consider the public interest in making production and consumption decisions.

False

By using the same ceteris paribus assumptions, economic principles are just as certain and precise as those of the laboratory sciences.

False

Command systems in the Soviet Union and Eastern Europe failed primarily because of a lack of resources.

False

Economic efficiency entails getting the smallest amount of output from a given level of input of scarce resources.

False

From the "economic perspective" people make purposeful decisions based on hypotheses.

False

If a nation is incurring a trade deficit(it is buying more from abroad - importing, then it is selling abroad - exporting), then it is most likely producing beyond the frontier of its production possibilities curve.

False

If the marginal benefits are greater that the marginal cost of an activity, then society is overallocationg resources to this activity.

False

If the marginal benefits of the output from resources devoted to the production of a product are greater than the marginal costs, then there has been an overallocation of resources to the production of that product.

False

In the U.S. economy, housing accounts for over half of all consumer expenditures.

False

In the U.S. economy, sole proprietorships account for over half the firms and over half of total sales revenue.

False

In the circular flow model, there is a money flow of economic resources and finished goods and services and a real flow of income and consumption expenditures.

False

In the market system, prices tend to guide resources from less important to more important uses as the market system progresses.

False

One of the most important economic resources is money.

False

Property rights are the right of the government to own, use, and dispose of resources in an economy.

False

Selfishness and self-interest are the same concepts.

False

The concept of consumer sovereignty refers to situations in which consumers are represented on the board of directors of large corporations.

False

The economizing problem arises from the conflict between having relatively unlimited resources and relatively limited wants.

False

The economy of the United States can best be described as pure capitalism.

False

The four factors of production are land, labor, capital, and government services.

False