Economics Chapters 1&2
Suppose your expenses for this term are as follows: tuition: $5,000, room and board: $3,000, books and other educational supplies: $500. Further, during the term, you can only work part-time and earn $4,000 instead of your full-time salary of $10,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college? -$5,500 -$8,500 -$11,500 -$14,500
$11,500
Which of the following is a microeconomic question? -Why do economies experience periods of recession? -Will government intervention lower the unemployment rate? -Why has growth in the economy slowed down over the past decade? -How will Apple decide on a selling price for the iPad?
How will Apple decide on a selling price for the iPad?
Your roommate, Serafina, a psychology major, said, "the problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment? -Yes, I agree with her. One cannot make predictions about economic behavior because in reality people make incorrect choices in many situations. -I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits. -Yes, I agree with her. Economic theory should allow for irrational behavior so that we can have more reliable predictions. -I disagree with her. If we cannot assume that decisions are correct, then we will not be able to examine the moral implications of these decisions.
I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits.
Which of the following is an example of a "how much" decision? -The Pleasantville movie theatre is open only in the evenings. The theatre's manager is debating whether to add daily matinee shows. -The Zhous have demolished their old home and are debating whether to build a ranch-style house or a Craftsman home. -You're planning to hold a graduation party and must decide between having your party catered or having a pot-luck. -Chelsea has withdrawn from the swim team to take a full-time job.
The Pleasantville movie theatre is open only in the evenings. The theatre's manager is debating whether to add daily matinee shows.
Which of the following is a macroeconomic question? -What determines the minimum wage? -What determines the production of video game consoles? -What factors determine the price of oreo cookies? -What determines the salaries of college professors?
What determines the minimum wage?
Fast food restaurants produce a range of menu items such as hamburgers, chicken sandwiches, salads, and french fries. What fundamental economic question are they addressing by offering this range of items? -How to produce goods that consumers want? -Why produce goods that consumers want? -What to produce? -Who to produce the menu items for?
What to produce?
Consider the follwing statements: a. Soda drinkers purchase more soda from a grocery store that sells soda at a lower price than other rival grocery stores in the area. b. Homeowners do not take steps to increase security even though they believe it is more costly to allow burglaries than to install security monitoring equipment. c. Manufacturers produce less of a particular cell phone when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives? -a -b -c -a and b -a b and c
a
Consider the following statements: a. Consumers rent more kayaks from a vendor that rents kayaks at a lower price than other rival kayak vendors along Waikiki beach b. Department stores take steps to increase security since they believe it is more costly to allow shoplifting than to install expensive security monitoring equipment c. Farmers produce more cotton when its selling price falls Which of the above statements demonstrates that economic agents respond to incentives? -a -b -c -a and b -a b and c
a and b
The term "market" in economics refers to -a place where money changes hands -a legal institution where exchanges can take place -a group of buyers and sellers of a product and the arrangement by which they come together to trade -an organization which sells goods and services
a group of buyers and sellers of a product and the arrangement by which they come together to trade
An example of a factor of production is -a car produced by an auto manufacturer -a worker hired by an auto manufacturer -a loan granted to an auto manufacturer -the automobiles exported by an auto manufacturer
a worker hired by an auto manufacturer
If you can produce more of something than others with the same resources, you have -a comparative advantage -an absolute advantage -an efficient production system -a free-market economy
an absolute advantage
What does the term "marginal" mean in economics? -the edge of a market -an additional or extra -illegal -secondary -trivial
an additional or extra
________ a nation's production possibilities frontier represents economic growth. -an outward shift of -an inward shift of -moving up along -moving down along
an outward shift of
Productive efficiency is achieved when firms produce goods and services -most desired by society -at the highest profit margin -at the lowest cost -of the highest quality
at the lowest cost
Individuals who have never been the best at doing anything -cannot have a comparative advantage in producing any product -can still have a comparative advantage in producing some product -perform all tasks at a higher opportunity cost than others -must have an absolute advantage in at least ones task
can still have a comparative advantage in producing some product
All _________ economies have been political dictatorships. -centrally planned -mixed -market -mixed and market
centrally planned
Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following? -never have to engage in trade with other nations -increase the variety of products that it can produce with a decrease in resources -consume a combination of goods that lies outside its own production possibilities frontier -produce a combination of goods that lies outside its own production possibilities frontier
consume a combination of goods that lies outside its own production possibilities frontier
The opportunity cost of taking an online history class is -the knowledge and enjoyment you receive from taking the class -the value of the time spent online -equal to the highest value of an alternative use of the time and money spent on the class -zero because there is no classroom time involved if you are enrolled in the course -the cost of tuition and fees only
equal to the highest value of an alternative use of the time and money spent on the class
To compete in the automobile market, Tesla must make many strategic decisions such as whether to introduce a new car model, how to sell and service its cars, and where to advertise. At Tesla's Fremont, California plant, managers must decide on the monthly production quantities of their S and X models. In making this decision, the managers -face no trade-off because the Fremont plant only produces these two models of the many Tesla models produced worldwide -face a trade-off, because producing more of one model means producing less of the other -will choose to only produce the quantity of S and X models where marginal cost equals zero -will always decide on production quantities in which revenues are maximized
face a trade-off, because producing more of one model means producing less of the other
A worker is hired in a -goods and services market -product market -government market -factor market
factor market
If a vineyard wants to raise funds to purchase a new bottling machine, it does so in the -factor market -output market -product market -alcoholic beverages market
factor market
Izzy Amador is a highly talented tattoo artist. She has chosen to specialize in tattoo art because of all the following except -her tattoos are highly esteemed by tattoo lovers who are willing to pay very high prices -for her, this is the most lucrative way to purchase the products that she wants to consume -her opportunity cost of pursuing another career is very low -she obviously has a comparative advantage in tattoo art
her opportunity cost of pursuing another career is very low
What is an economic model? -it is a description of an economic issue that includes all possible related information -it is a description of an economic issue based on official government information -it is a detailed version of some aspect of economic life used to analyze an economic issue -it is a simplified version of some aspect of economic life used to analyze an economic issue
it is a simplified version of some aspect of economic life used to analyze an economic issue
Which of the following are primarily macroeconomic topics and which are primarily microeconomic topics a. college tuition rates b. farm subsides c. national income d. automobile prices e. air traffic congestion f. economic recession
macro: c f micro: a b d e
The concept of _______ is that the economic cost of using factor production is the alternative use of that factor that is given up. -marginal cost -opportunity cost -normative economics -entrepreneurship
opportunity cost
Economists assume that -individuals behave in unpredictable ways -consumer behavior is explained by the existence of unlimited resources -people put other people's interests ahead of their own -optimal decisions are made at the margin
optimal decisions are made at the margin
In 2017, President Trump considered imposing a tariff on automobiles assembled by U.S. manufacturers in Mexico that were to be sold in the United States. If this tariff was imposed and as a result, some of these manufacturers moved their automobile assembly from Mexico back to the Untied States, these firms would be reacting to which of the three key economic ideas? -firms attempt to maximize revenues -optimal decisions are made at the margin -people are rational -people respond to economic incentives
people respond to economic incentives
Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying the economic idea that -people are rational -people respond to economic incentives -optimal decisions are made at the margin -equity is more important than efficiency
people respond to economic incentives
Every society faces economic trade-offs. This means -some people live better than others do -not everyone can have enough goods to survive -producing more of one good means less of another good can be produced -society's output cannot be made available to all
producing more of one good means less of another good can be produced
When goods and services are produced at the lowest possible cost, ________ occurs. -allocative efficiency -productive efficieny -equity -efficient central planning
productive efficiency
The study of economics arises due to -money -scarcity -greed -resources
scarcity
____________ exists because unlimited wants exceed the limited resources available to fulfill those wants. -scarcity -productive efficiency -the command growth -the economic growth
scarcity
Economic growth is represented on a production possibilities frontier model by the production possibilities frontier -shifting outward -shifting inward -becoming steeper -becoming flatter
shifting outward
Comparative advantage means -the ability to produce more of a product with the same amount of resources than any other producer -the ability to produce a good or service at a lower opportunity cost than any other producer -the ability to produce a good or service at a higher opportunity cost than any other producer -compared to others you are better at producing a product
the ability to produce a good or service at a lower opportunity cost than any other producer
Consider the following economic agents: a. the government b. consumers c. producers Who, in a modern mixed economy, decides what goods and services will be produced with the scarce resources available in that economy? -the government -producers -consumers -consumers and producers -the government, consumers, and producers
the government, consumers, and producers
Opportunity cost is defined as -the benefit of an activity -the monetary expense associated with an activity -the highest valued alternative that must be given up to engage in an activity -the total value of all alternatives that must be given up to engage in an activity
the highest valued alternative that must be given up to engage in an activity
Which of the following is a factor of production? -a sofa produced by a furniture manufacturer -20 shares of Microsoft stock -the janitor at the local elementary school -$500 in cash
the janitor at the local elementary school
The production possibilities frontier shows -the various products that can be produced now and in the future -the maximum attainable combinations of two products that may be produced in a particular time period with available resources -what an equitable distribution of products among citizens would be -what people want firms to produce in a particular time period
the maximum attainable combinations of two products that may be produced in a particular time period with available resources
Which of the following is a positive economic statement? -people should not buy imported fruits and vegetables -the government should subsidize solar power for homeowners -the minimum wage law causes unemployment -the number of work visas should not be limited by the government
the minimum wage law causes unemployment
__________ shows that if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good. -comparative advantage -absolute advantage -the mixed market system -the production possibilities frontier model
the production possibilities frontier model
According to the Centers of Disease Control and Prevention, ___________ in 2015 in which less than 20% of the population was considered obese. -Colorado was the only state -there were only 5 states -there were more than 25 states -there were no states
there were no states
Scarcity refers to the situation in which -unlimited wants exceed limited resources -unlimited resources exceed limited wants -a country's population is larger than its resource base -a nation's poverty level increases faster than its population
unlimited wants exceed limited resources
The resource income earned by those who supply labor services is called -wages and salaries -stock options -profit -bonus
wages and salaries