Homework 1

What is wrong with the statement "Economics is everything to do with money"? a. No, economics involves satisfying wants by using resources wisely. We must make choices based on limited resources. b. Yes, money is the basis of economics. The economy cannot thrive without money. c. No, economics involves satisfying limited wants with unlimited resources. d. Yes, all decisions made in the economy involve money.

a maybe

Which situation(s) may require government intervention? I. A local business has made a profit in each of the last ten years. II. Students are having difficulty deciding whether to go the beach or to go hiking for their class trip. III. A manufacturing firm on a river is dumping production run off into the water. a. III only b. I and II c. II only d. II and III

a. III only maybe

Which statement is a key idea in economic thinking? a. Incentives matter. b. Scarcity exists for the poor but not for the rich. c. The value of a good can be objectively measured and is the same for everyone. d. All of these are key ideas in economic thinking.

a. Incentives matter.

People use _____ to determine how many hours to work, and businesses use _____ to determine how much of their product they are willing to supply to the market. a. marginal analysis; marginal analysis b. allocative efficiency; production efficiency c. marginal analysis; allocative efficiency d. production efficiency; marginal analysis

a. marginal analysis; marginal analysis

In relation to the Production Possibilities Frontier (PPF), which of the following demonstrates unemployment? a. a point inside the PPF b. a point outside the PPF c. a point on the PPF d. a point to the right of the PPF

b maybe

The opportunity costs of attending college do NOT include: a. the expenditures for food. b. the forgone wages that could have been earned working. c. the costs of textbooks or eBooks. d. required student activity fees.

d (or maybe c)

_____ occurs when goods and services are produced with as few resources as possible, while _____ occurs when the mix of goods and services produced is the most desired by society. a. Allocative efficiency; production efficiency b. Allocative efficiency; social efficiency c. Production efficiency; social efficiency d. Production efficiency; allocative efficiency

d. Production efficiency; allocative efficiency

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a: a. model. b. conclusion. c. metaphor. d. practice.

a. model

When goods are produced at the lowest possible cost, an economy is said to have achieved: a. production efficiency. b. inferior quality goods. c. cheap production. d. allocative efficiency.

a. production efficiency

(Table) The table shows coffee and tea units produced for the United States and Japan. If Japan decides to increase production of tea from 12 units to 24 units, the opportunity cost is: a. 15 units of tea. b. 8 units of coffee. c. 10 units of coffee. d. 10 units of tea.

b. 8 units of coffee

Supply and demand analysis is used: a. only in microeconomics. b. in both microeconomics and macroeconomics. c. only in macroeconomics. d. in neither microeconomics nor macroeconomics.

b. in both microeconomics and macroeconomics.

Which is NOT a source of economic growth? a. reducing barriers to financial aid for higher education b. reducing the level of international trade c. increasing business investment d. increasing research and development

b. reducing the level of international trade

(Figure) What would be a reason why an economy is operating at point D? a. There is a new technological breakthrough in the production of energy-efficient airplanes. b. An economy experiences an influx of immigrants seeking jobs. c. A reduction in business investment causes unemployment to increase. d. An economy uses all of its inputs efficiently but changes the ratio of the goods produced

c. A reduction in business investment causes unemployment to increase.

Does an incentive exist to spend four or more years of one's life and tens of thousands of dollars to earn a college degree? a. Yes, everything an individual does involves incentives. b. No, an incentive does not exist since the student must pay a price to go to college. c. Yes, the student knows that going to college will help him receive a better paying job. The incentive to go to school involves self-interest. d. No, going to college does not involve an incentive.

c. Yes, the student knows that going to college will help him receive a better paying job. The incentive to go to school involves self-interest.

A production possibilities frontier that is a straight line is the result of: a. scarcity. b. increasing opportunity costs. c. constant opportunity costs. d. underemployment of resources.

c. constant opportunity costs.

(Figure: Bread and Honey) In the graph, a movement from point f to point g could occur if: a. unemployed workers find jobs. b. people decide they prefer honey to bread. c. technological improvements occur. d. people decide they prefer bread to honey.

c. technological improvements occur.

Macroeconomics is concerned with issues such as: a. what price to charge for goods. b. which orange juice to buy. c. unemployment. d. which job to take.

c. unemployment.

The limits on international trade include all of these EXCEPT: a. Trade may hurt some industries and individuals within each country. b. transportation and communication costs. c. increasing opportunity costs and diminishing returns. d. decreasing opportunity costs and increasing returns.

d. decreasing opportunity costs and increasing returns.

(Figure: Interpreting PPF Shifts) According to the graph, which of the following changes may cause the production possibilities frontier to shift inward from PPF1 to PPF0? a. increase in the population b. increase in the labor force c. improve the skills of the workers d. increase government regulation on businesses overall

d. increase government regulation on businesses overall

The economy can grow as a result of all of the following EXCEPT: a. increasing human capital. b. technological advances. c. an increase in the quality of resources. d. increasing government policy.

d. increasing government policy.