LC Chapter 1

Suppose you decide to go to a concert. It is on a day that you would not have worked anyway, but your daily earnings are usually $80. Your friend gave you the concert ticket, which would have cost you $40, and you cannot resell it. You can expect to spend $40 on food and beverages. What is the opportunity cost of going to the concert?

$40

________ is the study of how individuals, firms, and society allocate limited resources to many competing wants.

Both macroeconomics and microeconomics

Which of the following is an example of a macroeconomic topic?

Increased economic growth causes the average income of workers to rise.

Macroeconomics is concerned with the effect of monetary policy on inflation. ________ is(are) concerned with how trade policy can affect unemployment.

Macroeconomics

Microeconomics is concerned with how much you plan to spend on travel this year. ________ is(are) concerned with how high unemployment will get during a recession.

Macroeconomics

________ is(are) concerned with how much more expensive goods in general will become this year. Microeconomics is concerned with how much more expensive gas will become this year.

Macroeconomics

________ is(are) concerned with how labor markets determine salaries. Microeconomics is concerned with which products a business should produce and what price they should charge.

Microeconomics

Which of the following is an example of a microeconomic topic?

a business that may have to file for bankruptcy due to decreasing sales

A question based on societal beliefs is:

a normative question.

A question based on what should be is:

a normative question.

A question that can be answered as long as the information is available is:

a positive question.

A question that involves the basic understanding of facts is:

a positive question.

A positive question is:

a question that can be answered using available information or facts.

Specialization can lead to gains for _____ of the parties as long as exchange is possible and those involved trade in a mutually beneficial manner.

all

If we classify people by income level, which group or groups must deal with scarcity?

all income groups, even the very rich

Current Major League Baseball team owners get to vote on the sale of ball clubs to prospective new owners. Sometimes this means that the highest bidder may not win the bidding process. This is a violation of:

allocative efficiency.

Kevin just purchased two concert tickets at a fundraiser auction. He was able to get the tickets because he was the highest bidder. This is an example of:

allocative efficiency.

Tony just purchased a set of skis on craigslist. Several people contacted the seller, but Tony offered more money. This is an example of:

allocative efficiency.

Incentives can be used to change a person's:

behavior.

Markets work best when _____ can weigh carefully the costs and benefits of goods and services.

both sides of a transaction

To study the effect of price on Brett's demand for rock climbing lessons economists hold his monthly income constant. This is an example of a(n) _______ assumption.

ceteris paribus

To study the effect of price on Frank's demand for premium movie channels economists hold his monthly income constant. This is an example of a(n) _______ assumption.

ceteris paribus

The assumption used in economics where other relevant factors or variables are held constant is known as:

ceteris paribus.

Jan is most efficient at making braided bracelets, Martin is most efficient at making clay pots, and Marcus is most efficient at making beaded necklaces. Jan likes all three items. Jan should make bracelets and trade them for which goods?

clay pots and necklaces

Equity and efficiency:

collide in some economic situations and some policy issues.

Which of the following is an example of a microeconomic topic?

decision making by government

Markets are __________ because people make rational choices.

efficient

Tax cuts are a contentious political issue. Some politicians argue that tax cuts tend to benefit people with higher incomes more than those with lower incomes. An economist would say that these opponents to tax cuts are concerned with the ___ of the tax cuts.

equity

Economists and policy makers often deal with the tradeoff between efficiency and:

equity.

Economists look for rational responses to:

incentives.

Which of the following is an example of a microeconomic topic?

labor markets

Suppose Jessie is deciding between three different menu items at an Italian restaurant: lasagna, pizza, and ravioli. She decides that her favorite choice of the three is ravioli, with pizza second, and lasagna third. Unfortunately, the waiter informs her that they are out of ravioli. So she orders pizza. What is her opportunity cost of ordering pizza?

lasagna

Economics is the study of how individuals, firms, and society allocate ________ resources to many competing wants.

limited

Sam lives in a state that changes to Daylight Savings Time. Every time Sam has to change the clocks in his house, he realizes how many things have clocks built into them. Which of the following key ideas of economics can explain why clocks are so prevalent?

marginal analysis

Designing policies to mitigate environmental damage uses the tools of:

microeconomics.

Market failure:

occurs when consumers have to buy from a monopolist.

What drives and disciplines markets?

prices and profits

The best mechanisms known today for efficiently providing goods and services are:

private markets.

Because a monopolist reduces the quantity supplied in order to increase prices, it will not produce the good at the lowest possible cost. This firm is operating without:

production efficiency.

Call centers offering technical support for American products have been moved to India to take advantage of lower labor costs. This is an example of:

production efficiency.

Much of the world's supply of textiles is now manufactured in China. This has led to textile factories closing in part of the United States. A textile firm choosing to move its manufacturing to China would argue that it is doing so to improve

production efficiency.

Oranges are grown in Florida because the warm weather allows for the efficient growth of the trees and fruit. This is why most of the orange juice in the country is made in Florida. This is an example of:

production efficiency.

In order to make _____ choices, people need information.

rational

Which of the following is an example of a macroeconomic topic?

recessions

Economics focuses on the allocation of __________ to satisfy unlimited wants.

scarce resources

Economists develop "stylized" models to analyze issues. Another word for "stylized" is:

simple.

Economists use "stylized" models in their approach to many economic issues, which are models that are:

simple.

Both Maggie and Angie can make beaded necklaces and clay bowls, but Maggie is most efficient at making necklaces. Therefore, Maggie makes necklaces and trades them for clay bowls. This is an example of:

specialization.

Based on the idea of marginal analysis, more people would be likely to have dessert if:

the dessert was included in the price of the meal.

The next best alternative to a decision is:

the opportunity cost.

Opportunity cost can also be defined as the __________ cost of a decision.

total

Which of the following is an example of a macroeconomic topic?

unemployment

Economics focuses on the allocation of scarce resources to satisfy:

unlimited wants.

Malika wants to study the effect of rising textbook prices on the number of books students purchase. In planning her study she realizes there are other variables besides price that can affect this decision. To help her in building her model she can:

use the ceteris paribus assumption.

The term scarcity means that:

wants are greater than resources.

Opportunity cost is:

what you give up to do something or purchase something.

Which of the following is an example of a microeconomic topic?

why a movie theater charges different prices to different groups of people.