CH 1 ECON

Economics is BEST defined as the study of how: a. to classify resources used to produce final goods and services. b. people make rational decisions. c. resources are apportioned to satisfy human wants. d. technology can be used to change scarce resources into free resources.

b.

The economics of uranium mining would be studied in: a. deductive logic. b. microeconomics. c. inductive logic. d. macroeconomics.

b.

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

c.

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.

Because of scarcity: a. we face tradeoffs in nearly every choice we make. b. choices are unlimited. c. resources are limitless. d. wants are limited.

a.

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.

Scarcity: a. is faced by all individuals and societies. b. can be eliminated with adequate resources. c. is eliminated with greater technology. d. is synonymous with poverty.

a.

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

a.

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 and III d. II only

a.

In the study of economics, the goals of efficiency and equity are often: a. given equal emphasis. b. in conflict with one another. c. compatible. d. objectively definable.

b.

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

b.

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

b.

Which of these is NOT an example of market failure? a. Water is polluted by a paper company located by a river. b. Competition leads firms to provide products at the lowest possible price. c. Air is polluted by a manufacturing firm. d. Consumers must buy water from one local water utility.

b.

Which statement is TRUE about specialization and exchange between two individuals? a. They generally benefit the richer individual at the expense of the poorer individual. b. They generally benefit the poorer individual as well as the richer individual. c. They generally benefit neither the poorer individual nor the richer individual. d. They generally benefit the poorer individual at the expense of the richer individual.

b.

Paying a salesperson more for increased sales is an example of: a. efficiency. b. an opportunity cost. c. an incentive. d. equity.

c.

Rational behavior requires thinking at the margin. Which example represents this type of thinking? a. deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery b. deciding whether the overtime pay is worth working on your day off c. All of these examples represent thinking at the margin. d. deciding whether a second burger is worth the extra $2

c.

When the government chooses to use resources to build tourist centers, the selected resources are no longer available to build highways. This BEST illustrates the concept of: a. macroeconomics. b. efficiency. c. opportunity cost. d. scarcity.

c.

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

d.