CH1 HOMEWORK

B. productive resources are limited.

According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because: A. people are greedy. B. productive resources are limited. C. human beings are inherently insecure. D. people are irrational.

B. false

Because economic generalizations are simplifications from reality, they are impractical and useless. A. true B. false

A. true

In drawing a particular budget line, money income and the prices of the two products are fixed. A. true B. false

A. tradeoffs.

Which of the following most closely relates to the idea of opportunity costs? A. tradeoffs. B. economic growth. C. technological change. D. capitalism.

C. money in a business checking account

Which of the following would not be classified as an economic resource by economists? A. a professional soccer player B. water in a town's reservoir C. money in a business checking account D. the manager of the local hamburger restaurant

B. false

If economic theories are solidly based on relevant facts, then appropriate economic policy becomes obvious and uncontroversial. A. true B. false

A. true

Rational individuals may make different choices because their preferences and circumstances differ. A. true B. false

C. is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced.

The production possibilities curve: A. shows all of those levels of production that are consistent with a stable price level. B. indicates that any combination of goods lying outside the curve is economically inefficient. C. is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced. D. shows all of those combinations of two goods that are most preferred by society.

A. benefit exceeds its marginal cost.

A person should consume more of something when its marginal: A. benefit exceeds its marginal cost. B. cost exceeds its marginal benefit. C. cost equals its marginal benefit. D. benefit is still positive.

A. unemployment.

A point inside a production possibilities curve best illustrates: A. unemployment. B. the efficient use of resources. C. the use of best-available technology. D. unlimited wants.

C. the maximum amounts of two goods that can be produced assuming the full use of available resources.

A production possibilities curve shows: A. that resources are unlimited. B. that people prefer one of the goods more than the other. C. the maximum amounts of two goods that can be produced assuming the full use of available resources. D. combinations of capital and labor necessary to produce specific levels of output.

A. is a reality that underlies economic behavior.

According to economists, economic self-interest: A. is a reality that underlies economic behavior. B. has the same meaning as selfishness. C. is more characteristic of men than of women. D. is usually self-defeating.

A. rational self-interest, because he attempting to increase his own income by identifying and satisfying someone else's wants.

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as: A. rational self-interest, because he attempting to increase his own income by identifying and satisfying someone else's wants. B. greedy, because he is asking for a high wage. C. selfish, because he is asking for a wage that is higher than others might charge. D. irrational, because some neighbors refused his offer.

C. must be decreased.

Assume an economy is operating at some point on its production possibilities curve, which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods: A. will remain unchanged. B. may be either increased or decreased. C. must be decreased. D. must also be increased.

B. purposeful behavior.

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of: A. resource scarcity and the necessity of choice. B. purposeful behavior. C. marginal costs that exceed marginal benefits. D. the tradeoff problem that exists between competing goals.

A. most decisions involve changes from the present situation.

Economics involves marginal analysis because: A. most decisions involve changes from the present situation. B. marginal benefits always exceed marginal costs. C. marginal costs always exceed marginal benefits. D. much economic behavior is irrational.

D. purposeful

Economists contend that most economic decisions are: A. random B. chaotic C. spontaneous D. purposeful

C. pleasure and satisfaction.

For economists, the word "utility" means: A. versatility and flexibility. B. rationality. C. pleasure and satisfaction. D. purposefulness.

B. economic resources are perfectly substitutable between the production of the two products.

If the production possibilities curve is a straight line: A. the two products will sell at the same market prices. B. economic resources are perfectly substitutable between the production of the two products. C. the two products are equally important to consumers. D. equal quantities of the two products will be produced at each possible point on the curve.

A. scarcity and opportunity costs.

In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of: A. scarcity and opportunity costs. B. money and real capital. C. complementary economic goals. D. full production.

C. both technology and resource supplies.

In drawing a production possibilities curve we hold constant: A. the money supply. B. the consumer price index. C. both technology and resource supplies. D. resource supplies only.

A. the entire economy.

Macroeconomics approaches the study of economics from the viewpoint of: A. the entire economy. B. governmental units. C. the operation of specific product and resource markets. D. individual firms.

B. false

Macroeconomics explains the behavior of individual households and business firms; microeconomics is concerned with the behavior of aggregates or the economy as a whole. A. true B. false

A. the decision to engage in one activity means forgoing some other activity.

Marginal costs exist because: A. the decision to engage in one activity means forgoing some other activity. B. wants are scarce relative to resources. C. households and businesses make rational decisions. D. most decisions do not involve sacrifices or tradeoffs.

A. money, as such, is not productive.

Money is not an economic resource because: A. money, as such, is not productive. B. idle money balances do not earn interest income. C. it is not scarce. D. money is not a free gift of nature.

B. false

Purposeful behavior implies that everyone will make identical choices. A. true B. false

D. a budget line.

The alternative combinations of two goods which a consumer can purchase with a given money income is shown by: A. a production possibilities curve. B. a demand curve. C. consumer expenditure line. D. a budget line.

B. a comparison of marginal benefits and marginal costs in decision making.

The economic perspective entails: A. irrational behavior by individuals and institutions. B. a comparison of marginal benefits and marginal costs in decision making. C. short-term but not long-term thinking. D. rejection of the scientific method.

C. the making of purposeful decisions in a context of marginal costs and marginal benefits.

The economic perspective refers to: A. macroeconomic phenomena, but not microeconomic phenomena. B. microeconomic phenomena, but not macroeconomic phenomena. C. the making of purposeful decisions in a context of marginal costs and marginal benefits. D. unlimited resources in a context of limited economic wants.

B. limited resources to satisfy virtually unlimited wants.

The economizing problem is one of deciding how to make the best use of: A. virtually unlimited resources to satisfy virtually unlimited wants. B. limited resources to satisfy virtually unlimited wants. C. unlimited resources to satisfy limited wants. D. limited resources to satisfy limited wants.

A. the principle of increasing opportunity costs is relevant.

The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve indicates that: A. the principle of increasing opportunity costs is relevant. B. society's resources are limited. C. the opportunity cost of producing each product is constant. D. resources are perfectly shiftable between alternative uses.

B. false

The increasing wealth of the United States has reduced the relevance of economics. A. true B. false

A. resources are not equally efficient in producing various goods.

The law of increasing opportunity costs exists because: A. resources are not equally efficient in producing various goods. B. the value of the dollar has diminished historically because of persistent inflation. C. wage rates invariably rise as the economy approaches full employment. D. consumers tend to value any good more highly when they have little of it.

C. concave to the origin.

The law of increasing opportunity costs is reflected in a production possibilities curve that is: A. an upsloping straight line. B. a downsloping straight line. C. concave to the origin. D. convex to the origin.

B. innovate.

The main function of the entrepreneur is to: A. make routine pricing decisions. B. innovate. C. purchase capital. D. create market demand.

B. each good is produced at a level where marginal benefits equal marginal costs.

The optimal point on a production possibilities curve is achieved where: A. the smallest physical amounts of inputs are used to produce each good. B. each good is produced at a level where marginal benefits equal marginal costs. C. large amounts of capital goods are produced relative to consumer goods. D. large amounts of consumer goods are produced relative to capital goods.

B. reduced if marginal costs exceed marginal benefits.

The output of MP3 players should be: A. reduced if marginal benefits exceed marginal costs. B. reduced if marginal costs exceed marginal benefits. C. increased if marginal costs exceed marginal benefits. D. reduced to zero if their unit costs exceed the unit costs of alternative products.

B. comparing marginal benefits and marginal costs.

The point on the production possibilities curve that is most desirable can be found by: A. estimating the marginal costs of both products in real or physical terms. B. comparing marginal benefits and marginal costs. C. determining where least-cost production occurs. D. calculating where economic growth will be greatest.

A. major topics of macroeconomics.

The problems of aggregate inflation and unemployment are: A. major topics of macroeconomics. B. not relevant to the U.S. economy. C. major topics of microeconomics. D. peculiar to command economies.

C. investment.

The process of producing and accumulating capital goods is called: A. money capital. B. depreciation. C. investment. D. consumption.

B. persists because economic wants exceed available productive resources.

The scarcity problem: A. persists only because countries have failed to achieve continuous full employment. B. persists because economic wants to exceed available productive resources. C. has been solved in all industrialized nations. D. has been eliminated in affluent societies such as the United States and Canada.

C. these wants are virtually unlimited and therefore incapable of complete satisfaction.

When the economist says that economic wants are insatiable, this means that: A. economic resources are valuable only because they can be used to produce consumer goods. B. economic resources-land, labor, capital, and entrepreneurial ability-are scarce. C. these wants are virtually unlimited and therefore incapable of complete satisfaction. D. the structure of consumer demand varies from time to time and from country to country.

A. a computer programmer

Which of the following is a labor resource? A. a computer programmer B. a computer C. silicon (sand) used to make computer chips D. a piece of software used by a firm

C. silicon (sand) used to make computer chips

Which of the following is a land resource? A. a computer programmer B. a computer C. silicon (sand) used to make computer chips D. a piece of software used by a firm

D. natural gas

Which of the following is a land resource? A. a farmer B. an oil drilling rig C. a machine for detecting earthquakes D. natural gas

A. The gross profits of all U.S. businesses were $182 billion last year.

Which of the following is a macroeconomic statement? A. The gross profits of all U.S. businesses were $182 billion last year. B. The price of beef declined by 3 percent last year. C. General Motors' profits increased last year. D. The productivity of steelworkers increased by 1 percent last year.

C. production technology is fixed.

Which of the following is assumed in constructing a typical production possibilities curve? A. the economy is using its resources inefficiently. B. resources are perfectly shiftable among alternative uses. C. production technology is fixed. D. the economy is engaging in international trade.

A. make routine pricing decisions.

Which of the following is not a main function of the entrepreneur? A. make routine pricing decisions. B. innovate. C. assume the risk of economic losses. D. makes strategic business decisions.

B. a construction crane

Which of the following is real capital? A. a pair of stockings B. a construction crane C. a savings account D. a share of IBM stock

C. "There is no such thing as a free lunch."

Which one of the following expressions best states the idea of opportunity cost? A. "A penny saved is a penny earned." B. "He who hesitates is lost." C. "There is no such thing as a free lunch." D. "All that glitters is not gold."