Chapter 1 Quiz

Economics is

the study of how limited resources are allocated to satisfy unlimited wants.

Consider the following statement based on a positive economic analysis that assumes that all other things remain constant: A reduction in income tax rates will result in more people working. Which of the following (initially assumed constant) could occur and thus offset the stated outcome?

An increase in the outsourcing of jobs. An increase in hotel taxes at popular resorts.

The three fundamental economic questions that a nation addresses in order to allocate society's scarce resources include all of the following except:

Why will the items be produced?

Categorize each of the following issues as either a microeconomics issue or a macroeconomics issue. a. The national unemployment rate. b. The decision of a worker to work overtime or not. c. A family's choice of having a baby. d. The rate of growth of the money supply. e. The national government's budget deficit. f. A student's allocation of study time across two subjects.

a. Macro b. Micro c. Micro d. Macro e. Macro f. Micro

Categorize each of the following conclusions as being the result of positive analysis or normative analysis. a. A higher minimum wage will reduce employment opportunities for minimum wage workers. b. Increasing the earnings of minimum wage employees is desirable, and raising the minimum wage is the best way to accomplish this. c. Everyone should enjoy open access to healthcare. d. Heathcare subsides will increase the consumption of health care.

a. Positive economics b. Normative economics c. Normative economics d. Positive economics

For each of the following items, state whether a direct or an inverse relationship is likely to exist. a. The number of hours you study for an exam and your exam score is a/an ___ relationship. b. The price of pizza and the quantity purchased is a/an ___ relationship. c. The number of games the university basketball team won last year and the number of seasons tickets sold this year is a/an ___ relationship.

a. direct b. inverse c. direct

Economics

assumes individuals are rational and respond to different incentives.

The rationality assumption implies that

individuals will not intentionally make decisions that leave them worse off.