Eco 2301 Test 1 Review Bishop

Economics is concerned with: A. the choices people must make because resources are scarce. B. human decision makers and the factors that influence their choices. C. the allocation of limited resources to satisfy virtually unlimited desires. D. all of the answers are correct.

- the choices people must make because resources are scarce. -human decision makers and the factors that influence their choices. -the allocation of limited resources to satisfy virtually unlimited desires.

Which of the following is true? A. All of the other answers are true. B. One advantage of specialization is that workers acquire greater skill from repetition. C. The primary reason people pursue their comparative advantage is their self-interest. D. If a person, a region, or a country can produce a good or service at a lower opportunity cost than others, we say that they have a comparative advantage in the production of that good or service. E. People specialize by concentrating their energies on the activity to which they are best suited, because they incur lower opportunity costs as a result.

A. All of the other answers are true.

Which of the following is true: A. Poverty could be eliminated but scarcity could not B. Scarcity could be eliminated but poverty could not. C. Both scarcity and poverty could be eliminated. D. Neither scarcity nor poverty could be eliminated.

A. Poverty could be eliminated but scarcity could not

A change in which of the following variables does not cause a change in demand? A. prices of unrelated goods B. incomes of demanders C. expectations of demanders D. tastes of demanders E. the number of demanders

A. Prices of unrelated goods. Changes in the prices of unrelated foods do not affect the demand of a specific good. In Economics, the related goods are the so called complements or substitutes goods. Changes in the prices of a complement or a substitute do have an impact in the demand of a specific good. If two goods are substitutes, when the price of one increases, the demand for the other also increases. If two goods are complements, when the price of one increases, the demand for the other decreases.

If the price of music downloads decreases, which of the following is most likely to occur? A. Quantity demanded will increase. B. Demand will decrease. C. Quantity demanded will decrease. D. Demand will increase.

A. Quantity demanded will increase.

From an economists' perspective, which of the following observations is not true? A. Self-interest is purely monetary in nature B. Self-interest can include benevolence. C. Self-interest is a good predictor of human behavior in most situations. D. Self-interest is not the same as selfishness

A. Self-interest is purely monetary in nature. An an economist's perspective, self-interest is defined in a broad sense, which includes not only monetary or financial gains, but also the emotional and personal satisfaction derived from good deeds or actions that benefit society at large.

Which of the following is a statement of positive economics? A. The income tax reduces after-tax incomes of the rich B. A reduction in tax rates makes the after-tax distribution of income fairer. C. Tax rates ought to be reduced so that people will work more. D. All of the above are statements of positive economics. E. None of the above is statements of positive economics.

A. The income tax reduces after-tax incomes of the rich. This is a positive statement because its truthfulness can be tested mathematically or empirically. There is no value judgment on it.

Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy? A. Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments. B. Their positive statements help us understand the good results of a policy change, and their normative statements help us understand the negative results. C. We really do not have to worry about them since trained economists never make normative statements. D. Economists are always making assumptions, and policy should not be based on assumptions. E. Economists are "tricky" by nature, so we need to be able to distinguish truth from political rhetoric.

A. Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments

Tom is a castaway who washes up on a remote island. He can catch eight birds per day or catch ten fish per day. The natives on the island can catch ten birds per day or catch twenty fish per day. According to comparative advantage, A. Tom should catch more birds and fish less, then trade birds for fish. B. Both should catch more birds and fish less. C. Both should catch fewer birds and fish more. D. Tom should catch fewer birds and fish more, then trade fish for birds.

A. Tom should catch more birds and fish less, then trade birds for fish.

Which of the following would be most likely to cause a reduction in the supply of Nintendo video games? A. an increase in the price of computer chips used to make Nintendo games B. a decrease in the demand for Nintendo video games C. an increase in the demand for Nintendo video games D. a decrease in the price of computer chips used to make Nintendo games E. a decrease in the price of Nintendo video games

A. an increase in the price of computer chips used to make Nintendo games The computer chips are inputs in the production of the Nintendo games. The cost of the inputs is one of the factors then influence supply: If the price of the inputs increase, the cost of production increases, and as a consequence the supply of Nintendo Games decreases. This is is represented by the supply curve shifting leftward.

Whenever the price of Good A decreases, the demand for Good B increases. Good A and B appear to be: A. complements. B. inferior goods. C. compliments. D. substitutes. E. normal goods.

A. complements In general, two goods are considered complements if an decrease in the price of one causes the demand of the other to increase (an inverse relationship), or vice versa. Two good are complements if they tend to be consumed together. Tennis rackets and tennis balls are such type of goods: there is not that much that can be done with a racket alone, or with a tennis ball alone. Others examples of complement goods are computers and memory devices, printers and cartridges, and computers and software.

Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that: A. in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost. B. the man is behaving irrationally. C. smoking should be banned by the government in order to ensure the safety of smokers. D. the smoker is unconcerned about his future health. E. in the man's judgment, the expected marginal cost of smoking the cigarette outweighs the expected marginal benefit

A. in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost. The smoker, as a rational individual, considers that the marginal benefit of smoking, which is the personal satisfaction derived from her or his action, outweighs the marginal cost, some of which are the potential health hazards resulting from smoking.

Mike can wash a car in 5 minutes and wax a car in 15 minutes. Tony can wash a car in 10 minutes and wax a car in 20 minutes. Which of the following is true? A. Mike can wash a car faster and has comparative advantage in washing cars. B. Mike can wax a car faster and has comparative advantage in waxing cars. C. Tony can wash a car faster and has comparative advantage in washing cars. D. Tony can wax a car faster and has comparative advantage in waxing cars. E. Both a. and b. are true.

A. mike can wash a car faster and has comparative advantage in washing cars.

Each point on the supply curve shows the: A. quantity supplied at that price. B. the amount producers want to sell to buyers of different income levels. C. productive capacity of an individual producer. D. amount that people want to buy at that price.

A. quantity supplied at that price. A supply curve shows the relationship between the quantities offered of specific a good at different prices, ceteris paribus. Each point of the curve indicates the quantity that sellers of the good are willing to sell at a specific price.

Advantages of specialization do not include: A. reduced interdependence. B. the ability to utilize more complex production processes. C. gains from learning by doing. D. the exploitation of comparative advantage. E. All of the other answers are advantages of specialization.

A. reduced interdependence. Specialization does not bring about reduced interdependence. As people concentrate on the production of one or a few goods, the need for trade increases, and so interdependence increases.

Economists believe that in regards to criminal behavior: A. those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs. B. economics can shed very little light on the subject. C. individuals are irrational and don't respond to incentives. D. people engage in criminal activity because they are genetically predisposed to do so.

A. those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs. A criminal, especially one who seeks a monetary retribution, behaves in a way similar to that of any rational individual who is making choices: she or he weighs the expected marginal benefits versus the expected marginal costs.

Because of scarcity: A. we must sacrifice valuable alternatives to obtain more goods and services we desire. B. the opportunity cost of consumption is zero. C. we can obtain more of a desirable good without sacrificing other goods and services. D. shortages of goods prevail at current market prices. E. both a. and d. are correct.

A. we must sacrifice valuable alternatives to obtain more goods and services we desire.

A hypothesis is: A. a normative economic statement. B. a testable proposition. C. a statement that cannot be evaluated using real-world data. D. a model with no connection to the real world

B. A testable proposition

Which of the following is true? A. People can gain by specializing in the production of the good in which they have a comparative advantage. B. All of the above are true. C. Voluntary trade directly increases wealth by making both parties better off, and it is the prospect of wealth-increasing exchange that leads to productive specialization. D. Without the ability to trade, people would not tend to specialize in those areas where they had a comparative advantage. E. Voluntary trades give both parties more in value than what they give up.

B. All of the above are true.

Which of the following would NOT cause a change in the supply of milk? A. an increase in the cost of feed for cows B. an increase in the price of milk C. an increase in government subsidies to dairy farmers D. The changes in all of the other answers will cause a change in the supply of milk. E. the discovery of growth hormones to stimulate the milk production of cows

B. An increase in the price of milk. An increase in the price of milk would not cause a change in the supply of milk. Rather, it would cause an increase in the quantity supplied of milk. There is a difference between supply and quantity supplied. An increase in the quantity supplied, as a result of a price increase, is represented graphically by an upward movement along the supply curve. To the contrary, a decrease in the quantity supplied, as a result of a price increase, is represented graphically by a downward movement along the supply curve.

Which of the following would not shift the supply curve for swordfish? A. a reduction in the number of available fishing boats B. an increase in the price of swordfish C. the development of innovative new fishing equipment that makes it easier to catch swordfish D. an increase in the wages of fishermen E. unusually stormy weather during fishing season

B. An increase in the price of swordfish. An increase in the price of swordfish would not shift the supply curve for swordfish. However, it would change the quantity supplied. Be clear about the difference. You will be asked questions like this on the written tests.

Which of the following best illustrates the fallacy of composition? A. If Mr. Smith had more money, he could buy more scarce goods; if the Adams family had more money, it could buy additional goods. B. If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods. C. If other variables are not held constant, economists may not observe the relationship between price and quantity demanded that is expected. D. Aggregate consumption may not behave in the same manner as the consumption of a particular individual.

B. If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods. The fallacy of composition is the mistaken belief that what is true for an individual is also necessarily true for the individuals in a group. The statement above illustrates the fallacy of composition, since it extends the right conclusion applicable to Ms. Spann, an individual, to all of the individuals that make up nation. The nation as a whole may have more revenue, but that does not imply that everyone would be able to increase his or her expending.

Economists believe that individuals act as if they are motivated by self-interest and: A. respond selfishly. B. respond in predictable ways to changing circumstances. C. it leads to inconsistent and unpredictable behavior. D. all of the above

B. Respond in predictable ways to changing circumstances.

Market failure occurs when: A. the stock markets tumble due to heavy selling. B. the economy fails to allocate resources efficiently on its own. C. demand shows signs of slowing down. D. a country cannot produce a good or service at a lower opportunity cost than others.

B. The economy fails to allocate resources efficiently on its own. Market failure occurs when the economy fails to allocate resources efficiently: produces the erroneous amounts of certain goods and services, or does not assign sufficient resources to the production of a good whose output is economically justified.

Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes? A. He has already made all the clothes he will need for a few years. B. The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career. C. Sergei just can't find the material he likes in the United States. D. The opportunity cost of making clothes instead of playing hockey is relatively low, so he should instead concentrate on his hockey career (for which the opportunity cost is very high). E. Sergei has a comparative advantage in tailoring clothes.

B. The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.

Which of the following is true of resources? A. Their availability is unlimited. B. They are the inputs used to produce goods and services. C. Increasing the amount of resources available could eliminate scarcity. D. They are inputs used to produce goods and services and increasing the amount of resources available could eliminate scarcity.

B. They are the inputs used to produce goods and services.

Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n): A. disincentive to trade with others. B. comparative advantage in production. C. absolute advantage in production. D. None of the other answers. People, regions, and countries should learn to be self-sufficient. E. higher opportunity cost.

B. comparative advantage in production.

The law of demand refers to the: A. decrease in price that results as more units of a product are demanded. B. inverse relationship between the price of a good and the quantity demanded. C. increase in price that results from an increase in demand for a good of limited supply. D. increase in the quantity of a good made available when its price increases.

B. inverse relationship between the price of a good and the quantity demanded. The Law of Demand refers to the inverse relationship that exists between the price of a good and the quantity demanded of that good. This inverse relationship implies that, other things equal, the quantity demanded of a good rises when the price of the good declines, and vice versa. The quantity demanded of a good is the amount of a good that buyers are willing and able to purchase.

If the price of tennis rackets were to increase, we would expect: A. the demand for tennis balls to increase. B. the demand for tennis balls to decrease. C. the supply of tennis balls to increase, leading to a movement along the demand curve for tennis balls. D. the supply of tennis balls to decrease. E. both b. and d. to occur.

B. the demand for tennis balls to decrease.

In economics, the demand for a good refers to the amount of the good people: A. need to achieve a minimum standard of living. B. will buy at various prices. C. will buy at alternative income levels. D. would like to have if the good were free.

B. will buy at various prices. n economics, the demand for a good refers to the amount of the good people would buy at different prices, other things equal, or ceteris paribus "People' could be understood as an individual, as a single family, as all families in San Marcos, or even as all families in the United States or in the whole world. The ceteris paribus condition implies that the demand refers to the different amounts demanded at different prices of a specific good, isolating other factors that could impact the demand, such as income, tastes and prices of related goods.

The opportunity cost of going to college includes: A. tuition, but not the value of the student's time, which is a cash cost. B. tuition, but not the value of the student's time, which is a monetary cost. C. both tuition and the value of the student's time. D. neither tuition nor the value of the student's time, at least at state-supported universities and colleges. E. neither tuition nor the value of the student's time, since obtaining a college degree makes one's income higher in the future.

C. Both tuition and the value of the students time. The opportunity cost of going to college should include tuition and all collegiate related expenses, such as books and materials, since instead of paying for college, the student could expend the money in other goods and services, such as traveling or vacationing. It should also include the value of college time, which could be measured as the forgone income if the student worked full time. However, it should not include the cost of room and board since the student would have those expenses anyway even if she or he does not attend college.

Which of the following is true of a competitive market? A. The rules of supply and demand do not apply to it. B. Each buyer's or seller's effect on market price is substantial. C. Buyers and sellers have little market power. D. Few sellers offer similar products.

C. Buyers and sellers have little market power A competitive market is characterized by many buyers and sellers of a similar or homogeneous product, and no single buyer or seller can affect the market prices. The classic example of a competitive market is the market of specific agricultural products, wheat for example, where there are many farmers who each produce a very small fraction of the total production of wheat, and many buyers who each consume a tiny portion of that production. Because no single buyer or seller can affect the price of wheat, the price is taken as given. At the market price, buyers can buy all they want, and sellers can sell all they want.

Which of the following serve as the language of the market system? A. Monetary and fiscal policies B. Morals C. Market prices D. Governments

C. Market prices In a market system, the prices provide the means of communication for sellers and buyers about the relative value of resources. Prices provide information to buyers about the relative availability of goods and services, and information to sellers about the relative value assigned to those goods and services.

When economists speak of markets, they primarily mean: A. places where production of goods and services take place. B. those locations where sales of stocks and bonds of corporations take place. C. mechanisms that coordinate actions of buyers and sellers D. the trillions of dollars that change hands in the foreign exchange markets.

C. Mechanisms that coordinate actions of buyers and sellers. In economics, a market is the mechanism or the process by which buyers and sellers exchange goods and services. Markets bring together buyers - the demand side -, and the sellers - the supply side -. Markets can take many forms.

To an economist, a decrease in supply means a: A. rightward shift of the supply curve. B. movement down along the supply curve. C. None of the other answers is correct. D. downward shift of the supply curve. E. movement up along a supply curve

C. None of the answers are correct. To an economist, a decrease in supply means that for any given price, the producer is now willing to produce and sell less. A decrease in supply is represented by a shift leftward of the whole curve. The following changes or factors would result in a decrease in supply of a specific good: a) In increase in input prices, b) An increase in the price of a substitute in production, c) A decrease in the price of a complement in production, d) An expectation of higher prices in the future, e) A decline in the number of suppliers, f) New taxes that affect the cost of production, g) A drought or freezing temperatures.

A decrease in consumer incomes will: A. decrease the demand for an inferior good. B. increase the demand for a normal good. C. None of the other answers is correct. D. decrease the supply of an inferior good. E. increase the supply of a normal good.

C. None of the other answers are correct.

Which of the following is not an example of the use of the problem solving perspective provided by economics? A. An investor considers the tax consequences of selling stocks in order to buy bonds (which she believes offer a better return). B. A rancher recognizes that raising more cattle this year will damage his pasture and limit next year's herd size. C. The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember. D. An economics student considers the scarcity of available study time for studying the other subjects that she should be studying before deciding to study economics this evening.

C. The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember.

Entrepreneurship is: A. human capital. B. another word for the financial capital that can be used to start a business. C. the resource that organizes the other factors of production in order to produce goods and/or services. D.another word for physical capital that is used to produce goods and services.

C. The resource that organizes the other factors of production in order to produce goods and/or services. Entrepreneurship is the process of combining labor, land and capital to produce goods and services. In a broad sense, it also encompasses the risk taking, the innovative spirit, and the strategic decision-making that go into any business.

"As a rational person, you would expect individuals to always avoid actions that are illegal." A. This is a true statement because most people don't want to suffer the penalties associated with criminal behavior. B. This is a true statement because most individuals are good citizens and prefer not to commit crimes. C. This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway. D. This is a false statement because only people with certain genetic predispositions are likely to commit crimes.

C. This is a false statement because most individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway. The statement is false. Criminals may also behave rationally, if one goes by the economist's definition of rational behavior. Rational behavior means that people, including those involved in criminal activity, systematically do the best they can to achieve their goals and objectives, based on their values and information, weighing in current and future consequences. Criminals' values are such that lead some individuals to believe that committing crimes is an acceptable behavior.

Which of the following is most likely to be an inferior good? A. An Ivy League education. B. Lobster. C. Used clothing. D. Porsches.

C. Used clothing.

What according to an economist, forms the basis of rational human behavior under current and anticipated future circumstances? A. Scarcity and rarity B. Opportunities and pay-offs C. Values and information D. Legal consequences

C. Values and information Values and information are the basis of rational human behavior, which means that people systematically and purposefully do the best they can to achieve their goals and objectives, weighing in current and future consequences.

Which of the following lies primarily within the realm of microeconomics? A. an empirical analysis of the relationship between the growth of the money supply and the rate of inflation B. an economic model forecasting the impact of a tax increase on consumer spending and national output C. a study of supply and demand conditions in the market for orange juice D. a model forecasting the impact of a change in interest rates on the level of investment in the economy

C. a study of supply and demand conditions in the market for orange juice Microeconomics is the study of household and firm behavior and examines the functioning of individual actors. Thus, a study of supply and demand conditions in the market for orange juice does in fact pertain to the realm of microeconomics

The importance of the ceteris paribus assumption is that it: A. allows one to separate normative economic issues from positive economic ones. B. allows one to generalize from the whole to the individual. C. allows one to analyze the relationship between two variables apart from the influence of other variables D. allows one to hold all variables constant so the economy can be carefully observed in a suspended state.

C. allows one to analyze the relationship between two variables apart from the influence of other variables. The 'ceteris paribus' or 'all else equal' is an assumption used to analyze the relationship between two variables, while the values of other variables are maintained constant. It is a devise used in economics two isolate the two variables under analysis from the effects of other third variables

Pollution damages the environment we live in. An economist would advise that we reduce air pollution: A. until the total benefit from air pollution reduction just equals the total cost of pollution reduction. B. until air pollution levels reach near-zero levels. C. as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction. D. to the levels experienced in the 1950s when air was much cleaner near big cities.

C. as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.

Opportunity cost includes: A. monetary costs only. B. non-monetary costs only. C. both monetary and non-monetary costs. D. neither monetary nor non-monetary costs.

C. both monetary and non-monetary costs. Opportunity cost includes monetary and non-monetary costs. For example, the opportunity cost of a student going to the gym would include the price paid to the gym (monetary cost) plus the value of the time spent (non-monetary cost). The monetary cost is included since the money paid by the student for the service could have been spent in other goods and services, a movie ticket, for example; the non-monetary cost is included since time is a valuable commodity for the college student, and an hour in the gym is an hour not spent at the library, for instance.

Specialization is a way for: A. increasing one's opportunity cost for an activity. B. society to become wealthier while not using their resources. C. individuals to make the best use of resources by devoting themselves to one primary productive activity. D. people to avoid having to trade.

C. individuals to make the best use of resources by devoting themselves to one primary productive activity.

The difference between a change in quantity supplied and a change in supply is that a change in: A. supply and a change in the quantity supplied are the same thing. B. quantity supplied is a change in the amount people want to sell, while a change in supply is a change in the amount they actually sell. C. quantity supplied is caused by a change in a good's own, current price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes. D. supply is caused by a change in a good's own, current price, while a change in the quantity supplied is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.

C. quantity supplied is caused by a change in a good's own, current price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes. The difference between a change in quantity supplied and a change in supply is that a change in quantity supplied is caused by a change in a good's own, current price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes. A change in the quantity supplied is represented in by a movement along the supply curve: upward in the case of an increase, downward in the case of a decrease. A change in the supply is represent by a shift of the supply curve: rightward in the case of an increase and downward in the case of a decrease.

The market supply schedule reflects the total quantity: A. supplied by all of the producers at the equilibrium price. B. the vertical summation of the supply curves for individual firms. C. supplied at each price by all of the producers. D. supplied at market price.

C. supplied at each price by all of the producers. The market supply schedule reflects the total quantity of a good or service supplied at each price by all producers. The market supply schedule results from summing, for any given price, the quantities that each individual producer is willing to produce and sell.

An example of a capital resource is: A. stock in a computer software company. B. the funds in a CD account at a bank. C. a bond issued by a company selling electric generators. D. a dump truck. E. an employee of a moving company

D. A dump truck Capital, as an economic resource, is the equipment, machinery, tools, and structures used to produce goods and services. A dump truck is a capital resource since it is a piece of equipment required to produce a good or a service, such as, waste disposal.

Which of the following is an example of market failure? A. Overuse of highways that leads to traffic congestion B. Reduced levels of vaccinations which increase illness and disease C. Substantial foreclosures caused by sub-prime lending D. All of the answers are examples of market failure.

D. All of the answers are examples of market failure. Market failure occurs when the economy fails to allocate resources efficiently, produces the erroneous amounts of certain goods and services, or does not assign sufficient resources to the production of a good whose output is economically justified.

Which of the following is not true? A. Voluntary exchange is expected to be advantageous to both parties to the exchange. B. The expectation of gain motivates people to engage in trade. C. If one party to a potential voluntary trade decides it does not advance his interests, he can veto the potential trade. D. What one trader gains from a trade, the other must lose.

D. What one trader gains from a trade, the other must lose. The statement is not true. Trade, or voluntary exchange, makes both trading parties better off; otherwise they would not engage in any trade.

A theory can best be defined as: A. an untestable assertion or statement of untestable fact. B. a testable statement that can be definitively proven to be true or false using empirical analysis. C. a normative statement that can be tested empirically through analysis of real-world data. D. a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work

D. a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work

Economics is different from a "hard" science like physics because: A. economists abstract from reality in creating their theories. B. economics is easier to study than physics. C. economists must explain their theories to policy makers who lack formal mathematical training. D. economists cannot easily control all the variables that might influence human behavior. E. research in economics is primarily conducted in a very "social" way via interviews of consumers and corporate leaders.

D. economists cannot easily control all the variables that might influence human behavior The main difference between a "hard" science, like physics, and a "social" science, like economics, resides on the fact that the first one can conduct experiments under controlled laboratory conditions, while the latter can seldom do that. The laboratory of economics is the world itself.

A nation has a comparative advantage in the production of cars over another nation if: A. it can produce cars at a higher opportunity cost than the other country. B. it can produce cars with fewer resources than the other country. C. it is more self-sufficient in all areas of production, including automobile manufacturing. D. it can produce cars at a lower opportunity cost than the other country. E. it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country.

D. it can produce cars at a lower opportunity cost than the other country. A nation has a comparative advantage in the production of cars over another nation if can produce them at a lower opportunity cost than the other country.

When economists refer to economic behavior, they mean that: A. from time to time, everyone behaves irrationally. B. changes in incentives influence behavior in unpredictable ways. C. the pursuit of money is the most significant factor influencing decision making. D. rational people try to anticipate the likely consequences of their actions.

D. rational people try to anticipate the likely consequences of their actions. When economists refer to economic behavior, they mean that rational behavior and self-interest determines economic behavior, and as consequence, people systematically do the best they can to achieve their goals and objectives, based on their values and information, weighing in current and future consequences, that is, anticipating the likely consequences of their actions.

Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is: A. nothing because he enjoys playing basketball more than studying. B. nothing because he had a free pass into the sports complex to play basketball. C. the increase in skill he obtains from playing basketball for that hour. D. the benefit to his grades from studying for an hour.

D. the benefit to his grades from studying for an hour. Trent's opportunity cost could be the benefit to his grades from studying for an hour, if that is the best alternative given up when making his choice of playing basketball.

Human capital is: A. the same as labor. B. a term describing the tools and equipment owned by households. C. a worker's physical effort when working with machines. D. the expertise or knowledge possessed by workers. E. the money in checking, savings, or CD accounts at banks.

D. the expertise or knowledge possessed by workers

The opportunity cost of an item is: A. always equal to the dollar value of the item. B. The total value of opportunities you give up to get that item. C. always less than the dollar value of the item. D. the highest valued alternative you give up to get that item E. the value of all available alternatives you sacrifice to get that item.

D. the highest valued alternative you give up to get that item

Macroeconomic topics do not usually include: A. the rate of inflation. B. the rate of unemployment. C. economic growth. D. the profit maximizing decisions of an individual manufacturer E. the control of the money supply by the central bank

D. the profit maximizing decisions of an individual manufacturer. Macroeconomics is the study of the economy as a whole and examines the economic behavior of aggregates. Thus, the profit maximizing decision of an individual manufacturer does not pertain to the real of macroeconomics

Which of the following best defines rational behavior? A. analyzing the total costs of a decision B. analyzing the total benefits of a decision C. undertaking an activity as long as the total benefit of all activities exceeds the total cost of all activities D. undertaking activities whenever the marginal benefit exceeds the marginal cost E. undertaking activities as long as the marginal benefit exceeds zero

D. undertaking activities whenever the marginal benefit exceeds the marginal cost

Which of the following is an example of an individual motivated by self-interest? A. a student volunteering at a soup kitchen B. an attorney providing free legal service to low income families C. a young person volunteering for the Peace Corps D. a man buying a new Camaro E. all of the answers are correct

E. All of the answers are correct Economists believe that individuals behave as if they are motivated by self-interest. For example, to a consumer, it means to gain a higher level of satisfaction or utility given his or her budget constraints. To a person that performs charitable work, it means to experience a 'good feeling' of doing something to help other

Which of the following is not an example of a resource? A. a forest B. a river C. a John Deere tractor D. the chef at the city's best café E. All of the answers are resources

E. All of the answers are resources

The demand schedule for a good: A. indicates the quantity that people will buy at different times of the day or year. B. indicates the quantities that suppliers will sell at various market prices. C. indicates the quantity that people will buy at the prevailing price. D. is determined primarily by the cost of producing the good. E. indicates the quantities that will be purchased at alternative market prices.

E. Indicates the quantities that will be purchased at alternative market prices. A demand schedule indicates the quantities of a given good or service that will be purchased or demanded at alternative market prices, ceteris paribus. A demand schedule is presented in a table form, which is often depicted in a graph, or represented thru a mathematical function.

If people are self-interested: A. they will always choose work over leisure. B. they will never choose work over leisure C. as their preferences for leisure time increase, they are likely to work less. D. as the wages they are offered increase, they are likely to work more. E. both c. and d. are true.

E. both c. and d. are true.

An upward-sloping supply curve shows that: A. suppliers expand production as the product price falls. B. buyers are willing to pay more for particularly scarce products. C. buyers are not affected either directly or indirectly by the sellers' costs of production. D. buyers are willing to buy more as the product price falls. E. suppliers are willing to increase production of their goods if they receive higher prices for them.

E. suppliers are willing to increase production of their goods if they receive higher prices for them. An upward-sloping supply curve shows that suppliers are willing to increase production of their goods if they receive higher prices for them. The upward-sloping supply curve is explained by the Law of Supply. The Law of Supply states than when the price of a good increases, the quantity offered by the producers also increases, ceteris paribus.

Economic resources are also know as: A. profits. B. financial capital. C. factors of production. D. Costs

Factors of production

Economic choices or tradeoffs are the result of: A. basic human greed B. scarcity C. poverty D. private ownership E. the fallacy of composition.

scarcity

Economics is most importantly concerned with

studying how we allocate scarce resources to satisfy unlimited wants.