ECON 131 EXAM 1 (Ch. 1-4)

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Which statement best illustrates complementary goods? A) The price of tennis rackets declines so your economics instructor decides to take tennis lessons and purchases several cans of new tennis balls. B) The price of Apple Macintosh computers declines so your economics instructor sells his or her IBM personal computer and buys a Macintosh. C) After receiving a promotion and a hefty year-end bonus from the college, your economics instructor decides to stop buying denim jeans and switches to clothing befitting his or her loftier position on the faculty. D) Fearing that the price of pipe tobacco will rise next year, your economics professor goes to his local tobacconist and purchases an ample supply to last for several years.

A decrease in demand and a decrease in supply, will lead to a(n) ________ in equilibrium quantity and a(n) ________ in equilibrium price. A) decrease; indeterminate change B) indeterminate change; increase C) indeterminate change; decrease D) increase; indeterminate change

A decrease in supply is caused by: A) an increase in returns from other alternative activities. B) suppliers' expectations of lower prices in the future. C) an advancement in the technology for producing the good. D) a decrease in the price of a good using the same resources.

A decrease in supply means: A) a shift to the left of the entire supply curve. B) moving downward (to the left) along the supply curve with lower prices. C) less will be demanded at every price. D) more will be supplied at every price.

A negative relationship between the quantity demanded and price is called the law of ______. A) demand B) diminishing marginal returns C) market clearing D) supply

A shift of a demand curve to the right, all other things unchanged, will: A) increase equilibrium price and quantity. B) decrease equilibrium price and quantity. C) decrease quantity and increase price. D) increase quantity and decrease price.

An example of a natural resource is: A) oil in the ground. B) oil in storage tanks. C) a factory. D) a computer program.

An increase in the price of football tickets will cause the ________ for (of) basketball tickets (a substitute) to ________ .A) demand; increase B) demand; decrease C) supply; decrease D) supply; increase

Factors of production are: A) the resources the economy has available to produce goods and services. B) generally unlimited in modern economies. C) always employed in modern economies. D) the knowledge that can be applied to the production of goods and services.

For a factor of production to be called capital it must: A) be produced. B) occur in the natural environment. C) be a part of human skill. D) be a result of a stock issue.

Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will most likely result in: A) an increase in price and quantity. B) a decrease in price and an increase in quantity. C) a decrease in both price and quantity. D) an increase in price and a decrease in quantity.

Given that meat and potatoes are complementary goods, if the price of meat decreases substantially, there would be: A) an increase in the demand for potatoes. B) an increase in the quantity of potatoes demanded. C) a decrease in the demand for potatoes. D) no change in the demand for potatoes.

If Farmer Sam MacDonald can produce 200 pounds of cabbages and 0 pounds of potatoes or 0 pounds of cabbages and 100 pounds of potatoes and faces a linear possibilities curve for his farm, the opportunity cost of producing an additional pound of cabbage is ____ A) 1/2 B) 2 C) 100 D) 200

If an economy is operating on its production possibilities curve, it is: A) efficient and fully employed. B) fully employed but not necessarily efficient. C) efficiently producing but not necessarily fully employed. D) inevitably going to grow in the future.

If the United States decides to allocate more resources to capital goods and less to consumer goods, the United States will obtain a greater degree of: A) economic growth. B) full employment. C) price stability. D) technical efficiency.

The current rate of unemployment is 5 percent. This statement: A) is positive. B) is normative. C) involves a value judgment. D) is a personal reflection and has no value in economics.

The current rate of unemployment of 5 percent is too high. This is a _______ statement. A) normative B) ceteris paribus C) positive D) fallacy of false cause

The fact that a society's production possibilities curve is bowed out from the origin of a graph demonstrates the law of: A) increasing opportunity cost. B) decreasing opportunity cost. C) constant opportunity cost. D) convex opportunity cost.

The relationship between the quantity of a good or service sellers are willing to offer for sale at different prices is: A) supply. B) demand. C) equilibrium. D) disequilibrium.

The slope and location of the demand curve depend on: A) the number of buyers. B) production costs. C) the number of producers. D) all of the above.

The textbook classifies technology as _______ and entrepreneurs as _______ . A) knowledge; persons who seek profit by finding new ways to organize factors of production B) capital; labor C) labor skills; capital D) a factor of production; a factor of production

The three fundamental economic questions of what, how, and for whom: A) exist because of scarcity. B) are much more serious in a socialist system. C) are not serious in a capitalistic system. D) are not relevant in the industrialized world of today.

The use of controlled experiments using particular substances to test hypotheses is most likely to be found in: A) chemistry. B) economics. C) history. D) the humanities.

When a nation experiences economic growth: A) its production possibilities curve shifts outward. B) its production possibilities curve shifts inward. C) it has been able to reach full employment. D) it has moved to a more consumer-oriented position on its production possibilities curve.

When economists study the behavior of sellers, they are studying: A) supply. B) the role of government. C) demand. D) accounting.

When the government provides national defense, it is: A) providing goods and services. B) enforcing the legal system. C) maintaining the money supply. D) stabilizing the economy.

Which of the following is an example of capital? A) a gravel truck B) a savings account C) a share of General Motors stock D) a lake

An example of a normative statement is: A) The rate of unemployment is 4 percent. B) A high rate of economic growth is good for the country. C) The federal government spends half of its budget on national defense. D) People with health insurance tend to spend more on health care than those who are uninsured.

An increase in the demand for gasoline today caused by concerns that gasoline prices will be higher tomorrow is most likely attributable to which demand shifter? A) income B) consumer expectations C) consumer preferences D) prices of other goods

By specializing in the production of particular goods, a nation is: A) less likely to make efficient use of available resources. B) more likely to engage in international trade. C) able to become self-sufficient. D) unable to develop a comparative advantage.

Capital is best considered as: A) the natural environment. B) a factor of production that has been produced. C) financial assets. D) money.

Comparative advantage leads to producing at a: A) higher opportunity cost. B) lower opportunity cost. C) higher dollar cost. D) point where costs just begin to fall.

Economists concerned about economy-wide trends in the unemployment of labor, the rate of inflation, and the level of economic production are studying: A) microeconomics. B) macroeconomics. C) specific units or parts of the economy. D) the "trees" of economic behavior, rather than the "forest."

Efficient production exists when the economy is: A) operating inside its production possibilities curve. B) operating on its production possibilities curve. C) operating outside its production possibilities curve. D) moving beyond its production possibilities curve

Given that milk and cookies are complements, suppose the price of flour (an ingredient in cookies) rises. What happens in the market for cookies? A) The equilibrium price and quantity rise. B) The equilibrium price rises, and the equilibrium quantity falls. C) The equilibrium price and quantity fall. D) The equilibrium price falls, and the equilibrium quantity rises.

In a command socialist economy: A) resources are government owned but individuals make some decisions over their use. B) resources are government owned and government exercises broad power over their use. C) resources are privately owned and individuals make decisions over their use. D) resources are privately owned but government exercises broad power over their use.

In a market capitalist economy: A) markets are not competitive. B) individual ownership and decision making are relied upon. C) consumers have few choices. D) the government owns the factors of production.

In the 1990s, the Monks of St. Benedict's the Monks determined that their ________ were ________ in the egg and cookie business, so they ________ . A) opportunity costs; too low; switched to providing private retreats B) opportunity costs; too high; switched to providing private retreats C) profits; too high; went out of business D) operating costs; too low; opened a new business

In the Case in Point on campus parking, the implication was that existing prices for parking spaces on university campuses are generally: A) too high. B) too low. C) about right. D) unconscionable.

In the Case in Point on economic growth prospects for the United States, economist Robert Gordon expects for the near future: A) A period of robust growth. B) A period of secular stagnation. C) A period of no growth. D) A period of no technological innovation.

The best example of an increase in capital is: A) The discovery of new oil reserves. B) new computer software. C) legal immigration of computer programmers. D) conversion of military facilities to civilian uses.

The existence of alternative uses of a resource implies that it is: A) free. B) scarce. C) expensive. D) plentiful.

The law of demand is illustrated by a demand curve that is: A) horizontal. B) downward-sloping. C) vertical. D) upward-sloping.

The principle stating that, for virtually all goods and services, there is a negative relationship between price and quantity demanded, all other things unchanged, is the law of: A) supply. B) demand. C) scarcity. D) increasing opportunity costs.

The problem of determining for whom to produce exists because: A) government regulations prevent firms from producing the kinds of goods that consumers want. B) a decision that one person or group will receive a good or service usually means that another person or group will not. C) taxes on firms make it more costly for them to produce all the goods that people want. D) taxes on consumers make it more difficult for them to buy all the goods they want.

The process through which an economy's production possibilities curve is shifted outward is: A) comparative advantage. B) economic growth. C) full employment. D) specialization.

The statement that the minimum wage needs to be increased is a: A) positive statement. B) normative statement. C) condition contained in the fallacy of false cause. D) scientific conclusion based on marginal analysis.

The study of a single firm and how it determines prices would fall under: A) macroeconomics. B) microeconomics. C) the study of inflation. D) normative economics.

Trade can be beneficial to an economy because: A) it results in a more efficient use of the combined resources of some of the trading countries, even though it reduces efficiency in others. B) more goods and services can be obtained at lower opportunity cost. C) it prevents specialization in those activities in which countries have a comparative advantage. D) It prevents unemployment.

Which of the following is most likely an example of a free good? A) Sand in aquarium B) Sand in the middle of a desert C) Sand in a children's sandbox D) Sand at the beach

Which of the following will not lead to economic growth? A) increased immigration B) restrictions on international trade C) introduction of faster computers D) opening all federal lands to mining

A choice made _______ is a choice whether to do a little more or a little less of something. A) at the front end B) in the beginning C) at the margin D) all of the above.

A market shortage occurs if the: A) price is above the equilibrium price. B) price is equal to the equilibrium price. C) equilibrium price is above the current price. D) equilibrium price is below the current price.

A normative statement deals with: A) the facts. B) what was, is, or will be. C) what ought to be. D) the scientific method

According to the Case in Point on economic growth, which pattern describes the historical record on growth? A) growth has been strong throughout history B) growth was robust before the Industrial Revolution C) growth was very strong between 1870 and 1970 D) none of the above

An example of a demand shifter is: A) factor prices. B) technology. C) consumer preferences. D) producer expectations.

Countries import some goods and export other goods primarily because of: A) unemployment. B) self-sufficiency. C) comparative advantage. D) the law of increasing opportunity cost.

For most goods, purchases tend to rise with increases in buyers' incomes and to fall with decreases in buyers' incomes. Such goods are known as: A) inferior goods. B) direct goods. C) normal goods. D) luxury goods.

If people demand more of product A when the price of B falls, then A and B are: A) not related. B) substitutes. C) complements. D) inferior.

If the current price is above the equilibrium price, we would expect: A) quantity demanded to exceed quantity supplied. B) upward pressure on price. C) quantity supplied to exceed quantity demanded. D) no change in the market price.

Knowledge that can be applied to the production of goods and services is: A) natural resources. B) specialization. C) technology. D) comparative advantage.

Technological improvements will: A) leave the production possibilities curve unchanged. B) shift the production possibilities curve inward. C) shift the production possibilities curve to outward. D) necessarily lead to increased unemployment.

The BEST example of making a choice at the margin is: A) buying a new car. B) quitting your job. C) a coffee drinker drinking another cup of coffee. D) attending college.

The model that shows the goods and services the economy is capable of producing is the model of: A) utility. B) the fallacy of composition. C) production possibilities. D) scarcity.

An economic system is the set of rules that define _______ and _______. A) resources; prices B) who gets to vote; when elections will be held C) market prices; factors of production D) how an economy's resources are to be owned; how decisions about the resources are to be made

If the quantity of housing supplied in a community is less than the quantity of houses demanded, the existing price: A) will remain unchanged. B) will fall to clear the market. C) will either fall or remain unchanged. D) is below the market equilibrium price.

Improvements in technology provide benefits to: A) consumers, through lower prices. B) workers, although some jobs may be eliminated. C) firms, through lower production costs. D) all of the above.

In enforcing the legal system, the government in a market capitalist economy acts to: A) enforce contracts. B) enforce property rights. C) discourage fraud. D) do all of the above.

In the textbook, the prices of the factors of production, returns from alternative activities, technology, seller expectations regarding future prices, and the number of sellers are called: A) demand shifters. B) supply prices. C) market realities. D) supply shifters.

Labor is the _____ that can be applied to production. A) the natural environment. B) produced resources. C) financial assets. D) human effort.

Opportunity cost is: A) zero for the use of a free combo meal offer. B) the dollar payment for a product. C) the benefit derived from a product. D) the value of the best alternative forgone in making any choice.

Positive statements are: A) microeconomic in nature. B) macroeconomic in nature. C) statements involving value judgments. D) statements that can be tested.

The demand curve for on-demand videos has shifted to the right. What could have caused it? A) A fall in the price of on-demand videos. B) An increase in the price of on-demand videos. C) An increase in the supply of on-demand videos. D) An increase in the income of buyers.

The economy's factors of production are not equally suitable for producing different types of goods. This principle generates: A) economic growth. B) technical efficiency. C) resource underutilization. D) the law of increasing opportunity cost.

The opportunity cost of going to a movie is: A) the money spent on the ticket only. B) all of the other movies that could have been seen instead. C) the time spent in the theater only. D) the next best use of the time and the money spent.

The price of oranges falls. What happens in the market for apples, which are a substitute for oranges? A) The equilibrium price falls and the equilibrium quantity rises. B) The equilibrium price rises and the equilibrium quantity falls. C) The equilibrium price and quantity rise. D) The equilibrium price and quantity fall.

The slope of a typical production possibilities curve is: A) 0. B) vertical. C) positive. D) negative.

Who may benefit from technological progress? A) consumers B) workers C) firms. D) all of the above.

Money is considered to be a factor of production.

Scarcity is determined by the existence of bad alternatives.

"Smokers are more likely to be murdered than nonsmokers." This statement is an example of: A) the fallacy of unintended consequences. B) a positive economic statement. C) a normative economic statement. D) a value judgment.

A curve that shows the relationship between the price and quantity supplied during a particular period, all other things unchanged, is the: A) price curve. B) supply curve. C) quantity function. D) production possibilities curve.

A decrease in supply is caused by: A) a decrease in resource prices. B) a decrease in the number of sellers in the market. C) suppliers' expectations of lower prices in the future. D) an advancement in the technology for producing the good.

A decrease in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price. A) an increase; an increase B) an increase; a decrease C) a decrease; an increase D) a decrease; a decrease

A decrease in the price of eggs, all other things unchanged, will result in a(n): A) increase in the demand for eggs. B) increase in the supply of eggs. C) greater quantity of eggs supplied. D) greater quantity of eggs demanded.

A factor of production that is produced in order to produce something else is called: A) money. B) labor. C) technology. D) capital.

A source of economic growth is: A) idle factors of production. B) unemployment. C) more money. D) more factors of production.

A current price below the equilibrium price will result in a surplus.

Two components of labor are: A) residential location and education. B) natural ability and human capital. C) money and financial wealth. D) ingenuity and job-specific machinery.

When the price of gas goes up and the demand for tires goes down, this means tires and gas are: A) substitutes. B) complements. C) both expensive. D) both inexpensive.

Which of the following always results in an increase in equilibrium price and quantity? A) an increase in supply and a decrease in demand B) an increase in demand with no change in supply C) an increase in supply with no change in demand D) all of the above

Which of the following is not capital? A) a computer in the office of an accountant B) a migrant worker in the fields of California C) a wrench in an auto-repair shop D) a new machine used for producing microchips

If two goods are substitutes, a decrease in the price of one will result in an increase in demand for the other.

Improvements in technology will shift the production possibilities curve outward.

Margin suggests additional or incremental.

Natural resources are resources that occur in nature, while capital is a produced good that is used to produce another good.

Opportunity cost is the expected value of the alternative not chosen.

Society can operate on the production possibilities curve only if it has achieved efficiency.

The major difference between natural resources and capital is that the former refers to naturally occurring resources whereas the latter refers to produced resources.

The present position of a nation on its production possibilities curve will influence the future position of the production possibilities curve.

The production possibilities curve shows various combinations of two products that an economy can produce when there is full employment and economic efficiency.

The slope of a production possibilities curve is based on opportunity cost.

The value of the next-best choice not chosen is called opportunity cost.

There can be no shortages or surpluses at the equilibrium price.

There is an important role for government in a market capitalist economy.

The incorrect presumption that because two events tend to occur together, one must cause the other is the: A) confusion of economists. B) blunder of science. C) fallacy of false cause. D) error of inclusion.

The sacrifice of an alternative is called: A) revenue. B) benefit. C) opportunity cost. D) production.

A theory or model is a simplification of reality, in much the same way that a road map shows only those features needed to get from one point to another.

According to the textbook, demand and supply determine prices, and prices allocate scarce resources in the economy.

An increase in the price of a good will lead to an increase in the quantity supplied.

Anything that has alternative uses has an opportunity cost and is, therefore, scarce.

Consumer preferences are a demand shifter.

Society's production possibilities curve is primarily concerned with answering the economic question of what goods and services a society can produce.

The economic way of thinking pays special attention to costs, assumes individuals seek to maximize some objective, and focuses on choices at the margin.

The fallacy of false cause is committed when a person mistakenly assumes that one event causes another because the first event precedes the second.

Scarcity exists when: A) a choice must be made among two or more alternatives. B) we face the notion of "all other things unchanged." C) countries and people find themselves facing poverty. D) the notions of normative economics come into play.

Scarcity in economics means: A) not having sufficient resources to produce all the goods and services we want. B) the wants of people are limited. C) there must be poor people in rich countries. D) economists are clearly not doing their jobs.

A systematic set of procedures through which knowledge is created is: A) the economy. B) the scientific method. C) a market. D) a model.

According to the text, which of the following is true? A) Scientists can prove a hypothesis is true. B) Scientists can show that a hypothesis is false. C) Economists really don't try to use the scientific method. D) None of the above is true.

Although water is very abundant in most places, it is scarce because: A) it has no alternative uses. B) it has two or more alternative uses. C) it is a free good and not expensive. D) scarce goods in general are not all that costly.

Something whose value does not change is a: A) variable. B) constant. C) hypothesis. D) all of the above.

Statements that are a hypothesis or statement of fact are: A) pecuniary. B) positive. C) nominal. D) normative.

A free good is different from a scarce good because it is: A) not tradable. B) not produced. C) not scarce. D) found only in nature.

Economics is different from other social sciences because it gives special emphasis to the study of ______; it is similar to other social sciences because they are all concerned with the study of _______. A) unlimited resources; economic systems B) human interactions; limited resources C) opportunity costs; choices D) social behavior; scarcity

Microeconomics deals with: A) the working of the entire economy or large sectors of it. B) employment, growth, and inflation. C) individual units in the economy. D) normative economics for the most part.

The branch of economics that examines the choices of consumers and firms is: A) positive economics. B) normative economics. C) macroeconomics. D) microeconomics.

The concept of the margin deals with: A) making incremental choices. B) one more or one less of something. C) doing a little more or a little less. D) all of the above.

The models used in economics: A) are usually limited to variables that are directly related. B) are essentially not reliable because they are not testable in the real world. C) are of necessity unrealistic and have no relationship to the real world. D) emphasize basic relationships by abstracting from complexities in the everyday world.

The observed correlation between baldness and heart disease demonstrates that: A) being bald causes a man to have heart disease. B) being bald actually makes heart disease less likely. C) bald men are generally unreliable. D) there is probably some other factor that causes both baldness and heart disease.

The opportunity cost of something is: A) greater during periods of rising prices. B) equal to the money cost. C) less during periods of falling prices. D) what is given up to acquire it.

The problem of determining how goods and services should be produced exists because: A) we do not have enough skilled workers relative to the number of unskilled workers. B) we do not have enough unskilled workers relative to the number of skilled workers. C) corporations want to avoid changing their methods of production. D) most goods can be produced with different combinations of resources.

A proposition about the relationship between two variables that can be proven false is called: A) a hypothesis. B) a law. C) a theory. D) the scientific method.

A simplified representation of a particular problem is a: A) model. B) constant. C) hypothesis. D) law.

According to the textbook, the dramatic global shift toward market capitalist economies in the 1980s and 1990s is in large part the result of: A) an emphasis on individual ownership and decision making power yielding freedom not available under socialist systems. B) the philosophical and theoretical arguments of communism and socialism being finally proved correct. C) the realization that government controls will allocate resources on the basis of comparative advantage. D) a shift to more capital-intensive production.

An example of a positive statement is: A) The rate of unemployment is 4 percent. B) A high rate of economic growth is good for the country. C) Everyone in the country needs to be covered by national health insurance. D) Baseball players should not be paid higher salaries than the president of the United States.

An increase in demand, all other things unchanged, will result in a(n) ________ in the equilibrium price and a(n) ________ in the equilibrium quantity. A) increase; increase B) decrease; decrease C) decrease; increase D) increase; decrease

An increase in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price. A) an increase; an increase B) an increase; a decrease C) a decrease; an increase D) a decrease; a decrease

Any factor of production is capital if it: A) was produced and can be used to produce other goods and services. B) generates utility. C) uses human effort to produce goods and services. D) is included in financial capital.

Any point inside a production possibilities curve indicates: A) unemployment and/or inefficiency. B) that the law of increasing opportunity costs is no longer valid. C) that society doesn't want more of either good. D) that economic growth is no longer possible.

Government's role of protecting property rights is considered: A) enforcing a legal system. B) providing certain goods and services. C) redistributing income. D) maintaining the money supply.

In a market capitalist economy: A) factors of production are owned privately and decisions about their use are basically made by individuals. B) factors of production are owned by the government but decisions about their use are made privately. C) private ownership exists but decisions about resource allocation are usually made centrally by the government. D) there is no role for the government.

In drawing a production possibilities curve, it is assumed that: A) technology does not change. B) the economy is fully employed and may not be efficient. C) there are increasing qualities of the factors of production. D) all of the above are true.

In market capitalism: A) factors of production are privately owned and decisions are made privately. B) factors of production are owned by the government but decisions are made privately. C) there is no role for government. D) the consumer has few choices to make.

In the 1980s, the federal government undertook a major build-up of the military sector, leading to reports that prices charged by military contractors were spiraling upward. According to production possibilities analysis, this result is not surprising due to: A) the law of increasing opportunity cost. B) economic efficiency. C) technical efficiency. D) resource underutilization.

Inefficient production or unemployment exists when the economy is ________ the production possibilities curve. A) operating inside B) operating on C) operating outside D) moving along

The study of how people choose among the alternatives available to them is the: A) definition of economics. B) model of demand. C) theory of opportunity costs. D) method of distinguishing between microeconomics and macroeconomics.

Whenever a choice is made: A) the cost of that choice could be referred to as opportunity cost. B) the cost is easy to measure in dollar terms. C) a free good must be involved. D) scarcity is not the problem.

The law of increasing opportunity cost indicates that the production possibilities curve has a constant slope.

A market surplus occurs if the quantity: A) demanded is greater than the quantity supplied. B) demanded is less than the quantity supplied. C) demanded is equal to the quantity supplied. D) supplied is less than the quantity demanded.

A substantial increase in the price of oranges (a normal good) is likely to result from: A) an increase in the amount of imported oranges. B) a prolonged freeze in Florida. C) a decline in buyers' incomes. D) a decrease in the public's demand for orange juice

An announcement that smoking will harm your ability to think clearly will most likely result in: A) an increase in the quantity of cigarettes demanded. B) a decrease in the demand for cigarettes. C) no change in smoking habits. D) an increase in the equilibrium price of cigarettes.

An example of a supply shifter is: A) demographic characteristics. B) technology. C) income. D) consumer expectations.

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibilities curve has a(n): A) zero slope. B) constant, negative slope. C) increasing, negative slope. D) decreasing, negative slope.

If the price of mozzarella cheese (an ingredient in pizzas) declines due to a major technological breakthrough in the dairy industry, there would be: A) a decrease in the supply of pizza. B) an increase in the supply of pizza. C) an increase in the quantity of pizza supplied. D) no change in the supply of pizza.

In the Case in Point on "The Monks of St. Benedict's," the Monks got out of the egg business largely because: A) there was a large increase in the supply of eggs from other producers. B) of the increase in the price of chicken feed. C) the Pope forbade them from working on Sunday. D) a huge increase in the demand for eggs caused the price of eggs to increase, and their operation was too small to meet the demand.

It's certain that the equilibrium price will fall when: A) the supply curve and the demand curve both shift to the right. B) the supply curve shifts to the right and the demand curve shifts to the left. C) supply and demand both increase. D) supply decreases and demand stays the same.

Many disagreements among economists result because: A) economists deal only with positive economics. B) economists sometimes make normative judgments. C) economics is a social science. D) economics deals so much with theories and models.

The three broad types of resources used to produce goods and services are also known as: A) economic systems. B) factors of production. C) production possibilities. D) financial capital.

Two friends, one an engineer and the other an accountant, decide to form a partnership. If the accountant takes care of the books and the engineer runs the factory, they are likely to enhance the economy's productivity through: A) scarcity. B) specialization of labor. C) a shift in the production possibilities curve. D) a movement along the production possibilities curve.

Two goods are substitutes if: A) an increase in the price of one leads to a shift to the left in the demand curve for the other. B) an increase in the price of one leads to an increase in demand for the other. C) an increase in the price of one will increase the supply of the other. D) a fall in the price of one leads to a reduction in supply for the other.

Unemployment and inflation are: A) not relevant in the U.S. economy today. B) major topics in macroeconomics. C) unique only to capitalistic economies. D) very important in the study of microeconomics.

The same factors that lead to a change in quantity demanded also cause a change in demand.

The set of acquired skills and abilities that workers bring to the production of goods and services is: A) money. B) wealth. C) human capital. D) natural ability.

A competitive market with flexible prices and many buyers and sellers will: A) tend to create surpluses. B) tend to create shortages. C) reach an equilibrium where the market clears. D) reach and equilibrium only if a government agency sets the price.

A decrease in supply is caused by: A) a decrease in resource prices. B) an increase in the number of sellers in the market. C) suppliers' expectations of higher prices in the future. D) an advancement in the technology for producing the good.

A decrease in supply, with no change in demand, will lead to ________ in equilibrium quantity and ________ in equilibrium price. A) an increase; an increase B) an increase; a decrease C) a decrease; an increase D) a decrease; a decrease

A decrease in the demand for eggs caused by concerns over cholesterol is most likely attributable to which demand shifter? A) income B) prices C) consumer preferences D) prices of other goods

An example of a positive statement is: A) The rate of unemployment should be 4 percent. B) A high rate of economic growth is good for the country. C) an increase in investment spending tends to reduce unemployment. D) Everyone in the country needs to be covered by national health insurance.

An increase in supply of a good is caused by: A) resource prices rising. B) a fall in the price of the good. C) an increase in the number of sellers. D) expectations of future price increases.

Assume a market initially exhibits a shortage. Assuming that both prices and quantities are flexible, which of the following will be true after the market adjusts to equilibrium? A) Price is lower. B) Quantity demanded is greater. C) Quantity supplied is more. D) Quantity supplied will be reduced.

The situation when we face alternative choices is called abundance.

Every day for the past two years you've had ham and cheese on a whole wheat bagel for lunch at Bungalow Bob's Bagel Boutique. However, the price of whole wheat bagels has risen by 10 cents so today you decide to have ham and cheese on a rye bagel. In this case, whole wheat and rye bagels are best considered: A) superior goods. B) normal goods. C) substitute goods. D) complementary goods.

Government's role of taxing some citizens and transferring income to others is considered: A) enforcing a legal system. B) providing certain goods and services. C) redistributing income. D) maintaining the money supply.

Supply is best defined as the: A) relationship between the quantity of a good or service buyers are able to purchase, all other things unchanged. B) relationship between the quantity of a good or service buyers are willing to purchase, all other things unchanged. C) relationship between the quantity of a good or service sellers are willing to offer for sale and various prices, all other things unchanged. D) quantity of a good or service sellers are willing to offer for sale at a specific price, all other things unchanged.

The Case in Point on obesity suggests that food prices are lower because of: A) an increase in the in the demand for food only. B) an increase in the supply of food only. C) an increase in the demand for food was less than the increase in the supply of food. D) an increase in the supply of food that was less than the increase in demand for food.

The North Korean economy is currently classified as: A) a mixed economy. B) market capitalism. C) command socialism. D) the same kind of economy as Sweden.

The basic concern of economics is to: A) keep business firms from losing money. B) prove that capitalism is better than socialism. C) study the choices people make. D) use unlimited resources to produce goods and services to satisfy limited wants.

The best example of a command socialist economy is: A) Russia. B) China after 1979. C) Cuba. D) the United States.

There are several advantages that a market economy possesses. These do not include the fact that market economies: A) tend to result in high living standards. B) tend to encourage greater economic growth. C) tend to prevent entrepreneurial activity that would result in large accumulations of wealth in the hands of a few people. D) none of the above is true

There is an increase in incomes. What happens in the market for steak? A) The equilibrium price falls, and the equilibrium quantity rises. B) The equilibrium price rises, and the equilibrium price falls. C) The equilibrium price and quantity rise. D) The equilibrium price and quantity fall.

When we are forced to make choices we are facing the concept of: A) ceteris paribus. B) free goods. C) scarcity. D) the margin.

The three fundamental economic questions are what, how, and why.

A basic assumption used in many economic models is: A) as price goes up, the amount purchased will go up too. B) as price goes up, less will be offered for sale on the market. C) if the underlying theory doesn't represent reality, it is not useful. D) ceteris paribus, which means all other things remain unchanged.

A market surplus occurs if the: A) price is below the equilibrium price. B) price is equal to the equilibrium price. C) equilibrium price is above the actual price. D) equilibrium price is below the actual price.

A movement along the production possibilities curve would be a result of: A) unemployment. B) inflation. C) changes in prices. D) changes in the combinations of the two goods produced.

A student receives a bachelor's degree in economics and then achieves gainful employment as an economic analyst with a Fortune 500 company. This new worker is likely to enhance the economy's productivity through: A) scarcity. B) free goods. C) stable prices. D) specialization of labor.

After graduation from college you will receive a substantial increase in your income from a new job. If you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger would be considered a(n): A) normal good. B) substitute good. C) complementary good. D) inferior good.

An economy is said to have a comparative advantage in producing a particular good if it: A) can produce more of all goods than another economy. B) can produce less of all goods than another economy. C) has the highest cost for producing that good. D) has the lowest cost for producing that good.

An increase in capital goods and a decrease in consumer goods will: A) eventually lead to a shift to the right of the production possibilities curve. B) increase a nation's capacity to produce. C) lead to more rapid economic growth. D) do all of the above.

In a market capitalist economy, which of the following is not an accepted role for government? A) provision of national defense B) enforcing a legal system C) establishing policies to encourage full employment D) All of the above are acceptable roles for government.

Most economists' disagreements are a result of: A) factual considerations. B) positive economics. C) the scientific method. D) normative considerations.

One of the two criteria for a resource to be considered as a natural resource is that it must: A) have been produced. B) not be part of the environment. C) be part of a factory or building. D) be available for the production of goods and services.

One of the two criteria for a resource to be considered capital is that it must: A) occur naturally. B) be part of a factory or building. C) be a skill or talent possessed by a person. D) be possible to use it to produce other goods and services.

One reason you go to college is to improve your employment opportunities and obtain a higher income in the future. In the context of production possibilities, this is most comparable to: A) producing at any point on the production possibilities curve. B) producing at a point inside the production possibilities curve. C) producing relatively more consumer goods and relatively fewer capital goods. D) producing relatively more capital goods and relatively fewer consumer goods.

The concept of comparative advantage is based upon: A) absolute labor productivity. B) relative labor costs. C) dollar prices of labor. D) relative opportunity costs.

There is no role for government in a market capitalist economy.

When making a choice to do more of one activity, the highest-valued other choice society does not make is called _______ , and it is measured _______ . A) opportunity cost; in terms of the money it costs B) increasing cost; in terms of the amount of money spent doing so C) constant cost; by the slope of the production possibilities curve at that level D) opportunity cost; by the slope of the production possibilities curve at that level

Which of the following most correctly states the law of demand? A) As the price falls all other things unchanged, demand will go up. B) As the price goes up, all other things unchanged, demand will go down. C) As the price falls, all other things unchanged, the quantity demanded will go down. D) As the price falls, all other things unchanged, the quantity demanded will increase.

Which of the following will result in an increased price of milk? A) A shift to the right of the supply curve for milk. B) A shift to the right of the demand curve for milk. C) An increase in the number of milk suppliers. D) A decrease in the number of milk buyers.

Without government, the "for whom" question could not be solved.

A point inside the production possibilities curve may indicate that resources are not being used efficiently.

A production possibilities curve measures opportunity cost in dollar terms.

A shortage occurs at any price above the equilibrium price.

A shortage or a surplus can exist when the current price is equal to the equilibrium price

A shortage will exert pressures for the price to decrease

An attempt should always be made to maximize opportunity cost.

An improvement in technology will lead to a change in demand.

An increase in both supply and demand must increase both equilibrium price and quantity.

An increase in consumer income will lead to an increase in supply.

An increase in income will lead to an increase in demand for inferior goods.

An increase in price will result in a decrease in the quantity supplied.

An increase in price will result in an increase in supply.

Ceteris paribus means allowing all things to change.

Comparative advantage and trade allow nations to specialize in the production of a larger number of different goods.

Government in the United States plays an unimportant role in the economy because the rules for the functioning of the private economy are inherent in the markets themselves.

If the United States has a lower opportunity cost than Mexico in the production of wheat, then it will import wheat from Mexico.

Individuals will usually make choices to minimize the value of some objective.

Inefficiency occurs when an economy is operating outside its production possibilities curve.

Microeconomics is a branch of economics that examines the impact of choices on aggregates in the economy.

Money is a factor of production because it is part of capital.

Positive statements can be tested for being true but they can't be proven false.

Price changes for complements and substitutes have the same effect on demand.

Technology is a demand shifter.

The demand for a product is the quantity of it that people buy.

A decrease in both supply and demand will lead to a decrease in equilibrium quantitY

A decrease in price will lead to an increase in the quantity demanded.

A decrease in the price of a factor of production will lead to an increase in the supply of goods that use the factor in production.

A scarce resource is one that: A) is free. B) is abundant. C) has alternative uses. D) has no alternative uses.

An answer to the question "How are goods produced?" determines: A) who receives the goods that are produced. B) how tastes and preferences are determined. C) how resources are combined in the production of goods. D) the types and quantities of goods and services produced.

Ceteris paribus means: A) allowing all other things to change. B) making value judgments. C) all other things unchanged. D) differentiating between macroeconomics and microeconomics.

Suppose you observe that the sun sets every evening after the six o'clock business report. If you conclude that the six o'clock business report makes the sun set, you are guilty of the fallacy of: A) division. B) composition. C) false cause. D) science.

The "all other things unchanged" assumption is used to: A) express the fundamental questions in economics. B) approximate real-world conditions. C) simplify the very complex real world. D) do all of the above.

The economic way of thinking includes: A) attention paid to the opportunity costs involved in any choice. B) the assumption that individuals choose to average out some objective. C) concern with the biological make up of decision makers. D) emphasis on how choices affect total values rather than marginal values.

The fundamental economic questions that every economic system must answer are: A) what, how, and for whom. B) what, why, and for whom. C) when, why, and for whom. D) how, when, and how much.

The problem of determining how goods and services should be produced is a problem of deciding: A) the best combinations of resources to be used for producing goods and services. B) the extent to which imports should be reduced relative to exports. C) the extent to which exports should be reduced relative to imports. D) who owns the resources.

Economics is a: A) social science that studies goods with no alternative uses. B) natural science that studies goods with no alternative uses. C) social science concerned chiefly with how people choose among alternatives. D) social science concerned chiefly with reasons why society has unlimited resources

The statement that "there is no such thing as a free lunch" means: A) there are no tradeoffs between economic goals. B) any production requires the use of scarce resources, and thus the sacrifice of another alternative. C) choices need not be made in rational behavior. D) scarcity only exists in poor societies.

Economics, generally speaking, is primarily concerned with: A) the operation of the bond and stock markets. B) the issues of income inequality or income equality. C) how people choose among the alternatives available to them. D) ceteris paribus, the scientific method, and the margin.

Macroeconomics deals with: A) bits and pieces of the economy. B) the question of how a business unit should operate profitably. C) the analysis of the aggregate values in the economy. D) ceteris paribus.

Economists concerned about the behavior of individual households, firms, and industries are studying: A) microeconomics. B) macroeconomics. C) neither macroeconomics nor microeconomics D) the "forest" of economic behavior, rather than the "trees."

Making choices that are expected to achieve the highest possible value for some objective is termed: A) maximizing. B) minimizing. C) sanitizing. D) satisfying.

One question that arises when determining for whom goods and services should be produced is: A) Who gets how much of the economic pie? B) How can we import more goods for domestic consumption? C) How can we reduce exports so as to leave more goods for domestic consumption? D) Should society outlaw child labor?

The Case in Point on the Simpsons indicated that time is: A) a scarce resource. B) a resource without alternative uses. C) a ubiquitous resource. D) not a resource.

A hypothesis is an assertion that can be: A) proven to be false. B) proven to be true. C) proven to be true or false. D) tested only in the normative sense.

A scarce resource is one that: A) has two or more alternative uses. B) exhibits the basic properties of a free good. C) is confronted only under socialist conditions. D) has an unlimited supply.

A(n) _______ does not pose the problem of scarcity; one use of the good is not an alternative to another use. A) free good B) scarce good C) economic good D) monetary good

According to the textbook, economics is a: A) social science. B) study of business decisions, not social decisions. C) part of operations and management science. D) part of humanities.

Anything whose value can change is a: A) variable. B) constant. C) hypothesis. D) all of the above.

Each of the following statements about the use of models in the study of economics is true EXCEPT: A) models fit the observed facts exactly. B) models are sometimes revised in light of new research findings. C) models are easier to manipulate than the reality they represent. D) models contain the essential features of the economic behavior being studied.

A free good is: A) also a scarce good. B) a relatively abundant good. C) a good with no opportunity cost. D) a good with relatively low opportunity cost.

A variable that induces a change in another variable is a(n): A) dependent variable. B) independent variable. C) codependent variable. D) constant variable

At any price below the equilibrium price, the quantity demanded exceeds the quantity supplied, and the price tends to rise.

A market is a set of arrangements where: A) buyers and sellers can get together and buy and sell. B) buyers compete with sellers. C) sellers compete with buyers. D) A and C are true, but B is not true

A market shortage occurs if the quantity: A) demanded is greater than the quantity supplied. B) demanded is less than the quantity supplied. C) demanded is equal to the quantity supplied. D) supplied is greater than the quantity demanded.

A price below the equilibrium price will: A) result in pressure for price to rise. B) result in a surplus. C) never be the case. D) result in pressure for price to fall.

A source of economic growth is: A) advances in technology. B) unemployment. C) more money. D) idle factors of production.

During the Great Depression: A) By 1933, 25 percent of the nation's workers had lost their jobs. B) output reached its lowest level in 1929. C) the production possibilities curve shifted sharply inward, which explains the drop in output, jobs, and overall prosperity. D) firms increased output but used fewer workers.

Human capital is: A) the set of acquired skills and abilities that workers bring to the production of goods and services. B) the financial wealth the economy has available to produce goods and services. C) the ability to produce one of two goods at relatively lower cost. D) a factor of production only if it occurs naturally.

If an economy has to sacrifice increasing amounts of good X for each additional unit of good Y produced, then its production possibilities curve is: A) bowed out from the origin. B) bowed in toward the origin. C) a straight line. D) a vertical line.

If the price of hamburger increases, it would probably result in ________ in the demand for hamburger buns. A) a decrease B) an increase C) no change D) random fluctuations

If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price: A) is above the market equilibrium price. B) will rise to clear the market. C) will either rise or remain unchanged. D) is below the market equilibrium price.

If wages are higher in the United States than in Brazil, then: A) trade is still beneficial to the United States and Brazil. B) Brazil will not have a comparative advantage in the production of any good. C) the United States cannot have a comparative advantage in the production of any good. D) trade with Brazil will clearly lower wages in the United States.

In a competitive market, if there should be a surplus of a product at a given price: A) sellers will drive the price down. B) sellers will drive the price up. C) buyers will drive the price up. D) the price will tend to remain constant.

It is true that the equilibrium quantity will always go up if supply: A) and demand both increase. B) increases and demand decreases. C) and demand both decrease. D) decreases and demand remains unchanged.

Technology is: A) knowledge that can be applied to the production of goods and services. B) generally unlimited in modern economies. C) a graphical illustration of the alternative combinations of goods and services an economy can produce. D) the resources the economy has available to produce goods and services.

The cost of the Great Depression between 1929 and 1942 was a loss of: A) more than the United States ultimately spent on World War II. B) over $15 trillion in today's dollars. C) the output that otherwise would have been produced by the 50 percent of the nation's workers who had lost their jobs. D) both B and C are true.

The gains or benefits from trade are: A) A result of more efficient resource utilization. B) based on different wage rates in different countries. C) greater when rich nations trade with poor nations. D) based on the principle of absolute advantage.

The intersection of the supply and demand curves indicates: A) the equilibrium solution in the market. B) a surplus that will cause the price to fall. C) a shortage that will cause the price to rise. D) the quantity demanded exceeds the quantity supplied.

The key signals that send messages to buyers and sellers to buy or not to buy or to sell or not to sell are, all other things unchanged: A) prices. B) preferences. C) government mandates. D) expectations.

The price of apples falls. What happens in the market for apple pies? A) The equilibrium price falls, and the equilibrium quantity rises. B) The equilibrium price rises, and the equilibrium quantity falls. C) The equilibrium price and quantity rise. D) The equilibrium price and quantity fall.

The role of government in shifting the production possibilities curve to the right is considered: A) supporting economic growth. B) redistributing income. C) providing certain goods and services. D) enforcing private property rights.

The three broad types of factors of production are: A) capital, labor, and natural resources. B) money, profit, and interest. C) stocks, bonds, and financial assets. D) technology, human capital, and comparative advantage.

To be considered capital, a factor of production must: A) have been produced. B) occur naturally. C) be part of a factory or building. D) be a skill or talent possessed by a person.

What is the difference between a shortage and scarcity? A) Scarcity will always exist because choices must be made, but a shortage will only exist if the price is kept below the equilibrium level. B) Scarcity is a result of two or more alternative uses and will always exist, and quantities of supply and demand adjusting to flexible prices will create shortages. C) A surplus will exist when a good is scarce; a shortage merely implies that there isn't as much of something as people would like, which is nearly always the case. D) There is no distinction between the two. They are the same thing.

Which of the following will not cause the demand for milk (a normal good) to increase in the current time period? A) a fall in the price of milk B) an increase in income C) an expected increase in milk prices D) a decrease in the price of cookies (a complement)

A decrease in the price of milk (and ingredient of ice cream) will result in a(n): A) shift of the supply curve of ice cream to the left. B) shift of the supply curve of ice cream to the right. C) lower price of ice cream, and thus an increase in the demand for ice cream. D) increase in the demand for ice cream and a decrease in the supply of milk.

An economy that has the lowest cost for producing a particular good is said to have a(n): A) technological advantage. B) comparative advantage. C) convex news production possibilities curve. D) all of the above are correct and

An example of capital is: A) cash. B) a factory building. C) money in a checking account. D) the existing state of technology.

An increase in demand and a decrease in supply, will lead to a(n) ________ in equilibrium quantity and a(n) ________ in equilibrium price. A) decrease; decrease B) indeterminate change; increase C) indeterminate change; decrease D) increase; indeterminate change

Demand and supply are terms that refer to the behavior of people and firms as they interact in markets.

An increase in supply, with no change in demand, will lead to ______ _ in equilibrium quantity and ________ in equilibrium price. A) an increase; an increase B) an increase; a decrease C) a decrease; an increase D) a decrease; a decrease

Britain imports some goods and exports other goods primarily because of: A) free goods. B) specialization. C) unemployment. D) self-sufficiency.

Economic resources used in the production process are called: A) free gifts of the natural environment. B) factors of production. C) consumer items. D) money capital.

Economists are generally in support of: A) government restrictions on trade. B) free international trade. C) tariffs to restrict trade. D) subsidizing exports.

For most consumers, blu-ray players and blu-ray discs are likely to be: A) substitute goods. B) complementary goods. C) inferior goods. D) independent goods.

Given that chicken and beef are substitute goods, if the price of chicken decreases substantially, there would be: A) an increase in the demand for beef. B) a decrease in the demand for beef. C) a decrease in the quantity of beef demanded. D) no change in the demand for beef.

Government's role of providing national defense is considered: A) enforcing a legal system. B) providing certain goods and services. C) redistributing income. D) expanding economic growth.

Governments often establish rules that influence how an economy operates. Which of the following rules will most likely increase the ability of society to produce goods and services? A) laws allowing discrimination against women. B) providing tax incentives to encourage education by workers C) environmental regulations that prevent the use of industrial solvents in production D) increasing taxes on the formation of new capital

How a supply curve is sloped and located is affected by: A) consumer preferences. B) resource prices. C) the number of consumers. D) all of the above.

If Farmer Sam MacDonald can produce 200 pounds of cabbages and 0 pounds of potatoes or 0 pounds of cabbages and 100 pounds of potatoes and faces a linear production possibilities curve for his farm, the opportunity cost of producing an additional pound of potatoes is _____ _ pound(s) of cabbage. A) 1/2 B) 2 C) 100 D) 200

If a production possibilities curve were bowed in or convex to the origin of a graph, it would demonstrate: A) increasing opportunity cost. B) decreasing opportunity cost. C) constant opportunity cost. D) fluctuating opportunity cost.

If an economy is producing a combination of goods that places it on the production possibilities curve, then it has: A) economic growth. B) full employment. C) inefficiency. D) idle factors of production.

If both the demand for a product and the supply of it decrease, then the equilibrium quantity will ________ and the equilibrium price will ________. A) increase; either increase, decrease, or remain constant B) decrease; either increase, decrease, or remain constant C) increase; increase D) increase; decrease

If economists say, "the price is too high," they mean that: A) quantity demanded is greater than quantity supplied. B) quantity supplied is greater than quantity demanded. C) the equilibrium price exceeds the current price. D) the price of a good will tend to increase.

If steak and potatoes are complements, when the price of steak goes up, the demand curve for potatoes: A) shifts to the right. B) shifts to the left. C) stays the same. D) shifts to the right and then moves back.

If the price of a commodity increases as the result of increased demand, you would expect the: A) supply to increase. B) quantity supplied to increase. C) quantity supplied to decrease. D) supply curve to shift to the right.

If two countries participate in free trade: A) every individual in each country will benefit. B) both countries as a whole may gain from the trade. C) one country will benefit, but the other country will experience reduced welfare.. D) neither country will benefit.

Increases in resources or improvements in technology will tend to cause a society's production possibilities curve to: A) shift inward to the left. B) shift outward to the right. C) remain unchanged. D) become vertical.

One of the two criteria for a resource to be considered as a natural resource is that it must: A) have been produced. B) be found in nature. C) be part of a factory or building. D) not be used to produce goods and services.

Positive statements: A) imply value judgments must be made. B) are factual and can be tested. C) deal with what ought to be. D) are dealt with primarily in microeconomics.

Resources from nature that can be used to produce other goods and services are called: A) money. B) natural resources. C) labor. D) capital.

Specialization arises because A) some people don't like doing some tasks. B) differences in the costs of production give some producers a comparative advantage in the production of particular goods or services. C) the government directs resources into certain activities. D) inefficient production forces producers to trade.

The Case in Point on campus parking suggested that giving students lower fares for taking public transportation was what kind of factor in the demand for parking spaces? A) supply shifter B) demand shifter C) false prophet D) spoiler

The Case in Point on obesity argues that agricultural innovation led to: A) the increase in the demand for food. B) the increase in the supply of food. C) higher food prices. D) B and C occurred.

The basic economic differences among nations throughout history concerning institutions, philosophy, and ideology mainly focus on: A) unemployment and inflation. B) the ownership of factors of production and how they are coordinated in economic activity. C) the relative shares of agriculture, industry, and service sectors. D) the opportunity for social mobility.

The law of demand implies that: A) consumers are not responsive to price changes. B) consumers will, all other things unchanged, buy more at lower prices. C) sellers will, all other things unchanged, offer more on the market at higher prices. D) sellers will, all other things unchanged, offer less on the market at lower prices.

The law of demand is illustrated when: A) an increase in tuition encourages more students to enroll in college because the quality of education has risen. B) an increase in the purchases of personal computers results from lower prices. C) higher oil prices cause oil companies to drill for new sources of oil. D) higher fees for the use of public golf courses force golfers to purchase fewer golf balls.

The price of cotton rises. What happens in the market for cotton shirts? A) The equilibrium price falls and the equilibrium quantity rises. B) The equilibrium price rises and the equilibrium quantity falls. C) The equilibrium price and quantity rise. D) The equilibrium price and quantity fall.

The price of eggs might go up because: A) of an increase in the price of bacon. B) the price of chicken feed increased. C) the supply of eggs increased. D) the demand for eggs fell.

The primary difference between a change in demand and a change in the quantity demanded is: A) a change in demand is a movement along the demand curve, and a change in quantity demanded is a shift in the demand curve. B) a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve. C) both a change in quantity demanded and a change in demand are shifts in the demand curve, only in different directions. D) both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions.

The proposition that states that as output increases for one good in an economy that is on its production possibilities curve, the cost of additional units of the good on the horizontal axis will be greater and greater is the: A) law of absolute advantage. B) law of increasing opportunity cost. C) law of policy ineffectiveness. D) law of demand.

The relationship between the price of a good and the quantity people are willing and able to purchase is: A) supply. B) demand. C) equilibrium. D) disequilibrium.

Which of the following would not change the demand for automobiles? A) a change in the price of gasoline B) a change in the cost of steel C) a change in the price of motorcycles D) a change in tastes

Economists attempt to discover explanations for events that are observed.

A decrease in the price of a good will, all other things unchanged, result in: A) an increase in demand. B) an increase in supply. C) an increase in the quantity demanded. D) more being supplied.

A factor of production that has been produced for use in the production of other goods and services is: A) labor. B) money. C) capital. D) natural resources.

A person who seeks to earn profits by finding ways to organize factors of production is called a(n): A) foreman B) finance capitalist. C) entrepreneur. D) manager.

A price above the equilibrium price will: A) result in quantity supplied being less than quantity demanded. B) result in a shortage. C) create pressure for price to fall. D) tend to rise over time.

A shift in the demand curve to the left, all other things unchanged: A) will cause the supply curve to shift to the left, too. B) will cause a movement upward along the supply curve and a higher equilibrium price. C) will cause a movement downward along the supply curve and a lower equilibrium quantity. D) will result in a lower equilibrium price and greater equilibrium quantity.

A shift to the left of a supply curve is caused by: A) an increase in the number of sellers. B) a technological improvement. C) an increase in the returns from other supply possibilities. D) an increase in the number of buyers

A supply curve that is upward sloping means that: A) demand is being ignored. B) consumers will buy less at lower prices. C) suppliers will want to sell more at higher prices. D) suppliers will want to sell less at higher prices.

Assume an economy is operating on its production possibilities curve, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods: A) will increase too. B) will not change. C) must decrease. D) may increase or decrease.

Assume that Brazil gives up 3 automobiles for each ton of coffee it produces, while Peru gives up 7 automobiles for each ton of coffee it produces. A) Brazil has a comparative advantage in automobile production and should specialize in coffee. B) Brazil has a comparative advantage in coffee production and should specialize in the production of automobiles. C) Brazil has a comparative advantage in coffee production and should specialize in coffee production. D) Brazil has a comparative advantage in automobile production and should specialize in automobile production.

Capital, labor, and natural resources combine to produce goods and services. Which of the following will not lead to an increase in the ability of an economy to produce goods and services? A) increased training for workers B) establishing a more productive technology C) new government restrictions on which technologies may be used to produce goods and services D) discovery of new oil reserves

Consumer preferences, prices of related goods, income, and demographic characteristics are often termed: A) market technologies. B) demand prices. C) demand shifters. D) supply determinants.

Demand is defined as: A) an amount that is purchased at a specific price, given supply. B) a schedule that establishes the price of a good. C) a schedule that shows how much will be purchased at various prices during a particular period, all other things unchanged. D) the amount that will be bought at a specific price.

Economists know that a particular good can be classified as an inferior good if a(n) ________ in buyers' income causes a(n) ________ . A) increase; increase in demand B) increase; increase in quantity demanded C) increase; decrease in demand D) decrease; decrease in demand

Efficient production implies that it is: A) possible to produce more of all goods and services. B) it is possible to produce more of one good without producing less of another. C) not possible to produce more of one good without producing less of another good. D) producing at a combination of goods which lies between the production possibilities curve and the origin.

Given that milk and cookies are complements, suppose the price of flour (an ingredient in cookies) rises. What happens in the market for milk? A) The equilibrium price and quantity rise. B) The equilibrium price rises and the equilibrium quantity falls. C) The equilibrium price and quantity fall. D) The equilibrium price falls and the equilibrium quantity rises.

Human effort that can be applied in the production process is called: A) natural resources. B) technology. C) labor. D) specialization.

If a demand curve shifts to the left, then: A) the equilibrium price would go up and the equilibrium quantity would go down. B) the equilibrium price would go down and the equilibrium quantity would go up. C) a lower equilibrium price and quantity would result. D) a higher equilibrium price and quantity would result.

If all factors of production that are available for use under current market conditions are being utilized, then the economy has: A) economic growth. B) comparative advantage. C) full employment. D) inefficient production.

If an economy is operating efficiently and with full employment, the production of more of one commodity will necessarily lead to less of something else being produced because of: A) the unlimited wants of people. B) perfectly adaptability of resources in the production of various goods. C) scarcity. D) the lack of money capital.

If an economy's factors of production were owned by the government sector and the coordinating activity was done by a government planning board, the economy would be called: A) capitalism. B) market capitalism. C) command socialism. D) mixed capitalism.

If the current price is less than the market clearing or equilibrium price, we would expect: A) a surplus. B) downward pressure on price. C) upward pressure on price. D) no change in the market price.

If the demand for housing increases and the supply of housing decreases: A) price will go up and quantity will go down. B) price and quantity will both go up. C) price will increase, but the quantity change is indeterminate. D) the quantity will be higher, but the change in price is indeterminate.

If the opportunity cost of manufacturing machinery is higher in the United States than in Britain and the opportunity cost of manufacturing sweaters is lower in the United States than in Britain, then the United States will: A) export both sweaters and machinery to Britain. B) import both sweaters and machinery from Britain. C) export sweaters to Britain and import machinery from Britain. D) import sweaters from Britain and export machinery to Britain.

If the price in the market for a commodity is above the market equilibrium price, the: A) price will remain unchanged. B) price will rise to clear the market. C) quantity supplied exceeds the quantity demanded. D) quantity demanded exceeds the quantity supplied

If the price of a commodity increases, all other things unchanged, you would expect the: A) demand to decrease. B) quantity demanded to increase. C) quantity demanded to decrease. D) demand curve to shift to the left.

If the production possibilities curve were a straight line sloping down from left to right, this would suggest that: A) more of both goods could be produced moving along the curve. B) the two products must have the same price. C) no factor of production has any particular comparative advantage over other resources. D) the utility of the two goods must be equal to consumers.

If the quantity supplied in a market exceeds the quantity demanded in a market, we would expect price to: A) stay the same. B) increase. C) decrease. D) rise in order to clear the market.

In a competitive market, when price is below the equilibrium price, there will be pressure for the price to: A) fall. B) stay the same. C) rise. D) change only if demand and/or supply change.

In general, production possibilities curves are "bowed out" because: A) it's wasteful to produce too much of any one good. B) people generally prefer to consume goods in appropriate combinations. C) of the law of increasing opportunity cost. D) of the law of demand.

Plastic and steel are substitutes in the production of automobiles. If steel prices go up, all other things unchanged: A) the equilibrium price of plastic will fall. B) the demand curve for plastic will shift to the left. C) the demand curve for plastic will shift to the right. D) the equilibrium quantity of plastic demanded will increase and the equilibrium price will fall.

Researchers demonstrate conclusively that drinking 4-6 ounces of ginger ale each day increases life expectancy by 3 years. What happens in the market for ginger ale? A) The equilibrium price falls, and the equilibrium quantity rises. B) The equilibrium price rises, and the equilibrium quantity falls. C) The equilibrium price and quantity rise. D) The equilibrium price and quantity fall.

The difference between iron ore deposits and the steel produced from these deposits that is later used to make factory equipment illustrates the difference between: A) labor and a natural resource. B) labor and capital. C) a natural resource and capital. D) a natural resource and entrepreneurship.

The law of increasing opportunity cost means that: A) higher wages, rents, and interest will increase opportunity costs. B) opportunity cost will decrease the more you decide to produce more of one good along a production possibilities curve. C) opportunity cost increases when you produce more of one good while moving along a production possibilities curve. D) costs of production decrease at first, but then eventually rise.

The law of increasing opportunity cost says that: A) opportunity costs of production always tend to increase. B) increases in wages cause increases in the opportunity costs of production. C) as output increases for one good on its production possibilities curve, the opportunity cost of additional units of the other good will be greater and greater. D) along a production possibilities curve, as output increases in the production of one good, the opportunity costs of additional units of the other good will be less and less.

The price of oranges rises. What happens in the market for apples, which are a substitute for oranges? A) The equilibrium price falls, and the equilibrium quantity rises. B) The equilibrium price rises, and the equilibrium quantity falls. C) The equilibrium price and quantity rise. D) The equilibrium price and quantity fall.

The primary difference between a change in supply and a change in the quantity supplied is: A) a change in quantity supplied is a shift in the supply curve, and a change in supply is a movement along the supply curve. B) both a change in quantity supplied and a change in supply are movements along the supply curve, only in different directions. C) a change in quantity supplied is a movement along the supply curve, and a change in supply is a shift of the supply curve. D) a change in supply is a movement to the left along the supply curve and a change in quantity supplied is a movement to the right along the supply curve.

The production possibilities curve represents the fact that: A) the economy will automatically end up at full employment. B) an economy's productive capacity increases proportionally with its population. C) if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. D) economic production possibilities have no limit.

Economists pay special attention to making choices at the margin

When economists study the behavior of buyers, they are studying: A) supply. B) the role of government. C) demand. D) psychology.

When moving along a production possibilities curve, the opportunity cost to society of getting more of the good on the horizontal axis: A) is constant. B) is measured in dollar terms. C) is measured by the amount of the other good that must be given up. D) usually decreases.

When the market price is established where demand and supply curves intersect: A) consumer buying tends to exceed the quantity producers supply. B) the quantity consumers demand generally fall short of the quantity producers supply. C) the quantity demanded and the quantity supplied are equal. D) all of the above will result.

Which of the following is false? A) If demand increases and supply decreases, equilibrium price will go up. B) If demand remains constant and supply increases, equilibrium price will go down. C) If demand decreases and supply increases, equilibrium price will rise. D) If supply is unchanged and demand decreases, equilibrium price will fall.

Which of the following is true? A) If demand decreases, equilibrium price increases. B) If demand increases, equilibrium price decreases. C) If demand decreases, the demand curve shifts to the left. D) If demand decreases, the demand curve shifts to the right

Which of the following would result in a movement along the demand curve? A) a change in preferences B) an increase in the number of buyers C) an increase in the number of suppliers D) a decrease in income

Which of the following would shift the demand curve for new textbooks to the right? A) A decrease in the price of paper. B) A fall in the price of used textbooks. C) An increase in college enrollments. D) A fall in the price of new textbooks

Which would not cause the supply curve to shift? A) a change in technology B) a change in factor costs C) a change in the price of the good D) a change in the prices of related goods

If the U.S. economy adds to the capital stock, this may require a temporary decrease in the amount of present consumption.

All other things unchanged, a tax on a product that leads to an increase in the cost of production would: A) lead to an increase in supply. B) lead to a decrease in demand. C) result in an increased price. D) lead to a decrease in supply.

An economy is said to have a comparative advantage in the production of a good if it can: A) produce that good with more resources than another economy. B) produce that good with a higher opportunity cost than another economy. C) produce that good outside its production possibilities curve. D) produce the good at a lower opportunity cost than another economy.

An example of a normative statement is: A) The rate of unemployment is 4 percent. B) A high rate of economic growth creates more jobs for the country. C) The federal government spends half of its budget on national defense. D) Everyone in the country needs to be covered by national health insurance

An increase in supply is caused by: A) an increase in resource prices. B) a decrease in the number of sellers in the market. C) suppliers' expectations of higher prices in the future. D) an advancement in the technology for producing the good.

An increase in supply is caused by: A) an increase in resource prices. B) suppliers' expectations of higher prices in the future. C) an increase in the price of a good using the same resources. D) a decrease in the price of a good using the same resources.

An increase in the demand for medical services caused by an increase in the number of people over 65 is most likely attributable to which demand shifter? A) income B) consumer preferences C) prices of other goods D) demographic characteristics

Assuming that pizza is a normal good, if students' income at your college increases substantially, there would be: A) a reduction in the demand for pizza. B) an increase in the quantity of pizza demanded. C) no change in the demand for pizza. D) an increase in the demand for pizza.

By specializing in the production of particular goods in which it has a comparative advantage, a nation is: A) less likely to make efficient use of available resources. B) less likely to engage in international trade. C) able to become self-sufficient. D) able to operate efficiently.

Demand and supply curves are drawn assuming ceteris paribus. This means that: A) economists ignore all assumptions. B) economists don't watch for the fallacy of false cause. C) changes will be proportional. D) all other things besides price and quantity are assumed unchanged.

Demand is best defined as the: A) amount of a commodity that buyers would be willing and able to purchase at a specific price. B) price that buyers would be willing and able to pay for a specific quantity of a good. C) relationship between the price of a good and the quantity people are able to purchase, all other things unchanged. D) relationship between the price of a good and the quantity people are willing and able to purchase, all other things unchanged.

If two goods are complements, a fall in the price of one will lead to an increase in demand for the other.

Factor prices, returns from alternative activities, technology, number of firms, producer expectations, and natural events are often termed: A) demand determinants. B) demand quantities. C) supply prices. D) supply shifters.

If a market reflects a shortage and prices are allowed to move: A) supply will increase. B) demand will decrease. C) price will decrease. D) price will increase.

If an economy is producing a combination of goods that places it inside the production possibilities curve, then it has: A) economic growth. B) full employment. C) efficiency. D) idle factors of production or inefficient use of resources.

If an economy is producing a level of output that is on its production possibilities curve, the economy A) has idle resources. B) has idle resources but is using resources efficiently. C) has no idle resources but is using them inefficiently. D) has no idle resources and is using resources efficiently.

If both the demand for a product and the supply of it increase, then the equilibrium quantity will ________ and the equilibrium price will ________. 'A) decrease; increase B) decrease; decrease C) decrease; remain constant D) increase; either increase, decrease, or remain constant

If countries do not engage in international trade: A) they give up the ability to specialize in production. B) worldwide levels of production are lower. C) the world will be operating inside its production possibilities curve. D) all of the above are true.

If demand and supply both decrease: A) both price and quantity will be less. B) both price and quantity will go up. C) price will fall but quantity will go up. D) quantity will go down but the effect on price is indeterminate.

If demand and supply both shift to the right, then: A) both price and quantity will go up. B) price will go down and quantity will go up. C) quantity will go down and price will go up. D) quantity will go up, but price could go up, down, or stay the same

If the opportunity cost of manufacturing machinery is lower in the United States than in Britain and the opportunity cost of manufacturing sweaters is higher in the United States than in Britain, then the United States will: A) export both sweaters and machinery to Britain. B) import both sweaters and machinery from Britain. C) export sweaters to Britain and import machinery from Britain. D) import sweaters from Britain and export machinery to Britain.

If the price in the market for a commodity is below the equilibrium price, the: A) price will remain unchanged. B) price will decline to clear the market. C) quantity supplied exceeds the quantity demanded. D) quantity demanded exceeds the quantity supplied.

Increasing the level of education in the United States will: A) shift the production possibilities curve to the left. B) improve the level of technology. C) lead to increased natural resource use. D) lead to workers possessing greater human capital.

International trade is possible in part through: A) inefficiently employing resources. B) restricting the rate of growth of output. C) generalization in the production of all goods. D) specialization in the production of goods.

Statements that make value judgments are: A) pecuniary. B) positive. C) nominal. D) normative.

The best example of a market capitalist economy is: A) Russia. B) China before 1979. C) Cuba. D) the United States.

The factors of production are: A) money, labor, natural resources, and capital. B) technology, human capital, and natural resources. C) money, capital, and natural resources. D) labor, capital, and natural resources.

The law of increasing opportunity cost is associated with the slope of the: A) demand curve. B) supply curve. C) output curve. D) production possibilities curve.

The law of increasing opportunity costs is a result of the fact that: A) the value of the dollar has declined over time. B) wage rates rise as the economy reaches full employment. C) consumers tend to value a good more when they don't have much of it. D) resources are not equally productive in all output categories.

The theory underlying demand and supply curves assumes that, all other things unchanged, the primary variable that assures the equality of the quantities demanded and supplied is: A) consumer income. B) the preferences of consumers. C) the expectations of consumers and producers. D) price.

There is equilibrium in the market when: A) there is no shortage. B) there is no surplus. C) price is established where the supply curve and the demand curve intersect. D) all of the above are true.

A free good is one that can be acquired without sacrifice.

A decrease in price will lead to an increase in demand.

A decrease in the price of a good will result in a decrease in supply.

A production possibilities curve measures cost in terms of dollars spent, not in terms of sacrificed alternatives.

All choices have monetary costs.

The existence of alternative uses for a resource implies it isn't scarce.

The law of demand implies that the quantity demanded of a commodity is inversely related to income, assuming other things that may affect demand remain the same.

The law of increasing opportunity cost results in a constant slope of the production possibilities curve.

The questions of what goods to produce, how to produce them, and for whom to produce them are of concern only in advanced industrial economies.

A good is scarce if we must sacrifice something to obtain it.

A shortage results from a current price being below the equilibrium price.

A surplus is a result of equilibrium price being below the current price.

A surplus will cause pressure on the price to fall.

Economics is a: A) social science that deals with making choices among alternatives. B) natural science that concerns itself with allocating relatively scarce resources among alternative ends. C) science that has no theories or models based on the scientific method. D) humanities course that mainly concerns itself with limited wants versus unlimited resources.

Economists are: A) concerned with developing theories and interested in solving problems. B) interested in solving problems but not concerned with developing theories. C) reluctant to predict changes in variables such as prices, employment, and spending. D) always in agreement on the best way to implement policy decisions.

Water is considered a scarce good rather than a free good because: A) it has alternative uses. B) it does not have alternative uses. C) scarce goods are less expensive than free goods. D) free goods are more expensive than scarce goods

A model or theory in economics is: A) based mostly on value judgments. B) built using relevant observations, assumptions, and abstractions. C) only useful if it correctly portrays the real world and its complexities. D) useful only if it is based on normative economic statements.

A variable that responds to a change in another variable is called a(n) _______ variable. A) independent B) dependent C) theoretical D) all of the above are true

The economic way of thinking has to do with: A) analyzing benefits but not costs. B) analyzing costs but not benefits. C) making choices at the margin. D) making the distinction between microeconomics and macroeconomics.

In the 1930s, the federal government established the social security system to provide a minimum level of income to elderly and disabled people. This primarily addressed the economic question of: A) When will each good be produced? B) For whom shall the goods be produced? C) What goods and services should a society produce? D) How should the resources be organized for production?

Opportunity cost is: A) the costs of all sacrifices not chosen when a choice is made. B) the highest valued other choice that could have been made. C) the result of having made a bad choice. D) the result of not making choices at the margin.

The Case in Point on "baldness and heart disease" suggests that by preventing baldness: A) men can reduce the likelihood they will develop colon cancer. B) men are unlikely to influence their chances of having heart problems. C) men are likely to reduce their chances of having heart problems. D) men can live longer.

The Case in Point on the Simpsons indicated that even fictional characters face: A) diminishing marginal product. B) opportunity costs. C) the fallacy of false cause. D) positive statements.

The concept of scarcity indicates that: A) most goods have no alternative uses. B) almost all goods have alternative uses. C) most decisions can be made without sacrificing alternatives. D) certain societies are able to overcome the constraints imposed by alternative uses of resources.

The economic way of thinking includes: A) more attention paid to benefits rather than the costs involved in any choice. B) the assumption that individuals choose to maximize some objective. C) emphasis on how choices affect total values rather than marginal values. D) the notion that the world has solved the problem of scarcity.

The primary emphasis in macroeconomics is on: A) how firms set prices. B) aggregates in the economy. C) marginal analysis and normative economics. D) international trade and environmental economics.

The problem of determining what goods and services society should produce exists because: A) resources are plentiful. B) resources are scarce. C) most of our resources are privately rather than socially owned. D) most of our resources are socially rather than privately owned.

The problem of determining what goods and services society should produce: A) exists because we can produce more than we need or want. B) exists because there are not enough resources to provide all the goods and services that people want to purchase. C) would not exist if all goods and services were scarce. D) would not exist if government owned all of the resources.

The economic way of thinking includes: A) more attention paid to benefits rather than the costs involved in any choice. B) the assumption that individuals choose to average out some objective. C) emphasis on how choices are made at the margin. D) the notion that the industrialized nations have solved the problem of scarcity.

A key theme fundamental to all of economics is: A) there are limited wants. B) we are a rich country but are simply not aware of it. C) people have unlimited wants facing limited means to satisfy them. D) there are unlimited resources.

A theory that has won virtually universal acceptance is a: A) model. B) hypothesis. C) law. D) variable.

Microeconomics is most likely to be concerned with the: A) economy as a whole. B) activity of large segments of the economy. C) economic behavior of specific parts or units of the economy. D) economy-wide trends in unemployment, prices, and production.

The branch of economics that examines the impact of choices on aggregates in the economy is: A) positive economics. B) normative economics. C) macroeconomics. D) microeconomics.

Which of the following would be a part of macroeconomics? A study of: A) the change in automobile sales due to a change in the price of automobiles. B) a tax reduction impact on the profits of a business. C) inflation. D) the unemployment of workers displaced by technological change in the typesetting industry.

A feature that distinguishes economists' approach to making choices is (are): A) assigning opportunity costs a major role in their analyses of choices. B) assuming individuals make choices to maximize objectives. C) emphasizing that choices are made at the margin. D) all of the above.

A hypothesis that has been tested extensively without being rejected and has won widespread acceptance is a: A) model. B) constant. C) variable. D) theory.

A person who mistakenly assumes that because one event follows another, the second event results from the first commits the fallacy of: A) division. B) addition. C) composition. D) false cause.

A term that means "all other things unchanged" is: A) dependent variable. B) independent variable. C) quid pro quo. D) ceteris paribus.

An answer to the question "For whom" determines: A) tastes and preferences. B) how resources are combined in production. C) the kinds and quantities of goods produced. D) who gets the goods and services produced.

Economic models are: A) created and used in order to duplicate virtually every aspect of the real world. B) useless if they are simple. C) made generally of wood, plastic, and/or metal. D) built using assumptions.

Economists are: A) concerned with developing theories but not interested in solving problems. B) interested in solving problems but not concerned with developing theories. C) reluctant to predict changes in variables such as prices, employment, and spending. D) not always in agreement on the best way to implement policy decisions.

In economics, the function of theories, laws, and hypotheses is to: A) prevent any misunderstanding of economic behavior. B) divide topics between microeconomics and macroeconomics. C) generate a complete and unchanging description of economic behavior. D) discover relationships between events that are important to economic behavior.

In the 1970s, the Organization of Petroleum Exporting Countries (OPEC) tripled the price of petroleum, causing automobile manufacturers to look for ways to produce more fuel-efficient cars by substituting aluminum and plastic for steel. This was primarily a response to the economic question of: A) When will each good be produced? B) For whom shall the goods be produced? C) What goods and services should a society produce? D) How should goods and services be produced?

Macroeconomics is most likely to be concerned with the: A) amount of unemployment in a specific industry. B) economic behavior of a particular household. C) economic behavior of specific parts or units of the economy. D) aggregates in the economy.

Reaching the incorrect conclusion that one event causes another because the events tend to occur together is called: A) the scientific method. B) the economic way of thinking. C) making choices at the margin. D) the fallacy of false cause.

Suppose that voters in your community pass a one-cent sales tax increase to fund education, knowing full well they will have to forgo other goods they typically consume. This primarily addresses the economic question of: A) How will each good be produced? B) For whom shall the goods be produced? C) Why will the resources be used to produce goods? D) What goods and services should a society produce?

The "all other things unchanged" assumption is useful because it: A) states the main economic objectives. B) is a vehicle for determining whether a particular outcome is "good" or "bad.". C) helps to approximate real-world conditions. D) helps to restrict analysis to the effect of a single economic factor.

The answer to, "What goods are to be produced?" deals with: A) who gets the goods. B) how tastes and preferences are determined. C) how resources are combined to produce goods and services. D) the kinds and quantities of goods and services produced.

The problem of scarcity is confronted by: A) industrialized societies. B) pre-industrialized societies. C) societies governed by communist philosophies. D) all societies.

The scientific method is more difficult for economists than, say, chemists, because: A) controlled laboratory conditions are more problematic in economics. B) it is difficult to hold other factors that may affect the variables being studied constant in economics. C) economic conditions may change quickly and unexpectedly. D) all of the above.

Whenever a choice is made: A) the value of all the other choices that could have been made is called opportunity cost. B) normative economics is encountered. C) the problem of "all other things unchanged" results. D) the opportunity cost of that choice is the highest-valued other choice that could have been made.

Which of the following statements is (are) true? A) A model is a set of simplifying assumptions about some aspect of the real world. B) Models are based on assumed conditions that are simpler than those of the real world. C) A model cannot be a complete representation of the real world. D) All of the above are true.

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