ECON 2301 Chapter 1

42. Which of the following best represents the relationship between a capital good and a consumer good or service

A commercial baking oven and loaves of bread for sale at a bakery.

32. Which of the following best clarifies the "other-things_equal" assumption

All variables except those under immediate consideration are held constant for a particular analysis.

9. The highest-valued alternative that is given up or sacrificed when choosing to produce or consume one good over another is refereed to as

An opportunity cost

15. Combinations of goods that fall inside the production possibilities curve

Are attainable, are inefficiently produced, are not utilizing all of an economy's resources

39. Which of the following best describes the relationship between trade-offs and opportunity cost

As you give up consumption or production of one good over another(the trade-off), an opportunity cost is incurred.

28. Consider the relationship between the price of gas and the quantity of gas consumed by drivers. If we are consider the price of gas as the only factor affecting the quantity of gas consumed, while holding other factors such as drivers' incomes and tastes and preferences irrelevant, then we are invoking

Ceterus Paribus, The other-things-equal assumption

2.The "economy is us" means that it represents our collective production

consumption activities.

10. The alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology is an

economy's production possibilities.

7. For economist, Capital goods are those goods used to produce

final consumer goods and services.

25. The branch of economics that studies the decision-making process of individual workers, household, and firms (i.e., individual components of the larger economy) is known as

microeconomics.

3.Scarce resources are those for which the quantity desired exceeds the

quantity available.

30. Points lying inside the production possibilities curve (frontier) are attainable

reflecting less total output that can be produced.

29. The law of increasing opportunity cost states that as production of a particular good increases

the cost of producing an additional unit rises.

41. Which of the following best describe the concept of laissez-faire

the doctrine of "leave it alone.", Nonintervention by government in the market mechanism.

13. The law of increasing opportunity costs states that as production of a particular good Rises

the opportunity cost of producing an additional unit Rises.

31. Positive economics is concerned with what is

whereas normative economics deals with what should be.

1.True or false: The three man decisions that must be addressed by an economic system included what goods are to be produced, who will produce them, and where they will be produced

False - An economic system has to determine what goods are produced, how they are produced and for whom the output is produced.

4. True or False: Economists classify the factors of production into land, labor, money and entrepreneurial ability

False money is not a resource, rather it is just a medium of exchange. If it were to be used as a resource, then it cannot also function as a medium of exchange.

24. Government invention that falls to improve economic outcomes is called a

Government Failure

35. Adam Smith strongly advocated laissez faire: whereas

Karl Marx and John Maynard Keynes recognized the need for government intervention in an economy

5. Which of the following includes all natural resources used in the production of goods and services

Land

33. Match the factor for production with the correct example

Land-A forest, Labor-A steel worker, Captial- A computer, Entrepreneurship-A person who uses resources in innovative ways

16. Combinations of output that fall inside the production possibilities curve represent

Less total output in an economy, Goods that are attainable, Inefficient use of resources

23. An imperfection in the market mechanism that prevents optimal outcomes is called a

Market Failure

43. As more and more of a particular good is produced, which of the following rises

Opportunity costs

36. The concept that "There is no free lunch" reflects the notion that

Opportunity costs exist, Scarcity forces us to make trade-offs.

44. Each point on the production possibilities curve represents some alternative of two or more products

Output Combination

14. Given this production possibility curve, identify which output combination(s) are produced efficiently

Point A, Point B, Point C

46. The law of increasing marginal opportunity costs is driven by

Resources that are not equally productive nor interchangeable in the production of different goods and services.

12. As such, the production possibilities curve illustrates two essential principles

Scarce resources meaning that there's a limit to the amount of output we can produce in a given time period with available resources ans technology. Opportunity cost is the idea that we can obtain additional quantities of any particular good only by reducing the potential production of another good.

27. Which of the following define ceteris paribus

The idea that factors other than those being considered in a particular analysis do not change. Other-things-equal

22. The use of market prices and sales to signal desired outputs (or resource allocations) is called

The market mechanism, The invisible hand

38. What does each point on a production possibility curve represent

The maximum potential output for a combination of two or more final goods and services, Efficiency in production.

45. The United States, Like most nations, uses a combination of market signals and government directives to direct economic outcomes

This is commonly referred to as a mixed economy.

17. Which points or combinations of produced goods on a production possibilities curve are not attainable with the current level of resources

Those lying outside the curve

8. The function of an entrepreneur is

To organize other factors of production in the production of new products, To combine scarce resources and to produce desired goods or services

11. True or false? A trade-off occurs when some quantity of production or consumption of a good or service is given up in order to produce not consume

True

34. Differentiate positive from normative economic statements or questions. Positive- If income taxes are cut, what will be the effect on aggregate demand

When the price of gas rises, the quantity consumed by drivers falls. Normative- The minimum wage should be increased, The government ought to subsidize college education.

18. The three main decisions that must be addressed by an economic system does not include

Why output is produced

40. Combinations of goods that fall outside the production possibilities curve

Would require resources that are not currently available, Require economic growth, Currently are unattainable.