Econ chapter 1

Every society faces​ trade-offs because we live in a world of scarcity. Suppose a​ student-athlete has the opportunity to earn ​$800,000 next year playing for a minor league baseball​ team, ​$700,000 next year playing for a European professional football​ team, or​ $0 returning to college for another year. What is the opportunity cost of the student-athlete returning to college next year?

$800000

The three economic questions that every society must answer are

1. What goods will be​ produced 2. how will they be​ produced 3. who will receive the​ goods?

When the federal government crafts environmental policies that make it less expensive for firms to follow green​ initiatives, A. the policies are consistent with economic incentives. B. pollution is likely to increase. C. the policies are likely to be more successful than policies that cost firms​ more, but they do not recognize economic incentives. D. the policies are futile because where the environment is​ concerned, it has been repeatedly shown that firms do not respond to economic incentives.

A

Does Bill Gates face​ scarcity? A. ​No, because if a billionaire cannot get the goods and services they​ want, someone else can get it for them. B. ​Yes, because even though​ billionaires' financial resources enable them to afford a much greater array of goods and services than those less​ wealthy, their financial resources are not infinite. C. ​Yes, because there is a limit to the income even billionaires can earn. D. ​No, because billionaires can have anything that money can buy.

B

Which of the following statements is​ true? A. Some individuals experience scarcity because they have not learned to live within their means. B. All individuals face a scarcity of time and need to make choices how to allocate it. C. Most individuals face a scarcity of​ time, but few experience a scarcity of other resources. D. While resources are​ scarce, most people​ don't own resources and therefore do not face a scarcity of them.

B

Economics is a social science because A. it is based on studying the actions of individuals. B. it considers human behavior—particularly ​decision-making behavior. C. it applies the scientific method to the study of the interactions among individuals. D. all of the above.

D

Julia​ Paul, an analyst at a research​ institute, lives very close to her office and walks to work every day.​ Meanwhile, her​ colleague, Amanda​ Jones, dislikes the fact that it takes her almost an hour to commute to work every day. As a​ result, when Julia decides to move to a suburb farther​ away, Amanda is very surprised. Which of the​ following, if​ true, would explain​ Julia's behavior? A. During​ weekends, Julia teaches painting at an orphanage close to work. B. ​Julia's office is located in the heart of the city. C. The city has one of the highest crime rates in the country. D. Julia saves more in rent than she spends on commuting to work. E. Amanda earns more than Julia does.

D

A primary difference between macroeconomics and microeconomics is

Microeconomics examines individual markets while macroeconomics examines the economy as a whole.

Productive efficiency means that

a good or service is produced at the lowest possible cost.

economists use models to

answer questions and analyze issues

Suppose that your local police department recovers 100 tickets to a big NASCAR race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 A.M. Monday morning at City Hall. Suppose that your college decides to give away​ 1,000 tickets to the football game against your​ school's biggest rival. The athletic department elects to distribute the tickets by giving them away to the first​ 1,000 students who show up at the​ department's office at 10 a.m. the following Monday. The groups of people that are most likely to get the tickets will be those for whom the expected marginal _______ of going to the​ department's office on Monday morning are greater than the expected marginal ________ This is A. not an equitable way to distribute the tickets because there may be enough tickets for faculty and staff. B. an equitable way to distribute the tickets because the students who really want them will be able to go and get them. C. not an equitable way to distribute the tickets because some students who really want them may be unable to go and get them. D. an equitable way to distribute the tickets because everyone has an equal chance of getting a ticket.

benefits, costs, C

A market is a group of __________________ of a good or service and the institution or arrangement by which they come together to trade.

buyers & sellers

Allocative efficiency means that

every good or service is produced up to the point where marginal benefit is equal to marginal cost.

centrally planned economies allocate resources based on decisions by _______ while market economies answer these questions through decisions made by

government, households and firms

Micro or macro issue: The effect of higher income taxes on the total amount of consumer spending.

macro

Micro or macro issue: The reasons for the economies of East Asian countries growing faster than the economies of​ sub-Saharan African countries.

macro

An optimal decision occurs when

marginal benefit = marginal cost

Efficiency means that goods are distributed in a way that ________ while equity means that goods are distributed in a way that is ________

maximizes benefits to society, fair

Micro or macro issue: The effect of higher cigarette taxes on the quantity of cigarettes sold.

micro

Micro or macro issue: The reasons for low rates of profit in the airline industry.

micro

Positive or normal analysis: The federal government should spend more on AIDS research. This represents

normative

Positive or normal analysis: The price of coffee at Starbucks is too high. This represents

normative

Positive or normal analysis: A​ 50-cent-per-pack tax on cigarettes will reduce smoking by teenagers by 12 percent. This represents

positive

Positive or normal analysis: Rising paper prices will increase textbook prices. This represents

positive

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls

scarcity

economist data is used to

test models