Econ Chapter 1

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

D) all societies.

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.

D) built using assumptions.

An attempt should always be made to maximize opportunity cost True/False

False

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

False

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. True/False

False

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.

A) The rate of unemployment is 4 percent.

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

B) aggregates in the economy.

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

True

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

A) free good

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.

A) is positive.

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

A) maximizing.

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

A) model.

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) proven to be false.

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.

A) social science that deals with making choices among alternatives.

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.

A) social science.

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.

A) the best combinations of resources to be used for producing goods and services.

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.

A) the cost of that choice could be referred to as opportunity cost.

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

A) variable.

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.

B) are factual and can be tested.

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.

C) social science concerned chiefly with how people choose among alternatives.

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.

C) study the choices people make.

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

D) ceteris paribus.

All choices have monetary costs. True/False

False

Opportunity cost is the expected value of the alternative not chosen. True/False

True

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.

D) most goods can be produced with different combinations of resources.

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.

C) an increase in investment spending tends to reduce unemployment.

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

C) has alternative uses.

The situation when we face alternative choices is called abundance. True/False

False

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

False

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.

C) how resources are combined in the production of goods.

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.

C) individual units in the economy.

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

C) law.

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.

C) macroeconomics.

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.

C) making choices at the margin.

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.

C) not scarce.

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

C) opportunity cost.

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.

C) people have unlimited wants facing limited means to satisfy them.

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

C) scarcity.

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

True

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

True

Economists pay special attention to making choices at the margin. True/False

True

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.

A) attention paid to the opportunity costs involved in any choice.

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.

A) chemistry.

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.

A) concerned with developing theories and interested in solving problems.

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.

A) definition of economics.

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) it has alternative uses.

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

A) what, how, and for whom.

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.

C) all other things unchanged.

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?

A) Who gets how much of the economic pie?

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.

A) a choice must be made among two or more alternatives.

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) a hypothesis.

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.

B) A high rate of economic growth is good for the country.

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.

B) a decision that one person or group will receive a good or service usually means that another person or group will not.

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.

B) almost all goods have alternative uses.

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.

B) any production requires the use of scarce resources, and thus the sacrifice of another alternative.

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

B) constant.

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.

B) economists sometimes make normative judgments.

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

B) independent variable.

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.

B) it has two or more alternative uses.

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.

B) the assumption that individuals choose to maximize some objective.

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.

B) the highest valued other choice that could have been made.

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

B) the scientific method.

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.

C) a coffee drinker drinking another cup of coffee.

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.

C) emphasis on how choices are made at the margin.

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.

C) fallacy of false cause.

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.

C) false cause.

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.

C) how people choose among the alternatives available to them.

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

C) what ought to be.

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.

D) ceteris paribus, which means all other things remain unchanged.

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.

D) discover relationships between events that are important to economic behavior.

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.

D) false cause.

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

D) microeconomics.

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

D) normative.

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

D) statements that can be tested.

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.

D) the fallacy of false cause.

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.

D) the value of the best alternative forgone in making any choice.

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.

B) men are unlikely to influence their chances of having heart problems.

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.

B) normative statement.

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

B) positive.

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.

B) resources are scarce.

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

B) scarce.

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.

C) a good with no opportunity cost.

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.

D) the kinds and quantities of goods and services produced.

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.

D) the next best use of the time and the money spent.

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.

D) the opportunity cost of that choice is the highest-valued other choice that could have been made.

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.

D) theory.

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.

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.

D) what is given up to acquire it.

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.

D) who gets the goods and services produced.

Margin suggest additional or incremental True/False

True

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

True

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

True