ECON - Fundamentals Smartbook
___________ is the study of how individuals and institutions make decisions in a world of scarce resources.
Economics
Someone who is self-interested only performs actions for his or her own benefit and not for the benefit of others. True False
False
Martin has given himself an entertainment budget of $5 per week. He has decided that each week he will spend that $5 by either attending a matinee movie at his local theater or downloading five songs by one of his favorite artists. What is the non-monetary opportunity cost of seeing a movie this week? Five songs One movie and five songs $5 One movie
Five songs
_____ cost is most plainly visible when spending more money on one thing means that less money can be spent on another thing. Fixed Sunk Average Opportunity
Opportunity
Beneficial terms of trade are the terms—or prices—that are between the two parties' opportunity costs. True False
True
Because the world is characterized by scarcity, people must choose between different uses for the resources at their disposal. In economics, we refer to this as: spending resources. allocating resources. exhausting resources. common resources.
allocating resources.
At a local town council, people debated a proposal that would change the use of public space for recreational use by demolishing a skating park and building an arboretum. This is known as the problem of: allocating scarce resources. overusing scarce resources. locating scarce resources. eliminating scarce resources.
allocating scarce resources.
As the amount of an activity increases, its marginal benefit: decreases. is infinite. stays the same. increases.
decreases.
Specialization causes individuals and nations to rely on one another and increases the: degree of competition between them. degree of independence they have. degree of interdependence between them.
degree of interdependence between them.
Wind energy is relatively (less/more) scarce than coal.
less
A strong economic model allows us to analyze the economic events of the world by: employing the resources of the federal government. ignoring the ceteris paribus assumption. simplifying a very complex economic world. replicating the economic world exactly.
simplifying a very complex economic world.
A society's ability to produced needed goods and services is permanently reduced if it relies too heavily on capital production. uses resources too slowly. all of the above uses resources too quickly.
uses resources too quickly.
Individuals and countries specialize because the opportunity cost of producing goods and services: is constant. is in equilibrium. varies. is low.
varies.
If the terms of trade are the same as your opportunity cost, you will receive ________ gains from the trade. Listen to the complete question
zero
When resources are ________, increasing the production of one good causes a decrease in the production of the other.
fixed
Martin has given himself an entertainment budget of $5 per week. He has decided that each week he will spend that $5 by either attending a matinee movie at his local theater or downloading five songs by one of his favorite artists. What is the non-monetary opportunity cost of seeing a movie this week? Five songs One movie and five songs One movie $5
Five songs
Producing a good or a service at a lower opportunity cost gives the producer: an absolute advantage in the market. disadvantage. a negative advantage. a comparative advantage in the market.
a comparative advantage in the market.
If an activity is performed where the marginal benefit is greater than the marginal cost (MB > MC), there is: a net loss to the economy. a net gain to the economy. equilibrium. an opportunity cost.
a net gain to the economy.
A production possibilities frontier that illustrates a 1-for-1 trade off between goods is drawn as: a straight, downward-sloping line. a straight, upward-sloping line. a vertical line. a horizontal line.
a straight, downward-sloping line.
The process of assigning a good, a service, or a resource to one use instead of another describes "___________" (Enter one word in the blank.)
allocation
The more of a good or a service that is consumed in a given period of time, the lower the marginal __________ (one word) that is associated with each additional unit.
benefit
For an entire economy, the production possibilities frontier is going to be: a straight line because we have different resources with the same opportunity cost. L-shaped because we have different resources with different opportunity costs. bowed out because we have different resources with different opportunity costs. convex because we have different resources with different opportunity costs.
bowed out because we have different resources with different opportunity costs.
As long as there are differences in opportunity costs, there are ___________ advantages and there will be potential for trade to make both parties better off.
comparative
Combinations of output along the production possibilities frontier correspond to: under use of resources. maximum use of resources. efficient use of resources. excessive use of resources.
efficient use of resources.
In economics - resources can also be called marginal resources. factors of profit. factors of production. production possibilities.
factors of production.
In the circular flow model, _____ can obtain the income they need to buy the products they want to consume only by selling their resources. states households government agencies firms
households
The circular flow model shows how: government and firms interact in two key markets. households and consumers interact in two key markets. households and government interact in two key markets. households and firms interact in two key markets.
households and firms interact in two key markets.
In the real world, the opportunity cost of production ________ as production increases. (Enter only one word in the blank.)
increases
Specialization causes individuals and nations to rely on one another and: does not change the degree of interdependence among them. increases the degree of interdependence among them. decreases the degree of interdependence among them.
increases the degree of interdependence among them.
When resources are allocated in such a way that it is possible to increase the production of one good without decreasing the production of another, then the allocation of resources is: optimal. efficient. possible. inefficient.
inefficient.
On a production possibilities frontier (PPF), if you are able to increase the production of both goods at the same time then, initially, resources were allocated ____________ . (Enter one word in the blank.)
inefficiently
Combinations lying __________ the production possibilities frontier are possible but inefficient with the current resources and technology. (Use one word for the blank.)
inside
All physical and mental activity devoted to producing goods and services is classified under the resource category called ___________ . (Use one word for the blank.)
labor
The additional benefit associated with one more unit of an activity is the _____ benefit. total absolute marginal average
marginal
An economy should continue producing a good or a service so long as: marginal benefit is less than marginal cost. marginal benefit is equal to total benefit. total cost equals total benefit. marginal benefit exceeds marginal cost.
marginal benefit exceeds marginal cost.
When you decide - after studying for three hours - that another hour of sleep is more beneficial to you than a fourth hour of studying, you are engaging in: irrational decision making. marginal decision making. a calculated choice. comparative decision making.
marginal decision making.
The law of increasing opportunity costs exists because all resources are well-suited for all production. not all resources are well-suited for all production. of the difference between absolute advantage and comparative advantage. terms of trade are often different across regions.
not all resources are well-suited for all production.
Spending more money on one thing means that you have less money to spend on something else. This is called ______ cost. average sunk opportunity fixed
opportunity
The value of the next-best forgone alternative is the ________ cost.
opportunity
Self interest, marginal decisions, and optimization all form the basis of __________ decision making. (Enter one word in the blank.)
rational
Self-interest, marginal decision making, and optimization form the basis for: government intervention. microeconomics. rational decision making. macroeconomics.
rational decision making.
Drinkable water is ______ water in general. relatively less scarce than relatively more scarce than as scarce as
relatively more scarce than
Because the world is characterized by scarcity, people must allocate the limited _______ at their disposal among many competing uses.
resources
Because of differences in opportunity costs, individuals and businesses rarely trade with each other. produce as much of each good as possible. specialize in the production of the good for which they wield a comparative advantage. specialize in the production of the good for which they wield an absolute advantage.
specialize in the production of the good for which they wield a comparative advantage.
A potential risk of specialization is: market isolationism. government intervention susceptibility to market fluctuations. poor international relationships.
susceptibility to market fluctuations.
Marginal benefit is: the opportunity cost associated with one more unit of an activity. the opportunity benefit associated with one more unit of an activity. the total benefit associated with one more unit of an activity. the additional benefit associated with one more unit of an activity.
the additional benefit associated with one more unit of an activity.
Marginal cost is: the additional cost associated with one more unit of an activity. the additional benefit associated with one more unit of an activity. the total benefit associated with one more unit of an activity. the change in average cost with one more unit of an activity.
the additional cost associated with one more unit of an activity.
Equilibrium occurs when: the total benefit equals the marginal cost. the marginal benefit equals the total cost. the total benefit equals the total cost. the marginal benefit equals the marginal cost.
the marginal benefit equals the marginal cost.
There is no incentive to either increase or decrease the level of the activity performed when: the marginal benefit equals the marginal cost. the total benefit equals the total cost. the total benefit equals the marginal cost. the marginal benefit equals the total cost.
the marginal benefit equals the marginal cost.
Whether a good or a service will be traded internationally depends largely on: the terms associated with the trade. how large the market is for one of the goods. whether the product is consumable or not. the areas the traders live in.
the terms associated with the trade.
Opportunity cost is defined as: the marginal benefit minus the marginal cost. the value of the opportunity that you give up when you choose one activity instead of another. the expected value of buying a good or a service. the financial cost of purchasing a good or a service.
the value of the opportunity that you give up when you choose one activity instead of another.
If the price is too __________ , producers will not be eager to sell, but buyers will be willing and able to buy.
low
The quality of an economic model can be measured by how well it reflects reality and whether it gives us insights that can be used in the real world. the level of official central bank involvement. the level of official government involvement. whether it gives us insights that can be used in the real world. how well it reflects reality.
whether it gives us insights that can be used in the real world. how well it reflects reality.
__________ is the study of how individuals and societies allocate scarce resources among many competing uses and how this decision-making affects the economy at large.
economics
Every person's and every economy's standard of living relies on the effective use of ________
resources
Clara can spend her afternoon doing one of three things: She can study economics, plant a sapling in her garden, or wash her car. Suppose she values spending time in the garden most; next her time washing the car; and her time studying economics the least. What is the opportunity cost of planting a garden? Washing her car Studying economics Deciding what to plant in the garden Planting her garden
Washing her car
If you are relatively better at something, then you are said to have a(n) _____ advantage in that activity. comparative average productive absolute
comparative
When production is characterized by __________ opportunity costs, the resulting production possibilities frontier will be a straight line.
constant
The opportunity cost of producing a good for one producer may be different from that of another because of: differences in available resources and technology. government intervention. different product types. differences in market size.
differences in available resources and technology.
When resources are allocated in such a way that it is possible to increase the production of one good only by decreasing the production of another, then the allocation of resources is said to be __________ . (Enter one word in the blank).
efficient
Graphing the information in the production possibilities schedule produces the production possibilities: graph. line. slope. frontier.
frontier.
The benefit - or wealth - that accrues to a buyer or a seller as a result of trading one good - service - or resource for another is the: gains from trade. source of disparity in incomes. taxable profit. comparative advantage.
gains from trade.
Economics is about: the ways in which consumers and producers negotiate. how people get wealthy. the various types of insurance people can purchase. how people make choices in a world of scarcity.
how people make choices in a world of scarcity.
Suppose a firm spends $10,000 to train its employees on a new, company-wide software program that it has already purchased and intends to adopt in the following month. In this case, the knowledge gained through the training is considered: human capital. entrepreneurship. natural resources. physical capital.
human capital.
You are wasting resources that would be better spent elsewhere: if you continue producing when marginal benefit is greater than marginal cost. if you continue producing when marginal benefit is equal than profit. if you continue producing when total benefit is less than total cost. if you continue producing when marginal benefit is less than marginal cost.
if you continue producing when marginal benefit is less than marginal cost.
As the amount of an activity increases, its marginal cost: decreases. increases. is infinite stays the same.
increases.
Suppose a farmer has three kinds of land for growing peaches; good - better - and best. As the farmer increases production - she will use the best land first - and costs will be low. At some point - she will run out of the best land and will have to start using the better land - and costs will be a little higher. This describes the: law of increasing opportunity cost. law of marginal analysis. law of diminishing marginal costs. law of demand.
law of increasing opportunity cost.
Optimization behavior implies that if the marginal benefit of an activity is ______ ______ its marginal cost, you should not engage in that activity. equal to greater than less than
less than
When the opportunity cost associated with increasing the production of one good or service in terms of another is constant at every level of production, then the production possibility frontier is: hyperbolic. linear. concave. convex.
linear.
________ deals with large-scale issues of an economy - such as total output - average price levels (and inflation) - and unemployment.
macroeconomics
When you decide to turn off the bedroom light on your way to the kitchen so that you can save a little money on your electric bill, you are engaging in: scarce decision making. marginal decision making. active decision making. a calculated choice
marginal decision making.
__________ typically deals with individual households and markets - such as the market for gasoline. (Use one word for the blank)
microeconomics
Combinations outside of the production possibilities frontier are: only possible with a reduction in labor. not currently possible to produce. possible to produce but inefficient. possible to produce and efficient.
not currently possible to produce.
_______ cost is most plainly visible when spending more money on one thing as it means that less money can be spent on another thing.
opportunity
Consider a production possibilities frontier (PPF) with Good X on the horizontal axis and Good Y on the vertical axis. The slope of the PPF tells us the _____ of producing one additional unit of Good X. profitability average cost opportunity cost total cost
opportunity cost
Individuals and countries specialize because of differences in: opportunity costs. variable costs. total costs. fixed costs.
opportunity costs.
When the marginal benefit equals the marginal cost, we reach a(n): surplus level of output. optimal level of output. organic level of output. profitable level of output.
optimal level of output.
________ is the idea that people make choices to maximize the overall benefit - or utility - of an action subject to its cost. (Use one word to answer.)
optimization
When a decision maximizes overall benefit, it is called: scarcity. optimization. opportunity cost. welfare maximization.
optimization.
________ capital refers to tangible items that are created to increase productivity - such as - tools - factories - machinery - etc.
physical
When people trade - producers can achieve something they can't without trade. Thus - only with trade is it possible to operate outside the production possibilities frontier. impossible to operate outside the production possibilities frontier. possible to operate inside the production possibilities frontier. impossible to operate inside the production possibilities frontier.
possible to operate outside the production possibilities frontier.
Comparative advantage refers to the ability to: produce more of a good or service than others. produce a good or service at a lower total cost than others. produce a good or service at a lower opportunity cost than others. profit from the sale of a good or service.
produce a good or service at a lower opportunity cost than others.
A useful way to visually represent the data in a production possibilities schedule is by means of a graph called a(n) ________ ________ ________ . (Use one word for each blank.)
production possibilities frontier
Each row of the tabular __________ illustrates the maximum amount of a good or a service that can be produced given the production of the other. production possibilities curve supply schedule production possibilities schedule demand schedule
production possibilities schedule
Each row of the tabular __________ illustrates the maximum amount of a good or a service that can be produced given the production of the other. production possibilities schedule supply schedule production possibilities curve demand schedule
production possibilities schedule
Tomatoes represent a small subset of food, so tomatoes are: relatively less scarce than food in general. as abundant as food in general. as scarce as food in general. relatively more scarce than food in general.
relatively more scarce than food in general.
The circular flow model shows how households and firms interact in two key markets: the market and the market. (Remember - enter only one word per blank.)
resource product
Combinations of output along the production possibilities frontier are the result of making efficient use of all available ___________
resources
_________ is/are also called factors of production since they are transformed into output during the production process. Resources Outputs Capital Labor
resources
Economics is the study of how individuals and societies allocate __________ resources among many competing uses. (Use one word for the blank.)
scarce
Economics is the study of how individuals and societies allocate: unlimited resources among limited users. scarce resources among limited users. scarce resources among many competing users. unlimited resources among many competing users.
scarce resources among many competing users.
A common economic situation where an economy's resources are insufficient to meet the existing wants and must be used judiciously is referred to as ______. distribution poverty scarcity allocation
scarcity
A major problem faced by developing countries is the relative ______ of drinkable water as compared to water in general. scarcity abundance availability shortage
scarcity
Due to the ______ of natural resources, we cannot have all the housing and all the forests we may want. (Use one word for the blank.) scarcity supply demand abundance
scarcity
______ -interest is the idea that people choose to do the things that interest them. (Enter only one word in the blank.)
self
The ____________ of the production possibilities frontier equals the trade-off of the production of one good or service in terms of the other.
slope
The opportunity cost of producing a good or a service can be found by: subtracting the cost of one good from the cost of another good. solving for the cost of one good in terms of another. identifying the two products that can be produced. comparing the cost of one good to the total cost.
solving for the cost of one good in terms of another.
For an entire economy, the production possibilities frontier is going to be bowed out because: higher production levels are always associated with higher costs. the cost of producing more of one good is the forgone production of another good. prices rise over time, so costs will increase. some resources are better suited for producing some goods or services than others.
some resources are better suited for producing some goods or services than others.
In the real world, the opportunity cost increases as production increases, because: the cost of producing more of one good is the forgone production of another good. higher production levels are always associated with higher costs. prices rise over time, so costs will increase. some resources are better suited for producing some goods or services than others.
some resources are better suited for producing some goods or services than others.
The practice of producing a single good or service rather than producing multiple goods or services is called _____ (one word). industrialization specialization manufacturing production
specialization
Increasing marginal cost describes the direct relationship between the marginal benefit associated with the use of a good or a service and the quantity produced. the inverse relationship between the marginal cost associated with the use of a good or a service and the quantity produced. the inverse relationship between the marginal benefit associated with the use of a good or a service and the quantity produced. the direct relationship between the marginal cost associated with the use of a good or a service and the quantity produced.
the direct relationship between the marginal cost associated with the use of a good or a service and the quantity produced.
Increasing marginal cost describes the direct relationship between the marginal cost associated with the use of a good or a service and the quantity produced. the direct relationship between the marginal benefit associated with the use of a good or a service and the quantity produced. the inverse relationship between the marginal benefit associated with the use of a good or a service and the quantity produced. the inverse relationship between the marginal cost associated with the use of a good or a service and the quantity produced.
the direct relationship between the marginal cost associated with the use of a good or a service and the quantity produced.
Opportunity cost is: the expected value of buying a good or a service. the financial cost of purchasing a good or a service. the marginal benefit minus the marginal cost. the value of the opportunity that you give up when you choose one activity instead of another.
the value of the opportunity that you give up when you choose one activity instead of another.
The marginal cost of an activity can be found by calculating the change in: total benefits as the level of the activity increases by one unit. total costs of the entire activity. total costs as the level of the activity increases by one unit. total benefits of the entire activity.
total costs as the level of the activity increases by one unit.
If you continue producing when marginal benefit is less than marginal cost, you are: reducing scarcity. producing at the lowest cost. optimizing your use of resources. wasting resources that would be better spent elsewhere.
wasting resources that would be better spent elsewhere.