Economics Test 1

A natural experiment examines... a) environmental issues in an economic setting. b) the effects of environmental policy on the economy. c) ordinary situations where one factor of interest is different and other things equal. d) planned and staged situations where one factor of interest is different and other things are equal e) economic policy decisions for the government

A natural experiment examines (c) ordinary situations where one factor of interest is different and other things equal. (Don't overthink it!)

Which of the following is an example of making a rational choice on the margin? a) Comparing the total benefits minus the total costs for each alternative b) Comparing extra benefit to extra cost for one more unit c) Comparing the total benefits minus the total costs for all the alternatives d) Comparing the total benefits for all the alternatives e) Comparing the total costs for all the alternatives

An example of making a rational choice on the margin would be (b) comparing extra benefit to extra cost for one more unit.

How is marginal benefit measured?

By what you are willing to give up to get one more unit of something.

Ceteris paribus is used by economists to a) describe movements in price and quantity b) separate cause and effect by holding all other things constant c) test theories by allowing all factors in reality to change d) separate normative and positive statements e) help eliminate correlation

Cerebis paribus is used by economists to (b) separate cause and effect by holding all other things constant. Cerebis paribus = everything but one thing remaining the same

Which of the following statements is a macroeconomic issue? a) something involved in state b) something involving both China and the USA C) something involving Ford D) something involving American universities E) something involving nationwide businesses

China and the USA would involve international economy, being on the largest scale. So (b) would be the best answer.

This weekend, I can either clean my room, catch up on studies, or play video games. I decide, in the end, to play video games. The opportunity cost(s) of playing video games are

Cleaning my room and/or catching up on studies.

"Broadly speaking, the United States is not affected by scarcity. Economic growth is strong, unemployment is low, and living standards are rising." This statement is a) true because the United States is one of the richest countries in the world b) false because the United States must make choices among goods and services to produce c) true because the United States has an increased standard of living d) false because some people remain unemployed e) false because the United States still must import goods from other nations

False! The United States is affected by scarcity because the United States must make choices among foods and services to produce.

Neil and I are having a heated discussion about being on the floor. Neil said "Laying on the floor is not acceptable. You should actually use the chairs!" Neil's statement is an example of

Normative statement because it is a value judgement (opinion). Remember "NORMIES! RREEEEEE!"

For Bill Gates, a founder of Microsoft, scarcity is a) not a concern because he has so much money b) not a concern because he has so many employees working for his company c) a concern because time is a limited resource d) a concern because there are a limited number of computer customers e) no longer a concern but was when he was a college student

Scarcity is a concern to all, no matter how rich, because time is a limited resource.

The problem of scarcity affects a) only poor b) all people c) individuals, but not societies

The problem of scarcity affects ALL PEOPLE.

How do economics measure the benefit received from the choice of choosing something over another?

They use the value of the alternative given up.

A statement is a positive statement if it

can be tested to determine if it is correct. (positive = testable)

Economics is the study of how...

choices are made within the constraints of scarcity

Economics use the idea of rational choice to

explain how people use available resources to make the best choice. (Rational choice = using available resources towards choices)

Ceteris paribus is a term that means ...

other things remaining the same. For example, when economists make price theories, they do so ceteris paribus, meaning they assume all other conditions remain the same.

If the marginal benefit of surfing the Web for another hour exceeds the marginal cost, it is rational to...

surf the Web another hour! YEEE HAW!

Microeconomics studies...

the choices individuals make.

Macroeconomics studies...

the whole, or aggregate, economy.

Opportunity cost is...

what must be given to obtain something