Handout with Questions (Chapter 1)

The fact that people with higher incomes get to consume more goods and services addresses the ___ question a. "for whom" b. "when" c. "where" d. "how"

a. "for whom"

U.S. producers decide to produce more compact cars and fewer SUVs as the price of gasoline rises. Producers are answering the ________ question. a. "what" b. "how" c. "when" d. "how many"

a. "what"

When an economy produces more houses and fewer typewriters, it is answering the ___ question a. "what" b. "how" c. "where" d. "for whom"

a. "what"

During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is a. $10,300 b. $6,000 c. $4,300 d. $3,300

a. $10,300

The analysis of the behavior of individual decision-making units is the definition of a. microeconomics b. positive economics c. macroeconomics d. normative statements

a. microeconomics

The benefit that arises from an increase in an activity is called a. the marginal benefit b. the marginal cost c. opportunity cost d. an incentive

a. the marginal benefit

When a textile company keeps track of its inventory using a computer and its competitor uses a pad of paper and a pencil, they are both answering the ________ question. a. "what" b. "how" c. "for whom" d. "where"

b. "how"

A positive statement is a. about what ought to be b. about what is c. the result of a model's normative assumptions d. valid only in the context of a model with simple assumptions

b. about what is

Which of the following is a macroeconomic issue? a. how a rise in the price of sugar affects the market for sodas b. how federal government budget deficits affect interest rates c. what determines the amount a firm will produce d. the cause of a decline in the price of peanut butter

b. how federal government budget deficits affect interest rates

economic models a. are essentially different from those used in other sciences b. always use graphs c. simplify reality d. include all relevant factors

c. simplify reality

Which is the most accurate definition of the study of economics? Economics is the study of a. the distribution of surplus goods to those in need b. affluence in a morally bankrupt world c. the choices we make because of scarcity d. ways to reduce wants to eliminate the problem of scarcity

c. the choices we make because of scarcity

Which of the following is NOT a factor of production? a. the water used to cool a nuclear power plant b. the effort of farmers raising cattle c. the wages paid to workers d. the management skill of a small business owner

c. the wages paid to workers

Which of the following is a normative statement? a. the price of candy bars is $1.25 each b. candy bars are more expensive than newspapers c. you should eat less candy d. popcorn and candy are sold in movie theaters

c. you should eat less candy

Which of the following is NOT a factor of production? a. a new computer used by a small business owner b. the time worked by elementary school teachers c. a tractor used by a wheat farmer d. a share of stock issued by a firm

d. a share of stock issued by a firm

Because we face scarcity, every choice involves a. money b. the question "what" c. giving up something for nothing d. an opportunity cost

d. an opportunity cost

Economists point out that scarcity confronts a. neither the poor nor the rich b. the poor but not the rich c. the rich but not the poor d. both the poor and the rich

d. both the poor and the rich

Studying the determination of prices in individual markets is primarily a concern of a. positive economics b. negative economics c. macroeconomics d. macroeconomics

d. microeconomics

Entrepreneurs do all of the following EXCEPT a. organize labor, land, and capital b. come up with new ideas about what, how, when and where to produce c. bear risk from business decisions d. own all the other resources

d. own all the other resources

Marginal benefit is the benefit a. that your activity provides to someone else b. of an activity that exceeds its cost c. that arises from the secondary effects of an activity d. that arises from an increase in an activity

d. that arises from an increase in an activity

Human capital is a. all capital owned by individuals, but not by corporations or governments b. all capital owned by individuals or corporations, but not by governments c. machinery that meets or exceeds federal safety standards for use by humans d. the skill and knowledge of workers

d. the skill and knowledge of workers

Normative statements are statements about a. prices b. quantities c. what is d. what ought to be

d. what ought to be

During the next hour John can play basketball, watch television, or read a book. The opportunity cost of reading a book a. is how much the book cost when it was purchased b. is the value of playing basketball if John prefers that to watching television c. is the value of playing basketball and the value of watching television d. equals how much John enjoys the book

b. is the value of playing basketball if John prefers that to watching television

Economics is best defined as the study of how people, businesses, governments, and societies a. choose abundance over scarcity b. make choices to cope with scarcity c. use their infinite resources d. attain wealth

b. make choices to cope with scarcity

Statements about what ought to be are called a. positive statements b. normative statements c. assumptions d. implications

b. normative statements

The term used to emphasize that making choices in the face of scarcity involves a cost is a. substitution cost b. opportunity cost c. utility cost d. accounting cost

b. opportunity cost

The fact that wants cannot be fully satisfied with available resources reflects the definition of a. the what tradeoff b. scarcity c. the big tradeoff d. for whom to produce

b. scarcity

The most fundamental economic problem is a. security b. scarcity c. health d. the fact the United States buys more goods from foreigners then we sell to foreigners

b. scarcity

Marginal cost is the cost a. that your activity imposes on someone else b. that arises from an increase in an activity c. of an activity that exceeds its benefit d. that arises from secondary effects of an activity

b. that arises from an increase in an activity

Microeconomics focuses on all of the following EXCEPT a. the purchasing decisions that an individual consumer makes b. the effect of increasing the money supply on inflation c. the hiring decisions that a business makes d. the effect of an increase in the tax on cigarettes on cigarette sale

b. the effect of increasing the money supply on inflation

Which of the following is a macroeconomic topic? a. The reasons for a rise in the price of orange juice b. the reasons for the rise in average prices c. why plumbers can earn more than janitors d. whether the army should buy more tanks or more rockets

b. the reasons for the rise in average prices

In economics, positive statements are about a. the way things ought to be b. the way things are c. macroeconomics, not microeconomics d. microeconomics, not macroeconomics

b. the way things are

On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is a. working out at the gym, having breakfast with friends and sleeping late b. working out at the gym c. zero because you do not have to pay money to use the library d. not clear because not enough information is give

b. working out at the gym

When firms in an economy start producing more computers and fewer televisions, they are answering the ________ question a. "when" b. "for whom" c. "what" d. "where"

c. "what"

You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do not go to work where you could have earned $750. In terms of dollars, the opportunity cost of the vacation is a. $2,000 b. $750 c. $2,750 d. $1,250

c. $2,750

Which of the following topics would be studied in a microeconomics course? a. how a trade agreement between the United States and Mexico affects both nations' unemployment rates b. comparing inflation rates across countries c. how rent ceilings impact the supply of apartments d. how a tax rate increases will impact total production

c. how rent ceilings impact the supply of apartments

An autoworker is considered ___ and earns ___ a. labor; rent b. entrepreneurship; wages c. labor; wages d. capital; rent

c. labor; wages

When the government chooses to use resources to build a dam, these sources are no longer available to build a highway. This choice illustrates the concept of a. a market mechanism b. macroeconomics c. opportunity cost d. a fallacy of composition

c. opportunity cost