Macroeconomics review 1

Which of the following statements about economic resources is true?

Economic resources are also called factors of production

Which of the following statements is true?

Every individual, no matter how rich or poor, is faced with making trade-offs

Which of the following is a positive economic statement?

If the price of iPhones falls, a larger quantity of iPhones will be purchased

Which of the following is a normative economic statement?

Opinion

All of the following are part of an economic model except

Opinions

Which of the following statements is true about scarcity?

Scarcity refers to the situation in which unlimited wants exceed limited resources

Soo Jin shares a one-bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics major, you rightly conclude that

Soo Jin figured that the additional benefit of having her own place(as opposed to sharing) is at least 250$

Which of the following is a microeconomics question?

What factors determine the price of carrots?

The three fundamental questions that any economy must address are:

What goods and services to produce; how will these goods and services be produced; and who receives them?

Automobile manufacturers produce a range of automobiles such as sports utility vehicles, luxury sedans, pickup trucks and compact cars. What fundamental economic question are they addressing by making this range of products?

What to produce?

When production reflects consumer preferences, ________ occurs.

allocative efficiency

The revenue received from the sale of ________ of a product is a marginal benefit to the firm.

an additional unit

Economists assume that individuals

are rational and respond to incentives

If the marginal cost of keeping a doctor's office open one additional hour per day is $200, then the doctor should keep the office open for one extra hour

as long as the marginal benefit she receives is just equal to or greater than $200

Arlene quits her $125,000-a-year job to take care of her ailing parents. What is the opportunity cost of her decision? 48) ______

at least $125,000

The decision about what goods and services will be produced made in a market economy is made by

consumers and firms choosing which goods and services to buy or produce

Economists assume that rational behavior is useful in explaining choices people make

even though people may not behave rationally all the time

Microeconomics is the study of

how households and firms make choices

In economics, the term ________ means "additional" or "extra."

marginal

Economists reason that the optimal decision is to continue any activity up to the point where the

marginal benefit equals the marginal cost

The extra cost associated with undertaking an activity is called

marginal cost

A grocery store sells a bag of potatoes at a fixed price of $2.30. Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?

marginal revenue

An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue.

market

The term ________ in economics refers to a group of buyers and sellers of a product and the arrangement by which they cometogethertotrade.

market

The highest valued alternative that must be given up to engage in an activity is the definition of

opportunity cost

Suppose that some teachers have decided that economic and financial uncertainty have made the prospect of retiring more risky, and therefore carry a higher cost than not retiring. By using all available information as they act to achieve their goals, these teachers are exemplifying the economic idea that

people are rational

Suppose the U.S. government encouraged new medical school graduates to take over existing practices from doctors wishing to retire by paying both the new and retiring doctors $100,000. These doctors would be exemplifying the economic idea that

people respond to economic incentives

Economic models do all of the following except

portray reality in all its minute details

Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.

rationally

In economics, choices must be made because we live in a world of

scarcity

The basic economic problem of ________ has always existed and will continue to exist.

scarcity

By definition, economics is the study of

the choices people make to attain their goals, given their scarce resources

Macroeconomics is the study of

the economy as a whole

Consider the following economic agents:

the government

Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?

the government

How are the fundamental economic decisions determined in North Korea?

the government decides because North Korea is a centrally planned economy

Suppose when the price of laptops fall, college students buy more laptops. This implies that

there is a negative relationship between laptop prices and the quantities purchased by college students

The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of

trade-off

Economists assume that rational people do all of the following except

undertake activities that benefit others and hurt themselves

Marginal analysis involves undertaking an activity

until its marginal benefits equal marginal costs

Making optimal decisions "at the margin" requires

weighing the costs and benefits of a decision before deciding if it should deb pursued

Society faces a trade-off in all of the following situations except

when some previously unemployed workers find jobs

Which of the following is not an example of an economic trade-off that a firm has to make?

whether is should produce more of its product

Which of the following statements is false?

A straight line has a slope of zero

Which of the following questions or statements regarding medical school is normative?

Medical students who enter specialized fields make a larger contribution to society than do student who enter primary care