Microecon 1-3

A line drawn along a 45° angle has special significance. What does it tell us about the values of x and y?

A line drawn along a 45° angle is a line where the value of y is equal to the value of x.

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

A. the choices we make because of scarcity

Which factor of production earns the most income? A. Land B. Capital C. Labor D. Entrepreneurship

C. Labor

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 a small increase in an activity D. that arises from the secondary effects of an activity

C. that arises from a small increase in an activity

Which of the following is an example of an economic choice? A. what kind of toothpaste to use B. how many hours to spend at a party C. how many television sets to produce D. All the above

D. All the above

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

D. how federal government budget deficits affect interest rates

If the marginal benefit of a good exceeds its marginal cost,

we should produce more

After Hurricane Mitch devastated part of Central America in October 1998, we can be reasonably sure that the production possibility frontier for that area temporarily shifted....

shifted inward, toward the origin

The PPF shifts as

technology changes

the frontier of the production possibility curve illustrates

the combination of goods and services that can be produced efficiently

Assume that the quantity of pizza consumed is dependent on three factors: the price of a pizza, the income of pizza purchasers, and consumers' taste for pizza. When graphing the relationship between the price of a pizza and the quantity of pizza consumed __________.

the price of pizza and quantity of pizza consumed are the only variables that are allowed to change

economics is the study of how people choose A. abundance over scarcity B. to use limited resources C. scarcity over abundance D. to use their infinite resources

B. to use limited resources

Demonstrating how an economic variable differs across countries for a specific year is best illustrated by . A. a scatter diagram B. a time-series graph C. a cross-section graph D. none of the above, because any type of graph might mislead

C. a cross-section graph

Panasonic sends its HDTV salespeople to training sessions. This is an example of A. a macroeconomic decision. B. scarcity. C. a firm investing in workers' human capital. D. entrepreneurship.

C. a firm investing in workers' human capital.

The statement, "The unemployment rate for teens is higher than that for adults," is . A. a political statement B. an ethical statement C. a positive statement D. a normative statement

C. a positive statement

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

C. about what is

In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, Bob can produce either 8 loaves of bread or 8 pounds of butter. We know that Andy has a comparative advantage in the production of _________.

bread, while Bob has a comparative advantage in the production of butter

A person has a comparative advantage in producing a particular good if that person _________.

can produce it at lower opportunity cost than anyone else

Which of the following questions is NOT a microeconomic question? A. Can the Federal Reserve keep income growing by cutting interest rates? B. How would a tax on e-commerce affect eBay? C. What is Britney's opportunity cost of having another baby? D. Does the United States have a comparative advantage in information technology services?

A. Can the Federal Reserve keep income growing by cutting interest rates?

When the government chooses to spend the tax dollars that it collects on homeland security, its choice ________. A. involves a tradeoff of other goods and services such as education for more homeland security B. illustrates that scarcity does not always exist C. involves no tradeoff because the defense is necessary D. primarily affects who gets the goods and services produced

A. involves a tradeoff of other goods and services such as education for more homeland security

In terms of dollars, the marginal benefit of working five days a week instead of four days a week is A. the wages received for the fifth day of work. B. the wages received for 5 days of work. C. the wages received for 4 days of work. D. None of the above answers is correct.

A. the wages received for the fifth day of work.

A nation can consume at a point outside its PPF _________. A. when it trades with other nations B. never C. when its PPF is bowed out D. when it produces inefficiently

A. when it trades with other nations

The production possibility frontier is the boundary between those combinations of goods and services that can be _________. A. consumed and those that cannot be produced B. produced and those that cannot be produced C. produced and those that can be consumed D. consumed domestically and those that can be consumed internationally

B. produced and those that cannot be produced

When a country decides to produce fewer bombers and more public housing projects, it is answering the ________ part of one of the two big economic questions. A. "how" B. "what" C. "defense" D. "for whom"

B. "what"

Which of the following is a normative statement? A. Popcorn and candy are sold in movie theaters. B. You should eat less candy. C. The price of candy bars is $1.25 each. D. Candy bars are more expensive than newspapers.

B. You should eat less candy.

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. equals how much John enjoys the book D. is the value of playing basketball and the value of watching television

B. is the value of playing basketball if john prefers that to watching television

Factors of production include all of the following EXCEPT ________. A. machines made in past years B. money C. entrepreneurship D. a wheat field that is not irrigated

B. money

the ultimate cost of any choice is A. what someone else would be willing to pay B. the highest-valued alternative forgone C. the after-tax cost D. the dollars expended

B. the highest-valued alternative foregone

Production efficiency is achieved _________. A. when production occurs inside the production possibilities frontier B. when all goods and services desired by consumers can be produced in the economy C. at the point of production at which producing one more unit of one good cannot occur without producing less of some other good D. when the ability is gained to produce goods and services that are desired beyond the PPF boundary

C. at the point of production at which producing one more unit of one good cannot occur without producing less of some other good

An incentive A. could be a reward but could not be a penalty. B. could be a penalty but could not be a reward. C. could be either a reward or a penalty. D. is the opposite of a tradeoff.

C. could be either a reward or a penalty.

When an economist talks of scarcity, the economist is referring to the A. ability of society to employ all of its resources. B. ability of society to consume all that it produces. C. inability of society to satisfy all human wants because of limited resources. D. ability of society to continually make technological breakthroughs and increase production.

C. inability of society to satisfy all human wants because of limited resources.

A good economic model A. describes every aspect of the economic world, with no exception. B. includes all those features of the world that can be described numerically. C. includes only those features of the world that are needed for the purpose at hand. D. should not include more than two variables

C. includes only those features of the world that are needed for the purpose at hand.

the production possibility frontier represents A. the maximum amount of resources available at any given time B. the maximum rate of growth of output possible for an economy C. the maximum levels of production that can be attained D. combinations of goods and services that do not fully use available resources

C. the maximum levels of production that can be attained

Individual economic decisions are coordinated by __________. A. government through adjustments in income taxes B. markets through adjustments in sales levels C. government through adjustments in sales taxes D. markets through adjustments in prices

D. markets through adjustments in prices

What does the slope tell you about a line?

The line's direction, given by the sign of the slope, tells you whether the variables have a positive or negative relationship. The relationship is positive if the slope is positive and negative if the slope is negative.

Explain what the magnitude of the slope means.

The magnitude of the slope can tell us about the tradeoff between the two variables.