Chapter 1

The opportunity costs of attending college do NOT include: required student activity fees. the expenditures for food. the forgone wages that could have been earned working. the costs of textbooks or eBooks.

the expenditures for food

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a: metaphor. model. practice. conclusion.

model.

ational behavior requires thinking at the margin. Which example represents this type of thinking? deciding whether the overtime pay is worth working on your day off deciding whether a second burger is worth the extra $2 All of these examples represent thinking at the margin. deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery

All of these examples represent thinking at the margin.

Which of these is NOT an example of market failure? Competition leads firms to provide products at the lowest possible price. Consumers must buy water from one local water utility. Air is polluted by a manufacturing firm. Water is polluted by a paper company located by a river.

Competition leads firms to provide products at the lowest possible price.

Which situation(s) may require government intervention? I. A local business has made a profit in each of the last ten years. II. Students are having difficulty deciding whether to go the beach or to go hiking for their class trip. III. A manufacturing firm on a river is dumping production run off into the water. I and II II and III II only III only

III only

Which statement is a key idea in economic thinking? Scarcity exists for the poor but not for the rich. All of these are key ideas in economic thinking. The value of a good can be objectively measured and is the same for everyone. Incentives matter.

Incentives matter.

Which statement is TRUE about specialization and exchange between two individuals? They generally benefit the poorer individual at the expense of the richer individual. They generally benefit the richer individual at the expense of the poorer individual. They generally benefit neither the poorer individual nor the richer individual. They generally benefit the poorer individual as well as the richer individual.

They generally benefit the poorer individual as well as the richer individual.

Paying a salesperson more for increased sales is an example of: an incentive. equity. an opportunity cost. efficiency.

an incentive.

Supply and demand analysis is used: in both microeconomics and macroeconomics. only in macroeconomics. only in microeconomics. in neither microeconomics nor macroeconomics.

in both microeconomics and macroeconomics.

In the study of economics, the goals of efficiency and equity are often: compatible. objectively definable. given equal emphasis. in conflict with one another.

in conflict with one another.

Scarcity: is eliminated with greater technology. is faced by all individuals and societies. is synonymous with poverty. can be eliminated with adequate resources.

is faced by all individuals and societies.

People use _____ to determine how many hours to work, and businesses use _____ to determine how much of their product they are willing to supply to the market. allocative efficiency; production efficiency marginal analysis; allocative efficiency production efficiency; marginal analysis marginal analysis; marginal analysis

marginal analysis; marginal analysis

The economics of uranium mining would be studied in: inductive logic. deductive logic. microeconomics. macroeconomics.

microeconomics.

Macroeconomics is concerned with issues such as: which job to take. what price to charge for goods. which orange juice to buy. unemployment.

unemployment.

Because of scarcity: we face tradeoffs in nearly every choice we make. resources are limitless. choices are unlimited. wants are limited.

we face tradeoffs in nearly every choice we make.

When the government chooses to use resources to build tourist centers, the selected resources are no longer available to build highways. This BEST illustrates the concept of: opportunity cost. macroeconomics. scarcity. efficiency

opportunity cost

Economics is BEST defined as the study of how: to classify resources used to produce final goods and services. people make rational decisions. resources are apportioned to satisfy human wants. technology can be used to change scarce resources into free resources.

people make rational decisions.

When goods are produced at the lowest possible cost, an economy is said to have achieved: inferior quality goods. production efficiency. cheap production. allocative efficiency.

production efficiency.