Chapter 1 Macro HW

"The problem with economics is that is assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment? A. I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes the economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits. B. Yes, I agree with her. Economics theory should allow for irrational behavior so that we can have more reliable predications C. I disagree with her. If we cannot assume that decisions are correct, then we will not be able to examine the moral implications of these decisions. D. Yes, I agree with her. One cannot make predictions about economic behavior because in reality people make incorrect choices in many situations.

A. I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes the economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits.

a. Soda drinkers purchase more soda from a grocery store that sells soda at a lower price than other rival grocery stores in the area b. Home owners do not take steps to increase security even though they believe it is more costly to allow burglaries than to install security monitoring equipment. c. Manufactures produce less of a particular cell phone when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives? A. a only B. b only C. c only D. a and b E. a, b, and c

A. a only

The basic economic problem of scarcity A. has always existed and will continue to exist. B. is a problem only in developing economies C. does not apply to the wealthy in society D. will eventually disappear as technology continues to advance.

A. has always existed.

An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper? A. marginal revenue B. gross earnings C. marginal cots D. net benefit E. pure profit

A. marginal revenue

Economists assume that A. optimal decisions are made at the margins B. individuals behave in unpredictable ways C. consumer behavior is explained by the existence of unlimited resources D. people put other people's interests ahead of their own

A. optimal decisions are made at the margins

Which of the following best describes as assumption economists make about human behavior? A. They assume that individuals act randomly B. The assume that rational behavior is useful in explaining choice people make even though people may not behave rationally all the time C. They assume that people take into account the question of fairness in all decisions they make. D. They assume that individuals act rationally all the time in all circumstances.

B. They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.

Economics is the study of the ___________ people make to attain their goals, given their ________ resources. A. decisions; household B. choices; scarce C. purchases; unlimited D. income; available

B. choices; scarce

There is often a trade off between A. voluntary, and involuntary exchanges B. economic efficiency and economic equity C. productive efficiency and allocative efficiency D. limited and unlimited resources

B. economic efficiency and economic equity

Dr. Goldfinger decides to invest in companies which he believes can "improve the productivity and efficiency" of health care services. What would Dr. Goldfinger need to do to try to achieve allocative efficient? A. invest in companies that fairly distribute their products and services B. invest in companies that produce goods and services based on consumer prefrences C. invest in companies that produce up to the point where the marginal cost of the last unite produced is zero D. invest in companies that produce goods and services at the lowest possible cost.

B. invest in companies that produce goods and services based on consumer preferences.

The cost incurred from the production of an additional unit of a product A. is called a loss B. is a marginal cost to the firm C. must be zero for a firm to be efficient D. is called opportunity cost.

B. is a marginal cost to the firm

Scarcity refers to the situation in which A. a nation's poverty level increases faster than its population B. unlimited wants exceed limited resources C. a country's population is larger than its resource base D. unlimited resources exceed limited wants

B. unlimited wants exceed limited resources.

Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for his service. For a total price of $40, Lionel will also trim shrubs, a service that adds an additional $10 to the total cost of the standard package. Should Lionel continue to offer the shrub trimming service? A. no, his marginal benefit is less than his marginal cost B. yes, his marginal benefit is greater than his marginal cost C. yes, but only if he raises the price of the standard package D. More information is needed for Lionel to make this decision

B. yes, his marginal benefit is greater than his marginal cost

___________ involves undertaking an activity until its marginal benefits equal marginal costs A. Market intervention B. Central planning C. Marginal analysis D. Scarcity reduction

C. Marginal analysis

Holding all other personal characteristics - such as age, gender, and income - constant, economists would expect that A. people without health insurance will be more likely to be be overweight than people with health insurance. B. there is no correlation between not having health insurance and being overweight C. people without health insurance will be less likely to be overweight than people with health insurance D. people without health insurance will be equally likely to be overweight as people with health insurance.

C. people without health insurance will be less likely to be overweight than people with health insurance

Which of the following is an example of a "how much" decision? A. Humberto has taken a second job to earn money to buy a Harley Davidson SuperLow Sportster B. You plan on going to Las Vegas for your birthday and are deciding if you should fly or drive C. Octavia is debating whether to buy a pair of Jimmy Choo shoes or Steve Madden boots D. Diana is trying to decide is she should open her pet shop on Sundays

D. Diana is trying to decide is she should open her pet shop on Sundays.

Assuming that managers at these companies used all available information, including the increased preference by U.S. consumers for domestically produced, when making the decision to move production back to the United States exemplifies which key economic idea? A. Optimal decisions are made at the margin B. People respond to economic incentives C. The market system relies on the principle of voluntary exchange D. People are rational

D. People are rational

1. Consumer rent more kayaks from a vendor that rents kayaks at a lower price than other rival kayaks vendors along Waikiki beach. 2. Department stores take steps to increase security since they believe it is more costly to allow shoplifting that to install expensive security monitoring equipment. 3. Farmers produce more cotton when its selling price falls. Which of the statements demonstrates that economic agents respond to incentives? A. a only B. b only C. c only D. a and b E. a, b, and c.

D. a and b

If the marginal cost of producing a television is constant at $200, then a firm should produce this item A. only if the marginal benefit it receives is greater than $200 plus an acceptable profit margin. B. as long as its marginal cost does not rise C. until the marginal benefit it receives reaches zero D. as long as the marginal benefit is just equal to or greater than $200

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

Which of the following is counted as "capital" in economics? A. the wealth people have B. the labor force C. the money people have D. the machines that workers have to work with

D. the machines that workers have to work with.

Policies based on normative economic ideas tend to increase economic efficiency and improve equity True False

False

The decisions General Motors makes in determining production levels for its Chevy Volt is an example of a microeconomic topic True Flase

True