ECON 131 Quiz 2

1. Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

A. normative statement

As depicted in _________________, it is necessary to give up some of one good to gain more of the other good.

A. the production possibilities frontier

5. Macroeconomic topics do not usually include:

A. the profit maximizing decisions of an individual manufacturer.

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.

A. utility

7. Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is:

B. 15 points on the history exam.

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible.

B. budget constraint

13. Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change.

B. economy

4. The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending.

B. government

5. Scarcity implies that:

B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

4. Why is there scarcity?

C. Because our unlimited wants exceed our limited resources

As a person receives more of a good, the _______ from each additional unit of the good declines.

C. marginal utility

6. "If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

D. $44

Refer to Figure 2-2. When the economy moves from Point A to Point B in the diagram above: A. the economy begins using its resources efficiently to produce both food and clothing. B. the economy operates at its productive capacity once it reaches Point B. C. the economy increases production of both clothing and food. D. All of the above occur.

D. All of the above occur.

3. Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:

C. C to F

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display ___________.

A. allocative efficiency

11. Which of the following best characterizes the circular flow of income? A. Businesses buy resources from the government, and households buy goods and services from businesses. B. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. C. The government purchases resources from businesses and households and then sells goods and services to businesses and households. D. Households buy factors of production from businesses, and businesses buy goods and services from households.

B. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

1. In which of the following countries will the national government have the greatest influence with respect to the nation's economy?

B. Cuba

3. Which of the following best denotes the reason for the existence of substantial black markets?

B. a command economy

Economists refer to this pattern, the ___, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines.

B. law of diminishing marginal utility

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

B. marginal analysis

2. In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers?

B. the macroeconomy

7. Which of the following statements most likely lies within the realm of macroeconomics? A. An increase in the price of automobiles will lead to a decrease in the quantity of automobiles demanded. B. Due to process innovations in computer chip manufacturing, the market supply of computers increased. C. Due to an economic recession, manufacturing firms began implementing layoffs of their workforces. D. Anticipating that the benefits would outweigh costs involved, an undergraduate student purchases the course textbook.

C. Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.

6. Macroeconomics primarily examines:

C. broad issues such as national output, employment and inflation.

10. The basic difference between macroeconomics and microeconomics is that:

C. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

In many cases, it is reasonable to refer to the ________________ as the price.

C. opportunity cost

12. In the circular flow diagram model: A. households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses. B. businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households. C. households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses. D. Both (a) and (b) are correct.

D. Both (a) and (b) are correct.

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if: A. the economy moves along the production possibilities in the direction of a greater quantity of defense. B. the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. C. the production possibilities frontier shifts outward due to an improvement in technology. D. either b) or c) occurs, but not as a result of a).

D. either b) or c) occurs, but not as a result of a).

The opportunity cost of an action:

D. is a subjective valuation that can be determined only by the individual who chooses the action.

8. Which of the following lies primarily within the realm of macroeconomics? A. a study of the demand for gasoline B. a study of how tax cuts stimulate aggregate production C. an analysis of supply and demand conditions in the electricity market D. a study of the impact of "mad cow" disease on the price of beef worldwide

D. is concerned with the expansion and contraction of the overall economy.