Econ 200 Ch 1

In the 1970s, the Organization of Petroleum Exporting Countries (OPEC) tripled the price of petroleum, causing automobile manufacturers to look for ways to produce more fuel-efficient cars by substituting aluminum and plastic for steel. This was primarily a response to the economic question of:

How should goods and services be produced?

A free good is one that can be acquired without sacrifice.

True

A good is scarce if we must sacrifice something to obtain it.

True

Economists pay special attention to making choices at the margin.

True

The value of the next-best choice not chosen is called opportunity cost.

True

Scarcity exists when:

a choice must be made among two or more alternatives.

Many disagreements among economists result because:

economists sometimes make normative judgments.

A person who mistakenly assumes that because one event follows another, the second event results from the first commits the fallacy of:

false cause.

A tradeoff between two economic goals means that:

if you achieve more of one, you will achieve less of the other.

Economists concerned about economy-wide trends in the unemployment of labor, the rate of inflation, and the level of economic production are studying:

macroeconomics

The branch of economics that examines the impact of choices on aggregates in the economy is:

macroeconomics

A key theme fundamental to all of economics is:

people have unlimited wants facing limited means to satisfy them.

Statements that are a hypothesis or statement of fact are:

positive.

The "all other things unchanged" assumption is used to:

simplify the very complex real world.

Macroeconomics deals with:

the analysis of the aggregate values in the economy.

Whenever a choice is made:

the cost of that choice could be referred to as opportunity cost.

An attempt should always be made to maximize opportunity cost.

False

Individuals will usually make choices to minimize the value of some objective.

False

The questions of what goods to produce, how to produce them, and for whom to produce them are of concern only in advanced industrial economies.

False

`Briefly define scarcity, choice, and opportunity cost and explain carefully how they are related and why they are so essential in the study of economics.

Scarcity is the condition of having to choose among alternatives. Choice means that one alternative is selected over another. Opportunity cost is the value of the best alternative forgone in making any choice. These point in economics are essential in the study of economics because they economics deals with the study of human behavior and how humans allocate their limited resources (scarcity) with their unlimited wants.

Macroeconomics is most likely to be concerned with the:

aggregates in the economy.

The primary emphasis in macroeconomics is on:

aggregates in the economy.

The scientific method is more difficult for economists than, say, chemists, because:

all of the above.

The economic way of thinking includes:

attention paid to the opportunity costs involved in any choice.

A model or theory in economics is:

built using relevant observations, assumptions, and abstractions.

Opportunity cost is:

the value of the best alternative forgone in making any choice.

The observed correlation between baldness and heart disease demonstrates that:

there is probably some other factor that causes both baldness and heart disease.

The fundamental economic questions that every economic system must answer are:

what, how, and for whom.