Econ 2314 chap 1

d) the marginal benefit from the activity is equal to the marginal cost

Economists believe that an activity should be continued up to the point where a) the marginal benefit from the activity is less than the marginal cost b)the marginal benefit from the activity is greater than the marginal costs c) the marginal benefit from the activity plus the marginal cost equals zero d) the marginal benefit from the activity is equal to the marginal cost

d) by the decisions of households and firms interacting in markets

How are economic resources allocated in a market economy? a) by firms acting alone b) by consumers acting alone c) by the government d) by the decisions of households and firms interacting in markets

d) consumers, firms, and the government determine what goods and services will be produced by the choices they make

In a market system, how does society decide what goods and services will be produced? a) firms alone determine what goods and services will be produced b) what goods and services will be produced is determined by a vote of consumers c) the government decides what goods and services will be produced d) consumers, firms, and the government determine what goods and services will be produced by the choices they make

b) who receives the goods and services produced depends largely on how income is distributed

In a market system, how does society decide who will receive the goods and services produced? a) the government determines the goods and services produced b) who receives the goods and services produced depends largely on how income is distributed c) consumers determine who receives the goods and services produced d) firms determine who receives the goods and services produced

c) firms determine how goods and services will be produced

In a market system, what determines how goods and services will be produced? a) consumers determine how goods and services will be produced b) the government determines how goods and services will be produced c) firms determine how goods and services will be produced d) consumers, firms, and the government determine together how goods and services will be produced

c) "marginal" if the marginal revenue exceeds the marginal cost, the USPS's profit will increase. If the marginal cost exceeds the marginal revenue, the USPS's profit will decrease

The U.S. Postal Service (USPS) charges Amazon about $2 to deliver a package. The USPS argues that its contract with Amazon allows it to reduce the loss it suffers on its overall operations. A business writer for the Washington Post observes: "Looked at from the standpoint of incremental revenue (huge) minus these incremental expenses (modest), the Postal Service could very easily have come to the conclusion that, even at $2 a package, the Amazon contract was likely to be highly profitable." What does the writer mean by "incremental revenue" and "incremental cost"? Why would he focus on incremental revenue and incremental cost rather than on total revenue and total cost? "Incremental" means the same thing as: a) "additional" since this is an "all or nothing" decision, incremental revenue and incremental cost rather than total revenue and total cost must be examined b) "extra" since this is an "all or nothing" decision, incremental revenue and incremental cost rather than total revenue and total cost must be examined c) "marginal" if the marginal revenue exceeds the marginal cost, the USPS's profit will increase. If the marginal cost exceeds the marginal revenue, the USPS's profit will decrease d) "marginal" if the marginal revenue exceeds the marginal cost, the USPS's profit will decrease. If the marginal cost exceeds the marginal revenue, the USPS's profit will increase

the highest-valued alternative that must be given up to engage in that activity

What is opportunity cost?

c) when production is in accordance with consumer preferences

When does allocative efficiency occur? a) when an economy achieves equity b) when an economy no longer relies on voluntary exchange c) when production is in accordance with consumer preferences d) when a good or service is produced at the lowest possible cost

d) North Korea

Today, which of the following countries has a centrally planned economy? a) United States b) Canada c) Germany d) North Korea

False, economists assume people respond to economic incentives but they recognize that there are other motives for people's actions

True or false? Economists assume that the only reason people take the actions they do is in response to economic incentives

1. What goods and services will be produced? 2. How will the goods and services be produced? 3. Who will receive the goods and services produced?

What are the 3 fundamental questions that trade-offs use to force society to make choices?

1. people are rational 2. people respond to economic incentives 3. optimal decisions are made at the margin

What are the 3 key economic ideas?

producing more of one good or service means producing less of another good or service

What are trade-offs?

c) extra or additional

What do economists mean by the word "marginal"? a) small b) first c) extra or additional d) unimportant

an economy in which the government decides how economic resources will be allocated

What is a Centrally planned economy?

an economy in which the decisions of households and firms as they interact in markets determine the allocation of economic resources

What is a Market economy?

a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade

What is a market?

an analysis concerned with what is

What is a positive analysis?

the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth

What is macroeconomics?

an analysis that involves comparing marginal benefits and marginal costs

What is marginal analysis?

the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices

What is microeconomics?

an analysis concerned with what ought to be

What is normative analysis?

c) when a good or service is produced at the lowest possible cost

When does productive efficiency occur? a) when production is in accordance with consumer preference b) when an economy achieves equity c) when a good or service is produced at the lowest possible cost d) when an economy no longer relies on voluntary exchange

a) In a mixed economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources

Which of the following is a correct statement about a mixed economy? a) In a mixed economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources b) In a mixed economy, all economic decisions are made in markets c) In a mixed economy, most economic decisions are made by the government but markets play a significant role in the allocation of resources d) In a mixed economy, the government makes all economic decisions

d) an economic variable is something measurable that can have different values

Which of the following statements about an economic variable is correct? a) an economic variable must always be a posive number b) an economic variable must either be the price of a good or service or the quantity of a good or service c) an economic variable is always measured in dollars d) an economic variable is something measurable that can have different values

c) economics studies the actions of individuals

Which of the following statements about economics as a social science is correct? a) economics uses normative analysis but not positive analysis b) economics is not useful in analyzing the effects of government policy c) economics studies the actions of individuals d) economics considers human behavior only in the context of business

b) the idea assumes that consumers and firms use all available information as they act to achieve their goals

Which of the following statements about the idea that people are rational is correct? a) the idea assumes that consumers and firms take into account the costs of their actions but ignore the benefits b) the idea assumes that consumers and firms use all available information as they act to achieve their goals c) the idea assumes that consumers and firms always make correct decisions d) the idea assumes that consumers and firms take into account that benefits of their actions but ignore the costs

d) because models have to be simplified to be useful

Why are models based on assumptions? a) because models are not intended to analyze real-world problems b) because models are very different from theories c) because models are only concerned about questions of equity, not question of efficiency d) because models have to be simplified to be useful