Econ Ch.1 Foundations and Models

Firms that provide workers with health insurance may pay a lower wage to obese workers than to workers who are not obese because the latter tend to be healthier and consequently

*experience lower rates of absenteeism and early retirement *more productive at work *less costly to insure and therefore employ due to their lower claim submission rate

Corporations and universities are willing to pay employees to take care of themselves because a healthier workforce

*translate into lower costs, in part by reducing illness-related absenteeism and premature retirements *performs more efficiently, thereby improving overall productivity in the workplace

Which of the following is consistent with the law of supply?

An increase in the market price of MP3 players causes an increase in the production of MP3 players.

Which of these is an example of economic capital?

Bulldozer

According to rational assumption, people:

Do not intentionally make decisions that would leave them worse off

Consider the following statement. "The problem with economics is that it assumes that consumers and firms always make the correct decisions. But we know that everyone makes mistakes."

Economics assumes that consumers and firms are rational, not that they always make the right decisions

Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer?

How do we produce the products?

Which of the following is a positive economic statement?

If minimum wage rates rise, then unemployment will rise.

What is the name given to the development of a new good?

Invention

Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority?

North Korea

Jim declined to take part in a health study on a free basis but changed his mind after being offered $1,000 to participate in the study. Jim's behavior best illustrates which economic principle?

People respond to economic incentives

Given linear demand curves, if demanded increases and supply decreases, then ____

The equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous

The condition that exists when quantity at the current price is known as____

a surplus or excess supply

The grading system used by a teacher can affect the incentives of students to learn the course material by

altering the payoffs to achieving success on the various components of the course

Market price is determined by ____

both supply and demand

In what type of economy does the government decide how economic resources will be allocated?

centrally planned economy

If teachers put too much weight in the grading scale on a certain part of the course, like readings outside the textbook, students might respond by ____ other parts of the course.

de-emphasizing

When an employer offers a wellness program to its employees, the health insurance premiums the employer pays on behalf of the employees are likely to

decrease

One of the first steps in deciding whether to complete your education is to:

evaluate the marginal cost and the marginal benefit of that decision

Scarcity is central to the study of economics because it implies that

every choice involves an opportunity cost

Tangible products like cars and televisions are referred to as:

goods

Macroeconomics can be used to understand all of the topics listed below, except:

how a consumer decides between the purchase of two different cars

Teachers often wish that students came to class prepared having read the upcoming material. A teacher could design the grading system to motivate students to come to class prepared by ___ the grade weight assigned to being prepared.

increasing

Economics:

is concerned with how people respond to incentives

Economists believe that an individual or firm should continue any activity until:

marginal benefit is equal to marginal cost

When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?

market

The United States economy is best classified as a:

mixed economy

The resources provided by nature and used to produce goods and services are also known as:

natural resources

The incentive of employees to improve or maintain their health once they obtain insurance may be

negatively

The stock of computers, factory buildings and machine tools used to produce goods is known as:

physical capital

Macroeconomics is concerned with all of the following except:

political party affiliation

Regarding the question of whether health insurance provides people with an incentive to become obese, the finding of Bhattacharya and Bundorf seems

relevant since the link between insurance and obesity was established while holding many other variables constant

The principle of opportunity cost evolves from the concept of:

scarcity

Which of the following is not a possible opportunity cost of attending college?

the cost of housing

Economists assume that people are rational in the sense that

they use all available information as they take actions intended to achieve their goals

Which of the following best describes scarcity?

unlimited wants exceed the limited resources available