Econ Chapters 1-6

Ralph Waldo Emerson once wrote: "Want is a growing giant whom the coat of have was never large enough to cover." This statement relates to the definition of economics because A. wants and resources are unlimited. B. wants are unlimited and resources are scarce. C. wants and resources are scarce. D. wants are limited and resources are scarce.

B. because Emerson's statement reflects the fundamental economic problem of attempting to satisfy unlimited wants with finite (scarce) economic resources.

An example of a decision that requires a consideration of marginal costs and marginal benefits is the choice to A. Eat lunch B. Stay in Class C. Sleep D. Come to class

D. Come to class Explanation: The marginal benefits of attending class may include the acquisition of knowledge, participation in discussion, and better preparation for an upcoming examination. Marginal costs may include lost opportunities for sleep, meals, or studying for other classes.

Indicate whether each of the following statements applies to microeconomics or macroeconomics: a. The unemployment rate in the United States was 9.0 percent in April 2011. Macroeconomics b. A U.S. software firm discharged 15 workers last month and transferred the work to India. Microeconomics c. An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise. Microeconomics d. U.S. output, adjusted for inflation, decreased by 2.9 percent in 2010. Macroeconomics e. Last week, Wells Fargo Bank lowered its interest rate on business loans by one-half of 1 percentage point. Microeconomics f. The consumer price index rose by 1.6 percent in 2010. Macroeconomics

Indicate whether each of the following statements applies to microeconomics or macroeconomics: a. The unemployment rate in the United States was 9.0 percent in April 2011. Macroeconomics b. A U.S. software firm discharged 15 workers last month and transferred the work to India. Microeconomics c. An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise. Microeconomics d. U.S. output, adjusted for inflation, decreased by 2.9 percent in 2010. Macroeconomics e. Last week, Wells Fargo Bank lowered its interest rate on business loans by one-half of 1 percentage point. Microeconomics f. The consumer price index rose by 1.6 percent in 2010. Macroeconomics

a. Which of the following is not a key element of the scientific method? A. Formulating explanations B. Determining the validity of explanations C. Testing explanations D. Designing data

a. Which of the following is not a key element of the scientific method? Designing data b. The scientific method is the technique used by economists to determine economic principles. Explanation: The key elements include the gathering of data (observation), the formulation of possible explanations (hypothesis), testing the hypothesis, determining the validity of the hypothesis, and repeated testing of hypotheses that have appeared to be valid in prior tests. Data is gathered or collected, not designed. The scientific method is the technique used by economists to determine economic laws or principles. These laws or principles are formulated to explain and/or predict behavior of individuals or institutions.

Which of the following best describes the concept of utility and economic behavior? A. The trade-off between spending and saving B. The effort required to generate income C. The desires of consumers for products that are useful D. The satisfaction from consuming goods or services

D. The satisfaction from consuming goods or services Explanation: "Utility" refers to the pleasure, happiness, or satisfaction gained from engaging in an activity (eating a meal, attending a ball game, etc.). It does not refer to the usefulness of a product. Utility is an important component of purposeful behavior because people will allocate their scarce time, energy, and money in an attempt to gain the most utility possible.

In a market system scarce resources are allocated through the operation of

In a market system scarce resources are allocated through the operation of what must be sacrificed in using a resource for its next best use. Suppose a city block was going to be used for a parking lot. The opportunity cost would be greater in New York City because the alternative uses of the block are more valuable. Explanation: An opportunity cost is what was sacrificed to do or acquire something else. The condition of scarcity creates opportunity cost. If there was no scarcity, there would be no need to sacrifice one thing to acquire another. The opportunity cost would be much higher in New York City as the alternative uses for that square block are much more valuable than for a typical suburban city block.

a. Economic resources are the __________ inputs used to produce goods and services. A. natural, human, and manufactured B. natural, human, and technological C. natural, technological, and manufactured D. technological, human, and manufactured b. Economists classify resources as A. labor, resources, real capital, and entrepreneurs. B. labor, land, real capital, and entrepreneurs. C. labor, land, human capital, and entrepreneurs. D. labor, land, financial capital, and entrepreneurs. c. Because economic resources are used to produce goods and services, they are called A. factors of production or products. B. resources or products. C. factors of production or inputs. D. inputs or products.

a. Economic resources are the __________ inputs used to produce goods and services. A. natural, human, and manufactured b. Economists classify resources as B. labor, land, real capital, and entrepreneurs. c. Because economic resources are used to produce goods and services, they are called C. factors of production or inputs. Explanation: Economic resources are the natural, human, and manufactured inputs used to produce goods and services. Technological resources are manufactured resources. Economic resources fall into four main categories: labor, land (natural resources), real capital (machines, factories, buildings, etc.,) and entrepreneurs. Financial capital is not classified as a resource. It is used to facilitate resource transactions. Economic resources are also called factors of production because they are used to produce goods and services. They are called inputs because they go into a production process (like ingredients go into a bowl to make a cake), with the resulting goods and services also being referred to as output.

Consider the statement: "Buy 2, get 1 free." The "1 free" is free to the buyer but not to society because

the consumer does not make a purchase, but society's resources are used in production. Explanation: Because an expenditure is not required for the buyer to obtain the "1 free" once she has already purchased the first two, it is free to the buyer. It is not free to society, however, because resources were used in producing the third unit that could have been directed to alternate uses.