HW 1 - Microeconomics

The statement that "the unemployment rate will increase as the economy moves into a recession" is an example of a normative statement. a microeconomic statement. marginal analysis. a generalization.

d.)

Molly decides to spend three hours working overtime rather than watching video with her friends. She earns $8 an hour. Her opportunity cost of working overtime is a.) the enjoyment she would have received had she watched the video. b.) the $24 she earns working. c.) the $24 minus the enjoyment she would have received from watching the video. d.) nothing, since she would have received less than $24 of enjoyment from the video.

a.)

Money is not considered to be an economic resource because a.) as such it is not productive. b.) money is not a free gift of nature. c.) the terms of trade can be determined in nonmonetary terms. d.) idle money balances do not earn interest income.

a.)

Society wants to use its scarce resources efficiently. To achieve this economic goal it must a.) have full employment and full production. b.) have a fixed resource base and fixed technology. c.) expand the use of capital goods and reduce the use of labor. d.) increase the rental, interest, wage, and profit payments to the factors of production.

a.)

If a production possibilities boundary is a curve concave to the origin and not a straight line, then a.) resources are equally suited to producing alternative products. b.) resources are not equally suited to producing alternative products. c.) resources are perfectly interchangeable to alternative uses. d.) there are unemployed resources.

b

All of the following would affect the position of a country's production possibilities curve, except a.) the quantity of labor. b.) the level of unemployment. c.) the amount of the capital stock. d.) technological progress.

b.)

Economics can best be described as the study of a.) how to increase the level of productive resources so there is maximum output in society. b.) how people, institutions, and society make choices under conditions of scarcity. c.) how to use productive resources to maximize income level. d.) how business structures influence the allocation of income among firms.

b.)

If a production possibilities boundary is a curve concave to the origin and not a straight line, then resources are equally suited to producing alternative products. resources are not equally suited to producing alternative products. resources are perfectly interchangeable to alternative uses. there are unemployed resources.

b.)

Increases in resources or improvements in technology will tend to cause a society's production possibilities curve to a.) shift inward or to the left. b.) shift outward or to the right. c.) become horizontal. d.) become vertical.

b.)

Microeconomics focuses on: a.) the workings of the whole economy or large sectors of it. b.) the individual units that make up the whole of the economy. c.) issues such as unemployment and inflation. d.) total output and the general level of prices.

b.)

Opportunity cost is best defined as a.) marginal cost minus marginal benefit. b.) the value of the best forgone alternative. c.)the time spent on an economic activity. d.) the money cost of an economic decision.

b.)

A country's production possibilities curve is concave because of the Principle of Scarcity. there is a tradeoff that requires a decrease in the production of one good in order to increase the production of another good. the production of a good is expanded by first employing those resources with the lowest opportunity cost. the production of a good is expanded by first employing those resources with the highest opportunity cost.

c.)

A nation can increase its production possibilities by shifting resources from investment good production to consumer good production. shifting resources from private goods to public goods. improving labor productivity. reducing international trade.

c.)

According to the Gates, Winfrey, and Rodriguez illustration in the textbook, Gates, Winfrey, and Rodriguez made a mistake by not attending college. Gates, Winfrey, and Rodriguez did not weigh marginal benefits against marginal costs when making decisions. Opportunity costs vary greatly between individuals and matter in decision making. Attending college has little effect on lifetime earnings.

c.)

Amy is thinking about going to the movies tonight to see Nutty Professor 2. A ticket costs $7 and she will have to cancel her dog-sitting job that pays $30. The opportunity cost of seeing the movie is a.) $7. b.) $30. c.) $37. d.) $37 minus the benefit of seeing the movie.

c.)

Are the goods that businesses offer for "free" to consumers also free to society? a.) Yes, because the individual consumer does not have to pay for them. b.) Yes, because the marginal benefit is greater than the marginal cost. c.) No, because scarce resources were used to produce the free goods. d.) No, because society does not assign a value to free goods.

c.)

Which is considered to be an economic resource by economists? Rent Money Labor Wages

c.)

A movement along the production possibilities curve would imply that the labor force has grown. productivity has increased. productivity has declined. society has chosen a different combination of outputs.

d.)

According to cost-benefit principle, the lowest cost activity usually gives the lowest benefit. a person should always choose the activity with the lowest cost. a person should always choose the activity with the greatest benefit. the extra costs and benefits of an activity are more important considerations than the total costs and benefits.

d.)

After graduating from high school, Ron Willis plans to go to college. The college tuition is $15,000 a year. But, instead of going to college, Ron could take a full-time job paying $20,000. If Ron decides to go to college, what is his opportunity cost for attending for one year? $5,000 $15,000 $20,000 $35,000

d.)

An outward shift in the production possibilities curve can result from an increase in the amount of productive resources. increase in number of the minimum wage jobs. increase in the number of immigrants from abroad. Both A and C are true.

d.)

Points on a production possibilities curve are a.) efficient but may or may not be attainable. b.) inefficient and unattainable. c.) unattainable but efficient. d.) attainable and efficient.

d.)

Since the production possibilities curve is of concave in shape, a.) the opportunity cost of the good on the horizontal axis increases as more and more of the horizontal good is produced. b.) the opportunity cost of the good on the horizontal axis increases as more and more of the good on the vertical axis is produced. c.) the opportunity cost of the good on the vertical axis increases as more and more of the vertical good is produced. d.) Both A and C are true.

d.)

The Cost-Benefit Principle tells people they should take an action if total benefits exceed total costs. total costs exceed total benefits. marginal costs exceed marginal benefits. marginal benefits exceed marginal costs.

d.)

The purpose of the ceteris paribus assumption used in economic analysis is to a.) make sure that all relevant factors are considered. b.) avoid making normative statements. c.) avoid making positive statements. d.) restrict the analysis to the effect of a single economic factor.

d.)

The opportunity cost of an activity is the value of a.) an alternative forgone. b.) the best alternative forgone (plus funding for the activity). c.) the least-best alternative forgone. d.) the sum of all alternatives forgone.

b.)

The overallocation of resources by society to a product means that the marginal benefit is greater than the marginal cost. marginal cost is greater than the marginal benefit. entrepreneurs are making too much profit in the economy. workers are not being paid adequate wages and salaries.

b.)

The production possibilities curve bows outward from the origin because opportunity costs decrease as the production of a good increases. opportunity costs increase as the production of a good increases. more production of one good results in more production of the other good. resources are not of uniform

b.)

When modeling consumer choice, the price ratio of the two products is the equilibrium exchange rate. slope of the budget line. point of tangency for equilibrium. demand for the two products.

b.)

When society over-allocates resources to a product it means that the a.) investment in the product is declining. b.) opportunity cost of the product is decreasing. c.) marginal benefit is greater than the marginal cost. d.) marginal benefit is less than the marginal cost.

d.)

Which situation would most likely shift the production possibilities curve for a nation in an outward direction? a.) A decrease in the quality of products. b.) An increase in the supply of resources. c.) A decrease in the state of technology. d.) An increase in the amount of discrimination.

b.)

As a student of economics, when you speak of scarcity, you are referring to a.) the ability of society to employ all of its resources. b.) consume all that is produced. c.) satisfy economic wants given limited resources. d.) continually make technological breakthroughs and increase production.

c.)

As a student of economics, when you speak of scarcity, you are referring to the ability of society to employ all of its resources. consume all that is produced. satisfy economic wants given limited resources. continually make technological breakthroughs and increase production.

c.)

Decreases in product prices causes the consumer's production possibilities curves to shift outward from the origin. production possibilities curves to shift inward to the origin. budget line to shift outward from the origin. budget line to shift inward to the origin.

c.)

If one fails to account for opportunity costs in decision making, then applying the cost-benefit rule will be flawed because a.) the benefits will be overstated. b.) the costs will be overstated. c.) the costs will be understated. d.) the benefits will be understated.

c.)

The opportunity cost of an item is the number of hours needed to earn money to buy it. usually less than the dollar value of the item. what you give up to get that item. the dollar value of the item.

c.)

The production possibility curve is convex to the origin. is based on the law of diminishing returns. is the boundary between attainable and unattainable outputs. reflects the mixed economy found with most economic systems.

c.)

What is the opportunity cost of living in a house that you already own? Zero, because you already own it. That mostly depends on current mortgage rates. The rent you could receive if you rented the house out to someone else. That depends on how much you like living there.

c.)

When an economy is at full employment and full production, more of any one product a.) cannot be produced because there is full production. b.) can be produced only if there is a general decrease in prices. c.) can be produced only if there is less production of some other products. d.) cannot be produced unless private enterprise does so rather than government.

c.)

Which is an illustration of a microeconomic question? a.) What is the current national rate of unemployment? b.) Is the economy experiencing a declining rate of inflation? c.) Will a new type of television set increase the number of buyers? d.) Is the production of goods and services in the economy greater this year than last year?

c.)

When an economist says that there is "too much of a good thing," the economist is suggesting that scarcity is not a problem. wants are limited. the marginal cost of the thing is less than the marginal benefit. the marginal benefit of the thing is less than the marginal cost

d.)