Quiz 1 - Chapter 1

Economists concerned about the behavior of individual households, firms, and industries are studying: A) microeconomics. B) macroeconomics. C) neither macroeconomics nor microeconomics. D) the "forest" of economic behavior, rather than the "trees."

A) microeconomics.

A simplified representation of a particular problem is a: A) model. B) constant. C) hypothesis. D) law.

A) model.

Scarcity in economics means: A) not having sufficient resources to produce all the goods and services we want. B) the wants of people are limited. C) there must be poor people in rich countries. D) economists are clearly not doing their jobs.

A) not having sufficient resources to produce all the goods and services we want.

A hypothesis is an assertion that can be: A) proven to be false. B) proven to be true. C) proven to be true or false. D) tested only in the normative sense.

A) proven to be false.

The Case in Point on the Simpsons indicated that time is: A) a scarce resource. B) a resource without alternative uses. C) a ubiquitous resource. D) not a resource.

A) a scarce resource.

The economic way of thinking includes: A) attention paid to the opportunity costs involved in any choice. B) the assumption that individuals choose to average out some objective. C) concern with the biological make up of decision makers. D) emphasis on how choices affect total values rather than marginal values.

A) attention paid to the opportunity costs involved in any choice.

The use of controlled experiments using particular substances to test hypotheses is most likely to be found in: A) chemistry. B) economics. C) history. D) the humanities.

A) chemistry.

Economists are: A) concerned with developing theories and interested in solving problems. B) interested in solving problems but not concerned with developing theories. C) reluctant to predict changes in variables such as prices, employment, and spending. D) always in agreement on the best way to implement policy decisions.

A) concerned with developing theories and interested in solving problems.

The study of how people choose among the alternatives available to them is the: A) definition of economics. B) model of demand. C) theory of opportunity costs. D) method of distinguishing between microeconomics and macroeconomics.

A) definition of economics.

Two important notions in economics are the scarcity of resources and the tremendous magnitude of the wants of people. Given this, evaluate and explain the following statement: "The study of economics is essentially to investigate how to maximize the satisfaction of wants utilizing available resources."

The study of economics is to see how certain factors surrounding a decision will influence the choice of an individual. The example that speaks most clearly to me would be raising the price of water to reduce the consumption of a person on a daily basis. Water is a necessity, so would raising the price of water actually reduce a person's use since they need it anyway? Or would they be more efficient with their use such as rather than leaving the sink running while they're brushing their teeth or turn the faucet off to save a few liters of water and so forth?

Anything that has alternative uses has an opportunity cost and is, therefore, scarce. A) True B) False

A) True

Economists pay special attention to making choices at the margin. A) True B) False

A) True

Opportunity cost is the expected value of the alternative not chosen. A) True B) False

A) True

The economic way of thinking pays special attention to costs, assumes individuals seek to maximize some objective, and focuses on choices at the margin. A) True B) False

A) True

Microeconomics is a branch of economics that examines the impact of choices on aggregates in the economy. A) True B) False

B) False

Scarcity is determined by the existence of bad alternatives. A) True B) False

B) False

The existence of alternative uses for a resource implies it isn't scarce. A) True B) False

B) False

The three fundamental economic questions are what, how, and why. A) True B) False

B) False

"Smokers are more likely to be murdered than nonsmokers." This statement is an example of: A) the fallacy of unintended consequences. B) a positive economic statement. C) a normative economic statement. D) a value judgment.

B) a positive economic statement.

The problem of determining what goods and services society should produce: A) exists because we can produce more than we need or want. B) exists because there are not enough resources to provide all the goods and services that people want to purchase. C) would not exist if all goods and services were scarce. D) would not exist if government owned all of the resources.

B) exists because there are not enough resources to provide all the goods and services that people want to purchase.

The Case in Point on "baldness and heart disease" suggests that by preventing baldness: A) men can reduce the likelihood they will develop colon cancer. B) men are unlikely to influence their chances of having heart problems. C) men are likely to reduce their chances of having heart problems. D) men can live longer.

B) men are unlikely to influence their chances of having heart problems.

The existence of alternative uses of a resource implies that it is: A) free. B) scarce. C) expensive. D) plentiful.

B) scarce.

The economic way of thinking includes: A) more attention paid to benefits rather than the costs involved in any choice. B) the assumption that individuals choose to maximize some objective. C) emphasis on how choices affect total values rather than marginal values. D) the notion that the world has solved the problem of scarcity.

B) the assumption that individuals choose to maximize some objective.

A systematic set of procedures through which knowledge is created is: A) the economy. B) the scientific method. C) a market. D) a model.

B) the scientific method.

The BEST example of making a choice at the margin is: A) buying a new car. B) quitting your job. C) a coffee drinker drinking another cup of coffee. D) attending college.

C) a coffee drinker drinking another cup of coffee.

A free good is: A) also a scarce good. B) a relatively abundant good. C) a good with no opportunity cost. D) a good with relatively low opportunity cost.

C) a good with no opportunity cost.

A choice made _______ is a choice whether to do a little more or a little less of something. A) at the front end B) in the beginning C) at the margin D) all of the above.

C) at the margin

Economics, generally speaking, is primarily concerned with: A) the operation of the bond and stock markets. B) the issues of income inequality or income equality. C) how people choose among the alternatives available to them. D) ceteris paribus, the scientific method, and the margin.

C) how people choose among the alternatives available to them.

Microeconomics deals with: A) the working of the entire economy or large sectors of it. B) employment, growth, and inflation. C) individual units in the economy. D) normative economics for the most part.

C) individual units in the economy.

A theory that has won virtually universal acceptance is a: A) model. B) hypothesis. C) law. D) variable.

C) law.

Economics is a: A) social science that studies goods with no alternative uses. B) natural science that studies goods with no alternative uses. C) social science concerned chiefly with how people choose among alternatives. D) social science concerned chiefly with reasons why society has unlimited resources.

C) social science concerned chiefly with how people choose among alternatives.

The basic concern of economics is to: A) keep business firms from losing money. B) prove that capitalism is better than socialism. C) study the choices people make. D) use unlimited resources to produce goods and services to satisfy limited wants.

C) study the choices people make.

A normative statement deals with: A) the facts. B) what was, is, or will be. C) what ought to be. D) the scientific method

C) what ought to be.

The "all other things unchanged" assumption is useful because it: A) states the main economic objectives. B) is a vehicle for determining whether a particular outcome is "good" or "bad." C) helps to approximate real-world conditions. D) helps to restrict analysis to the effect of a single economic factor.

D) helps to restrict analysis to the effect of a single economic factor.

Economists are: A) concerned with developing theories but not interested in solving problems. B) interested in solving problems but not concerned with developing theories. C) reluctant to predict changes in variables such as prices, employment, and spending. D) not always in agreement on the best way to implement policy decisions.

D) not always in agreement on the best way to implement policy decisions.

The observed correlation between baldness and heart disease demonstrates that: A) being bald causes a man to have heart disease. B) being bald actually makes heart disease less likely. C) bald men are generally unreliable. D) there is probably some other factor that causes both baldness and heart disease.

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

Explain the following statement: "In economics there are few absolute solutions. Almost all problem solutions require tradeoffs."

Economic problems are problems of relative scarcity, wants exceed resources in the relative sense. We cannot absolutely solve all of our economic problems; that is, satisfy all of everyone's wants and needs. The fact that totally free goods and services do not exist provides support for the notion that total fulfillment of our wants is impossible.

Explain the rationale behind the assertion that economics is a social science and uses the scientific method.

Economics is regarded as a social science because it uses scientific methods to build theories that can help explain the behavior of individuals, groups and organizations. Economics attempts to explain economic behavior, which arises when scarce resources are exchanged.

Explain how and why the concept of "all other things unchanged" is so important in the study of economics.

It is difficult to account for all the what-ifs that are possible in society. If we take into consideration the example given to us by our text book about the increase in price of gasoline meaning a reduced consumption of the good, we can see how it becomes unpredictable as other external factors affect this theory. The increase in population, the increase in overall pay in the country, the overall employment is high; all these factors mean that while increasing the price of gasoline might mean a reduced consumption, the fact that there is an easier means to obtain this good means that it is less affected by the price.