Unit 1 Economics

In the study of economics, the goals of efficiency and equity are often:

in conflict with one another

"Ceteris paribus" means: a) None of these b) Changing prices to see how demand (or supply) shifts c) Allowing the free market to decide, not government d) Holding all other things equal

Holding all other things equal

Which situation(s) may require government intervention? I. A local business has made a profit in each of the last ten years. II. Students are having difficulty deciding whether to go the beach or to go hiking for their class trip. III. A manufacturing firm on a river is dumping production run off into the water. a) III only b) II only c) II and III d) I and II

III only

Rational behavior requires thinking at the margin. Which example represents this type of thinking? a) deciding whether to pay a fine each time for polluting the local harbor or installing antipollution machinery b) All of these examples represent thinking at the margin. c) deciding whether the hourly overtime pay is worth working on your day off d) deciding whether a second burger is worth the extra $2

All of these examples represent thinking at the margin.

Which of these is NOT an example of market failure? a) Air is polluted by a manufacturing firm. b) Water is polluted by a paper company located by a river. c) Competition leads firms to provide products at the lowest possible price. d) Consumers must buy water from one local water utility.

Competition leads firms to provide products at the lowest possible price.

Which statement is a key idea in economic thinking? a) Incentives matter. b) The value of a good can be objectively measured and is the same for everyone. c) Scarcity exists for the poor but not for the rich. d) All of these are key ideas in economic thinking.

Incentives matter.

Which statement is TRUE about specialization and exchange between two individuals? a) They generally benefit the poorer individual as well as the richer individual. b) They generally benefit neither the poorer individual nor the richer individual. c) They generally benefit the richer individual at the expense of the poorer individual. d) They generally benefit the poorer individual at the expense of the richer individual.

They generally benefit the poorer individual as well as the richer individual.

A salesperson getting paid more at their job for increased sales is an example of: a) equity. b) an incentive. c) an opportunity cost. d) efficiency.

an incentive.

A production possibilities frontier that is a straight line is the result of: increasing opportunity costs. constant opportunity costs. underemployment of resources. scarcity.

constant opportunity costs.

Investment in human capital refers to: increasing the financial capital in the economy. increasing the number of people working at companies. increasing the machinery and equipment that firms use. education, on-the-job training, and professional training activities.

education, on-the-job training, and professional training activities.

Supply and demand analysis is used:

in both microeconomics and macroeconomics.

Scarcity: a) is eliminated with greater technology. b) can be eliminated with adequate resources. c) is faced by all individuals and societies. d) is synonymous with poverty.

is faced by all individuals and societies.

People use _____ to determine how many hours to work, and businesses use _____ to determine how much of their product they are willing to supply to the market.

marginal analysis; marginal analysis

When the government chooses to use resources to build tourist centers, the selected resources are no longer available to build highways. This BEST illustrates the concept of:

opportunity cost.

Economics is BEST defined as the study of how:

people make rational decisions.

When goods are produced at the lowest possible cost, an economy is said to have achieved: a) allocative efficiency. b) cheap production. c) production efficiency. d) inferior quality goods.

production efficiency.

Which is NOT a source of economic growth? reducing the level of international trade reducing barriers to financial aid for higher education increasing research and development increasing business investment

reducing the level of international trade

The opportunity costs of attending college do NOT include: a) required student activity fees b) the forgone wages that could have been earned working. c) the costs of textbooks or eBooks. d) the expenditures for food.

the expenditures for food.

Which is an example of capital in the production process of an amusement park? the mechanics who maintain the equipment the electricity used at the park the roller coaster the ticket-taker

the roller coaster

Macroeconomics is concerned with issues such as: a) which job to take. b) which orange juice to buy. c) what price to charge for goods. d) unemployment.

unemployment

Because of scarcity: a) we face tradeoffs in nearly every choice we make. b) choices are unlimited. c) resources are limitless. d) wants are limited.

we face tradeoffs in nearly every choice we make.