CH 01

Which of the following questions could be answered using economics? "How are the prices of goods and services determined?" "How does pollution affect the economy, and how should government policy deal with these effects?" "Why do firms engage in international trade, and how do government policies affect international trade?" All of the above are economic questions.

All of the above are economic questions.

Which of the following is an example of a positive question? Should the university offer free parking to students? Should the university provide more financial aid assistance to students? If the college increased tuition, would class sizes decline? Should the college cut tuition to increase enrollments?

If the college increased tuition, would class sizes decline?

Fill in the blank is the study of how households and businesses make choices, how they interact in markets, and how the government influences their choices.

Microeconomics

Which of the following best describes the characteristics of models used in economics? Models are approximations to reality that capture as many details as possible. Models are usually complex abstractions of reality that simulate practical problems. Models are concerned with what economic policies ought to be. Models are simplifications of reality that include only essential elements and exclude less relevant details.

Models are simplifications of reality that include only essential elements and exclude less relevant details.

Which of the following statements best defines scarcity?

Scarcity is a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Which of the following questions can be answered using normative economic reasoning? If a college offers free parking, will more students drive to campus? If a college provided more financial aid, would more students go to college? If a college hires better qualified instructors, will more students attend? Should a college cut tuition to stimulate enrollments?

Should a college cut tuition to stimulate enrollments?

Which of the following is not among the fundamental economic questions that every society must solve?

What goods and services will be exchanged?

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

a centrally planned economy

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

a market

What type of assessment is one in which a person's values and political views form part of that assessment?

a normative assessment

What type of statement would "A minimum wage actually reduces employment" be considered?

a positive statement

What types of economies require that answers be given to the following questions: what goods and services will be produced, how will the goods and services be produced, and who will receive the goods and services produced? market economies centrally planned economies mixed economies all of the above

all of the above

Which of the following is achieved when a good or service is produced up to the point where the marginal benefit to consumers is equal to the marginal cost of producing it?

allocative efficiency

What is the name given to the practical application of an invention?

an innovation

What is the name given to the development of a new good or a new process for making a good?

an invention

Fill in the blanks. In economics, as well as in life, optimal decisions are made.

at the margin

Which of the following terms best refers to a fair distribution of economic benefits?

equity

Which of the following covers the study of topics such as inflation and unemployment? microeconomics macroeconomics Both microeconomics and macroeconomics give equal emphasis to these problems. none of the above

macroeconomics

In Solved Problem 1-1: "Orasure Makes a Decision" which of the concepts below is most applicable in solving the problem?

marginal analysis

Which of the following is the best classification for the economies of the United States, Canada, Japan, and Western Europe? pure market economies mixed economies centrally planned economies none of the above

mixed economies

What type of economic analysis is concerned with the way things ought to be?

normative analysis

Which of the following is not an essential component of an economic model?

normative statements

What is the stock of computers, factory buildings, and machine tools used to produce goods better known as?

physical capital

Which of the following involves an estimation of the what the benefits and costs of a particular action are?

positive analysis

What does an economy achieve by producing a good or service at the least possible cost?

productive efficiency

Human capital is

the accumulated training and skills that workers possess

What is the purpose of an economic hypothesis?

to establish a causal relationship

Which of the following terms summarizes the situation in which a buyer and a seller exchange a product in a market and, as a result, both are made better off by the transaction? productive efficiency allocative efficiency voluntary exchange+ equity

voluntary exchange+