Chapter 1
Which of the following is not a factor of production? labor entrepreneur capital money
money
The economic principle that the "unemployment rate will tend to increase as the economy moves into a recession" is an example of a normative statement. an assumption. loaded terminology. a generalization.
a generalization.
Assume that a consumer purchases only two products and there is a decrease in the consumer's income. The prices of the two products stay constant. The decrease in income will result in Multiple Choice a shift of the budget line outward to the right. a shift of the budget line inward to the left. an increase in the slope of the budget line. a decrease in the slope of the budget line.
a shift of the budget line inward to the left.
Refer to the diagram. The combination of computers and bicycles shown by point F Multiple Choice is irrelevant because it is inconsistent with consumer preferences. suggests that opportunity costs are constant. is attainable but implies that the economy is not using all its resources. is unattainable given currently available resources and technology.
is attainable but implies that the economy is not using all its resources.
One basic difference between "land" and "capital" resources is that land is Multiple Choice unlimited, while capital is limited. limited, while capital is unlimited. manufactured, while capital is created by humans. natural, while capital is created by humans.
natural, while capital is created by humans.
Which of the following is not a main function of the entrepreneur? Multiple Choice to make routine pricing decisions to innovate to assume the risk of economic losses to make strategic business decisions
to make routine pricing decisions
In a market system, the allocation of scarce goods involves the consideration of the dollar cost of any good or service. the time required to pursue an economic activity. identifying the possibility of professional advancement. 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 in both New York City and a small town. The opportunity cost would be lower in New York City because the alternative uses of the city block are more varied. greater in New York City because the alternative uses of the block are more valuable. lower in a small city because the alternative uses of the city block are more varied. greater in a small city because the alternative uses of the city block are more valuable.
what must be sacrificed in using a resource for its next-best use. greater in New York City because the alternative uses of the block are more valuable.
The following graph is the production possibilities curve of a nation. The total opportunity cost of nine drill presses is Multiple Choice 1 unit of bread. 3 units of bread. 10 units of drill presses. 1 unit of drill presses.
3 units of bread.
Economic principles are value judgments about what the economy should be like or the way the economic world ought to be.
False
In graphing a relationship between two variables, economists always follow the mathematical convention. Thus, if price is the independent variable then it is measured on the horizontal axis.
False
Refer to the diagram. Which of the following is a normative statement? Multiple Choice Point C is superior to point B because it is important to enhance the future of society. Other things equal, the combination of outputs represented by point D will result in more rapid economic growth than will the combination represented by point C. If society produces 2 units of tractors and 12 units of bread, it is not using its available resources with maximum efficiency. If society is initially at point C, it must sacrifice 6 units of bread to obtain one more unit of tractors.
Point C is superior to point B because it is important to enhance the future of society.
Which of the following represents a positive economic statement?r The unemployment rate is too high. The unemployment rate is 4.8 percent. The government should extend unemployment benefits. Taxes should not be increased since that will lower spending. Which of the following represents a normative economic statement? Higher taxes will lower spending. The unemployment rate is higher than it was last year. The government ought to lower taxes so people have more money. The government will have a larger deficit if unemployment benefits are extended.
The unemployment rate is 4.8 percent. The government ought to lower taxes so people have more money.
Which question is an example of a macroeconomic question? Multiple Choice What is the level of industrial concentration in the U.S. automobile industry? What economic incentives can be used to reduce the cost of health care in the nation? What market conditions are expected for milk in the nation this year? What policies would be recommended for stimulating national economic growth?
What policies would be recommended for stimulating national economic growth?
anice really likes potatoes. Potatoes cost $1.10 per pound, and she has $6.00 that she could possibly spend on potatoes or other items. Suppose she feels that the first pound of potatoes is worth $1.50, the second pound is worth $1.14, the third pound is worth $1.05, and all subsequent pounds are worth $0.30. Instructions: Enter your answers as whole numbers. a. How many pounds of potatoes will she purchase? b. What if she only had $3.00 to spend?
a. 2 b. 2
A production possibilities table for DVDs and computers is shown below. Production Alternatives Type of Production A B C D E Computers 0 20 40 60 80 DVDs 80 75 60 35 0 Instructions: Enter your answers as absolute and whole numbers. a. What is the opportunity cost of computers when moving from point A to point B? b. What is the opportunity cost of computers when moving from point B to point C? c. What is the opportunity cost of computers when moving from point C to point D? d. What is the opportunity cost of computers when moving from point D to point E? e. As we produce more computers, opportunity costs are increasing.
a. 5 DVDs b. 15 DVDs c. 25 DVDs d. 35 DVDs e. increasing
a. Which of the following is not a key element of the scientific method? Designing data Testing explanations Formulating explanations Determining the validity of explanations b. The scientific method is the technique used by economists to determine the size of government. the price of a product. economic principles. the way in which consumers relate to each other.
a. Designing data b. economic principles.
a. Specify the typical shapes of marginal-benefit and marginal-cost curves. The marginal benefit curve is downward sloping. The marginal cost curve is upward sloping. b. With these curves, the optimal allocation of resources to a particular product will occur when MB = MC. c. If current output is such that marginal cost exceeds marginal benefit, should more or fewer resources be allocated to this product? Fewer
a. downward; upward b. MB = MC c. Fewer
If an inverse relationship exists between two variables, then Multiple Choice as one variable increases, the other decreases. as one variable increases, so does the other. the two variables are close substitutes for each other. both variables increase over time.
as one variable increases, the other decreases.
A person should consume more of something when its marginal Multiple Choice cost exceeds its marginal benefit. cost equals its marginal benefit. benefit is still better. benefit exceeds its marginal cost.
benefit exceeds its marginal cost.
Refer to the diagram. Which line(s) show(s) a negative vertical intercept? Multiple Choice both C and E both B and C B, C, and E C only
both B and C
Refer to the diagram. The movement down the production possibilities curve from point A to point E suggests that the production of Multiple Choice both bicycles and computers is subject to increasing opportunity costs. computers, but not bicycles, is subject to increasing opportunity costs. bicycles, but not computers, is subject to increasing opportunity costs. both bicycles and computers is subject to constant opportunity costs.
both bicycles and computers is subject to increasing opportunity costs.
Through specialization and international trade, a nation Multiple Choice will only attain some combination of goods lying within its production possibilities curve. will cause its production possibilities curve to shift leftward. can move from a high consumption-low investment to a high investment-low consumption point on its production possibilities curve. can attain some combination of goods lying outside its production possibilities curve.
can attain some combination of goods lying outside its production possibilities curve.
Through specialization and international trade, a nation can attain some combination of goods lying outside its production possibilities curve. can move from a high consumption-low investment to a high investment-low consumption point on its production possibilities curve. will only attain some combination of goods lying within its production possibilities curve. will cause its production possibilities curve to shift leftward.
can attain some combination of goods lying outside its production possibilities curve.
Refer to the diagram. Points A, B, C, D, and E show that the opportunity cost of bicycles increases, while that of computers is constant. combinations of bicycles and computers that society can produce by using its resources efficiently. Correct that the opportunity cost of computers increases, while that of bicycles is constant. that society's demand for bicycles is greater than its demand for computers.
combinations of bicycles and computers that society can produce by using its resources efficiently.
Rosa works at a gelato shop and observes that the number of people buying gelato varies greatly from day to day. For a couple of weeks, she has recorded the number of people at the shop each day, as well as the daily temperature, and has observed a positive relationship between temperature and the number of customers. Based on her observations, Rosa should conclude definitively that people buy more gelato when the temperature rises. determine if there are other relevant factors and attempt to hold these constant before drawing conclusions. Correct continue to gather data on the number of visitors and daily temperatures, because eventually other relevant variables will not matter. throw out the data if it does not show a perfect relationship between buying habits and temperature.
determine if there are other relevant factors and attempt to hold these constant before drawing conclusions.
The best output or the optimal production of the nation is Multiple Choice a combination of products at either of the two endpoints of the production possibilities curve. a combination of products at the midpoint of the production possibilities curve. determined by equalizing the marginal benefits and marginal costs of each product. the production combination where the opportunity costs are minimized.
determined by equalizing the marginal benefits and marginal costs of each product.
If two variables are inversely related, then as the value of one variable Multiple Choice increases, the value of the other increases. decreases, the value of the other decreases. increases, the value of the other decreases. increases, the value of the other may either increase or decrease.
increases, the value of the other decreases.
Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of Multiple Choice opportunity costs. normative economics. imperfect information. marginal benefits that exceed marginal costs.
opportunity costs.
Refer to the tables. Opportunity costs of producing military goods are Multiple Choice increasing in Duckistan but constant in Herbania. constant in both Duckistan and Herbania. smaller in Duckistan than Herbania. larger in Duckistan than in Herbania.
smaller in Duckistan than Herbania.
Refer to the diagram for athletic shoes. If the current output of shoes is Q3, then Multiple Choice society should produce fewer shoes to achieve the optimal allocation of resources. shoes are more valuable to society than alternative products resources are being allocated efficiently to the production of shoes. society should produce more shoes to achieve the optimal allocation of resources.
society should produce fewer shoes to achieve the optimal allocation of resources.
Any point inside the production possibilities curve indicates Multiple Choice that resources are imperfectly substitutable among alternative uses. that more output could be produced with the available resources. the presence of technological change. the presence of inflationary pressures.
that more output could be produced with the available resources.
The movement from line A to line A' represents a change in Multiple Choice the intercept only. neither the slope nor the intercept. both the slope and the intercept. the slope only.
the intercept only.
A student will decide to attend class when there is an attendance policy. the marginal benefit is positive. the marginal benefit of attending exceeds the marginal cost of attending. the marginal cost is low.
the marginal benefit of attending exceeds the marginal cost of attending.
Which of the following indicates an inverse relationship between x and y? Multiple Choice y = 6.2x y = 7 - 0.9x y = -3 + 5x y = -50
y = 7 - 0.9x
Answer the question on the basis of the following information. Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment, so investment would be zero. But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion. If the interest rate were 12 percent, $20 billion would be invested. Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate. Refer to the information. Which of the following is an accurate verbal statement of the described relationship? There is no regular or dependable relationship between business investment and the interest rate. The amount of business investment is unaffected by changes in the interest rate. Investment spending by businesses varies inversely with the interest rate. Investment spending by businesses varies directly with the interest rate.
Investment spending by businesses varies inversely with the interest rate.
Which of the following best describes the concept of utility and economic behavior? Consumers' desires for products that are useful Satisfaction from consuming goods or services The effort required to generate income The trade-off between spending and saving
Satisfaction from consuming goods or services
If the opportunity cost of producing extra units of one good (expressed in terms of the amount of another good given up) remains constant, then the shape of the production possibilities curve is Multiple Choice a vertical line. an upward-sloping line. a straight downward-sloping line. a straight horizontal line.
a straight downward-sloping line.
a. Economic resources are the natural, human, and technological inputs used to produce goods and services. natural, technological, and manufactured inputs used to produce goods and services. natural, human, and manufactured inputs used to produce goods and services. technological, human, and manufactured inputs used to produce goods and services. b. Economists classify resources as labor, land, real capital, and entrepreneurs. labor, land, human capital, and entrepreneurs. labor, land, financial capital, and entrepreneurs. labor, resources, real capital, and entrepreneurs. c. Because economic resources are used to produce goods and services, they are called factors of production or inputs
a. natural, human, and manufactured inputs used to produce goods and services. b. labor, land, real capital, and entrepreneurs. c. factors of production or inputs
a. Why is money not considered to be a capital resource in economics? Money is not considered a capital resource because money is not productive Correct .b. Why is entrepreneurial ability distinct from labor even though both are considered as a category of economic resource? Because entreprenuerial ability is directly engaged in production Because entreprenuerial ability is not directly engaged in production c. What are the major functions of the entrepreneur? Instructions: Click in each box for a 'check-mark' for each correct answer and click again to clear the box for incorrect answers. Make routine pricing decisions Innovate Purchase capita Create market demand Take risks Make decisions
a. not productive b. Because entreprenuerial ability is not directly engaged in production c. Innovate; Take risks; Make decisions