Chapter 1: Exploring Economics

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

in conflict with one another

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.

III only

Which statement is a key idea in economic thinking?

Incentives matter.

The economics of uranium mining would be studied in:

microeconomics.

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a:

model.

Rational behavior requires "thinking at the margin." Which of the following is an example of this type of thinking?

All of these are examples of thinking at the margin. ✔ deciding whether a second burger is worth the extra $2 ✔ deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery ✔ deciding whether the overtime pay is worth working on your day off

Which of the following is NOT an example of market failure?

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

Which is TRUE about specialization and exchange between two individuals?

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

Paying a salesperson more for increased sales is an example of:

an incentive.

Supply and demand analysis is used:

in both microeconomics and macroeconomics.

Scarcity:

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 chosen 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:

production efficiency.

The opportunity costs of attending college do NOT include:

the expenditures for food.

Macroeconomics is concerned with issues such as:

unemployment.

Because of scarcity:

we face tradeoffs in nearly every choice we make.