Chapter 1 warm up

Refer to the diagram. Technological advance that improves the ability to produce capital goods but not consumer goods is shown by the shift of the production possibilities curve from AB to CD. BE. AF. GH.

BE

You should decide to go to a movie if the marginal cost of the movie exceeds its marginal benefit. if the marginal benefit of the movie exceeds its marginal cost. if your income will allow you to buy a ticket. because movies are enjoyable.

if the marginal benefit of the movie exceeds its marginal cost.

According to economists, economic self-interest is a reality that underlies economic behavior. has the same meaning as selfishness. means that people never make wrong decisions. is usually self-defeating.

is a reality that underlies economic behavior.

Suppose you have a money income of $10, all of which you spend on Coke and popcorn. In the diagram, the prices of Coke and popcorn, respectively, are $.50 and $1.00. $1.00 and $.50. $1.00 and $2.00. $.40 and $.50.

$.50 and $1.00.

Which of the following is a positive statement? A humidity level of 90 percent is too high. It is too hot to run outside when the temperature exceeds 80 degrees. The temperature is 92 degrees today. Summer evenings are nice when it cools off to around 70 degrees.

The temperature is 92 degrees today.

The economic perspective entails irrational behavior by individuals and institutions. a comparison of marginal benefits and marginal costs in decision making. short-term but not long-term thinking. rejection of the scientific method.

a comparison of marginal benefits and marginal costs in decision making.

A person should consume more of something when its marginal benefit exceeds its marginal cost. cost exceeds its marginal benefit. cost equals its marginal benefit. benefit is still better.

benefit exceeds its marginal cost.

If an economy is operating inside its production possibilities curve for consumer goods and capital goods, it can only produce more consumer goods by producing fewer capital goods. can only produce more capital goods by producing fewer consumer goods. can produce more of both consumer goods and capital goods by using resources that are currently idle. must improve its technology to produce more output.

can produce more of both consumer goods and capital goods by using resources that are currently idle.

The study of economics is primarily concerned with keeping private businesses from losing money. demonstrating that capitalistic economies are superior to socialistic economies. choices that are made in seeking the best use of resources. determining the most equitable distribution of society's output.

choices that are made in seeking the best use of resources.

If an economy is operating on its production possibilities curve for consumer goods and capital goods, this means that it is impossible to produce more consumer goods. resources cannot be reallocated between the two goods. it is impossible to produce more capital goods. more consumer goods can only be produced at the cost of fewer capital goods.

more consumer goods can only be produced at the cost of fewer capital goods.

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 opportunity costs. marginal benefits that exceed marginal costs. imperfect information. normative economics.

opportunity costs.

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of resource scarcity and the necessity of choice. purposeful behavior. marginal costs that exceed marginal benefits. the trade-off problem that exists between competing goals.

purposeful behavior.

The output of digital music players should be reduced if marginal benefits exceed marginal costs. reduced if marginal costs exceed marginal benefits. increased if marginal costs exceed marginal benefits. reduced to zero if their unit costs exceed the unit costs of alternative products.

reduced if marginal costs exceed marginal benefits.

When an economy is operating under conditions of full employment, the production of more of commodity A will mean the production of less of commodity B because of the law of increasing opportunity costs. economic wants are insatiable. resources are limited. resources are specialized and only imperfectly substitutable.

resources are limited.

Economics may best be defined as the interaction between macro and micro considerations. social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity. empirical testing of value judgments through the use of logic. study of why people are rational.

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.