Econ (Micro) Ch1

In the 1970s, the Organization of Petroleum Exporting Countries (OPEC) tripled the price of petroleum, causing automobile manufacturers to look for ways to produce more fuel-efficient cars by substituting aluminum and plastic for steel. This was primarily a response to the economic question of:

How should goods and services be produced?

The branch of economics that examines the choices of consumers and firms is:

Microeconomics

True/False: A theory or model is a simplification of reality, in much the same way that a road map shows only those features needed to get from one point to another.

True

True/False: Anything that has alternative uses has an opportunity cost and is, therefore, scarce.

True

True/False: Economists attempt to discover explanations for events that are observed.

True

True/False: The fallacy of false cause is committed when a person mistakenly assumes that one event causes another because the first event precedes the second.

True

True/False: The value of the next-best choice not chosen is called opportunity cost

True

Anything whose value can change is a:

Variable

The BEST example of making a choice at the margin is:

a coffee drinker drinking another cup of coffee

A proposition about the relationship between two variables that can be proven false is called:

a hypothesis.

The primary emphasis in macroeconomics is on:

aggregates in the economy.

Ceteris paribus means:

all other things unchanged.

An example of a positive statement is:

an increase in investment spending tends to reduce unemployment..

A basic assumption used in many economic models is:

ceteris paribus, which means all other things remain unchanged.

Economists are:

concerned with developing theories and interested in solving problems.

A scarce resource is one that:

has two or more alternative uses.

The scientific method is more difficult for economists than, say, chemists, because:

1) controlled laboratory conditions are more problematic in economics. 2) it is difficult to hold other factors that may affect the variables being studied constant in economics. 3) economic conditions may change quickly and unexpectedly.

A feature that distinguishes economists' approach to making choices is (are):

1)assigning opportunity costs a major role in their analyses of choices. 2) assuming individuals make choices to maximize objectives. 3)emphasizing that choices are made at the margin.

True/False: An attempt should always be made to maximize opportunity cost.

False

True/False: Microeconomics is a branch of economics that examines the impact of choices on aggregates in the economy.

False

True/False: The existence of alternative uses for a resource implies it isn't scarce.

False

True/False: The situation when we face alternative choices is called abundance.

False

The Case in Point on earnings of economics majors made all of the following points EXCEPT:

Firms that use maquiladoras have transferred from the United States to Mexico the stages of the manufacturing process that use more machinery and less labor.

The current rate of unemployment is 5 percent. This statement:

is positive.

Economists concerned about economy-wide trends in the unemployment of labor, the rate of inflation, and the level of economic production are studying:

macroeconomics.

The economic way of thinking has to do with:

making choices at the margin.

The study of a single firm and how it determines prices would fall under:

microeconomics.

Each of the following statements about the use of models in the study of economics is true EXCEPT:

models fit the observed facts exactly.

Most economists' disagreements are a result of:

normative considerations.

The statement that the minimum wage needs to be increased is a:

normative statement.

The sacrifice of an alternative is called:

opportunity cost.

A hypothesis is an assertion that can be:

proven to be false.

A systematic set of procedures through which knowledge is created is:

the scientific method.

The observed correlation between baldness and heart disease demonstrates that:

there is probably some other factor that causes both baldness and heart disease.

A normative statement deals with:

what ought to be.

Macroeconomics deals with:

the analysis of the aggregate values in the economy

The answer to, "What goods are to be produced ?" deals with:

the kinds and quantities of goods and services produced.

True/False: A good is scarce if we must sacrifice something to obtain it.

True

An example of a normative statement is:

Everyone in the country needs to be covered by national health insurance.

Microeconomics is most likely to be concerned with the:

economic behavior of specific parts or units of the economy.

Many disagreements among economists result because:

economists sometimes make normative judgments.

The models used in economics:

emphasize basic relationships by abstracting from complexities in the everyday world.

The incorrect presumption that because two events tend to occur together, one must cause the other is the:

fallacy of false cause.

true/false: The situation when we face alternative choices is called abundance.

false

A person who mistakenly assumes that because one event follows another, the second event results from the first commits the fallacy of:

false cause.

When we are forced to make choices we are facing the concept of:

scarcity.

Economics is a:

social science that deals with making choices among alternatives.

Positive statements are:

statements that can be tested.

The Case in Point on earnings of economics majors provides data that indicates:

students who major in economics tend to have higher earnings than those who major in other social sciences..