Macroeconomics - Chapter 1

A point inside the production possibilities curve is __________, while a point outside the curve is __________. a. attainable; unattainable b. unattainable; attainable c. below the maximum possible; the maximum possible d. the maximum possible; below the maximum possible

a. attainable; unattainable

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

a. is a reality that underlies economic behavior.

When a nation is under-allocating resources to the production of a good, then the a. marginal benefit is greater than the marginal cost of the good. b. marginal benefit is less than the marginal cost of the good. c. marginal cost of producing the good is decreasing. d. marginal benefit of producing the good is increasing.

a. marginal benefit is greater than the marginal cost of the good.

Economics involves marginal analysis because a. most decisions involve changes from the present situation. b. marginal benefits always exceed marginal costs. c. marginal costs always exceed marginal benefits. d. much economic behavior is irrational.

a. most decisions involve changes from the present situation.

Assume an economy is incurring unemployment. The effect of resolving this problem will be to a. move the level of actual output closer to the economy's production possibilities curve. b. create a less equal distribution of income. c. shift its production possibilities curve to the left. d. shift its production possibilities curve to the right.

a. move the level of actual output closer to the economy's production possibilities curve.

When studying human behavior, economists assume rational self-interest. This means that: a. people make decisions based on some desired outcome. b. people are quite selfish and are not concerned about others. c. people always make the right decisions. d. people have all the information they need to make a decision.

a. people make decisions based on some desired outcome.

"Macroeconomics is the part of economics concerned with individual units, such as a person, a household, a firm, or an industry." This statement is a. positive but incorrect. b. positive and correct. c. normative but incorrect. d. normative and correct.

a. positive but incorrect.

In deciding whether to study for an economics quiz or go to a concert, one is confronted by the idea(s) of: a. scarcity and opportunity costs. b. money and real capital. c. complementary economic goals. d. full production.

a. scarcity and opportunity costs.

Opportunity costs exist because a. the decision to engage in one activity means forgoing some other activity. b. wants are scarce relative to resources. c. households and businesses make rational decisions. d. most decisions do not involve sacrifices or trade-offs.

a. the decision to engage in one activity means forgoing some other activity.

The economizing problem is a. the need to make choices because economic wants exceed economic means. b. how to distribute resources equally among all members of society. c. that people's means often exceed their wants. d. that people do not know how to rationally allocate resources.

a. the need to make choices because economic wants exceed economic means.

The production possibilities curve shows a. the various combinations of two goods that can be produced when society employs all of its scarce resources. b. the minimum outputs of two goods that will sustain a society. c. the various combinations of two goods that can be produced when some resources are unemployed. d. the ideal, but unattainable, combinations of two goods that would maximize consumer satisfaction.

a. the various combinations of two goods that can be produced when society employs all of its scarce resources.

Which of the following is not a main function of the entrepreneur? a. to make routine pricing decisions b. to innovate c. to assume the risk of economic losses d. to make strategic business decisions

a. to make routine pricing decisions

The optimal allocation of resources is found a. where MB = MC. b. at every point along a production possibilities curve. c. where the marginal benefit is at its greatest. d. where the marginal cost is at its lowest.

a. where MB = MC.

The budget line shows a. the amount of product X that a consumer is willing to give up to obtain one more unit of product Y. b. all possible combinations of two goods that can be purchased, given money income and the prices of the goods. c. the minimum amount of two goods that a consumer can purchase with a specific money income. d. all possible combinations of two goods that yield the same level of utility to the consumer.

b. all possible combinations of two goods that can be purchased, given money income and the prices of the goods.

The role of the entrepreneur in society is to a. provide capital to the firm, which the management combines with labor. b. bring the factors of production together and take the risks of producing output. c. control the land upon which all production takes place and to get the most rent. d. regulate what products are considered safe to market.

b. bring the factors of production together and take the risks of producing output.

If the production possibilities curve is a straight line, a. the two goods will sell at the same market prices. b. economic resources are perfectly substitutable between the production of the two goods. c. the two goods are equally important to consumers. d. equal quantities of the two goods will be produced at each possible point on the curve.

b. economic resources are perfectly substitutable between the production of the two goods.

The economizing problem for individuals is a consequence of the fact that a. economic means or incomes are greater than economic wants. b. economic wants are greater than economic means or incomes. c. positive economics is more important than normative economics. d. normative economics is more important than positive economics.

b. economic wants are greater than economic means or incomes.

The four factors of production are a. land, labor, capital, and money. b. land, labor, capital, and entrepreneurial ability. c. labor, capital, technology, and entrepreneurial ability. d. labor, capital, entrepreneurial ability, and money.

b. land, labor, capital, and entrepreneurial ability.

Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This example illustrates a. distorted priorities. b. opportunity costs. c. increasing opportunity costs. d. productive efficiency.

b. opportunity costs.

Scarcity a. persists only because countries have failed to achieve continuous full employment. b. persists because economic wants exceed available resources. c. has been solved in all industrialized nations. d. has been eliminated in affluent societies such as the United States and Canada.

b. persists because economic wants exceed available resources.

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

b. purposeful behavior

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

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

Purposeful behavior suggests that a. everyone will make identical choices. b. resource availability exceeds economic wants. c. individuals may make different choices because of different desired outcomes. d. an individual's economic goals cannot involve trade-offs.

c. individuals may make different choices because of different desired outcomes.

The Latin term "ceteris paribus" means a. that if event A precedes event B, A has caused B. b. that economics deals with facts, not values. c. other things equal. d. prosperity inevitably follows recession.

c. other things equal.

For economists, the word "utility" means a. versatility and flexibility. b. rationality. c. pleasure or satisfaction. d. purposefulness.

c. pleasure or satisfaction.

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 a. of the law of increasing opportunity costs. b. economic wants are insatiable. c. resources are limited. d. resources are specialized and only imperfectly substitutable.

c. resources are limited.

The distinction between microeconomics and macroeconomics is a. that microeconomics examines the beach, while macroeconomics looks at the sand, individual rocks, and shells, so to speak. b. so clear-cut that every topic can be readily labeled as either macro or micro. c. that microeconomics studies the behavior of individual consumers, workers, and firms, while macroeconomics studies the economy as a whole. d. that microeconomics seeks to obtain an overview, while macroeconomics observes the details of individual components.

c. that microeconomics studies the behavior of individual consumers, workers, and firms, while macroeconomics studies the economy as a whole.

Which of the following is considered an economic resource? a. the ice cream that kids buy at the ice cream parlor b. the HD-TV sets in people's homes c. the land that is designated as national parks by the government d. shoppers buying stuff at the mall

c. the land that is designated as national parks by the government

A production possibilities curve shows a. that resources are unlimited. b. that people prefer one of the goods more than the other. c. the maximum amounts of two goods that can be produced, assuming the full use of available resources. d. combinations of capital and labor necessary to produce specific levels of output.

c. the maximum amounts of two goods that can be produced, assuming the full use of available resources.

The alternative combinations of two goods that a consumer can purchase with a specific money income is shown by a. a production possibilities curve. b. a demand curve. c. a consumer expenditure line. d. a budget line.

d. a budget line.

A positive statement is one that a. is derived by induction. b. is derived by deduction. c. focuses on the best course of action and is based on value judgments. d. focuses on facts, descriptions, and theoretical relationships.

d. focuses on facts, descriptions, and theoretical relationships.

One major part of the opportunity costs of one's decision to go to college after high school graduation is the a. additional income that one can get if one had a college degree. b. education that one gets while in college. c. high-school diploma needed in order to apply for college. d. full-time job that one could have gotten instead of going to college.

d. full-time job that one could have gotten instead of going to college.

A normative statement is one that a. is based on the law of averages. b. applies only to microeconomics. c. applies only to macroeconomics. d. is based on value judgments.

d. is based on value judgments.

Any combination of goods lying outside of the budget line a. implies that the consumer is not spending all of the consumer's income. b. yields less utility than any point on the budget line. c. yields less utility than any point inside the budget line. d. is unattainable, given the consumer's income.

d. is unattainable, given the consumer's income.

The economizing problem faced by society is essentially one of deciding how to make the best use of a. limited economic resources to satisfy limited wants. b. unlimited economic resources to satisfy unlimited wants. c. unlimited economic resources to satisfy limited wants. d. limited economic resources to satisfy unlimited economic wants.

d. limited economic resources to satisfy unlimited economic wants.

Any point inside the production possibilities curve indicates a. the presence of technological change. b. that resources are imperfectly substitutable among alternative uses. c. the presence of inflationary pressures. d. that more output could be produced with the available resources.

d. that more output could be produced with the available resources.

In economics, the pleasure, happiness, or satisfaction received from a product is called a. marginal cost. b. rational outcome. c. status fulfillment d. utility

d. utility