Macroeconomics (Review Intro Concepts)-Economics

______ is the study of the choices people make to attain their goals, given their scarce resources.

Economics

Why might studying economics be particularly good preparation for being the top manager of a corporation or a leader in government?

Economics teaches us how to look at the tradeoffs involved in every decision.

Every society faces trade-offs because we live in a world of scarcity. Suppose a student-athlete has the opportunity to earn $400,000 next year playing for a minor league baseball team, $900,000 next year playing for a European professional football team, or $0 returning to college for another year. The opportunity cost of the student-athlete returning to college next year is $_______ (Enter your response as integer)

900,000

A primary difference between macroeconomics and microeconomics is ...

Microeconomics examines individual markets (i.e. individual, households, and firms) while macroeconomics examines the economy as a whole.

What type of economic analysis is concerned with the way things ought to be?

Normative Analysis

A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payments by Medicare to nursing homes for short-term stays by patients that require therapy or care upon leaving hospitals. Assume the corporation is considering expanding the number of "Beds" it offers at its nursing homes. Given the changes to Medicare, if the marginal benefit of offering an additional bed is $5,000 and the marginal cost is $6,000 per bed, then the corporation __________ (should / should not) offer additional beds.

Should not.

The three economic questions that every society must answer are ...

What (and how much of the) goods will be produced, how will they be produced, and who will receive the goods?

Indicate whether each of the following is primarily a microeconomic or macroeconomic issue. a. The effect of higher cigarette taxes on the quantity of cigarettes sold. b. The effect of higher income taxes on the total amount of consumer spending. c. The reasons for the economies of East Asian countries growing faster than the economies of sub-Saharan African countries. d. The reasons for low rates of profit in the airline industry.

a. Microeconomic issue b. Macroeconomic issue c. Macroeconomic issue d. Microeconomic issue

Indicate which of the following statements represent positive analysis (analysis concerned with what is) and which represent normative analysis (analysis concerned with what ought to be). a. A 50-cent-per-pack tax on cigarettes will reduce smoking by teenagers by 12 percent. b. The federal government should spend more on AIDS research. c. Rising paper prices will increase textbook prices. d. The price of coffee at Starbucks is too high.

a. Positive analysis b. Normative analysis c. Positive analysis d. Normative analysis

Which of the following best describes scarcity? a. Prices of goods are very high. b. Unlimited wants exceed the limited resources available. c. Markets cannot properly allocate resources. d. Wants cannot by fulfilled and thus all goods must be rationed.

b. Unlimited wants exceed the limited resources available.

Which of the following is a normative economic statement? a. The state of Texas is considering increasing funds for light-rail development to promote the use of public transportation. b. With rising mortgage rates and rising unemployment rates, the number of unsold homes has increased. c. Rising global demand for coal has led to increases in the price of coal. d. Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.

d. Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.

Which of the following is NOT a step that economists use in developing a useful economic model? a. Formulate a testable hypothesis. b. Decide on the assumptions to be used in developing the model. c. Revise the model if it does not explain the data well. d. Use economic data to test the hypothesis. e. Make a value judgement about the merits of the hypothesis.

e. Make a value judgement about the merits of the hypothesis.

Scarcity is central to the study of economics because it implies that ...

every choice involves an opportunity cost.

Centrally planned economies allocate resources based on decisions by _________ (government / households / firms), while market economies answer these questions through decisions made by ________ (government / households and firms).

government; households and firms.

Examining why economies experience periods of recession is most likely an issue in ...

macroeconomics

Economics is the ______ _______ that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the ______ that influence and reconcile our choices.

social science; incentives

Opportunity cost is ...

the highest valued alternative that must by give up to engage in an activity.

Economists assume that people are rational in the sense that ....

they use all available information as they take actions intended to achieve their goals.