Week 1: Introducttion

( ) is the study of how individuals and societies allocate scarce resources among many competing uses and how this decision-making affects the economy at large. (Enter one word in the blank.)

economics

___________________ is the study of how individuals and societies allocate scarce resources among many competing uses and how this decision-making affects the economy at large.

economics

Economics is about: Multiple choice question. how people make choices in a world of scarcity. the various types of insurance people can purchase. how people get wealthy. the ways in which consumers and producers negotiate.

how people make choices in a world of scarcity.

You are wasting resources that would be better spent elsewhere: Multiple choice question. if you continue producing when total benefit is less than total cost. if you continue producing when marginal benefit is greater than marginal cost. if you continue producing when marginal benefit is equal than profit. if you continue producing when marginal benefit is less than marginal cost.

if you continue producing when marginal benefit is less than marginal cost.

Wind energy is relatively _____________________(less/more) scarce than coal.

less

Optimization behavior implies that if the marginal benefit of an activity is ______ ______ its marginal cost, you should not engage in that activity. Multiple choice question. equal to greater than less than

less than

The study of macroeconomics( ) deals with how the whole economy can be affected by important national and global events - such as wars and natural disasters.

macroeconomics

When the marginal benefit equals the marginal cost, that stable level is referred to as an ________________________________level. (Remember - enter only one word in the blank.)

optimal

________________________________ is the idea that people make choices to maximize the overall benefit - or utility - of an action subject to its cost.

optimization

Self interest, marginal decisions, and optimization all form the basis of ____________________ decision making.

rational

Self-interest, marginal decision making, and optimization form the basis for: Multiple choice question. rational decision making. microeconomics. government intervention. macroeconomics.

rational decision making.

Every person's and every economy's standard of living relies on the effective use of ( )

resources

If you decide to produce at a level where marginal cost exceeds marginal benefit (MC > MB), there is a waste of ________________________ that could be better used somewhere else.

resources

Due to the ______ of natural resources, we cannot have all the housing and all the forests we may want. (Use one word for the blank.) Multiple choice question. supply abundance scarcity demand

scarcity

_______________________________ means that resources are limited.

scarcity

Marginal benefit is: Multiple choice question. the additional benefit associated with one more unit of an activity. the opportunity benefit associated with one more unit of an activity. the opportunity cost associated with one more unit of an activity. the total benefit associated with one more unit of an activity.

the additional benefit associated with one more unit of an activity

The marginal cost of an activity can be found by calculating the change in: Multiple choice question. total costs of the entire activity. total costs as the level of the activity increases by one unit. total benefits as the level of the activity increases by one unit. total benefits of the entire activity.

total costs as the level of the activity increases by one unit.

Every person's and - ultimately - every economy's standard of living depends on the effective use of resources. Multiple choice question. False True

true

Use your knowledge of relative scarcity to rank the following items from least scarce (top) to most scarce (bottom): Diamonds Drinking water Salt water

1 Salt Water 2 Drinking Water 3 Diamonds

Martin has given himself an entertainment budget of $5 per week. He has decided that each week he will spend that $5 by either attending a matinee movie at his local theater or downloading five songs by one of his favorite artists. What is the non-monetary opportunity cost of seeing a movie this week? Multiple choice question. Five songs One movie $5 One movie and five songs

Five songs Reason: By choosing to see a movie this week, Martin gives up the 5 songs he could have bought instead.

Money spent by a firm on machinery that is designed to improve future productivity is called:

Physical Capital

Evaluate the following statement: "I love ice cream. But I've eaten so much ice cream today, I can't possible eat another cup." Multiple choice question. The marginal cost of eating ice cream is negative. The total benefit of eating ice cream is negative. The marginal benefit of eating ice cream is falling. The marginal benefit of eating ice cream is rising.

The marginal benefit of eating ice cream is falling

If an activity is performed where the marginal benefit is greater than the marginal cost (MB > MC), there is: Multiple choice question. equilibrium. a net loss to the economy. a net gain to the economy. an opportunity cost.

a net gain to the economy

Because the world is characterized by scarcity, people must choose between different uses for the resources at their disposal. In economics, we refer to this as: Multiple choice question. common resources. allocating resources. spending resources. exhausting resources.

allocating resources.

At a local town council, people debated a proposal that would change the use of public space for recreational use by demolishing a skating park and building an arboretum. This is known as the problem of: Multiple choice question. locating scarce resources. overusing scarce resources. eliminating scarce resources. allocating scarce resources.

allocating scarce resources.

Individuals and businesses must choose between the different uses for their available resources. This is called ______ resources and is due to the concept of ______. Multiple choice question. allocating; scarcity scarcity; production production; scarcity exchanging; opportunity cost

allocating; scarcity

The more of a good or a service that is consumed in a given period of time, the lower the marginal _______________________ that is associated with each additional unit.

benefit

The more of a good or a service that is produced in a given period of time, the higher the marginal ________________________________ that is associated with each additional unit.

cost

As the amount of an activity increases, its marginal benefit: Multiple choice question. stays the same. increases. is infinite. decreases.

decreases

In economics - resources can also be called__________________________.

factors of production

As the amount of an activity increases, its marginal cost: Multiple choice question. is infinite stays the same. decreases. increases.

increases

The additional benefit associated with one more unit of an activity is the _____ benefit. Multiple choice question. total average absolute marginal

marginal

An economy should continue producing a good or a service so long as: Multiple choice question. marginal benefit exceeds marginal cost. marginal benefit is less than marginal cost. marginal benefit is equal to total benefit. total cost equals total benefit.

marginal benefit exceeds marginal cost

When you decide to turn off the bedroom light on your way to the kitchen so that you can save a little money on your electric bill, you are engaging in: Multiple choice question. marginal decision making. scarce decision making. active decision making. a calculated choice

marginal decision making

When you decide - after studying for three hours - that another hour of sleep is more beneficial to you than a fourth hour of studying, you are engaging in: Multiple choice question. marginal decision making. comparative decision making. a calculated choice. irrational decision making.

marginal decision making.

The value of the next-best forgone alternative is the ___________________________________ .

opportunity cost

Labor as a resource is defined as all _____________________ and ________________________ activity devoted to producing goods and services.

physical; mental

The comparison of the scarcity of one good, service, or resource to that of another is called _______________________scarcity." (Enter just one word in the blank.)

relative

Drinkable water is ______ water in general. Multiple choice question. as scarce as relatively more scarce than relatively less scarce than

relatively more scarce than

Tomatoes represent a small subset of food, so tomatoes are: Multiple choice question. as scarce as food in general. as abundant as food in general. relatively more scarce than food in general. relatively less scarce than food in general.

relatively more scarce than food in general.

Anything that is used to produce a good or a service - whether it is provided by nature or is manufactured - is a(n) ( ).

resource

Because resources are _____________________ (one word), they must be allocated between competing uses.

scarce

Economics is the study of how individuals and societies allocate ________________________________ resources among many competing uses. (Use one word for the blank.)

scarce

Economics studies how individuals and businesses make decisions in a world of (. )resources.

scarce

______________________-interest is the idea that people choose to do the things that interest them.

self

The idea that people choose to do the things that interest them is: Multiple choice question. self-interest. irrational. selfish. uncommon.

self-interest

Increasing marginal cost describes Multiple choice question. the direct relationship between the marginal cost associated with the use of a good or a service and the quantity produced. the inverse relationship between the marginal cost associated with the use of a good or a service and the quantity produced. the direct relationship between the marginal benefit associated with the use of a good or a service and the quantity produced. the inverse relationship between the marginal benefit associated with the use of a good or a service and the quantity produced.

the direct relationship between the marginal cost associated with the use of a good or a service and the quantity produced.

There is no incentive to either increase or decrease the level of the activity performed when: Multiple choice question. the marginal benefit equals the marginal cost. the marginal benefit equals the total cost. the total benefit equals the marginal cost. the total benefit equals the total cost.

the marginal benefit equals the marginal cost

Opportunity cost is defined as: Multiple choice question. the value of the opportunity that you give up when you choose one activity instead of another. the expected value of buying a good or a service. the marginal benefit minus the marginal cost. the financial cost of purchasing a good or a service.

the value of the opportunity that you give up when you choose one activity instead of another.

The marginal benefit of an activity can be found by calculating the change in: Multiple choice question. total benefits of the level of the activity. total benefits as the level of the activity increases by one unit. total costs of the level of the activity. total costs as the level of the activity increases by one unit.

total benefits as the level of the activity increases by one unit

The marginal benefit of an activity can be found by calculating the change in: Multiple choice question. total costs as the level of the activity increases by one unit. total benefits as the level of the activity increases by one unit. total costs of the level of the activity. total benefits of the level of the activity.

total benefits as the level of the activity increases by one unit.

If you continue producing when marginal benefit is less than marginal cost, you are: Multiple choice question. optimizing your use of resources. producing at the lowest cost. reducing scarcity. wasting resources that would be better spent elsewhere.

wasting resources that would be better spent elsewhere