Chapter 1

marginal analysis

The comparison of marginal ("extra" or "additional") benefits and marginal costs, usually for decision making.

A production possibilities curve with an increasing slope is the result of which of the following? The scarcity of resources The economizing problem The law of increasing opportunity costs The other-things-equal assumption

The law of increasing opportunity costs

scarcity

The limits placed on the amounts and types of goods and services available for consumption as the result of there being only limited economic resources from which to produce output; the fundamental economic constraint that creates opportunity costs and that necessitates the use of marginal analysis (cost-benefit analysis) to make optimal choices.

utility

The want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service (or from the consumption of a collection of goods and services).

Which statement best describes combinations of goods that are beyond the production possibilities curve? They are efficiently produced. They are inefficiently produced. They are attainable. They are unattainable.

They are unattainable.

True or false: A decrease in income will shift the budget line to the left.

True. A decrease in income will shift the budget line to the left and an increase in income will shift the budget line to the right.

True or false: A trade-off occurs when some quantity of production of a good is given up in order to produce another good.

True. Because: A common error is to perceive this situation as describing opportunity cost. However, opportunity cost is the value or cost associated with any trade-off.

The following statement best describes_______. The satisfaction or pleasure obtained from consuming a good or service.

Utility

the following describes _________ A curve showing various combinations of two products a consumer can purchase with a specific amount of income.

a budget line

Suppose you are given a $100 gift card and you choose to spend it on a number of goods. You will select a combination of goods that is best for you and that maximizes your satisfaction. Your choices will involve which of the following? a. A comparison of marginal benefits and marginal costs for each good considered b. An evaluation of the unlimited resources used in the production of each good considered c. The available supply of each good considered d. A decision between attainable and unattainable combinations of the goods under consideration

a. A comparison of marginal benefits and marginal costs for each good considered

Which of the following is a result of having scarce economic resources for the production of goods and services? a. Fewer options that require choices b. Poverty and unequal distribution of wealth c. The production of unlimited goods and services d. Deflation

a. Fewer options that require choices

Which of the following are ways of expressing the meaning of ceteris paribus?

- Assuming things remain constant - Assuming factors other than those being considered in a particular analysis do not change

What are the 4 categories of economic resources?

1. Land 2. Labor 3. Capital 4. Entrepreneurial Ability

A point that lies inside the production possibilities curve reflects which of the following? An efficient use of resources Unattainable combinations of output A failure to achieve full employment Too many resources being allocated to the production of one good

A failure to achieve full employment

Economic perspective

A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions.

Which of the following enables society to produce more goods with current resources? Decreases in entrepreneurial ability Decreases in labor Advances in technology Increases in population

Advances in technology

What does every point on a budget line graph represent?

All combinations of goods that can be purchased with a given income

______ economics considers the desirability of certain aspects of the economy and underlies expressions of support for particular economic policies. A. Macroeconomics B. Positive economics C. Normative D. Microeconomics

C. Normative

Factories, storage, transportation, and machinery are all examples of ______ goods.

Capital

If economists examine the relationship between the price of a good and the sales of that good while ignoring other related factors, or assuming those other factors are equal, they are using which of the following?

Ceteris paribus

Select all that apply Which of the following combinations are attainable given a consumer's budget line? Combinations that fall on the budget line Combinations falling only on the Y-axis Combinations that fall beyond the budget line Combinations that fall inside the budget line

Combinations that fall on the budget line Combinations that fall inside the budget line Combinations on the midpoint of the budget line, Combinations that fall on the budget line, Combination involving the entire consumption of one good and zero consumption of the other good, and Combination that fall inside the budget line.

A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions is known as a(n) ______.

Economic Principle

Taken together, the four general categories of economic resources (land, labor, capital, and entrepreneurial ability) are referred to as which of the following? Opportunity cost Factors of production Other-things-equal assumption Economizing problem

Factors of production

True or false: Everyone except for the super wealthy has a finite, or limited, amount of income.

False. Because: Everyone has a finite amount of income, including the super-rich.

True or false: Economists use the terms "capital" and "money" interchangeably.

False. Reason: The term "capital" as used by economists does not refer to money.

True or false: Positive economics encourages value judgments.

False. because: Positive economics avoids value judgments, instead seeking to empirically describe the facts of the case.

When a country engages in international specialization, it focuses on producing which of the following? Goods with the highest opportunity costs Goods that minimize utility Goods whose marginal costs exceed their marginal benefits Goods with the lowest opportunity costs

Goods with the lowest opportunity costs

______ comes in the form of wages, interest, rent, profit, and even from government programs.

Income

Which of the following can be stated as potentially true about any economy? Increased supplies of the factors of production will only affect its current location on its production possibilities curve. Increased supplies of the factors of production will cause its future location on the curve to expand inward. Its future location on its production possibilities curve has no bearing on its current decisions. Its current choice of position on its production possibilities curve helps determine the curve's future location.

Its current choice of position on its production possibilities curve helps determine the curve's future location.

What do economists call the physical actions and mental activities that people contribute to the production of goods and services?

Labor

Which discipline studies the economy as a whole or its basic subdivisions or aggregates?

Macroeconomics

Which discipline studies the decision-making process of customers, workers, households, and business firms on an individual basis rather than as aggregates?

Microeconomics

Select all that apply Which of the following resources would be considered to be land by an economist? Oil and mineral deposits Forests Water Arable land Factories

Oil and mineral deposits Forests Water Arable land

Which of the following illustrates the attainable combination of two goods that can be produced given a specific set of resources? Budget line Budget constraint Demand and supply curve model Production possibilities curve Opportunity cost

Production possibilities curve

______ economic resources means limited goods and services.

Scarce

The ratio of the price of two goods on a graphed budget line is measured by its ______________ . (Enter one word in the blank.)

Slope

Select all that apply Specializing and participating in international trade allows an economy to do which of the following? a. Increase the quantities of capital and consumer goods available to society b. Get more of a desired good by sacrificing greater amounts of some other good c. Circumvent the output limits imposed by its own production possibilities curve d. Divert high-skilled resources toward low-valued services

a. Increase the quantities of capital and consumer goods available to society. Reason: International specialization allows a nation to sacrifice less to get more of a desired good than it would without trade. c. Circumvent the output limits imposed by its own production possibilities curve Reason: International specialization means directing domestic resources to output in which a nation is highly efficient.

For better or worse, people have ______. a. virtually unlimited wants b. extremely limited desires c. virtually unlimited income d. few unsatisfied wants

a. virtually unlimited wants

land

any and all natural resources ("free gifts of nature") that are used to produce goods and services. these include: forests, mineral and oil deposits, water resources, wind power, sunlight, and arable land. ... oceans, sunshine, coal deposits, forests, the electromagnetic spectrum, and fisheries *land is one of the four economic resources.

Positive economics ______ value judgments, tries to establish ______ statements about economic behavior, and deals with ______ economic events.

avoids; scientific; actual Positive economics _avoids_ value judgments, tries to establish _scientific_ statements about economic behavior, and deals with _actual_ economic events.

Which of the following combinations are unattainable given a consumer's budget line? a. A combination that intersects either of the axes b. Combinations that fall beyond the budget line c. Combinations that fall on the budget line d. Combinations that fall inside the budget line

b. Combinations that fall beyond the budget line

Suppose an economy produces consumer goods and capital goods. Its current combination of production involves a higher level of capital goods than consumer goods. Which of the following can be inferred from this current choice on its production possibilities curve? a. That its future choice in production may result in higher present prospects for economic growth b. That its present choice in production may result in higher future prospects for economic growth c. That its present choice in production may result in lower future prospects for economic growth d. That its present choice in production has no effect on future prospects for economic growth

b. That its present choice in production may result in higher future prospects for economic growth

Normative economics is ______.

based on value judgments

A consumer's ________________ line or constraint shows various combinations of two products that can be purchased with a specific amount of income. (Enter one word in the blank.)

budget

Select all that apply Which of the following are issues most explored in microeconomics? a. The level of public debt b. Unemployment and inflation rates c. The expenditures of a government entity d. Measuring the price of specific goods e. Measuring total revenues of a firm

c. The expenditures of a government entity d. Measuring the price of specific goods e. Measuring total revenues of a firm

An increase in income will ______. a. shift the budget line to the left b. cause a movement up the budget line c. shift the budget line to the right d. cause a movement down the budget line

c. shift the budget line to the right

For economists, ______ goods include all manufactured aids used in producing consumer goods and services.

capital

All natural resources, human resources, and manufactured goods that go into the production of goods and services are considered as society's scarce ____________ resources.

economic

In developing economic theories, principles, or models, economists ______.

economists remove the clutter and simplify

The ________ problem refers to the need to make choices because economic wants exceed economic means. (Enter one word in the blank.)

economizing

What is the simplified term economists use to refer to "factors of production"? inputs capital goods investment outputs

inputs

People desire goods and services that provide maximum utility. In fact, our desires or wants are:

instaible and Unlimited

The work-related activities of a teacher and doctor fall under the resource category of ___________ .

labor

From an economic standpoint, ______ includes all natural resources used in the production process. labor supply capital land

land

______ is the discipline that examines the performance and behavior of an economy as a whole.

macroeconomics

Economists do not include money as an economic resource because ______.

money produces nothing Reason: Money only facilitates the purchase of economic resources.

Improvements in the methods of production allows for the creation of ______. more goods with available resources the same amount of goods utilizing more resources fewer goods with more resources fewer goods with fewer resources

more goods with available resources

A production possibilities curve (PPC) illustrates the attainable combination ______. of two goods that can be produced given a limited amount of income of two goods that can be produced given a specific set of resources of two goods that can be produced given an unlimited amount of resources of many goods that can be produced given an unlimited amount of resources

of two goods that can be produced given a specific set of resources Reason: It is true that two goods are illustrated on the graph. However, these two goods are meant to represent (imply) the combinations of the many goods that can be produced in an economy given a set of resources.

Points lying ______ the production possibilities curve represent greater, but unachievable levels of output with current inputs, than that at any point on the curve. along outside inside midpoint of at the axis of

outside

Unemployment in the economy is graphically represented by ______ the production possibilities curve. a movement outside a rightward shift of points inside a change to a new point on

points inside

This ______ table lists the different combinations of pizza and robots that can be produced with a specific set of resources. budget possibilities production possibilities production function product budget

production possibilities

A ______ lists the different combinations of two products that can be produced with a specific set of resources, assuming full employment.

production possibilities table

When an economy produces a good such that the marginal benefit equals the marginal cost, this indicates that ______. society's well-being would increase by decreasing the output of the good resources are being allocated efficiently society would be better off by increasing the output of the good the unemployment rate is at its minimum

resources are being allocated efficiently

Land and mineral resources, transportation and communication facilities, factories and farm buildings, equipment, and tools and machinery are all examples of:

scarce economic resources.

Your next-door neighbors want to go on a European vacation but cannot afford it. So they decide to visit a local amusement park instead. This is an example of:

the economizing problem

The outward bowing shape of the production possibilities curve is due to ______. the law of increasing opportunity costs the diminishing marginal benefits the law of diminishing marginal utility the law of decreasing opportunity costs

the law of increasing opportunity costs

The optimal allocation of resources occurs when ______. the marginal cost of producing the good is equal to zero the marginal benefit of the good is greater than the marginal cost the production of the two goods is equal the marginal benefit of the good equals the marginal cost

the marginal benefit of the good equals the marginal cost

In this figure, obtaining more books by giving up some movies is called a(n) ______; whereas losing two books in order to gain 1 movie is referred to as ______.

trade-off; an opportunity cost

The pleasure, satisfaction, or happiness obtained from consuming a good or service is known as______.

utility

Because consumers behave in a rationally self-interested manner, the consumer will purchase a good or service ______.

when the marginal benefit is greater than equal to the marginal cost