Chapter 1 Quiz

What kind of relationship is shown in the​ graph?

A direct relationship

To which of the following​ household-type(s) does the phrase​ "unlimited wantsLOADING... and limited resourcesLOADING...​" ​apply? I. A​ low-income household II. A​ middle-income household III. A​ high-income household

Above all

"A reduction in income tax rates will result in more people working." Which of the following (initially assumed constant) could occur and this offset the stated outcome?

An increase in the outsourcing of jobs.

Which of the following is a true statement about​ self-interest as used in the study of​ economics?

Any action can be based on​ self-interest if the person has some reason for the action.

Economic models relate to the way people think rather than to the way people act.

FALSE

Suppose a student is trying to decide whether or not to take another economics class. Which of the following is not an aspect of the economic way of thinking that would apply in this​ decision-making process?

Flipping a coin.

Which of the following statements best demonstrates the concept of bounded ​rationality?

Individuals make short-run choices that are no consistent with their long-term goals.

Much of human behavior can be explained in terms of how individuals respond to changing incentives over time.

TRUE

The rationality assumption of economics is the assumption that people do not intentionally make decisions that would leave them worse off.

TRUE

Suppose that the U.S. federal government has borrowed​ $500 billion to expand its total spending on goods and services across the entire economy in an effort to boost by​ $500 billion the aggregate production by the​ nation's firms. Would we apply microeconomic or macroeconomic analysis to analyze this policy​ action?

We would apply macroeconomic analysis because this policy action would affect the behavior of the economy as a whole.

The three fundamental economic questions that a nation addresses in order to allocate​ society's scarce resources include all of the following ​except:

Why will the items be​ produced? Where the items will be produced?

A politician states​ "taxes should be raised to provide more spending on school lunch​ programs." This is

a normative economic statement.

An increase in the price of clothing will reduce the amount of clothing purchased. This is

a positive economic statement.

The economic way of thinking is best described as

an analytical framework enabling one to reach informed conclusions.

What kind of relationship is shown in the graph?

an inverse relationship.

Economics

assumes individuals are rational and respond to different incentives.

Economic models

can be used to explain or predict economic phenomena.

During her years of​ college, Dominique discovered that her three favorite subjects were​ astronomy, chemistry, and political science. She chose to major in astronomy because she had seen data indicating that science majors earn​ higher-than-average wages and because she liked astronomy better than both chemistry and political science. Upon​ graduation, however, she learned that average wages in chemistry fields were 20 percent higher than average wages earned by astronomers. Did​ Dominique's behavior violate the rationality​ assumption? ​Dominique's decision to major in astronomy

did not violate the rationality assumption because she preferred ​astronomy, and​ because, at the time she made her​ decision, data showed science majors earn​ higher-than-average wages.

Microeconomics is the part of economic analysis that studies decision making undertaken by​ ________. Macroeconomics is the part of economic analysis that studies the behavior of​ ________.

individuals and forms; the economy as a whole

The rationality assumption implies that

individuals will not intentionally make decisions that leave them worse off.

Based on the recommendation of a​ friend, you buy a ticket and attend a movie with high expectations. After seeing the​ movie, you think that it is the worst film ever made and that it was a complete waste of money. This situation

is consistent with rational behavior because you had thought that you were going to like the movie.

The impact of the national debt on the​ economy's unemployment is an example of

macroeconomics analysis.

The intersection of the x axis and the y axis is called the

orgin

The ceteris paribus assumption means

other things equal. ​"other things​ constant."

An economic model

should capture only the essential relationships that are sufficient to analyze a particular problem or answer a particular question.

Some people claim that the​ "economic way of​ thinking" does not apply to issues such as health care. All of the following choices clearly demonstrate how economics applies to this​ issue, except when

the individual decides against health care as it may make him better off.

The ultimate purpose of economics is

to study how individuals make choices.

One of your​ classmates, Sally, is a hardworking​ student, serious about her​ classes, and conscientious about her grades. Sally is also​ involved, however, in volunteer activities and an extracurricular sport. Is Sally displaying rationalLOADING... ​behavior?

​Yes, she is using her time allocated among​ school, studying, sports and volunteer work in a manner she deems best.