Econ 202 2.1-2.6 Study Set

Which of the following are assumptions of economics A. Scarcity. B. Tradeoffs C. Opportunity costs. D. All of the above. E. A and B above.

A. Scarcity.

Using basic assumptions you can determine A. Why markets are efficient. B. When markets are efficient. C. When government intervention helps or hurts economic performance. D. All of the above. E. A and B above.

D. All of the above.

Which of the following can be derived form other assumptions of economics A. Scarcity. B. Tradeoffs. C. Opportunity costs. D. B and C above. E. A and B above.

D. B and C above

Which of the following are assumptions needed for simple arithmetic A. Numbers exist. B. Multiplication. C. Addition. D. All of the above. E. A and C above.

E. A and C above.

Positive analysis is concerned with "what ought to be," while normative analysis is concerned with "what is." True False

False

Which of the following is a normative economic statement? The federal government is considering increasing regulations on the use of fossil fuels to promote the use of wind power. Rising corn prices have increased the price of corn-based ethanol. With rising home prices and falling mortgage interest rates, the amount of home foreclosures has decreased. Farmers should not be allowed to grow and sell genetically-modified crops.

Farmers should not be allowed to grow and sell genetically-modified crops.

Which of the following is a positive economic statement? The government should implement a national consumption tax. The U.S. government should increase regulations on the banking industry. If the price of beef falls, a larger quantity of it will be bought. The standard of living in the United States is too low.

If the price of beef falls, a larger quantity of it will be bought.

Which of the following is a positive economic statement? The U.S. government should not have bailed out U.S. auto manufacturers. If the price of iPhones falls, a larger quantity of iPhones will be purchased. The government should revamp the health care system. The standard of living in the United States should be higher.

If the price of iPhones falls, a larger quantity of iPhones will be purchased.

The video describes the steps in simple arithmetic as proceeding from Numbers to cardinal numbers to addition to subtraction to division to multiplication. Numbers to addition to subtraction to division to multiplication. Numbers to cardinal numbers to addition to subtraction to multiplication to division. Cardinal numbers to numbers to addition to multiplication to subtraction to division. None of the above.

Numbers to cardinal numbers to addition to subtraction to multiplication to division.

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

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

Which of the following is a positive economic statement? U.S. citizens should only buy products which are produced in the United States. The government should ban the production and sale of incandescent light bulbs. The government should revamp its immigration policies. Raising the tax on gasoline raises the selling price of gasoline.

Raising the tax on gasoline raises the selling price of gasoline.

Which of the following is a positive economic statement? Scarcity necessitates that people make trade-offs. Foreign workers should not be allowed to work for lower wages than the citizens of a country. The government should mandate electric automobiles. People should not buy SUVs.

Scarcity necessitates that people make trade-offs.

Which of the following statements is true? Models help economists to explain the past, but do not help in predicting the future. Testing with data enables economists to distinguish between good models and bad models. Models that economists use are perfect replicas of reality. The scientific method used by economists is based on idealism and not empiricism.

Testing with data enables economists to distinguish between good models and bad models.

Which of the following is a normative economic statement? When the price of gasoline rises, the quantity of gasoline purchased falls. The current high price of gasoline is the result of strong worldwide demand. When the price of gasoline rises, transportation costs rise. The price of gasoline is too high.

The price of gasoline is too high.

Which of the following is a normative economic statement? The price of wheat is too low. The current low price of wheat is the result of increased worldwide supply. When the price of wheat falls, the cost of wheat-based products falls. When the price of wheat falls, the quantity of wheat purchased rises.

The price of wheat is too low.

"An increase in the price of gasoline will increase the demand for hybrid vehicles." This statement is an example of a positive economic statement. True False

True

The additional cost to a producer of hiring an additional unit of labor is called the marginal cost. True False

True

When voluntary exchange takes place, both parties gain from the exchange. False True

True

A model refers to: a simplified description, or representation, of reality. a set of facts established by observation and measurement. facts, measurements, or statistics that describe the world. a perfect replica of reality.

a simplified description, or representation, of reality.

Consider the following statements: a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area. b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. c. Firms produce more of a particular DVD when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives? a only b only c only a and b a, b, and c

a, b, and c

Economists assume that individuals are rational and respond to incentives. prefer to live in a society that values fairness above all else. behave in unpredictable ways. will never take actions to help others.

are rational and respond to incentives.

Making "how much" decisions involves calculating the total costs of the activity and determining if you can afford to incur that expenditure. calculating the average benefit and the average cost of an activity to determine if it is worthwhile undertaking that activity. calculating the total benefits of the activity and determining if you are satisfied with that amount. determining the additional benefits and the additional costs of that activity.

determining the additional benefits and the additional costs of that activity.

The opportunity cost of going to an outdoor music festival is equal to the highest value of an alternative use of the time and money spent on the festival. the value of the time spent at the festival. the enjoyment you receive from going to the festival. the cost of the festival ticket only. zero because there are no overhead costs for an outdoor festival.

equal to the highest value of an alternative use of the time and money spent on the festival.

Economists assume that rational behavior is useful in explaining choices people make even though people rarely, if ever, behave in a rational manner. even though people may not behave rationally all the time. because irrational people do not make economic choices. because individuals act rationally all the time in all circumstances.

even though people may not behave rationally all the time.

Marginal utility is the total satisfaction received from consuming a given number of units of a product. average satisfaction received from consuming a product. extra satisfaction received from consuming one more unit of a product. satisfaction achieved when a consumer has had enough of a product.

extra satisfaction received from consuming one more unit of a product.

The highest valued alternative that must be given up to engage in an activity is the definition of economic equity marginal benefit marginal cost opportunity cost

opportunity cost

An item has utility for a consumer if it is something everyone else wants. has a high price. is scarce. generates enjoyment or satisfaction.

generates enjoyment or satisfaction

An omitted variable is a variable that: is purposely left out as it does not aid an economic analysis. has been left out, and if included, would explain why the variables considered in a study are correlated. does not cause other variables in a study to change when it changes. is removed from a study as it can lead to the problem of reverse causality.

has been left out, and if included, would explain why the variables considered in a study are correlated.

Economists assume that the goal of consumers is to consume as much as possible. spend all their income. make themselves as well off as possible. do as little work as possible to survive.

make themselves as well off as possible.

The extra cost associated with undertaking an activity is called foregone cost. marginal cost. opportunity cost. net loss.

marginal cost.

The extra cost associated with undertaking an activity is called marginal cost. foregone cost. opportunity cost. net loss.

marginal cost.

The best alternative use of a resource is referred to as its: sunk cost. market price. marginal utility. opportunity cost.

opportunity cost.

Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and therefore choose to invest in foreign markets. By using all available information as they act to achieve their goals, these investors are exemplifying the economic idea that people are rational. people respond to economic incentives. optimal decisions are made at the margin. equity is more important than efficiency.

people are rational.

Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles. These consumers who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that people are rational. people respond to economic incentives. optimal decisions are made at the margin. equity is more important than efficiency.

people respond to economic incentives.

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that people with health insurance are more likely to be overweight than people without health insurance. people with health insurance are equally likely to be overweight as people without health insurance. people with health insurance are less likely to be overweight than people without health insurance. there is no correlation between having health insurance and being overweight.

people with health insurance are more likely to be overweight than people without health insurance.

Economic models do all of the following except make economic ideas explicit and concrete for use by decision makers. answer economic questions. simplify some aspect of economic life. portray reality in all its minute details.

portray reality in all its minute details.

Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits. selfishly equitably rationally emotionally

rationally

By definition, economics is the study of how to make money in a market economy. how to make money in the stock market. supply and demand. the choices people make to attain their goals, given their scarce resources.

the choices people make to attain their goals, given their scarce resources.

A correlation between two variables implies that: there is a mutual relationship between both the variables. it is impossible to measure one variable without measuring the other. when one variable changes, the other variable always changes by exactly the same amount. there is a cause-effect relationship between the two variables.

there is a mutual relationship between both the variables.

Economists assume that rational people do all of the following except respond to economic incentives. undertake activities that benefit others and hurt themselves. use all available information as they act to achieve their goals. weigh the benefits and costs of all possible alternative actions.

undertake activities that benefit others and hurt themselves.