Econ 202 Chapter 2 Quizzes

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

- a simplified description, or representation, of reality

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

A and C above (numbers exist and addition)

Which of the following can be derived from other assumptions about numbers. - Subtraction. - Multiplication. - Division - All of the above. - B and C above.

All of the above

Which of the following can be derived from other assumptions of economics: - Scarcity. - Tradeoffs. - Opportunity costs. - B and C above. - A and B above.

B and C above (tradeoffs and opportunity cost)

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. - 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. - Rising corn prices have increased the price of corn-based ethanol.

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

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

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

Which of the following is a positive economic statement? - 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 government should revamp the health care system. - 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.

In economics, the term ________ means "additional" or "extra.": - equity - allocative - optimal - marginal

Marginal

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? - The state of Texas is considering increasing funds for light-rail development to promote the use of public transportation. - 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. - Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.

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

________ occurs when the direction of cause and effect is mixed up in a study. - Omitted variable bias - Reverse causality - Adverse causality - Limited information bias

Reverse causality

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

Scarcity

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

Scarcity necessitates that people make trade-offs.

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. - The price of gasoline is too high. - When the price of gasoline rises, transportation costs rise.

The price of gasoline is too high.

Which of the following is a normative economic statement? - When the price of wheat falls, the quantity of wheat purchased rises. - 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. - The price of wheat is too low.

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

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

True

The revenue received from the sale of ________ of a product is a marginal benefit to the firm. - the total number of units - only profitable units - an additional unit - no units

an additional unit

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

are rational and respond to incentives.

Causation occurs when: - two variables tend to move in opposite directions. - change in one variable is the reason for the change in another variable. - change in one variable does not cause any change in another variable. - two variables tend to move in the same direction.

change in one variable is the reason for the change in another variable.

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

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. - satisfaction achieved when a consumer has had enough of a product. - extra satisfaction received from consuming one more unit of a product.

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

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

generates enjoyment or satisfaction

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

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: - make themselves as well off as possible. - do as little work as possible to survive. - consume as much as possible. - spend all their income.

make themselves as well off as possible.

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

marginal cost

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

opportunity cost

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

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: - there is no correlation between having health insurance and being overweight. - people with health insurance are less 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 more likely to be overweight than people without health insurance.

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

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

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. - equitably - selfishly - rationally - emotionally

rationally

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

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

The principle of opportunity cost is that: - taking advantage of investment opportunities involves costs. - the economic cost of using a factor of production is the alternative use of that factor that is given up. - the cost of production varies depending on the opportunity for technological application. - in a market economy, taking advantage of profitable opportunities involves some money cost.

the economic cost of using a factor of production is the alternative use of that factor that is given up.

Economists assume that rational people do all of the following except: - undertake activities that benefit others and hurt themselves. - respond to economic incentives. - 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.

Making optimal decisions "at the margin" requires: - making decisions according to one's whims and fancies. - making borderline decisions. - weighing the costs and benefits of a decision before deciding if it should be pursued. - making consistently irrational decisions.

weighing the costs and benefits of a decision before deciding if it should be pursued.