ECON 2105 Exam 1

For every 10 exam points Myrna must earn in order to pass her economics course and meet her graduation​ requirements, she will study one additional hour for her economics test next week.

Based on the rationality assumption

deals with the fact that individual choices can be affected by psychological limitations.

Behavioral Economics

Italy and Malaysia are countries that trade with each other. If Italy has a comparative advantage in cell phones and Malaysia has a comparative advantage in hats​, which of the following is a correct statement about the effects of trade between these​ nations?

Both countries are likely to be better​ off, and world production will increase.

In the above graph, which of the following combinations is unattainable with the current resources available in this country?

Combination G

According to the law of increasing additional​ cost, the opportunity cost of producing

Corn is likely to increase as society tries to produce more corn.

According to the rationality assumption, people:

Do not intentionally make decisions that would leave them worse off.

Suppose a government official is trying to decide whether or not to allow more immigration. 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 countries has an economy where most of the resource allocation is determined by a central planning authority?

North Korea

Which one of the following is a positive​ statement?

The Fed has cut the key interest rate several times this year.

Macroeconomics focuses on which of the following topics?

Unemployment, inflation, growth, and trade

In economic terms, a(n) is the total amount of some good or service.

aggregate

Understanding economics can help policymakers devise strategies to do all of the following except:

eliminate climate change

Economics is the study of choice under conditions of:

scarcity

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.

When nations specialize in their comparative advantage and engage in trade:

the overall standard of living increases

Current production of capital goods means that

the production possibilities curve can be expected to shift outward in the future.

In​ economics, resources are

things used to produce items of value

Using information in the previous table, what is country A's opportunity cost of producing 1 unit of clothing?

2 units of food

In the graphs shown, which country has a comparative advantage in the production of shirts?

Country B

In the above graph, which of the following combinations of pies and cakes is unattainable given the existing resources?

Four cakes and seven pies

Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer?

How do we produce the products?

What is a positive economics statement?

If the price of gasoline goes up relative to all other prices, then the amount of it that people buy will fall.

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

Individuals make​ short-run choices that are not consistent with their​ long-term goals.

Which of these covers the study of topics such as inflation and unemployment?

Macroeconomics

Which of the following best demonstrates the concept of​ scarcity?

Michael has enough money to buy a CD or a book, not both

__________ is the study of how households and businesses make choices, how they interact in markets, and how government influences their choices.

Micoreconomics

Refer to the previous graph. Which of the following best represents the situation in which BMW must face a trade-off between producing SUVs and producing hybrids?

Moving from point B to C

If you receive a free ticket to a​ concert, what, if​ anything, is your opportunity cost of attending the​ concert?

The next best activity that​ can't be done while attending the concert.

Which of these is a macroeconomic study?

The study of how fast prices in general are rising.

You and your neighbor pick apples and cherries. If you can pick apples at a lower opportunity cost than your neighbor can, which of the following is true?

You have a comparative advantage at picking apples

When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?

a market

If the president of Columbia commented that "we should do something to reduce inflation in Columbia," this would be an example of:

a normative statement

The outward shift of the production possibilities frontier from point A to point B in the above graph would most likely be caused by:

a technological advance that affects both the production of automobiles and aircraft carriers

The ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources is known as:

absolute advantage

According to the theory of comparative advantage, specialization and free trade will benefit:

all trading partners who specialize in goods where they have comparative advantage

Ms. Boulware is the best lawyer and the best secretary in town. She has:

an absolute advantage in both jobs

Using real world data to test a hypothesis is known as;

an empirical test

The hypothesis that people cannot always make completely rational decisions by examining every possible choice but instead use of rules of thumb to guide them is known as;

bounded rationality

Economic models

can be used to explain or predict economic phenomena.

The factors of production include land, labor and:

capital

Economic models often simplify the real world by holding all things equal and changing one variable to determine the impact of the change. The "all things equal" assumption is also known as:

ceteris paribus

A centrally planned economy is also referred to as a;

command and control economy

Countries gain from specializing in producing goods in which they have a(n) __________ advantage and trading for goods in which other countries have a(n) __________ advantage.

comparative, comparative

If a country has a comparative advantage in the production of a good, then that country:

has a lower opportunity cost in the production of that good

Economics is best defined as the study of

how people allocate limited resources to satisfy unlimited wants.

​Recently, a bank was trying to decide what fee to charge for​ "expedited ​payments"long dash payments that the bank would transmit extra speedily to enable customers to avoid late fees on cable TV​ bills, electric​ bills, and the like. To try to determine what fee customers were willing to pay for expedited​ payments, the bank conducted a survey. It was able to determine that many of the people surveyed already paid fees for services that exceeded the maximum fees that they said they were willing to pay. This illustrates that

it is important to focus on what rational individuals actually do rather than what they say they will do.

Kyla is buying clothes. She can choose between blue jeans​, khaki pants​, and black jeans. She​ doesn't like black jeans​, and after some​ thought, she chooses blue jeans. What is the opportunity cost of this​ choice?

khaki pants

The resources provided by nature and used to produce goods and services are also known as:

natural resources

Which of these is NOT an essential component of an economic model?

normative statements

What is the name given to the highest-valued alternative that must be given up to engage in any activity?

opportunity cost

Absolute advantage is the ability of an individual, firm, or country to:

produce more of a good or service than competitors using the same amount of resources

Each individual must make choices because

resources are limited and therefore cannot satisfy one's many competing wants.

The principle of opportunity cost evolves from the concept of:

scarcity

Economists assume that an individual acts as if motivated by

self-interest

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the _ the payoff to devoting additional resources to that activity.

smaller

The role of the entrepreneur always involves:

taking risks

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

What and how much will be​ produced? How will the items be​ produced? For whom will the items be​ produced?

Which of the following is not generally considered to be a resource​ (factor of​ production)?

a U.S. Treasury Bond

In what type of economy does the government decide how economic resources will be allocated?

a centrally planned economy

The global trend towards large multinational firms is partially driven by __________.

comparative advantage

Economics:

is concerned with how people respond to incentives

The assumption of bounded rationality suggests that people might use rules of thumb to guide their decision making because

people can not examine every possible choice available to them.

One basic underlying principle in economics is that;

people respond to incentives

The stock of computers, factory buildings and machine tools used to produce goods is known as:

physical capital

Which of the following is not a possible opportunity cost of attending college?

the cost of housing

In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?

the division of labor

Macroeconomics can be used to understand all of the topics listed below, except:

what decides if a consumer will buy a car or not