Chapter 1

Question 1

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

• Macroeconomics
• Normative economics
• Positive economics
• Microeconomics

Answer 1

Macroeconomics

Question 2

______ economic resources means limited goods and services

• Physical
• Tangible
• Insatiable
• Scarce

Answer 2

Scarce

Question 3

Positive economics

Answer 3

Focuses on the analysis of facts or data to establish scientific generalizations about economic behavior

Question 4

Utility

Answer 4

The satisfaction or pleasure obtained from consuming a good or service

Question 5

Economizing Problem

Answer 5

the need to make choices because economic wants exceed economic means

Question 6

Opportunity cost

Answer 6

The amount of other products that must be sacrificed to produce a unit of a product

Question 7

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

• by examining only marginal benefits
• by examining only marginal costs
• when opportunity costs are greater than marginal benefits
• when the marginal benefit is greater than the marginal cost

Answer 7

when the marginal benefit is greater than the marginal cost

Question 8

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

Answer 8

False

Question 9

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

• Negative economics
• Microeconomics
• Positive economics
• Macroeconomics

Answer 9

Microeconomics

Question 10

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

Answer 10

Macroeconomics

Question 11

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

• unlimited
• supply-driven
• limited
• reasonable

Answer 11

Unlimited

Question 12

True or false: Positive economics encourages value judgments.

Answer 12

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

Question 13

What is a budget line?

Answer 13

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

Question 14

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 utility problem
• a hypothesis
• the economizing problem
• ceteris paribus

Answer 14

The economizing problem

Question 15

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

• Taxes
• Spending
• Transfers
• Income

Answer 15

Income

Question 16

Which of the following are issues most explored in microeconomics?

• The level of public debt
• Measuring the price of specific goods
• Measuring total revenues of a firm
• The expenditures of a government entity
• Unemployment and inflation rates

Answer 16

• Measuring the price of specific goods
• Measuring total revenues of a firm
• The expenditures of a government entity

Question 17

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

Answer 17

Economic

Question 18

For better or worse, people have ______.

• few unsatisfied wants
• virtually unlimited income
• virtually unlimited wants
• extremely limited desires

Answer 18

virtually unlimited wants

Question 19

A consumer’s ______ line or constraint shows various combinations of two products that can be purchased with a specific amount of income

Answer 19

Budget

Question 20

The economizing problem

Answer 20

the need to make choices because economic wants exceed economic means

Question 21

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 many goods that can be produced given an unlimited amount of resources
• of two goods that can be produced given an unlimited amount of resources

Answer 21

of two goods that can be produced given a specific set of resources

Question 22

A production possibilities curve with an increasing slope is the result of which of the following?

• The law of increasing opportunity costs
• The scarcity of resources
• The other-things-equal assumption
• The economizing problem

Answer 22

The law of increasing opportunity costs

Question 23

Law Of Increasing Opportunity Costs

Answer 23

As the production of a good increases, the opportunity cost of producing an additional unit rises

Question 24

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

• economic growth
• scarce economic resources
• insatiable wants
• unlimited economic resources

Answer 24

Scarce economic resources

Question 25

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

Answer 25

the marginal benefit of the good equals the marginal cost

Question 26

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

Answer 26

a. Land

Question 27

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

Answer 27

c. points inside

Question 28

A ______ lists the different combinations of two products that can be produced with a specific set of resources, assuming full employment. a. consumption function. b. production possibilities table c. budget table d. production function

Answer 28

b. production possibilities table

Question 29

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

Answer 29

e. Production possibilities curve

Question 30

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

Answer 30

d. more goods with available resources

Question 31

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

Answer 31

c. the law of increasing opportunity costs

Question 32

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

Answer 32

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

Question 33

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

Answer 33

a) resources are being allocated efficiently

Question 34

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

Answer 34

a. A failure to achieve full employment

Question 35

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

Answer 35

a. Goods with the lowest opportunity costs

Question 36

Production possibilities Table

Answer 36

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

Question 37

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

Answer 37

c. Advances in technology

Question 38

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 present choice in production may result in lower future prospects for economic growth b. That its present choice in production may result in higher future prospects for economic growth c. That its future choice in production may result in higher present prospects for economic growth d. That its present choice in production has no effect on future prospects for economic growth

Answer 38

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

Question 39

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

Answer 39

d. the marginal benefit of the good equals the marginal cost

Question 40

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

Answer 40

c. Increase the quantities of capital and consumer goods available to society d. Circumvent the output limits imposed by its own production possibilities curve

Question 41

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

Answer 41

b. resources are being allocated efficiently