Econ 201: Chapter 1

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Microeconomics
Chapter 1
Limits, Alternatives, and Choices
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College: First year
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1

A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions is known as:

A. economic model
B. economic principle
C. economic theory
D. normative economic statement

A, B, C

2

True or false: A trade-off occurs when some quantity of production or consumption is given up in order to produce or consume another good or service.

True

3

All natural, human, and manufactured goods that go into the production of goods and services are considered society's _______ economic resources.

scarce

4

True or false: Economists classify economic resources into land, labor, money, and entrepreneurial ability.

False

5

Which of the following would be synonymous with land to an economist.

A. Water
B. Forests
C. Arable land
D. Sunlight
E. Oil and mineral deposits

A, B, C, D, E

6

From an economic standpoint, ______ includes all natural resources used in the production process.

A. Supply
B. Land
C. Labor
D. Capital

B

7

In addition to entrepreneurship, the resource of human ______ consists of the physical actions and mental activities that people contribute to the production of goods and services.

Labor

8

Factories, storage, transportation, and distribution facilities, as well as tools and machinery are all examples of physical ______ goods.

Capital

9

In economics, the term ______ describes spending that pays for the production and accumulation of capital goods.

A. Investment
B. Money
C. Expenses
D. Capital
E. Financial

A

10

An entrepreneur:

A. takes risks of earning profits or suffering losses from owning an enterprise
B. makes strategic business decisions that set the course of an enterprise
C. is employed by a large company
D. innovates
E. looks for the latests new products to copy

A, B, D

11

This _____ _____ table lists the different combinations of pizza and robots that can be produced with a specific set of resources.

A. budget possibilities
B. product budget
C. production function
D. production possibilities

D

12

A production possibilites curve illustrates the attainable combination:

A. of two goods the can be produced given an unlimited amount of resources
B. of two goods that can be produced given a specific set of resources
C. of many goods that can be produced given an unlimited amount of resources
D. of two goods that can be produced given a limited amount of income

B

13
card image

Which of the following scenarios are illustrated in this particular PPC?

A. An economy in full employment along the curve.
B. Attainable combinations of both goods below the curve.
C. Efficiency in production as points A-E.
D. Production at C being better than production at B.

B, C

14

The law of increasing _____ states that as production of a particular good increases, the cost of producing an additional unit rises.

A. demand
B. production
C. accounting costs
D. utility
E. opportunity costs

E

15

The four general categories of economic resources are:

A. labor
B. capital
C. currency and coins
D. natural resources
E. entrepreneurship

A, B, D, E

16

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

A. production possibilites table
B. production function
C. consumption function
D. budget table

A

17
card image

Which of the following scenarios are illustrated in this particular PPC?

A. Production at C bering better than production at B.
B. Attainable combinations of both goods below the curve.
C. Efficiency in production as points A-E.
D. An economy in full employment along the curve.
E. Unemployment at point W.

B, C, D

18

The law of increasing opportunity costs states that as production of a particular good _____, the opportunity cost of producing an additional unit _____.

A. rises; rises
B. rises; falls
C. fall; remains constant
D. falls; rises
E. falls; falls

A

19

Combinations of goods that fall on the production possibilities curve:

A. are attainable
B. utilize all of an economy's resource
C. represent economic growth
D. are efficiently produced
E. are unattainable
F. are inefficiently produced

A, B, D

20

For better or worse, people have virtually _____ wants.

A. utilitarian
B. maximum
C. unlimited
D. supply-driven
E. limited

C

21

The _____ problem refers to the need to make choices because economic wants exceed economic means.

economizing

22

_____ is the discipline that examines either the economy as a whole or its aggregates.

Macroeconomics

23

The disciple that studies the decision-making process of workers, households, firms, and government on an individual basis, rather than as aggregates is known as:

A. microeconomics
B. macroeconomics
C. normative economics
D. positive economics
E. economics
F. labor economics

A.

24

Everyone, even the very wealthy, has a _____ amount of income.

finite

25

Capital goods differ from consumer goods in that:

A. consumer goods satisfy want directly
B. capital goods or money enable the purchase of consumer goods
C. capital goods satisfy consumer wants indirectly through the production of consumer goods
D. consumer goods satisfy wants indirectly

A, C

26

Evaluate whether the following statement would apply to microeconomics or macroeconomics:

The consumer price index rose by 3 percent in 2007.

Macroeconomics

27

Evaluate whether the following statement would apply to microeconomics or macroeconomics:

The real GDP for the United States grew by 2.2 percent in 2007.

Macroeconomics

28

Evaluate whether the following statement would apply to microeconomics or macroeconomics:

The trade deficit between the U.S. and China grew between 2000 and 20009.

Macroeconomics

29

Evaluate whether the following statement would apply to microeconomics or macroeconomics:

An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise.

Microeconomics

30

Evaluate whether the following statement would apply to microeconomics or macroeconomics:

A U.S. software firm laid off 15 workers last month and transferred the work to India.

Microeconomics

31

Evaluate whether the following statement would apply to microeconomics or macroeconomics:

Recently, Chase Bank lowered its interest rate on business loans by 2 percentages points.

Microeconomics

32

The highest-valued alternative that is given up or sacrificed when choosing to produce or consume one good over another is referred to as:

A. an economic choice
B. an implicit cost
C. an explicit cost
D. an opportunity missed
E. a trade-off

D

33

Combinations of output that fall inside the production possibilities curve represent:

A. inefficient use of resources
B. proper output in an economy
C. goods that are unattainable
D. less total output in an economy
E. goods that are attainable

A, D, E

34

Normative economics is:

A. based on value-judgements
B. based on facts
C. based on the use of the scientific method
D. applicable only to macroeconomics

A

35

The concept or term the refers to the notion that all variables except those under immediate consideration are held constant for a particular analysis is known as:

A. the generalizations assumption
B. the purposeful simplification assumption
C. the scientific method
D. the other-things-equal assumption
E. ceteris paribus

D, E

36

A(n) _____ in income will shift the budget line to the left.

A. decrease
B. no change
C. increase

A.

37

In macroeconomics, an _____ is a collection of specific economic units treated as if they were one unit.

aggregate

38

Arable land, water, machinery and a professional baseball player are all considered scarce economic _____ to production.

resources


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