CH 1 & 2 HW

Question 1

The national unemployment rate

Answer 1

Macroeconomics

Question 2

The decision of a worker to work overtime or not

Answer 2

Microeconomics

Question 3

A family’s choice of having a baby

Answer 3

Microeconomics

Question 4

The rate of growth of the money supply

Answer 4

Macroeconomics

Question 5

The national government’s budget deficit

Answer 5

Macroeconomics

Question 6

A student’s allocation of study time across two subjects

Answer 6

Microeconomics

Question 7

The ultimate purpose of economics is

Answer 7

to study how individuals make choices

Question 8

What is the relationship between wants and resources

Answer 8

Resources are used to produce things that satisfy people’s wants

Question 9

Microeconomics is the part of economic analysis that studies decision making undertaken by _____ the behavior of _____

Answer 9

individuals and firms; the economy as a whole

Question 10

Economics is a social science that involves the study of how individuals chooseamong alternatives to satisfy their _____, which are what people would buy if their income were _____.

Answer 10

wants; unlimited

Question 11

_____, the study of the decision-making procsses if individuals (or households) and firms, and _____, the study of the performances of the economy as a whole, are the two main branches into which the study of economics is divided

Answer 11

Microeconomics; macroeconomics

Question 12

The economic system in which individuals and families own all of the scarce resources used in production, decide how and what to produce, and how many products to produce, is best described as a price system.

Answer 12

True

Question 13

The economic system in which a government establishes ownership of resources and issues rules for how to manage the production of products is best described as

Answer 13

a command and control system

Question 14

The three basic economic questions are _____ will be produced, _____ will items be produced, and for _____ will items be produced?

Answer 14

what and how much; how; whom

Question 15

Economics

Answer 15

assumes individuals are rational and respond to different incentives.

Question 16

In economics, we assume that peope _____ make decisions that will leave them _____off. This is known as the _____ assumption.

Answer 16

do not intentionally; worse; rationality

Question 17

Sebastian is a financial analyst who is convinced that his clients do not always make choices that are consistent with theirlong-term objectives. He has also determined that his clients do not consider every relevant choice and often fail to act in their ownself-interest. Does Sebastian perceive that hisclients’ behavior accords with the rationality assumption or the assumption of boundedrationality?

Sebastian perceives that hisclients’ behavior accords with the assumption of

Answer 17

Bounded rationality because they cannot examine and think through every possible choice they confront without help.

Question 18

A _____ uses assumptions and is by nature a simplification of the real world. Its usefulness can be evaluated by brining empirical evidence to bear on its predictions.

Most models use the _____ _____ assumption that all other things are held constant, or equal.

_____ economics emphasizes psychological constraints and complexities that potentially interfere with rational decision making. This approach utilizes the _____ _____ hypothesis that people are not quite rational, because they cannot study every possible alternative but instead use simple rules of thumb to decide among choices.

Answer 18

model

ceteris paribus

Behavioral

bounded rationality

Question 19

Which one of the following is a prositive statement?

Answer 19

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

Question 20

A higher minimum wage will reduce employment opportunities for minimum wage workers.

Answer 20

Positive economics

Question 21

Increasing the earnings of minimum wage employees is desirable, and raising the minimum wage is the best way to accomplish this

Answer 21

Normative economics

Question 22

Everyone should enjoy open access to healthcare

Answer 22

Normative economics

Question 23

Healthcare subsidies will increase the comsumption of health care.

Answer 23

Positive economics

Question 24

Each individual must make choices because

Answer 24

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

Question 25

______ is the situation in which human wants always exceed that can be produced with the limited resources and time that nature makes available.

Answer 25

Scarcity

Question 26

We use scarce resources, such as, _____, _____, _____ and _____ capital, and _____, to produce economic goods–goods that are desired but are directly obtainable from nature to the extent demanded or desired at a zero price.

Answer 26

land; labor; physical; human; entrepreneurship

Question 27

Based on the information provided, the opportunity cost to this student of allocating enough additional study time on economics to move her grade up from a 90 to 100 is a reduction in Biology grade of _____ points.

Economics                Biology
     100                           40
      90                           50
      80                           60
      70                           70
      60                          80
      50                          90
      40                         100

Answer 27

10

Question 28

The following table list the costs incurred by a student attending a public university for one semester. (Note: by attending college, the student will have to work fewer hours but will stay in his current appartment.)

Tuition and Fees $4,000
Room and Board $800
Books and supplies $600
Lost wages $7,500

What is the total opportunity cost that the student incurs by attending college for one semester?

Answer 28

$12,100

Question 29

Scarcity requires us to choose. Whenever we choose, we lose the _____-valued alternative.

Answer 29

next-highest

Question 30

Cost is always a forgone _____

Answer 30

opportunity

Question 31

Another way to look at opportunity cost is the trade-off that occurs when one activity is undertaken rather than the _____

Answer 31

next-best

Question 32

A _____ curve graphically shows the trade-off that occurs when more of one output is obtained at the sacrifice of another. This curve is a graphical representation of, among other things, opportunity cost

Answer 32

production possibilities

Question 33

A nation’s residents can allocate their scarce resources either to producing consumption goods or to producing human capital long dash—that is, providing themselves with training and education. The table to the right displays the production possibilities for this nation.

If the nation’s residents currently produce combination A, the opportunity cost of increasing the production of consumption goods by 10 units is ___ units of human capital.

If the nation’s residents currently produce combination E, the opportunity cost of increasing the production of consumption goods by 10 units is ___ units of human capital.

Does the law of increasing relative costhold true for this nation?

Production Units of Consumption Units of Human
Combination Goods Capital
A 0 100
B 10 97
C 20 90
D 30 75
E 40 55
F 50 30
G 60 0

Answer 33

3

25

yes

Question 34

Trade-offs are represented graphically by a _____ curve showing the maximum quantity of one good or service that can be produced, given a specific quantity of another, from a given set of resources over a specified period of time-for example, one year

Answer 34

production possibilities

Question 35

A production possibilities curve is drawn with the quantity and quality of all resources _____ over the time period under study.

Answer 35

fixed

Question 36

Points _____ the production possibilities curve are unattainable. Points _____ are attainable but represent an inefficient use or underuse of available resources.

Answer 36

outside; inside

Question 37

Because many resources are better suited for certain productive tasks than for others, the production possibilities curve are bowed _____, reflecting the law of increasing additional cost.

Answer 37

outward.

Question 38

Whenever a society forgoes current consumption in order to invest in capital goods,

Answer 38

the more the society can produce in the future.

Question 39

_____ goods are goods that will later be used to produce consumer goods.

Answer 39

Capital

Question 40

A trade-off is involved between current consumption and capital goods or , alternatively, between current consumption and future consumption. The _____ we invest in capital goods today, the greater the amount of consumer goods we can produce in the future and the _____ the amount of consumer goods we can produce today.

Answer 40

more

smaller

Question 41

You can wash, fold, and iron a basket of laundry in two hours and prepare a meal in one hour. Your roomate can wash, fold, and iron an basket of laundry in three hours and prepare a meal in one hour.

The absolute advantage in laundry is held by _____ and in meal preparation by _____.

The comparative advantage in laundry is held by _____ and in meal preparation by _____

Answer 41

you; neither

you; your roommate