CH 1 & 2 HW Flashcards
HOMEWORK
The national unemployment rate
Macroeconomics
The decision of a worker to work overtime or not
Microeconomics
A family’s choice of having a baby
Microeconomics
The rate of growth of the money supply
Macroeconomics
The national government’s budget deficit
Macroeconomics
A student’s allocation of study time across two subjects
Microeconomics
The ultimate purpose of economics is
to study how individuals make choices
What is the relationship between wants and resources
Resources are used to produce things that satisfy people’s wants
Microeconomics is the part of economic analysis that studies decision making undertaken by _____ the behavior of _____
individuals and firms; the economy as a whole
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 _____.
wants; unlimited
_____, 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
Microeconomics; macroeconomics
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.
True
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
a command and control system
The three basic economic questions are _____ will be produced, _____ will items be produced, and for _____ will items be produced?
what and how much; how; whom
Economics
assumes individuals are rational and respond to different incentives.
In economics, we assume that peope _____ make decisions that will leave them _____off. This is known as the _____ assumption.
do not intentionally; worse; rationality
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
Bounded rationality because they cannot examine and think through every possible choice they confront without help.
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.
model
ceteris paribus
Behavioral
bounded rationality
Which one of the following is a prositive statement?
The Fed has cut the key interest rate several times this year.
A higher minimum wage will reduce employment opportunities for minimum wage workers.
Positive economics
Increasing the earnings of minimum wage employees is desirable, and raising the minimum wage is the best way to accomplish this
Normative economics
Everyone should enjoy open access to healthcare
Normative economics
Healthcare subsidies will increase the comsumption of health care.
Positive economics
Each individual must make choices because
resources are limited and therefore cannot satisfy one’s many competing wants.
______ is the situation in which human wants always exceed that can be produced with the limited resources and time that nature makes available.
Scarcity
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.
land; labor; physical; human; entrepreneurship
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
10
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?
$12,100
Scarcity requires us to choose. Whenever we choose, we lose the _____-valued alternative.
next-highest
Cost is always a forgone _____
opportunity
Another way to look at opportunity cost is the trade-off that occurs when one activity is undertaken rather than the _____
next-best
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
production possibilities
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
3
25
yes
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
production possibilities
A production possibilities curve is drawn with the quantity and quality of all resources _____ over the time period under study.
fixed
Points _____ the production possibilities curve are unattainable. Points _____ are attainable but represent an inefficient use or underuse of available resources.
outside; inside
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.
outward.
Whenever a society forgoes current consumption in order to invest in capital goods,
the more the society can produce in the future.
_____ goods are goods that will later be used to produce consumer goods.
Capital
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.
more
smaller
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 _____
you; neither
you; your roommate
