Chapter 1 Flashcards
Define Economics:
A. The study of how individuals spend money on goods and services.
B. The science of scarcity and choice, examining how individuals, businesses, and governments allocate resources to satisfy unlimited wants.
C. The analysis of financial markets and stock exchanges.
D. The study of historical economic events and their impact on societies.
B. The science of scarcity and choice, examining how individuals, businesses, and governments allocate resources to satisfy unlimited wants.
What is the Fundamental problem in economics?
A. Excessive government intervention.
B. Lack of economic growth.
C. The challenge of addressing unlimited wants with limited resources.
D. Unequal distribution of wealth.
C. The challenge of addressing unlimited wants with limited resources.
The three general categories of any economy’s resources are ______, ______, and ______. Economists refer to these resources as the ______ of production.
A. Land, Labor, Capital; Factors of Production
B. Money, Goods, Services; Inputs
C. Technology, Innovation, Education; Pillars
D. Demand, Supply, Price; Dynamics
A. Land, Labor, Capital; Factors of Production
When we use any resource, the benefit given up by not using it in its best alternative way is known as the ______ of that resource.
A. Opportunity cost
B. Marginal cost
C. Sunk cost
D. Variable cost
A. Opportunity cost
“Factors of production” is an economic term that describes
A. The inputs that are used in the production of goods or services in order to make an economic profit.
B. The factors that determine the market demand for a product.
C. The costs associated with manufacturing a product.
D. The financial resources available for investment in production.
A. The inputs that are used in the production of goods or services in order to make an economic profit.
The concepts of scarcity, choice, and opportunity cost can be illustrated by a curve known as the ______
A. Demand curve
B. Marginal cost curve
C. Production possibilities frontier (PPF) curve
D. Supply curve
C. Production possibilities frontier (PPF) curve
When looking at a production possibilities boundary, any point that is outside the boundary demonstrates ______. The ______ slope of the production possibilities boundary demonstrates ______.
A. Scarcity; steeper; economic growth
B. Scarcity; steeper; opportunity cost
C. Scarcity; negative; opportunity cost
D. Scarcity; negative; economic growth
C. Scarcity; negative; opportunity cost
A straight line PPB indicates that the opportunity cost of each good is __________ no matter how much of that good is produced. A PPB that is concave to the origin indicates that a(n) ____________ amount of good must be given up to produce more of the other good.
A. Constant; increasing
B. Variable; decreasing
C. Decreasing; constant
D. Increasing; variable
A. Constant; increasing
Consider the economy producing two goods A & B, with a PPB that is concave to the origin. As the economy produces more of a good A & less of good B, its opportunity cost of producing A ______________.
A. Increases
B. Decreases
C. Remains constant
D. Becomes negative
A. Increases
What is the difference between microeconomics and macroeconomics?
A. Microeconomics studies the allocation of resources as it is affected by the workings of the price system, while macroeconomics studies the determination of economic aggregates.
B. Microeconomics deals with positive analysis of big corporations and its effect on long-term growth, while macroeconomics deals with normative analysis of small corporations and its effect on short term growth.
C. Microeconomics lends itself to empirical analysis, while macroeconomics uses the concept of incentives.
D. Microeconomics examines the big picture of the national economy, while macroeconomic examines individual units and how they affect one another.
A. Microeconomics studies the allocation of resources as it is affected by the workings of the price system, while macroeconomics studies the determination of economic aggregates.
Production possibilities boundaries are typically drawn as being non-linear and
A. convex to the origin, since they reflect the increasing productivity of inputs.
B. concave to the origin, since they reflect the increasing opportunity cost of producing goods.
C. concave to the origin, since they reflect the constant opportunity cost of producing goods.
D. convex to the origin, since they reflect the decreasing opportunity cost of producing goods.
E. concave to the origin, since they reflect the constant productivity of inputs.
B. concave to the origin, since they reflect the increasing opportunity cost of producing goods.
Which of the following is one of the four basic questions that must be answered in all economies?
A. Why are products sometimes prices too high?
B. Why are products sometimes priced too low?
C. What is consumed and by whom?
D. What is produced and where is it produced?
C. What is consumed and by whom?
A point on a production possibilities boundary shows an
A. inefficient combination of goods.
B. efficient combination of goods.
C. unattainable combination of goods.
D. inefficient combination of inputs.
B. efficient combination of goods.
Consider an economy that can produce video games and houses.
If worker productivity improves for the production of video games and remains unchanged for the production of houses, then the opportunity cost:
A. falls for houses and rises for video games.
B. falls for both goods.
C. stays the same for houses and falls for video games.
D. rises for houses and stays the same for video games.
E. rises for houses and falls for video games.
E. rises for houses and falls for video games.
The concept of scarcity in economics usually refers to a condition:
A. Where more than three categories of resources are used in production.
B. Where the choices among competing alternatives must be made, implying the existence of costs.
C. Where too many frivolous goods and services are produces at the expense of socially desirable goods and services.
D. that afflict only the countries with limited subsoil resources
E. that is common only to developed countries due to high level of consumption there.
B. Where the choices among competing alternatives must be made, implying the existence of costs.
An important insight by early economists was that an economy based on free-market transactions is:
A. Government-controlled
B. Self
C. Labor-driven
D. Community-dependent
Adam Smith developed the idea that ________, not benevolence, is the foundation of economic order:
A. Greed
B. Altruism
C. Selflessness
D. Self-interest
B. self D. self-interest
What do self-interested buyers and sellers respond to?
A. Government regulations
B. Altruistic motives
C. Market prices and incentives
D. Incentives
D. Incentives
Identify the types of decision makers in any economy. (can be multiple)
a. Law enforcement
b. consumers
c. producers
d. government
e. markers
b. consumers, c. producers, and d. government
Consumers are assumed to make decisions that will_________. Producers are assumed to make decisions that will____________.
A. Maximize social welfare; minimize personal profit
B. Minimize personal satisfaction; maximize production costs
C. Maximize their utility, Maximize their profits.
D. Minimize social welfare; maximize personal wealth
C. Maximize their utility, Maximize their profits.
Consumers and producers are assumed to weigh the costs and benefits of their decisions_______. For example, for a consumer, the benefit of buying “one more” unit of a good must outweigh the ____________ of buying that unit.
A. Over time; total cost
B. At the margin; total cost
C. At the margin; marginal cost
D. Simultaneously; opportunity cost
C. At the margin; marginal cost
The interaction of consumers and producers through goods and factor markets is illustrated by the circular flow of:
A. wages and salaries.
B. profits and losses.
C. income and expenditure.
D. capital and consumer goods.
C. income and expenditure.
The main characteristics of market economies that produce spontaneous self-organization include:
A. Mandates
B. Labour unions
C. Scarcity
D. Self-interest
D. Self-interest (It’s private ownership of resources and decisions made in a decentralized manner)
Which of the following statements is true?
A. Firms and consumers who are trying to maximize should weigh the costs and benefits of their decisions at the margin.
B. A producer interested in maximizing his profits will hire the extra worker only if the benefit in terms of extra revenue exceeds the cost in terms of higher wages.
C. A consumer trying to maximize his utility will buy a CD only if he thinks the benefit to him in terms of extra utility exceeds the marginal cost.
D. All of the above are true.
D. All of the above are true.
In the circular flow of income, the allocation of resources is largely decided by:
A. Central authorities and producers acting independently
B. Political parties and firms only.
C. Firms and households acting independently
D. Labour and trade unions
E. Consumers only.
C. Firms and households acting independently
