Chapter 1 and 2

Question 1

The branch of economics that focuses on decision making for the economy as a whole is called

Answer 1

Macroeconomics

Question 2

Human wants

Answer 2

are unlimited

Question 3

Scarcity is

Answer 3

a problem that exists in every economy

Question 4

A tractor is an example of which of the following factors of production?

Answer 4

Capital

Question 5

Which of the following is a resource or factor of production?

Answer 5

Land, labor, entrepreneurship, capital (all of the above)

Question 6

Which of the following is the best example of a nonrenewable resource?

Answer 6

Crude oil or natural gas

Question 7

Which of the following is the best example of a microeconomic topic?

Answer 7

The analysis of Ford Motors’ competitiveness in the automobile industry

Question 8

An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, ceteris paribus. The phrase “ceteris paribus” means that

Answer 8

other relevant factors like consumer incomes, population, etc must be held constant

Question 9

When economists use the term ceteris paribus, they are indicating that

Answer 9

all other variables except the ones specified are assumed to be constant

Question 10

Which of the following represents a positive economics statement?

Answer 10

A very high income tax rate will reduce the amount of time that people spend working. It will also lead to higher level of underground economy.

Question 11

The statement “Violent crime (statistics show) has decreased in the last five years,” is

Answer 11

positive because it is testable

Question 12

Statistics show that an increase in the federal minimum wage causes an increase in unemployment among teenagers is

Answer 12

a positive economics statement

Question 13

The fundamental question(s) every society asks/answers are

Answer 13

How to produce, what to produce, for whom to produce (all of the above)

Question 14

Which fundamental economic question requires society to choose the combination (mix) of resources (factors of production) in order to produce goods and services?

Answer 14

The how to produce question

Question 15

The opportunity cost of making a decision (by an individual or a society) is

Answer 15

the best alternative that was sacrificed

Question 16

The opportunity cost of an action taken by an individual/society is

Answer 16

the value of the best opportunity that must be sacrificed in order to take the current action

Question 17

If an economy is operating at a point inside the production possibilities curve,

Answer 17

its resources are not being used efficiently

Question 18

A point outside the production possibilities curve represents a combination of goods that is

Answer 18

unattainable

Question 19

Which of the following will be most likely to cause the production possibilities curve for a country short toward?

Answer 19

A decrease in the stock of physical capital

Question 20

Any point on the production possibilities curve illustrates

Answer 20

maximum production possibilities

Question 21

A production possibilities curve (ppc) or production possibilities frontier (ppf) shows the various

Answer 21

combinations of goods the economy has the capacity to produce

Question 22

If an economy keeps increasing its capital stock/number of workers/technology/natural resources, then over time its production possibilities curve will

Answer 22

shift to the right

Question 23

Compare two economies A and B that start out with identical production possibiliers curves. Economy A chooses an efficient point with 10 consumption/consumer goods (more consumer goods as compared to economy B) and 5 capital/producer/industrial goods, while economy B also chooses an efficient point, but with 6 consumption/consumer goods and 9 capital/producer/industrial goods. In the future we can predict

Answer 23

economy B will grow faster than economy A

Question 24

Economic growth may be represented by a(n)

Answer 24

outward shift of a production possibilities curve

Question 25

From an economic standpoint, government intervention is justified when

Answer 25

the market mechanism fails to achieve the optima mix of output

Question 26

Using the above figures, suppose point C represents the optimal mix of output for a society. If market forces cause society to produce at point D then the society may allow the government to intervene in the economy; such a government intervention could

Answer 26

move the production to the optimal level C, move the production to point B in the diagram, move the production point to A in the diagram (all of the above)