Chapter 1 Homework

Question 1

You currently subscribe to two magazines and are trying to decide whether you should subscribe to a third. What should determine your decision, if you are rational?

Answer 1

the cost of the third magazine compared to the additional enjoyment you would get from it

Question 2

Some individuals or families can become completely saturated with a service such as television. This suggests that

Answer 2

desires for a single commodity can be satisfied but then the focus will switch to other goods and services

Question 3

Economic theory

Answer 3

predicts the average behavior of a group of similar economic decision makers after an economic change

Question 4

Which of the following is a positive statement?

Answer 4

When the national unemployment rate is 7 percent, the unemployment rate for inner-city youth is often close to 40 percent.

Question 5

Which of the following is a normative statement?

Answer 5

Congress must recognize that the growing national debt is the most serious problem that the country faces.

Question 6

Alicia makes the statement that everytime she eats chocolate, it gives her acne. By ignoring the possibility that there may be another factor that causes Alicia to eat chocolate and which also causes her acne, Alicia is commiting the

Answer 6

fallacy that association is causation

Question 7

Elijah, a basketball fan, reasons that because his favorite team has three superstars on it, the team must be a great team and will win the championship. Elijah is committint the

Answer 7

fallacy of composition

Question 8

Environmentalists continually argue for the use of alternatives to fossil fuels for generating energy. For example, harnessing wind by creating wind farms has been one alternative proposed and implemented. When it is found that these wind farms lead to the slicing and dicing of migratory birds and the decimation of local bat populations, we could say that environmentalists have committed the

Answer 8

mistake of ignoring secondary effects

Question 9

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

Answer 9

has mistakenly inferred causation from observed correlation

Question 10

Economics is best defined as the study of how

Answer 10

individuals decide to use scarce resources in an attempt to satisfy their unlimited wants

Question 11

Because resources are scarce,

Answer 11

people must make choices among alternatives

Question 12

The expression “There’s no such thing as a free lunch” means

Answer 12

that resources used up in producing the lunch are not available to satisfy other wants

Question 13

The assumption that individuals act rationally implies that

Answer 13

people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile

Question 14

Economists generally believe that

Answer 14

additional information is costly to acquire

Question 15

Rational economic decision makers will make a change only if

Answer 15

the expected marginal benefit exceeds expected marginal cost