Practice Ch 1&2 Questions

Question 1

The opp. cost of an activity is the value of:
1. An alternative forgone.
2. the next-best alternative forgone.
3. the least-best alternative forgone.
4. the difference between the chosen activity & the next-best alternative-forgone.

Answer 1

2

Question 2

Whether studying the size of the U.S. economy or the number of children a couple will choose to have, the unifying concept is that wants are:
1. limited, resources are limited, and thus trade-offs must be made.
2. unlimited, resources are limited, and thus trade-offs must be made.
3. unlimited, resources are limited to some but not to others and thus some people must make trade-offs.
4. unlimited, resources are limited, and thus government needs to do more.

Answer 2

2

Question 3

Which of the following questions would be studied in microeconomics?
1. Why did our economic growth rate slow down during the 2000s?
2. How did the recession end in 2009 if unemployment continued to rise?
3. How will the legalization of marijuana in Colorado affect a supplier of cigarettes?
4. When should Congress raise taxes in order to tackle the debt crisis?

Answer 3

3

Question 4

Which of the following questions would a macroeconomist most likely try to answer?
1. What stage of the business cycle is our economy currently in?
2. Why do Broadway musicals and airlines have different price discrimination strategies?
3. How much would marijuana consumption change if the market became legal?
4. Should IZZE increase its distribution from national to international?

Answer 4

1

Question 5

Think about the definition of scarcity that you learned in this chapter. Identify three examples of scarcity people face every day.
1. limited resources for travel
2. few friends
3. limited income for family cars
4. inadequate education
5. not enough time to do everything you want

Answer 5

1,3,5

Question 6

Determine whether each of the following statements is positive or normative. (Remember that a positive statement isn’t necessarily correct; it just makes a factual claim rather than a moral judgment.)

a. People who pay their bills on time are less likely than others to get into debt:    b. Hard work is a virtue:   c. Everyone should pay his or her bills on time:   d. China has a bigger population than any other country in the world:   e. China’s One-Child Policy (which limits families to one child each) helped to spur the country’s rapid economic growth:   f. Lower taxes are good for the country:

Answer 6

a. Positive.
b. Normative.
c. Normative.
d. Positive.
e. Positive.
f. Normative.

Question 7

Which of the following is an example of an investment in physical capital?
1. A firm trains workers to operate new machinery.
2. A firm pays for workers to take college classes.
3. A chemical firm employs chemists to develop new chemicals.
4. A firm purchases new equipment for a manufacturing process.

Answer 7

4

Question 8

Finding Opp Cost, Comp. Adv. & Abs. Adv.

Answer 8

Opp Cost. : Divide
Comp. Adv: which ever opp. cost is lower
Abs. Adv: Whoever can produce more/ higher #

Question 9

Which of the following is not correct? A typical production possibilities curve:

1. indicates how much of two products a society can produce.
2. reveals how much each additional unit of one product will cost in terms of the other product.
3. specifies how much of each product society should produce.
4. indicates that to produce more of one product society must forgo larger and larger amounts of the other product.

Answer 9

3

Question 10

If a producer is operating at an inefficient point on a production possibilities curve using currently available resources, that producer:

1. cannot produce more of one good without giving up some of the other good.
2. can produce more of one good without producing less of the other good.
3. must be at an unattainable point on the production possibilities curve.
4. must be specializing in activities for which it has a comparative advantage.

Answer 10

2

Question 11

If an economy is operating on its production possibilities curve for consumer goods and capital goods, this means that:

1. it is impossible to produce more consumer goods.
2. resources cannot be reallocated between the two goods.
3. it is impossible to produce more capital goods.
4. more consumer goods can only be produced at the cost of fewer capital goods.

Answer 11

4

Question 12

The Principle of Increasing Opportunity Costs implies that:
1. productive people do the hardest tasks first, while they are fresh.
2. to increase production, you should use the resources with the lowest opportunity cost first.
3. the cost-benefit principle does not apply to increasing productivity.
4. specialization increases productivity.

Answer 12

2

Question 13

Large developed countries can produce more of practically everything than can a small, less developed country. Therefore,

1. the large country has no incentive to trade with the smaller country.
2. it would be impossible for the smaller country to have a comparative advantage in making any products that the larger country wants to buy.
3. trade will benefit both countries if each country has a comparative advantage in a traded product.
4. trade between the countries is more likely to benefit the small country and harm the larger country.

Answer 13

3

Question 14

The benefits of specialization can be used to explain why

1. workers prefer to work on a variety of tasks during the day.
2. machines are more productive than human workers.
3. trade can make both parties to the trade better off.
4. big companies take advantage of smaller ones.

Answer 14

3