MicroEcon Ch 1 Quiz

Decision making “at the margin” means making a choice based on __________ of a decision.
comparing the total benefits and costs
How is scarcity related to competition?
Competition is an effect of scarcity.
Which of the following is a positive macroeconomics statement?
The increase in the nation’s money supply helped push the nation’s unemployment rate down in the short run
In an interview an economist states, “This problem should be of greater concern to the federal government.” We can explicitly put this statement in the category of
normative economics.
condition in an economy that makes a “rationing device” a necessity is the fact that
scarcity exists.
headline in the newspaper reads “County Supervisors Debate Building New Schools.” The headline relates closest to which economic concept?
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In all cases, normative economics deals with
what should be.
It usually takes less time to buy a six-pack of 7-Up, a loaf of bread, and a half-gallon of ice cream at a small convenience store (such as a 7-Eleven) than at a large, full-service grocery store. Which of the following persons is most likely to buy these items at a convenience store?
NOT: a person with low opportunity cost of time

a person with high opportunity cost of time

a person who is out of work

There is not enough information to answer the question.

good provides __________ and a bad provides __________.
utility; disutility
Why do societies need rationing devices?
Because scarcity exists.
condition often used in economics to isolate the relationship between two variables is
ceteris paribus.
In every economy people vie for the economy’s rationing device, a process called
Produced goods used as inputs for the production of other goods comprise the resource known as
What does it mean if a person makes a “decision at the margin”?
The person compares additional benefits and additional costs when deciding what to do.
Which of the following is a positive economic statement?
Consumers bought fewer cars when the relative price of cars increased.
How are changes in opportunity cost predicted to affect behavior?
b and c
The absence of value judgments is the essence of
positive economics.
At the optimal level of an activity, the activity’s marginal benefit must
equal the marginal cost of the activity.
Which statement uses the term ceteris paribus correctly?
If you exercise regularly, you will be healthier, ceteris paribus.
The study of an economy’s price level is explicitly a part of
If an economist says “the higher the price of oranges, the fewer oranges individuals will buy, ceteris paribus,” this means that
as the price of oranges rises, individuals’ preferences do not change, nor does anything else, but individuals buy fewer oranges in response to the higher price of oranges.
In economics, scarcity implies
Efficiency is consistent with
NOT: maximizing net benefits.

equating marginal benefits and marginal costs.

maximizing total benefits.

minimizing total costs.

a and b

Attempts to determine “what is” are part of __________ economics.
Which of the following is an unintended effect of placing safety caps on medicines?
People leave their medicine containers open more often, which ends up making it easier for children to get into the medicine.
Choice implies
opportunity cost.
Opportunity cost is the value of
the best forfeited alternative.
Which of the following issues is most unlikely to be addressed by an economist practicing positive economics?
the desirability of a minimum wage increase
The opportunity cost of attending college
NOT: consists of the tuition costs plus the costs of room and board and other expenses.

consists of the tuition costs only.

is zero, if the student receives a scholarship that covers the costs of tuition, room and board, and other expenses.

varies from person to person.

both b and c

Which of the following is a microeconomics topic?
NOT: a and c

the study of how prices are determined in the computer industry

the study of unemployment in the economy

the study of how changes in the nation’s money supply affect the nation’s output

b and c

Which of the following is a positive microeconomics statement?
NOT: The increase in the nation’s money supply helped push the nation’s unemployment rate down in the short run.

The central bank should increase the nation’s money supply.

Ford Motor Company’s new advertising campaign ended up hurting General Motors’s sales.

The local government ought to spend more on recreational activities.

The purpose of the ceteris paribus condition is to allow economists to
isolate the relationship between two variables.
Some years ago, chemists at 3M Corporation were trying to create a super-strong glue. Somehow they got their molecules twisted and came up with one of the weakest glues ever made. But, rather than pouring it down the drain, they tried coating some paper with it, and the “Post-It Note” was born. In this case, 3M was acting as a(n)
Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.
circular flow diagram
The branch of economics that studies the decisions of individuals and firms is called
Scarcity means
wants are greater than the limited resources available to satisfy these wants.
In the ____________, households work and receive payment from firms.
labor market
Which of the following would NOT be considered a macroeconomic topic?
the reasons for a decline in the price of crude oil
Which of the following statements most likely lies within the realm of microeconomics?
An increase in labor costs will increase the additional cost of producing another bus.
In countries like _____________ the command economy predominates.
NOT: China and Vietnam

Cuba and North Korea

South Africa and Kenya

Germany and France

If macroeconomics looks at the economy as a whole, it focuses on which of the following?
unemployed people
A theory is
built on the major factors or variables that the theorist believes explain some event.

a simplified abstract representation of the real world.

used to understand the real world.

a and b

ANSWER: a, b, and c

Which of the following is generally accepted as a valid criticism of the production of useful goods and services?
environmental pollution
In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.
division of labor
In the ______________, households receive goods and services and pay firms for them.
goods and services market
Microeconomics is the branch of economics that deals with
human behavior and choices as they relate to relatively small units — an individual, a firm, an industry.
In all cases, macroeconomics deals with
aggregates or the entire economy.
In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.
The physical and mental talents people bring to production processes comprise the resource called
Which of the following best characterizes the circular flow of income?
Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.
A theory is an abstract representation of reality. This means a theory
omits certain factors when trying to explain something.
The question of how a tax change might impact U.S. economic output is most closely associated with the study of
Which of the following lies primarily within the realm of macroeconomics?
a study of how tax cuts stimulate aggregate production
When nations desire a healthy macroeconomic, they typically focus on three goals, one of these being:
low inflation
Which of the following best denotes the reason for the existence of substantial black markets?
a command economy
In all cases, microeconomics deals with
relatively small units in the economy.
Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn’t change.
The basic difference between macroeconomics and microeconomics is that:
microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).
Which of the following statements most likely lies within the realm of macroeconomics?
An increase in the price of automobiles will lead to a decrease in the quantity of automobiles demanded.

Due to process innovations in computer chip manufacturing, the market supply of computers increased.

Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.

NOT: Anticipating that the benefits would outweigh costs involved, an undergraduate student purchases the course textbook.

The reason people can’t have everything they want is because
scarcity exists.
Which of the following is most likely a topic of discussion in macroeconomics?
a decrease in the unemployment rate
Macroeconomics primarily examines:
broad issues such as national output, employment and inflation.
can lead to an increase in overall production.
Which of the following best describes a monetary policy tool?
interest rates
Which of the following best describes a fiscal policy tool?
government spending
Macroeconomic topics do not usually include:
the profit maximizing decisions of an individual manufacturer.
All sellers may be tempted to raise the price of what they sell, but an unintended effect of raising the price could be __________ in units sold large enough to __________ their total revenue earned.
a decrease; lower