Economics - Chapter 1 Quiz

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Questions and Answers

What does scarcity require individuals to do?

Allocate their time and money (correct)
Randomly choose goods and services
Ignore opportunity costs
Make irrational decisions

What does opportunity cost refer to?

A perfect decision-making process
The emotions attached to a decision
A random decision-making process
The value placed on a choice (correct)

According to economics, what does 'rational self-interest' mean?

Assuming perfect decision-making
Pursuing opportunities to maximize satisfaction (correct)
Being immune from faulty logic
Making random decisions

What does 'marginal' mean in economics?

A change in (A) Signup and view all the answers

Why is marginal analysis important in decision making?

To compare marginal benefits and costs (B) Signup and view all the answers

What is a well-tested and widely accepted economic theory referred to as?

An economic law (A) Signup and view all the answers

What are economic principles expressed as?

Tendencies of average consumers, workers, or business firms (C) Signup and view all the answers

What assumption do economists use when constructing theories?

Ceteris paribus assumption (D) Signup and view all the answers

What are the general categories into which economists classify economic resources?

Land, labor, capital, and entrepreneurial ability (B) Signup and view all the answers

Which resource consists of the physical and mental talents of individuals used in producing goods and services?

Labor (A) Signup and view all the answers

What does the resource capital include for economists?

Manufactured aids used in producing consumer goods and services (B) Signup and view all the answers

What does a production possibilities table list?

Different combinations of two products that can be produced with a specific set of resources (D) Signup and view all the answers

What is the special human resource, distinct from labor, called according to economists?

Entrepreneurial ability (D) Signup and view all the answers

How are the economy's output of capital goods and consumer goods represented on a production possibilities curve?

Consumer goods on the horizontal axis and capital goods on the vertical axis (C) Signup and view all the answers

What does a point lying inside the production possibilities curve imply?

It reflects less total output and is less desirable than points on the curve (C) Signup and view all the answers

What does the law of increasing opportunity costs indicate?

The opportunity cost of each additional unit of pizzas is greater than the opportunity cost of the preceding one (D) Signup and view all the answers

According to the optimization rule, when should an economic activity be expanded?

When marginal benefit exceeds marginal cost (C) Signup and view all the answers

What does the optimal quantity of pizza production indicate?

The point where marginal benefit equals marginal cost (B) Signup and view all the answers

How do unemployment and unused production capacity relate to the production possibilities model?

Less output is produced than at full employment (B) Signup and view all the answers

What does a shift from the inner curve to curve A’ B’ C’ D’ E’ in Figure 1.5 indicate?

Economic growth (A) Signup and view all the answers

What contributes to economic growth according to the text?

Increases in supplies of resources, improvements in resource quality, and technological advances (B) Signup and view all the answers

What does a point outside the production possibilities curve indicate?

Unattainable level of production (C) Signup and view all the answers

Upon what specific assumptions is the production possibilities curve based?

Full employment and fixed resources (B) Signup and view all the answers

What is the main concern of economics?

Satisfying unlimited wants with limited resources (D) Signup and view all the answers

What is the definition of economics according to the text?

The social science concerned with how to make optimal choices under conditions of scarcity (A) Signup and view all the answers

What is the main characteristic of the market system according to the text?

Private ownership and freedom of choice (A) Signup and view all the answers

What does microeconomics focus on?

Individual units such as a person, a household, a firm, or an industry (C) Signup and view all the answers

How do economists view the world according to the text?

Through the lens of scarcity (C) Signup and view all the answers

What does the economic perspective emphasize according to the text?

Scarcity and choice (A) Signup and view all the answers

Which of the following is an example of positive economics?

'The unemployment rate in France is higher than that in the United States.' (A) Signup and view all the answers

What does a budget line visualize?

Various combinations of two products a consumer can purchase with a specific money income (D) Signup and view all the answers

What causes people to be forced to make choices according to the text?

Limited productive capacity of scarce resources (C) Signup and view all the answers

What does society's economizing problem stem from?

Limited or scarce economic resources (C) Signup and view all the answers

What is the fundamental problem faced by society according to the text?

The mismatch between wants and resources (C) Signup and view all the answers

What is the focus of macroeconomics?

The economy as a whole or its basic subdivisions or aggregates (A) Signup and view all the answers

What does economics focus on?

How individuals, institutions, and society make optimal choices under conditions of scarcity (C) Signup and view all the answers

Which statement best describes normative economics?

Incorporates value judgments or what particular policy actions should be recommended (C) Signup and view all the answers

What does positive economics focus on?

Facts and cause-and-effect relationships (A) Signup and view all the answers

What is the economizing problem faced by individuals?

'We desire various goods and services that provide utility.' (D) Signup and view all the answers

Economics is the social science concerned with how individuals, institutions, and society make choices under conditions of .

optimal - scarcity Signup and view all the answers

Economists view the world through the lens of ______.

scarcity Signup and view all the answers

What does scarce economic resources mean?

Limited goods and services Signup and view all the answers

What is the definition of opportunity cost?

The value of the next best alternative forgone (B) Signup and view all the answers

How would you describe the decision-making process in economics, where individuals weigh costs and benefits to make decisions?

Purposeful and rational (C) Signup and view all the answers

What condition ensures profitability when selling a ticket to a standby passenger?

If the passenger pays more than the marginal cost (C) Signup and view all the answers

What is the correct sequence of steps in the economics scientific method (procedure) described?

Observing real-world behavior, forming a hypothesis, accepting or rejecting the hypothesis, ongoing testing, evolving into a theory. (B) Signup and view all the answers

What term is used to describe a thoroughly tested and widely accepted economic theory, often referred to as a fundamental concept in economics?

Economic law (C) Signup and view all the answers

Flashcards

Scarcity Requirement

Allocating their time and money due to limited resources.

Opportunity Cost

The value of the next best alternative forgone.