Econ 2301 Chapter 2 Quiz
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Questions and Answers

Difficulty in predicting social sciences is the result of analyzing ____ but can be overcome by focusing on ____ groups.

human behavior; large groups

What does scarcity imply?

It is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

Which of the following statements about scarcity is correct?

  • Exists only in command economies.
  • Exists only in market economies.
  • Will likely disappear as technology advances sufficiently.
  • Exists only in economies in which there is poverty.
  • None of the above are correct. (correct)

    • What type of resource is Raylene's effort in working for the firm?

    <p>Labor</p> Signup and view all the answers

    Land as a factor of production can include all of the following except:

    <p>A sawmill</p> Signup and view all the answers

    What is an example of entrepreneurship?

    <p>Building up a banking business.</p> Signup and view all the answers

    What is an example of physical capital?

    <p>A chainsaw.</p> Signup and view all the answers

    What is human capital?

    <p>The expertise or knowledge possessed by workers.</p> Signup and view all the answers

    What does the expression, 'There's no such thing as a free lunch' imply?

    <p>Costs are incurred when resources are used to produce goods and services.</p> Signup and view all the answers

    What is the definition of opportunity cost?

    <p>The value of the best foregone alternative that was not chosen.</p> Signup and view all the answers

    The opportunity cost of going to college includes:

    <p>Both A and B</p> Signup and view all the answers

    If a student has a chance to see Green Day in concert but has a major economics exam in the morning, what can be said?

    <p>All of the above are correct.</p> Signup and view all the answers

    Marginal thinking is best demonstrated by:

    <p>Choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.</p> Signup and view all the answers

    What is the definition of marginal benefit?

    <p>The additional benefit received as a result of undertaking an action.</p> Signup and view all the answers

    What is the definition of marginal cost?

    <p>The additional cost incurred as a result of undertaking an action.</p> Signup and view all the answers

    What does the rule of rational choice suggest?

    <p>You will engage in more of an activity if the additional benefit received as a result of the activity exceeds the additional cost incurred.</p> Signup and view all the answers

    What would an economist conclude about a man who lights a cigarette despite health warnings?

    <p>In the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.</p> Signup and view all the answers

    How should we reduce air pollution according to economists?

    <p>As long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.</p> Signup and view all the answers

    What would be the expected effect of a tax imposed on each child born?

    <p>Fewer children would be born.</p> Signup and view all the answers

    What is specialization in economics?

    <p>A way for individuals to make the best use of resources by devoting themselves to one primary productive activity.</p> Signup and view all the answers

    What does it mean to have a comparative advantage in production?

    <p>Can produce at the lowest opportunity cost.</p> Signup and view all the answers

    How is information about the relative value of resources communicated in markets?

    <p>Through prices.</p> Signup and view all the answers

    What is a positive incentive?

    <p>An incentive that either reduces costs or increases benefits, resulting in an increase in an activity or behavior.</p> Signup and view all the answers

    What type of incentive is a 'buy one, get one free' sale?

    <p>A positive incentive because it increases benefits of purchasing and so it increases purchases.</p> Signup and view all the answers

    From the customer point of view, increasing the price of a haircut is considered what type of incentive?

    <p>A negative incentive because it increases the cost and it may result in fewer haircuts being purchased.</p> Signup and view all the answers

    What happens during a market failure?

    <p>A market fails to allocate resources efficiently on its own.</p> Signup and view all the answers

    What is an example of market failure?

    <p>A steel mill pollutes the air, which imposes costs on others that the steel mill does not have to pay for.</p> Signup and view all the answers

    Which of the following contributes to long-run productivity growth?

    <p>All of the above.</p> Signup and view all the answers

    How does the government define and protect property rights?

    <p>All of the above.</p> Signup and view all the answers

    Which statements about markets are true?

    <p>All of the above are true statements.</p> Signup and view all the answers

    What is efficiency in economic terms?

    <p>Both A and B.</p> Signup and view all the answers

    Which of the following is (are) true statements?

    <p>All of the above.</p> Signup and view all the answers

    Using the Rule of Rational Choice, how many times per month would Sally likely go to the movies if the marginal cost is constant at $6.50?

    <p>3 times.</p> Signup and view all the answers

    Study Notes

    Prediction in Social Sciences

    • Difficulty in predicting individual behavior is overcome by analyzing large groups.

    Scarcity

    • Scarcity arises from the limited resources available to satisfy unlimited human desires for goods and services.
    • It exists across all economies and cannot be eliminated, regardless of technological advancement.

    Factors of Production

    • Labor refers to human effort used in production.
    • Land includes naturally occurring resources, excluding physical capital like a sawmill.
    • Entrepreneurship includes initiatives like starting a banking business involving risk-taking.
    • Physical capital is represented by equipment like a chainsaw, while human capital reflects workers' expertise and knowledge.

    Opportunity Cost

    • Opportunity cost is defined as the value of the best alternative not chosen.
    • Includes costs such as tuition and the value of time when considering college attendance.
    • Examples illustrate that engaging in one activity incurs costs related to forgoing others.

    Marginal Analysis

    • Marginal thinking involves assessing additional benefits versus additional costs, guiding decision-making in continuous activities.
    • Marginal benefits and costs are crucial for rational choice, influencing whether to engage more in an activity based on their comparison.

    Response to Incentives

    • People respond predictably to incentives; government-imposed taxes can lead to fewer births.
    • Specialization allows individuals and economies to utilize resources efficiently by focusing on areas of comparative advantage, minimizing opportunity costs.

    Market Dynamics

    • In markets, resource values are conveyed through prices, aiding in efficient allocation.
    • Positive incentives encourage behaviors by reducing costs or increasing benefits, while negative incentives may deter actions by raising costs.

    Market Failures

    • A market failure occurs when resources are not efficiently allocated independently.
    • Examples include pollution by firms that impose costs on third parties without bearing the expenses themselves.

    Long-Run Productivity Growth

    • Contributors include improvements in education, advances in technology, and supportive tax policies for research.

    Government Role

    • Property rights are established and protected by legal systems, police, and military forces.

    Market Characteristics

    • Markets are generally efficient and enable the interactions of numerous producers and consumers, although they may not always lead to fair resource allocations.

    Economic Efficiency

    • Economic efficiency expands overall wealth (the economic pie) and maximizes resource utilization.

    Price Mechanisms

    • Higher prices incentivize consumers to reduce purchases while encouraging producers to increase supply, and vice versa for lower prices.

    Decision-Making and Rational Choice

    • Based on marginal benefits and costs, decisions on activities, such as attending movies, are influenced by whether the benefit exceeds the cost. In Sally's case, she would choose to go to the movies three times a month, where the marginal benefit exceeds the marginal cost.

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    Description

    Test your knowledge on the fundamental concepts of economics with this quiz focused on Chapter 2 of Econ 2301. Explore challenges such as prediction in social sciences and understand the implications of scarcity. Perfect for reinforcing your understanding of economic principles!

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