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Questions and Answers
Which of the following is a normative statement?
Which of the following is a normative statement?
- Social media is detrimental to the current generation.
- Tabulations from data collected in a recent government survey show that 10 percent of adults in the population think that social media ought to be heavily regulated. (correct)
- The Toronto Raptors have signed Cameron Payne, a guard who played last season with Chicago and Cleveland.
- French fries are not really French.
If an inverse relationship exists between x and y, then an increase in x will cause y to decrease.
If an inverse relationship exists between x and y, then an increase in x will cause y to decrease.
True (A)
What does ceteris paribus mean?
What does ceteris paribus mean?
- Prosperity inevitably follows recession
- All other things remain the same (correct)
- If event A precedes event B, A has caused B
- Economics deals with facts, not values
Which of the following is a positive statement?
Which of the following is a positive statement?
The role of the entrepreneur involves:
The role of the entrepreneur involves:
Economics can best be described as the study of how:
Economics can best be described as the study of how:
Microeconomics is concerned with the:
Microeconomics is concerned with the:
Macroeconomics approaches the study of economics from the viewpoint of:
Macroeconomics approaches the study of economics from the viewpoint of:
Which of the following is a correct statement?
Which of the following is a correct statement?
An economic model usually includes:
An economic model usually includes:
If we say that two variables are directly related, this means that:
If we say that two variables are directly related, this means that:
If we say that two variables are inversely related, this means that:
If we say that two variables are inversely related, this means that:
To produce a total output of 3 TVs and 13 stereos, this economy must:
To produce a total output of 3 TVs and 13 stereos, this economy must:
Assume that a change in government policy results in the increased production of all types of products. It can be concluded that the:
Assume that a change in government policy results in the increased production of all types of products. It can be concluded that the:
Any point inside the production possibilities curve indicates:
Any point inside the production possibilities curve indicates:
Consider the following two tables for North and South Cantinas. If North Cantina is producing 2 hamburgers and 17 hot dogs while South Cantina is producing 2 hamburgers and 21 hot dogs, what can be concluded?
Consider the following two tables for North and South Cantinas. If North Cantina is producing 2 hamburgers and 17 hot dogs while South Cantina is producing 2 hamburgers and 21 hot dogs, what can be concluded?
The shape of each production possibilities curve:
The shape of each production possibilities curve:
The concept of opportunity cost is best represented by:
The concept of opportunity cost is best represented by:
An improvement in technology could be expected to:
An improvement in technology could be expected to:
The economic problem is essentially one of deciding how to make the best use of:
The economic problem is essentially one of deciding how to make the best use of:
Economists assume that people customarily behave rationally, meaning that people:
Economists assume that people customarily behave rationally, meaning that people:
An economist who says that consumer wants are inexhaustible means that:
An economist who says that consumer wants are inexhaustible means that:
The fundamental problem of economics is:
The fundamental problem of economics is:
A product has utility if it:
A product has utility if it:
The economic problem stems from the fact that:
The economic problem stems from the fact that:
Utility refers to the:
Utility refers to the:
The study of economics is carried out because:
The study of economics is carried out because:
To maximize utility, a consumer who derives greater satisfaction from writing music than from studying drama will choose to:
To maximize utility, a consumer who derives greater satisfaction from writing music than from studying drama will choose to:
The scarcity problem:
The scarcity problem:
Because of scarcity, the efficient use of resources is:
Because of scarcity, the efficient use of resources is:
Which of the following expressions best states the idea of opportunity cost?
Which of the following expressions best states the idea of opportunity cost?
As used in economics, the notion of scarcity means that:
As used in economics, the notion of scarcity means that:
The notion of opportunity cost applies to:
The notion of opportunity cost applies to:
Stocks and bonds are not considered to be an economic resource because they:
Stocks and bonds are not considered to be an economic resource because they:
Which of the following is not an illustration of the notion of opportunity cost?
Which of the following is not an illustration of the notion of opportunity cost?
The money payments made to owners of human resources are:
The money payments made to owners of human resources are:
The notion of opportunity cost is best defined as:
The notion of opportunity cost is best defined as:
Which of the following best describes your opportunity cost of downloading a free app on your smartphone?
Which of the following best describes your opportunity cost of downloading a free app on your smartphone?
Economic resources do NOT include:
Economic resources do NOT include:
The production possibilities curve illustrates the basic principle that:
The production possibilities curve illustrates the basic principle that:
Which of the following is a capital resource?
Which of the following is a capital resource?
A total output of 3 TVs and 4 stereos:
A total output of 3 TVs and 4 stereos:
Points A, B, C, D, and E in a production possibilities curve diagram show:
Points A, B, C, D, and E in a production possibilities curve diagram show:
If a society is currently producing 9 bicycles and 4 computers, the decision to increase computer output to 6 costs:
If a society is currently producing 9 bicycles and 4 computers, the decision to increase computer output to 6 costs:
If a society is currently producing the combination of bicycles and computers shown by point D on the production possibilities curve, the production of 2 more bicycles:
If a society is currently producing the combination of bicycles and computers shown by point D on the production possibilities curve, the production of 2 more bicycles:
The law of increasing opportunity costs is reflected in a production possibilities curve that:
The law of increasing opportunity costs is reflected in a production possibilities curve that:
The United States economy most closely approximates a:
The United States economy most closely approximates a:
Which basic economic question is associated with a factory's decision to automate its production process with robots?
Which basic economic question is associated with a factory's decision to automate its production process with robots?
What basic economic question is associated with a marketing research survey to determine popular fruit combinations for a frozen yogurt dessert?
What basic economic question is associated with a marketing research survey to determine popular fruit combinations for a frozen yogurt dessert?
Which economic question is related to a scenario where people on a deserted island demand an equal share of food despite unequal work effort?
Which economic question is related to a scenario where people on a deserted island demand an equal share of food despite unequal work effort?
Match the following markets with their descriptions:
Match the following markets with their descriptions:
How is the basic question 'what to produce' answered in a market economy?
How is the basic question 'what to produce' answered in a market economy?
Which of the following is a drawback of a market economy?
Which of the following is a drawback of a market economy?
How is the basic question 'what to produce' answered in a command economy?
How is the basic question 'what to produce' answered in a command economy?
Which of the following is a drawback of a command economy?
Which of the following is a drawback of a command economy?
Between the early 1990s and late 2000s, India's and China's economies steadily grew by an annual average of:
Between the early 1990s and late 2000s, India's and China's economies steadily grew by an annual average of:
Modern mixed economy refers to an economy:
Modern mixed economy refers to an economy:
The Canadian economy most closely approximates a:
The Canadian economy most closely approximates a:
The unemployment rate includes:
The unemployment rate includes:
Inflation is defined as:
Inflation is defined as:
The Kyoto Protocol:
The Kyoto Protocol:
According to Adam Smith, the most significant single cause of economic progress has been:
According to Adam Smith, the most significant single cause of economic progress has been:
Laissez-faire suggests that:
Laissez-faire suggests that:
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Study Notes
The Economic Problem
- The economic problem is the problem of having unlimited wants, but limited resources.
Scarcity
- Resources are scarce in relation to consumer wants.
- Scarcity means that the available quantity of a resource is less than the total demand for it.
- Scarcity is a fundamental problem of economics.
Human Behavior
- Economists assume that people behave rationally, meaning they weigh the personal benefits and costs of every available action and choose an action based on their individual wants.
The Study of Economics
- The study of economics is necessary because resources are scarce in relation to consumer wants.
- The efficient use of resources is an important economic goal in all economies.
- Economics is the study of how to distribute limited resources among alternative ends.
Microeconomics and Macroeconomics
- Microeconomics is concerned with the behavior of individual participants in various markets.
- Macroeconomics approaches the study of economics from the viewpoint of entire economic sectors.
Economic Models
- Economic models are abstractions of reality that emphasize basic economic relationships by abstracting from the complexities of the real world.
- Economic models are simplified representations of economic reality, used to understand economic phenomena.
Resources
- Resources include natural resources, human resources, and capital resources.
- Economic resources do not include stocks and bonds.
- The money payments made to owners of human resources are wages, salaries, or interest.
Entrepreneurship
- The role of the entrepreneur involves bearing risks.
Definition of Economics
- Economics can be described as the study of how to distribute limited resources among alternative ends.
- Economics is primarily the study of how to use scarce resources among alternative ends.### Economic Models
- Economics is concerned with explaining how economies operate, not with how they should operate
- Economic laws are useful for predicting and controlling events
- Economics is a scientific field, similar to physics and chemistry
Independent and Dependent Variables
- An economic model usually includes two or more factors that have measurable values
- Independent variables affect dependent variables
- The value of the dependent variable is determined by the value of the independent variable
Relationships between Variables
- A direct relationship exists between two variables if an increase in one variable is associated with an increase in the other variable
- An inverse relationship exists between two variables if an increase in one variable is associated with a decrease in the other variable
- Ceteris paribus, or "all other things remaining equal," is an assumption used to isolate the relationship between two variables
- The ceteris paribus assumption allows one to focus on the relationship between two variables while holding other factors constant
Positive and Normative Statements
- A positive statement is a statement of fact, based on objective evidence
- A normative statement is a statement of opinion or value judgment
- Economists distinguish between positive and normative statements to separate facts from value judgments
Utility and Opportunity Cost
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A product has utility if it satisfies consumer wants
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Utility refers to the satisfaction derived from a good or service
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Opportunity cost is the value of the next best alternative that is given up when a choice is made### Opportunity Cost
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Opportunity cost is relevant to economies of all ideological persuasions.
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It is not limited to consumers or businesses, but applies to both.
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It does not disappear even if poverty is eliminated.
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It applies to governments as well.
Definition of Opportunity Cost
- Opportunity cost is the utility that could have been gained by choosing an action's best alternative.
- It is not the monetary price of any productive resource, product, or the amount of labor used to produce a unit of a product.
Production Possibilities Curve
- The production possibilities curve illustrates the basic principle that if all resources of an economy are fully used, more of one item can be produced only if less of another item is produced.
- The curve shows all combinations of products that can be produced and those that cannot be produced.
- It does not show all levels of production that are consistent with a stable price level.
- Any point inside the curve indicates that resources are not fully employed, and more output could be produced with available resources.
- Any point outside the curve indicates that the economy is trying to produce more than it is capable of, and some of the resources would be idle.
Opportunity Cost and Production Possibilities Curve
- The production possibilities curve is a frontier between all combinations of products that can be produced and those that cannot be produced.
- The curve illustrates the law of increasing opportunity costs.
- An improvement in technology can shift the production possibilities curve outward, indicating that more of both products can be produced.
- A change in consumer preferences or a change in government policy can also shift the production possibilities curve.
Other Key Points
- The concept of opportunity cost is best represented by the movement from one point to another on the production possibilities curve.
- The shape of the production possibilities curve indicates that resources are not perfectly shiftable from one use to another.
- An economy that is not fully employing its resources is represented by a point inside the production possibilities curve.
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