Deck 1: Introduction: What Is Economics

Question 1

An arrangement that allows buyers and sellers to exchange things is called

A)a contract.
B)a market.
C)money.
D)efficient.

Answer 1

a market.

Question 2

Tradeoff is

A)allowing the government and other organizations to choose for us.
B)sacrificing one thing for another.
C)deciding who consumes the products produced in an economy.
D)holding other variables fixed.

Answer 2

sacrificing one thing for another.

Question 3

Deciding if a power company will generate electricity from wind power or coal answers the economic question of

A)who consumes the products produced.
B)what products will be produced.
C)where will the products be consumed.
D)how will the products be produced.

Answer 3

how will the products be produced.

Question 4

A changing Chinese economy has resulted in significant labor shortages. Factories continue to expand as
China’s economy grows, but the number of uneducated workers is declining and the population of young
people is leveling off. Add to these an increased number of people remaining inland, and this leaves coastal
regions which specialize in factory production and exports with a large number of job openings.
The labor shortages are resulting in wage increases, pushing up costs on Chinese -made products. This could
make China less competitive in global markets. Anticipating a continuation of rising costs for Chinese
manufacturing, international manufacturers are already looking at moving factories to countries with lower
costs.
The increase in wages is also fueling a growing Chinese middle class. Minimum wages in big cities have
grown roughly 25% over the past three years, and infrastructure, housing and retail projects have started to
develop in more rural areas. The number of people going to college has also increased significantly. In 2005,
over 14 million people enrolled in Chinese colleges and universities, an increase of more than 250% since
1999.
Labor shortages and the resulting cost and wage increases may prompt even more changes in China. Labor
conditions and worker benefits have already started to improve, and increased manufacturing costs could
cause a shift away from the production of lower-end products. Rising wages could create an increased
demand for imports, and factories have started moving inland, where labor is more readily available
According to the Application, the number of people in China who are going to college has increased significantly. An increase in college enrollment leads to a more educated workforce and, in turn, higher wages. Obtaining an education in order to receive a higher wage is an example of which element of the economic way of thinking?

A)thinking at the margin
B)response to incentives
C)isolation of variables
D)using assumptions to simplify

Question 5

Economics is the study of

A)how to invest in the stock market.
B)how society uses limited resources.
C)the role of money in markets.
D)how government officials decide which goods and services are produced.

Question 6

Deciding if a company will produce automobiles by robotics or manual labor answers the economic question of

A)who consumes the products produced.
B)what products will be produced.
C)where will the products be consumed.
D)how will the products be produced.

Question 7

Resources are all of the following EXCEPT

A)unlimited and in abundance.
B)the things we use to produce goods and services.
C)limited in quantity and can be used in different ways.
D)scarce and therefore require choices to be made.

Question 8

A changing Chinese economy has resulted in significant labor shortages. Factories continue to expand as
China’s economy grows, but the number of uneducated workers is declining and the population of young
people is leveling off. Add to these an increased number of people remaining inland, and this leaves coastal
regions which specialize in factory production and exports with a large number of job openings.
The labor shortages are resulting in wage increases, pushing up costs on Chinese -made products. This could
make China less competitive in global markets. Anticipating a continuation of rising costs for Chinese
manufacturing, international manufacturers are already looking at moving factories to countries with lower
costs.
The increase in wages is also fueling a growing Chinese middle class. Minimum wages in big cities have
grown roughly 25% over the past three years, and infrastructure, housing and retail projects have started to
develop in more rural areas. The number of people going to college has also increased significantly. In 2005,
over 14 million people enrolled in Chinese colleges and universities, an increase of more than 250% since
1999.
Labor shortages and the resulting cost and wage increases may prompt even more changes in China. Labor
conditions and worker benefits have already started to improve, and increased manufacturing costs could
cause a shift away from the production of lower-end products. Rising wages could create an increased
demand for imports, and factories have started moving inland, where labor is more readily available
This Application reinforces the basic definition of economics, which is the

A)possible or feasible combinations of an economyʹs production options.
B)study of choices made by people when there is scarcity.
C)arrangement that allows buyers and sellers to exchange things.
D)forces that affect economic activity and predict the consequences of alternative actions.

Question 9

Because resources are limited

A)only the very wealthy can get everything they want.
B)firms will be forced out of business.
C)the availability of goods will be limited but the availability of services will not.
D)people must make choices.

Question 10

Which of the following is an example of a normative question?

A)How will an increase in the inheritance tax affect tax revenues?
B)What fraction of an income tax cut will be spent on imported goods?
C)Should Florida implement a state income tax to reduce its deficit?
D)How will an increase in unemployment benefits affect the unemployment rate?

Question 11

Economics is best defined as the study of

A)financial decision-making.
B)how consumers make purchasing decisions.
C)choices made by people faced with scarcity.
D)inflation, unemployment, and economic growth.

Question 12

An economic model is a

A)realistic version of an economic environment.
B)detailed version of an economic issue.
C)fictional representation of an entire economy.
D)simplified representation of an economic environment.

Question 13

Which of the following is a question answered with normative economic reasoning?

A)If the college offers free textbooks for students, will more students read their textbooks?
B)If the college provided less financial aid for out-of-state students, would more in-state students benefit?
C)If the college increased its enrollment requirements, would class size decline?
D)Should the college increase tuition to fund its athletic programs?

Question 14

Scarcity can best be defined as a situation in which

A)there are no buyers willing to purchase what sellers have produced.
B)there are not enough goods to satisfy all of the buyersʹ demand.
C)the resources we use to produce goods and services are limited.
D)there is more than enough money to satisfy consumersʹ wants.

Question 15

The 3 key economic questions include all of the following EXCEPT

A)ʺwhat products do we produce?ʺ
B)ʺhow do we produce these products?ʺ
C)ʺwhere should these products be produced?ʺ
D)ʺwho consumes the products?ʺ

Question 16

What factor of production is the primary focus of this Application?

A)natural resources
B)physical capital
C)labor
D)entrepreneurship

Question 17

Which of the following is a question answered with positive economic analysis?

A)Should the college reduce tuition for out-of-state residents?
B)Should the college charge higher tuition for part-time students?
C)If the college increased its eligibility requirements for enrollment, will class sizes decline?
D)Should the college eliminate its athletic program to cut its costs?

Question 18

One of the macroeconomic issues addressed in this Application is

A)companies increasing worker benefits.
B)the increase in college enrollment.
C)the growth of the Chinese economy.
D)the decisions by workers to remain inland.

Question 19

Deciding how a societyʹs products are distributed among its citizens answers the economic question of

A)who consumes the products produced.
B)what products will be produced.
C)where will the products be consumed.
D)how will the products be produced.

Question 20

Normative economics

A)is the focus of most modern economic reasoning.
B)answers the question ʺWhat ought to be?ʺ
C)predicts the consequences of alternative actions.
D)answers the question ʺWhat is?ʺ

Question 21

In the final two decades of the twentieth century, average per capita global income

A)increased by approximately 35 percent.
B)remained relatively unchanged.
C)decreased by approximately 6 percent.
D)increased by more than 75 percent.

Question 22

One of the key economic questions is ʺwhere should products be produced?ʺ

Question 23

Normative economic analysis answers what question?

Question 24

Positive economic analysis answers what question?

Question 25

Positive economics question, ʺWhat ought to be?ʺ Normative economics predicts the consequences of alternative actions, answering the questions, ʺWhat is?ʺ or ʺWhat will be?ʺ

Question 26

Economists will always reach the same conclusion in their positive analyses.

Question 27

One of the key economic questions is ʺwho consumes the products?ʺ

Question 28

Economic models explore decision making by individuals, firms and other organizations.

Question 29

Normative economics question, ʺWhat ought to be?ʺ Positive economics predicts the consequences of alternative actions, answering the questions, ʺWhat is?ʺ or ʺWhat will be?ʺ

Question 30

List and briefly describe the five factors of production.

Question 31

Would an economist consider clean air a scarce resource? Explain.

Question 32

An economic model is a detailed version of an economic environment.

Question 33

Economic models are used to

A)explain every detail of an economic theory.
B)explore decision making by individuals, firms and other organizations.
C)build physical renditions of government construction projects.
D)represent the complexities of economic environments.

Question 34

According to the Texas Transportation Institute, the typical U.S. commuter wastes approximately how much time per year due to traffic congestion?

A)14 hours
B)22 hours
C)47 hours
D)96 hours

Question 35

Give an example of something that is scarce in your life and explain the choices youʹve made because of scarcity.

Question 36

Richard runs a pizza delivery restaurant. List the three basic types of decisions studied in economics and give an example from Richardʹs restaurant.

Question 37

In the past few centuries, choices have led to a substantial decline in the standards of living around the globe.

Question 38

Talking about alternatives is the first step in a process that helps us make better choices about how we use our resources.

Question 39

Scarcity is a situation in which resources are unlimited in quantity and can be used in different ways.

Question 40

Most modern economic analysis is normative in nature, but involves questions with positive aspects.

Question 41

In the final two decades of the twentieth century, per capita income in sub-Saharan Africa

A)increased by approximately 35 percent.
B)remained relatively unchanged.
C)decreased by approximately 6 percent.
D)increased by more than 75 percent.

Question 42

Prior to the financial crisis and recession which began in 2007, credit for mortgages was _______, creating a _______.

A)virtually unavailable; housing bubble
B)only available to borrowers with high credit scores; shortage of affordable housing
C)easily obtained; housing boom
D)unavailable to low-income borrowers; large demand for rental properties

Question 43

Recall the Application about the experiment in which Chinese factory workers were divided into groups
and offered bonuses for their production output to answer the following question(s).
The results of the experiment discussed in this Application show the differences in productivity from the threat of having a bonus taken away for not meeting a production target and the promise of receiving a bonus for meeting a production target. These results describe the economic concept of

A)using assumptions to simplify.
B)ceteris paribus.
C)marginal thinking.
D)rational self interest.

Question 44

Recall the Application about the experiment in which Chinese factory workers were divided into groups
and offered bonuses for their production output to answer the following question(s).
According to the Application, workers who were told they would lose their bonuses if their output fell short of the production target were more productive than those workers who were offered a bonus if they met the production target. This is an example of which element of the economic way of thinking?

A)responding to incentives
B)thinking at the margin
C)isolating variables
D)using assumptions to simplify

Question 45

The Latin phrase ceteris paribus means that when a relationship between two variables is being studied,

A)both are treated as unpredictable.
B)neither of those two variables is allowed to change.
C)all other variables are held fixed.
D)we recognize that some factors are unknown.

Question 46

Jerome has a ʺCʺ average in his philosophy course and a ʺBʺ average in his economics course. He decides to study an extra hour for his philosophy exam. This is an example of

A)thinking at the margin.
B)using assumptions to simplify.
C)ceteris paribus.
D)caveat emptor.

Question 47

In the 1980s and 1990s, average per capita income increased by a greater percentage in sub-Saharan Africa than it did in the rest of the world.

Question 48

To make things simpler and focus attention on what really matters, economists would

A)use assumptions.
B)ignore all variables.
C)think at the margin.
D)respond to incentives.

Question 49

When determining an appropriate congestion tax economists would use which of the following elements of the economic way of thinking?

A)thinking at the margin
B)isolating variables
C)making assumptions
D)all of the above

Question 50

When economists assume that people are rational and respond to incentives, they mean

A)people act with kindness.
B)people are altruistic.
C)people act in their own self-interest.
D)people are selfish.

Question 51

A small change in a variable is

A)an average change.
B)a ceteris paribus change.
C)an efficient change.
D)a marginal change.

Question 52

To think at the margin means to consider

A)how nothing remains constant over time.
B)how a small change in one variable affects another variable.
C)how people behave in their own self-interest.
D)how people will decide what to purchase.

Question 53

Recall the Application about the experiment in which Chinese factory workers were divided into groups
and offered bonuses for their production output to answer the following question(s).
According to the Application, the results of the experiment suggests that the fear of a loss provides the prospect of a gain.

A)a lesser incentive than
B)an equal incentive to
C)a greater incentive than
D)a negative incentive compared to

Question 54

After the implementation of the congestion tax in London, traffic volume was reduced and travel time for cars and buses was cut in half. This is an example of

A)responding to incentives.
B)the role of pricing in allocating resources.
C)caveat emptor.
D)comparative advantage.

Question 55

Adam Smith

A)is considered the founder of economics.
B)introduced the concept of ceteris paribus to the discussion of supply and demand.
C)is responsible for refining the model of supply and demand.
D)is the author of this text.

Question 56

Congestion taxes tend to cause an increase in traffic volume during rush hours.

Question 57

The financial crisis and recession which began in 2007

A)impacted only high-income countries.
B)was only severe in the United States.
C)had a global impact.
D)impacted only low-income countries.

Question 58

Who is associated with the following summary of the economic way of thinking: ʺThe theory of economics does not furnish a body of settled conclusions immediately acceptable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its processer draw correct conclusions.ʺ

A)John Maynard Keynes
B)Alfred Marshall
C)Adam Smith
D)President Harry Truman

Question 59

When deciding to implement a congestion tax, economists and the government would use the elements of the economic way of thinking to determine

A)if the tax would be allocated equitably.
B)what tax amount should be charged.
C)who should be exempt from the tax.
D)how much revenue will the tax generate.

Question 60

A variable measures

A)something that always has the same value.
B)something that can take on different values.
C)factors that occur with high degrees of uncertainty.
D)the degree to which something varies over time.

Question 61

Which of the following is a macroeconomic question?

A)Should we have a constitutional amendment requiring the government to implement a national consumption tax to replace the current income tax?
B)Why did a leading computer manufacturer establish call centers in India?
C)Why does a pharmaceutical manufacturer try to lower its production costs?
D)Should the government put a tax on alcohol in an attempt to assist in the funding of support groups like Alcoholics Anonymous?

Question 62

A small, one-unit change in value is called a marginal change.

Question 63

Ceteris paribus is the same as rise / run.

Question 64

Economists assume that individuals make informed decisions and act in their own self-interest.

Question 65

Microeconomics is best described as the study of

A)the choices made by individual households, firms, and governments.
B)inflation, unemployment, gross national product, and the nationʹs economy as a whole.
C)how markets interact in the aggregate economy.
D)marginal changes in the economy.

Question 66

Macroeconomics involves the study of the decision-making of individual firms or individuals.

Question 67

A key assumption of most economic analysis is that people are altruistic, meaning that they act in their own self-interest.

Question 68

We can use macroeconomic analysis to

A)learn how to balance a checkbook.
B)study the choices made by households.
C)understand marginal changes in the macroeconomy.
D)understand why economies grow.

Question 69

Using assumptions to make things simpler and focus attention on what really matters is like using a road map to plan a trip.

Question 70

Describe the field of economics known as macroeconomics.

Question 71

The congestion tax implemented in London reduced traffic volume and cut travel time for cars and buses in half.

Question 72

Macroeconomics helps explain economic fluctuations, why the economy shrinks and expands and why some of the economyʹs resources are idle.

Question 73

A key assumption of most economic analysis is that people act rationally, meaning they respond to incentives.

Question 74

Which of the following is NOT a macroeconomic question?

A)Should we have a constitutional amendment requiring the federal government to balance the budget each year?
B)Should restaurants be required to list the number of calories for each product on their menus?
C)How does a fiscal stimulus package affect gross domestic product?
D)Should Congress enact tougher immigration laws to reduce unemployment?

Question 75

What is meant by the term ʺmarginal changeʺ?

Question 76

The study of the choices made by individual households, firms, and government is called

A)macroeconomics.
B)microeconomics.
C)managerial economics.
D)market economics.

Question 77

Ceteris paribus means ʺLet the buyer beware.ʺ

Question 78

Explain three ways we can use macroeconomic analysis.

Question 79

To determine an appropriate congestion tax, an economist had to assume that people responded to incentives.

Question 80

Macroeconomics is best described as the study of

A)very large issues.
B)the choices made by individual households, firms, and governments.
C)the nationʹs economy as a whole.
D)the relationship between inflation and wage inequality.