Deck 1: Limits, Alternatives, and Choices

Question 1

An economy cannot produce at a point outside of its production possibilities curve because human economic wants are insatiable.

Answer 1

False

Question 2

Products and services are scarce because resources are scarce.

Answer 2

True

Question 3

Positive statements are expressions of value judgments.

Answer 3

False

Question 4

Choices entail marginal costs because resources are scarce.

Question 5

The lower the consumer's income, the higher his or her budget line.

Question 6

In drawing a particular budget line, money income and the prices of the two products are fixed.

Question 7

The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment.

Question 8

The entrepreneur's sole function is to combine other resources (land, labor, and capital)in the production of some good or service.

Question 9

An economy will always operate at some point on its production possibilities curve.

Question 10

Normative statements are expressions of facts.

Question 11

Rational individuals may make different choices because their preferences and circumstances differ.

Question 12

Macroeconomics explains the behavior of individual households and business firms; microeconomics is concerned with the behavior of aggregates or the economy as a whole.

Question 13

Although sleeping in on a work day or school day has an opportunity cost, sleeping late on the weekend does not.

Question 14

The present choice of position on the production possibilities curve will not influence the future location of the curve.

Question 15

Because economic generalizations are simplifications from reality, they are impractical and useless.

Question 16

Purposeful behavior implies that everyone will make identical choices.

Question 17

If economic theories are solidly based on relevant facts, then appropriate economic policy becomes obvious and uncontroversial.

Question 18

The process by which capital goods are accumulated is known as investment.

Question 19

Marginal analysis means that decision makers compare the extra benefits with the extra costs of a specific choice.

Question 20

Economics is the social science concerned with the best use of scarce resources to achieve maximum satisfaction of economic wants.

Question 21

Economic principles are value judgments about what the economy should be like or the way the economic world ought to be.

Question 22

"The role of government in the economy should be kept to a minimum" is an example of a positive economic statement.

Question 23

The budget line shows the various incomes that an individual can earn from different jobs.

Question 24

The quantity or supply of land resources available to a nation is pretty much fixed and cannot increase over time.

Question 25

When economists talk about the capital resources in the economy, they are referring to the amount of money circulating in the economy.

Question 26

Rational behavior implies that different people faced with similar choices will make the same decisions.

Question 27

Economic analysis is primarily concerned with marginal changes from the status quo, as a result of a certain action or decision.

Question 28

Entrepreneurship refers to a new college graduate who is looking for a job with a large company.

Question 29

Macroeconomics is concerned with the study of the nationwide market for specific goods like oranges.

Question 30

The scientific method does not apply to economics, because economics studies human behavior, which cannot be generalized.

Question 31

The resource category called "land" includes forests, animals, and water resources.

Question 32

Marginal analysis is the valuation of insignificant or small benefits from doing things.

Question 33

If economic resources were perfectly adaptable to alternative uses, then there would be constant opportunity costs along the production possibilities curve.

Question 34

The economizing problem for individuals arises from the conflict between having relatively unlimited time and relatively limited jobs to do.

Question 35

The comment that "taxes must be reduced for the good of the economy" is an example of a normative economic statement.

Question 36

The study of economics is not useful for consumers, because economic analysis focuses only on businesses and the economy.

Question 37

The fundamental economic problem faced by a society is that productive resources are so varied and versatile that it is hard to decide what to do with them.

Question 38

When firms give away "freebies" like free apps, free checking accounts, free maps, or free toothbrushes, they are contradicting economists' contention that "there is no free lunch."

Question 39

If falling gasoline prices are good for the consumers, then they must be good everyone in the economy.

Question 40

The study of global businesses such as Apple Inc is one major focus of macroeconomic analysis.

Question 41

If the marginal benefits are greater than the marginal cost of an activity, then society should allocate fewer resources to this activity.

Question 42

The slope of a graph measures the rate of change in one variable as the other variable changes.

Question 43

In graphing a relationship between two variables, economists always follow the mathematical convention. Thus, if price is the independent variable then it is measured on the horizontal axis.

Question 44

A reduction in the unemployment rate will cause the nation's production possibilities curve to shift outward.

Question 45

Suppose that Julia receives a $30 gift card for the local coffee shop, where she only buys lattes and muffins. If the price of a latte is $3 and the price of a muffin is $2, then we can conclude that Julia

A)should only buy muffins.
B)should only buy lattes.
C)can buy 10 lattes or 15 muffins if she chooses to buy only one of the two goods.
D)can buy 10 lattes and 15 muffins with her $30 gift card.

Question 46

Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. If the consumer spent all of her budget on just apples or just bananas, how many apples or bananas maximum would she be able to buy?

A)12 apples or 8 bananas
B)8 apples or 12 bananas
C)16 apples or 12 bananas
D)8 apples or 16 bananas

Question 47

In a curved graph that is dome-shaped, the tangent line at its maximum, or highest point, has an infinite slope.

Question 48

If two sets of data are inversely related, they will appear on a graph as an upward-sloping line.

Question 49

A nation's production possibilities curve shows the maximum combinations of resources that a nation can use.

Question 50

In the graph for the linear equation S = 15 − 5T, with T on the horizontal axis, the vertical intercept of the graph is −5.

Question 51

If A is the dependent variable and B is the independent variable, then a change in A results in a change in B.

Question 52

Camille is at the candy store with Grandma Mary, who offers to buy her $12 worth of candy. If lollipops are $1 each and candy bars are $4 each, what combination of candy can Camille's Grandma Mary buy her?

A)twelve lollipops and three candy bars
B)four lollipops and two candy bars
C)two lollipops and four candy bars
D)two lollipop and three candy bars

Question 53

The slope of a graph relating two variables is −5. This indicates that as one variable decreases, the other variable also decreases.

Question 54

Economic growth is shown as an increase in production from inside the production possibilities curve out toward a point on the possibilities curve.

Question 55

Assume the price of product Y (the quantity of which is on the vertical axis)is $10 and the price of product X (the quantity of which is on the horizontal axis)is $5. Also assume that money income is $30. The absolute value of the slope of the resulting budget line is

A)2.
B)1/2.
C)3.
D)6.

Question 56

A linear relationship only refers to one whose graph is either vertical or horizontal.

Question 57

An assumption is usually made in a two-axes (or two-dimensional)graph that, aside from the two variables under study, the influence of all other variables or factors is assumed to be constant.

Question 58

If society has overallocated resources to a particular activity, then the marginal benefits of the activity would be less than the marginal costs.

Question 59

A nation's consumption is strictly limited by its production possibilities, even with specialization and international trade.

Question 60

An increase in immigration would shift the production possibilities curve to the left.

Question 61

Assume that a consumer has a given budget or income of $10 and that she can buy only two goods, apples or bananas. The price of an apple is $2.00 and the price of a banana is $1.00. What is the slope of the budget line if the quantity of apples were measured on the horizontal axis and bananas on the vertical axis?

A)-0.5
B)-0.8
C)-1.6
D)-2

Question 62

Answer the question on the basis of the data given in the following production possibilities table. Refer to the table. If the economy is producing at production alternative B, the opportunity cost of the sixth unit of consumer goods will be approximately

A)4 units of capital goods.
B)3 units of capital goods.
C)1/3 of a unit of capital goods.
D)1/4 of a unit of capital goods.

Question 63

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities schedule. The marginal opportunity cost of the fifth unit of tanks is

A)shift the production possibilities curve from PP1 to PP2.
B)shift the production possibilities curve from PP2 to PP1.
C)move the economy from A to C along PP1.
D)move the economy from A, B, or C on PP1 to D.

Question 64

Assume that a consumer has a given budget or income of $10 and that she can buy only two goods, apples or bananas. The price of an apple is $1.00 and the price of a banana is $0.50. For this consumer, the opportunity cost of buying one more apple is

A)0.5 of a banana.
B)0.1 of a banana.
C)1 banana.
D)2 bananas.

Question 65

According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because

A)people are greedy.
B)productive resources are limited.
C)human beings are inherently insecure.
D)people are irrational.

Question 66

For economists, the word "utility" means

A)versatility and flexibility.
B)rationality.
C)pleasure or satisfaction.
D)purposefulness.

Question 67

A person should consume more of something when its marginal

A)benefit exceeds its marginal cost.
B)cost exceeds its marginal benefit.
C)cost equals its marginal benefit.
D)benefit is still better.

Question 68

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities schedule. The total opportunity cost of one unit(s)of tanks is

A)100 units of autos.
B)50 units of autos.
C)1,000 units of autos.
D)950 units of autos.

Question 69

Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of

A)opportunity costs.
B)marginal benefits that exceed marginal costs.
C)imperfect information.
D)normative economics.

Question 70

Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. If the consumer decides to buy 4 apples, how many bananas can she also buy with the remainder of her budget, assuming she exhausts her income?

A)8 bananas
B)4 bananas
C)6 bananas
D)10 bananas

Question 71

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule. The marginal opportunity cost of the first unit of steel is

A)15 units of wheat.
B)90 units of wheat.
C)10 units of wheat.
D)100 units of wheat.

Question 72

When economists say that people act rationally in their self-interest, they mean that individuals

A)look for and pursue opportunities to increase their utility.
B)generally disregard the interests of others.
C)are mainly creatures of habit.
D)are usually impulsive and unpredictable.

Question 73

Answer the question on the basis of the following production possibilities tables for two countries, North Cantina and South Cantina. Refer to the tables. If North Cantina is producing at production alternative B, the opportunity cost of the eleventh unit of consumer goods will be

A)cannot be achieved because resources are fully employed.
B)will cost 2 units of computers.
C)will cost 1/2 of a unit of computers.
D)will cause some resources to become unemployed.

Question 74

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities schedule. In moving from combination B to A, the opportunity cost of producing 50 more autos is

A)1 units of tanks.
B)1 unit of tanks.
C)950 units of autos.
D)1,950 units of autos.

Question 75

Answer the question on the basis of the following production possibilities table for two countries, North Cantina and South Cantina. Refer to the table. If South Cantina is producing at production alternative C, the opportunity cost of the fourth unit of capital goods will be

A)1/7 of a unit of consumer goods.
B)3 units of consumer goods.
C)19 units of consumer goods.
D)7 units of consumer goods.

Question 76

The basic truth that underlies the study of economics is the fact that we all face

A)death.
B)taxes.
C)risk.
D)scarcity.

Question 77

According to economists, economic self-interest

A)is a reality that underlies economic behavior.
B)has the same meaning as selfishness.
C)means that people never make wrong decisions.
D)is usually self-defeating.

Question 78

Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $2.00 and the price of a banana is $1.00. This means that, in order to buy six bananas, this consumer must forgo

A)3 apples.
B)0.8 apples.
C)6 apples.
D)2 apples.

Question 79

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule. The opportunity cost of producing the 31st unit of wheat is approximately

A)25 units of steel.
B)0 units of steel.
C)1 unit of steel.
D)1/25 of a unit of steel.

Question 80

In economics, the pleasure, happiness, or satisfaction received from a product is called

A)marginal cost.
B)rational outcome.
C)status fulfillment.
D)utility.