Question 1

Decision making "at the margin" means making a choice based on __________ of a decision.

Accepted Answer

Decision making "at the margin" means comparing the additional benefits and costs of a decision, hence the best choice would be to choose the option that has the highest additional benefits compared to the additional costs. Therefore, the answer is D.

Question 2

Several years ago,a bookstore chain extended its closing time from 9 p.m.to 10 p.m.Now it is considering a further extension to 11 p.m.In making this marginal decision,the results of having gone from 9 p.m.to 10 p.m.are

Accepted Answer

The decision to extend closing time from 10 p.m. to 11 p.m. is a marginal decision, meaning it is based on the additional costs and benefits of staying open an extra hour beyond 10 p.m., not on the costs and benefits incurred from previous changes in hours. Therefore, the results of the previous extension from 9 p.m. to 10 p.m. are no longer relevant to this new decision.

Question 3

In all cases,normative economics deals with

Accepted Answer

Normative economics is concerned with what should be, or what ought to be. It involves making value judgments and recommending actions based on those judgments.

Question 4

The synonym economists commonly use for additional is

Accepted Answer

Economists commonly use the term "marginal" to refer to additional units or changes in circumstances. Marginal analysis involves examining the costs and benefits of small, incremental changes, which is a key principle in economic thinking. Therefore, the answer is C, marginal.

Question 5

In all cases,microeconomics deals with

Accepted Answer

Microeconomics deals with the individual units in the economy, such as households and businesses, and how they make decisions concerning the allocation of scarce resources. It focuses on specific markets and the interactions between buyers and sellers, rather than the entire economy as a whole.

Question 6

In all cases,macroeconomics deals with

Accepted Answer

Macroeconomics deals with the entire economy, including broader issues such as inflation, economic growth, unemployment, and national income. It focuses on analyzing economic trends and policies that impact the overall performance of the economy as a whole.

Question 7

Economists believe that people's wants are

Accepted Answer

Economists generally believe that people's wants are infinite, meaning that there is no limit to the desires people may have for goods and services. This is a key assumption in economic theory and helps to explain how markets operate and how resources are allocated.

Question 8

Scarcity means

Accepted Answer

Scarcity refers to the situation where people's wants and needs are greater than the limited resources available to satisfy them. This means that choices must be made about how to allocate these limited resources in the most effective way, to ensure that they are used to meet the most pressing needs and wants. Therefore, option A is the correct answer as it reflects the true meaning of the term 'scarcity'. Option B is incorrect as it suggests that there are surplus resources, which is not the case in scarcity. Option C is also incorrect as it assumes resources are infinite, which is not the case in reality. Option D is partially correct, but it only focuses on the wants being limited, while scarcity implies that the resources too are limited. Option E is also incorrect as it is a combination of the incorrect options C and D.

Question 9

Opportunity cost is the value of

Accepted Answer

Opportunity cost measures the value of the best forfeited alternative, i.e. the next best alternative that one has to give up in order to choose a particular option.

Question 10

In economics,a synonym for utility is

Accepted Answer

Utility refers to the satisfaction or pleasure that a consumer derives from consuming a good or service. It is not the same as usefulness (A), sacrifice (C) or a service (D).

Question 11

The latest Taylor Swift album is available to be downloaded for $18.99.Is this price a rationing device?

Accepted Answer

Price can be a rationing device when it is used to limit the demand for a product. In this case, the album is priced at $18.99, which may not be affordable for everyone. Therefore, only those who are willing and able to pay that price will purchase the album, thereby restricting the demand for it.

Question 12

Normative economics is concerned with

Accepted Answer

Normative economics involves value judgments and opinions about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal, making both A and B correct.

Question 13

In every economy people vie for the economy's rationing device,a process called

Accepted Answer

Competition is the process by which people vie for the economy's rationing device, which is typically money. In a market economy, prices determine who gets what, so individuals and firms must compete with one another to earn income and purchase goods and services. Competition helps ensure that resources are allocated in the most efficient manner possible, as each producer must strive to offer high-quality goods and services at the lowest possible price to attract consumers. Therefore, choice A is the correct answer.

Question 14

In all cases,positive economics deals with

Accepted Answer

Positive economics is concerned with what is or what exists in reality, rather than what should or ought to be. It deals with facts and cause-and-effect relationships, and does not involve value judgments or opinions. It can apply to both small units within the economy and aggregates of the entire economy.

Question 15

What is the most prominent rationing device you will likely find at your campus bookstore?

Accepted Answer

Dollar price is the primary rationing device used in most market transactions, including those at a campus bookstore. It determines who can purchase an item based on their willingness and ability to pay the set price.

Question 16

The need to make choices is most closely related to the economic concept of

Accepted Answer

The economic concept of opportunity cost is the cost of giving up the next best alternative when making a decision. This means that whenever we make a choice, we are giving up something else in order to obtain what we chose. Therefore, the need to make choices is closely related to the concept of opportunity cost.

Question 17

At the optimal or efficient level of an activity,the activity's marginal benefit must

Accepted Answer

At the optimal level, the marginal benefit of the activity must be equal to its marginal cost. If the marginal benefit exceeds the marginal cost, then it is possible to increase the activity and gain additional benefits. However, if the marginal cost exceeds the marginal benefit, then it is better to reduce the activity as the additional cost outweighs the additional benefit. If the marginal benefit is zero or less than the marginal cost, then there is no incentive to undertake the activity at all. Therefore, the optimal or efficient level of an activity is where the marginal benefit equals the marginal cost.

Question 18

Positive economics is concerned with

Accepted Answer

Positive economics is based on cause-effect relationships and focuses on describing the economy as it is, rather than making value judgments or unproven observations.

Question 19

Which of the following is a positive economic statement?

Accepted Answer

This statement provides a factual observation without expressing any value judgments or subjective opinions.

Question 20

The condition in an economy that makes a "rationing device" a necessity is:

Accepted Answer

A rationing device is a tool used to allocate scarce resources in an economy. Without scarcity, there would be no need for rationing devices. Therefore, the condition that makes a rationing device a necessity is scarcity.

Quiz 1: What Economics Is About