Question 1

Normative statements are expressions of facts.

Accepted Answer

Normative statements express value judgments and opinions, rather than objective facts. They convey how things ought to be, rather than how they are.

Question 2

Products and services are scarce because resources are scarce.

Accepted Answer

This statement is true because resources like land, labor, and capital are limited and cannot always meet the demands for all products and services desired by consumers. Therefore, choices have to be made about what to produce and how to allocate resources, leading to scarcity of certain products and services.

Question 3

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

Accepted Answer

The statement is reversed. Microeconomics deals with the behavior of individual households and business firms, while macroeconomics is concerned with the behavior of aggregates or the economy as a whole.

Question 4

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

Accepted Answer

Economic theories may present different interpretations or solutions based on political or ethical considerations, making economic policy controversial and subject to debate. Additionally, the relevance and accuracy of facts may be questioned or disputed.

Question 5

(Last Word) A study found that the incidence of skin cancer increases along with the amount of time people work under fluorescent light, leading some people to conclude that fluorescent lighting is a cause of skin cancer.But further analysis found that people who work in offices, where fluorescent light is common, suffer more sunburn on their vacations than other workers.The sunburns, not the fluorescent light, were the cause of the higher incidence of skin cancer.The original conclusion illustrates
A)the fallacy of composition.
B)confusion of correlation and causation.
C)identifying marginal costs and marginal benefits.
D)biases and loaded terminology.

Accepted Answer

Confusion of correlation and causation. The study found that people who work under fluorescent light have a higher incidence of skin cancer, but it did not prove that fluorescent light causes skin cancer. It is possible that there is another factor, such as sun exposure, that is causing both the higher incidence of skin cancer and the increased use of fluorescent light.

Question 6

In drawing a particular budget line, money income and the prices of the two products are fixed.Test Bank: I Topic: Unemployment, Growth, and the Future

Accepted Answer

The budget line represents the combinations of two products that a consumer can purchase with a fixed income, given the prices of the two products.

Question 7

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

Accepted Answer

While economic generalizations do simplify complex phenomena, they are still useful for understanding trends and making predictions. They can also help guide policy decisions and inform economic research.

Question 8

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

Accepted Answer

The present choice of position on the production possibilities curve will influence the future location of the curve because resources are limited and the choices made in the present will affect the availability of resources in the future. For example, if all resources are used up in the present to produce consumer goods, there will be fewer resources available in the future to produce capital goods, thereby shifting the curve inward. On the other hand, if resources are used wisely in the present to produce a mix of consumer and capital goods, the curve may shift outward in the future as more resources become available for production.

Question 9

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

Accepted Answer

Entrepreneurs not only combine resources like land, labor, and capital but also innovate, take risks, and make strategic decisions that affect the direction and success of their business ventures.

Question 10

Choices entail marginal costs because resources are scarce.

Accepted Answer

When we make a choice, we need to give up something else, which is known as the opportunity cost. Resources used to make that choice are no longer available for other uses, making them scarce. Therefore, choices entail marginal costs because we have to give up something to obtain the benefits of the chosen option.

Question 11

An economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy.

Accepted Answer

An economic model is a simplified representation of economic processes, used to analyze and predict economic behavior, not an ideal or utopian economy.

Question 12

An economy will always operate at some point on its production possibilities curve.Difficulty: 02 Medium
Learning Objective: 01-07 Explain how economic growth and international trade increase consumption possibilities.

Accepted Answer

An economy can operate inside its production possibilities curve due to inefficiencies, such as unemployment or underutilized resources.

Question 13

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

Accepted Answer

Investment is the process of accumulating capital goods, such as machines, tools, and buildings, that are used to produce goods and services.

Question 14

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

Accepted Answer

Rationality does not guarantee that individuals will always make the same choices as each other. People have different preferences and circumstances, which may influence their decisions even if they are being rational.

Question 15

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

Accepted Answer

The reason an economy cannot produce at a point outside of its production possibilities curve is due to limited resources and technology, not because human economic wants are insatiable. The curve represents the maximum output combinations that can be achieved with available resources and technology.

Question 16

Purposeful behavior implies that everyone will make identical choices.

Accepted Answer

Purposeful behavior implies that individuals have unique goals, values, and preferences that influence their decision-making process, so it is unlikely that everyone will make identical choices.

Question 17

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

Accepted Answer

Marginal analysis involves evaluating the additional benefits and costs of a decision or action, in order to determine whether it is worthwhile to proceed or not. Therefore, decision makers do compare the extra benefits with the extra costs of a particular choice.

Question 18

Positive statements are expressions of value judgments.

Accepted Answer

Positive statements are objective statements that can be tested or rejected by referring to the facts. They describe the world as it is, not as it should be, unlike normative statements which express value judgments.

Question 19

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

Accepted Answer

The production possibilities curve is a graphical representation of the maximum combinations of two products that an economy can produce given its resources and technology when achieving full employment.

Question 20

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

Accepted Answer

Sleeping late on the weekend still has an opportunity cost as there may be other activities or responsibilities that could be done during that time.

Quiz 1: Limits, Alternatives, and Choices