Microeconomics 102 505 Chapters 1-2

The best way to describe economics is that it is the study of __________

money and finances.
preventing scarcity.
maximizing productivity.
how decisions are made.

Within 3 months of starting work at the book publishing company, Shawn has greatly increased his skill and speed at packaging books for shipping.

Division of labor
Specialization of labor
Economies of scale

Everyone in the Jackson family is equally good at baking, so they have begun selling pies at a local farmer's market. Mr. Jackson realizes they can be more productive if each member of the family does a different task associated with making the pies.

Division of labor
Specialization of labor
Economies of scale

Though it required an increase in workforce, Tiny House Manufacturers has expanded its level of production and can now manufacture each home more affordably and efficiently.

Division of labor
Specialization of labor
Economies of scale

Which are concepts that Adam Smith first introduced in his 1776 book The Wealth of Nations? (Select all that apply.)

Economics
Fiscal policy
Scarcity
Division of labor
Specialization of labor

Which factor drives the study of economics?

Scarcity
Politics
Trade
Profit

Which statements are true of the study of microeconomics? (Select all that apply.)

It is concerned with how individual households spend their budgets.
It has an opposite view of macroeconomics.
It analyzes the slowing down or speeding up of a country's economy.
It examines how a business decides if and when to borrow money.
It focuses on monetary policy.

As an exercise to understand macroeconomics, an instructor presents her students with the national economy of a fictitious country. She divides the students in her class into two groups. Students in Group A will identify and analyze the spending by the country's government and its taxes. Group B will focus on the country's bank lending policy, interest rates, and financial capital markets.
As students in both groups make their analysis, which factors will help them define the overall macroeconomic health of the fictitious country's economy? (Select all that apply.)

Price determination of businesses
Employment rate
Savings rates of families
Consumer confidence
Standard of living

As an exercise to understand macroeconomics, an instructor presents her students with the national economy of a fictitious country. She divides the students in her class into two groups. Students in Group A will identify and analyze the spending by the country's government and its taxes. Group B will focus on the country's bank lending policy, interest rates, and financial capital markets.
Group A is tasked with the country's _______ policy, while group B has the focus of its ______ policy.

fiscal/monetary
macroeconomic/microeconomic
microeconomic/macroeconomic
monetary/fiscal

In the circular flow diagram, what do households sell to business firms?

Goods
Labor
Benefits
Salaries

What is used in economics interchangeably with the term "theory"?

Variable
Diagram
Model
Equation

Which two primary markets interact in the circular flow diagram?

Imports and exports
Households and businesses
Income and payments
Goods and services and labor

What is most likely to encourage underground economies?

Globalization
Market economies
Traditional economies
Command economies

Which factors contribute to globalization? (Select all that apply.)

Cheaper transportation
Communism
Regulation
Traditional economies
Innovation in technology

Production and distribution of goods and services are made by the government with little to no regard of the average citizen. Communism/socialism are current structures of command economies.

Traditional
Command
Market

Production and distribution of goods and services are made by individuals and businesses. Capitalism is the current form of market economies.

Traditional
Command
Market

Production and distribution of goods and services are made by traditions. A person's occupation was determined by their family, and the amount of goods and services they received was based on their traditional social status.

Traditional
Command
Market

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:

all consumers.
buyers and sellers.
producers and input suppliers.
producers and government planning committees.

____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.

Skill
Specialization
Economies of scale
Division of labor

Specialization:

leads to greater self-sufficiency.
can lead to an increase in overall production.
allows workers to develop skills by working on a large number of tasks
is always the result of an inefficient use of resources

n the ______________, households receive goods and services and pay firms for them.

labor market
financial capital market
goods and services market
savings market

Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.

financial capital market
circular flow diagram
financial investment market
Specialization Model

In countries like _____________ the command economy predominates.

China and Vietnam
Cuba and North Korea
South Africa and Kenya
Germany and France

The basic difference between macroeconomics and microeconomics is that:

microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets).
macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries.
microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).
macroeconomics is concerned with generalization while microeconomics is concerned with specialization.

The circular flow diagram of economic activity is a model of the:

flow of goods, services, and payments between households and firms.
influence of government on business behaviour.
role of unions and government in the economy.
interaction among taxes, prices, and profits.

When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being:

balanced budget
prudent monetary policy
low inflation
assuring competition between firms

In the ____________, households work and receive payment from firms.

financial investment market
financial capital market
labor market
savings market

The basic difference between macroeconomics and microeconomics is:

microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade.
microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms.
microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.
microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change.

market
economy
production
firm

Macroeconomic topics do not usually include:

the profit maximizing decisions of an individual manufacturer.
the rate of inflation.
the rate of unemployment.
economic growth.

Which of the following best denotes the reason for the existence of substantial black markets?

a market-oriented economy
a command economy
government laws and rules
the microeconomy

Which of the following is most likely a topic of discussion in macroeconomics?

an increase in the price of a hamburger
a decrease in the production of DVD players by a consumer electronics company
an increase in the wage rate paid to automobile workers
a decrease in the unemployment rate

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.

division of labor
interconnected economy
task economy
modern economy

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.

government
market
firm
business sector

Which of the following best describes a monetary policy tool?

interest rates
taxes
household savings
government spending

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

market-oriented economy
macroeconomy
microeconomy
command economy

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?

division of labor
international trade
economies of scale
command economy

Jean Paul is a second year university architecture student on a very tight budget. Although a scholarship covers his tuition, books, dormitory and meals, he must budget tightly each week for his school supplies, entertainment, and clothing. His roommate is offering him a drafting table for a remarkably low price and allowing him to make payments over 4 weeks, but this will pinch his budget. However, having a drafting table in his room will save him the time and energy of using the drafting table of a friend who lives off campus, and it will give him more flexibility for completing his assignments.
What is Jean Paul considering in the act of adjusting his budget to accommodate the purchase of the drafting table?

Opportunity cost
Sunk costs
Law of diminishing marginal utility
Utility

Jean Paul is a second year university architecture student on a very tight budget. Although a scholarship covers his tuition, books, dormitory and meals, he must budget tightly each week for his school supplies, entertainment, and clothing. His roommate is offering him a drafting table for a remarkably low price and allowing him to make payments over 4 weeks, but this will pinch his budget. However, having a drafting table in his room will save him the time and energy of using the drafting table of a friend who lives off campus, and it will give him more flexibility for completing his assignments.
Jean Paul's weekly choice of allotting his budget to a varying combination of school supplies, entertainment, clothing, and other specialty purchases such as the drafting table represent his _________

opportunity set.
utility.
law of diminishing marginal utility.
sunk costs.

Sandra took an expensive cruise. In order to pay for it, she stopped her gym membership.

Marginal analysis
Law of diminishing marginal utility
Sunk costs
Opportunity cost

Elijah's car needs expensive repairs. When Elijah was deciding whether to do them, he remembered that the car had cost him $20,000.

Marginal analysis
Law of diminishing marginal utility
Sunk costs
Opportunity cost

Reba is deciding whether she should eat an additional half of a sandwich.

Marginal analysis
Law of diminishing marginal utility
Sunk costs
Opportunity cost

Mario's restaurant has a budget for advertising each month. Each additional ad brings in less new customers than the previous ad.

Marginal analysis
Law of diminishing marginal utility
Sunk costs
Opportunity cost

Opportunity costs involve what factor besides price?

Time
Utility
Slope
Tradeoff

Budget constraint is to the individual, as ________ is to society.

allocation efficiency
comparative advantage
law of diminishing returns
production possibilities frontier

Which factor corresponds to the curving slope of a production possibilities frontier (PPF) graph?

Allocation efficiency
Comparative advantage
Utility
Law of diminishing returns

Sally has determined that hiring a fifth worker will increase her production of roses in her greenhouse less than the cost of hiring the worker.

Productive efficiency
Allocative efficiency
Comparative advantage
Law of diminishing returns

Due to its climate, India has a lower opportunity cost for producing rice than the United States.

Productive efficiency
Allocative efficiency
Comparative advantage
Law of diminishing returns

The amount of gas being produced is equal to the amount of gas consumers want.

Productive efficiency
Allocative efficiency
Comparative advantage
Law of diminishing returns

A country is producing the maximum amount of education given its fixed amount of resources to produce education.

Productive efficiency
Allocative efficiency
Comparative advantage
Law of diminishing returns

Which scenario exemplifies the concept of the invisible hand?

The combination of approving the new museum and postponing expansion of the airport has been dictated by the city's voters.
The city cannot make improvements to its infrastructure without making cuts in another area.
Susan feels that despite the economic hardship it will mean to her, all of her children should go to college to achieve their very best.
When Carl purchases local products because they are cheaper, he is not thinking of the advantage it has on his area's manufacturing sector.

Which are normative statements? (Select all that apply.)

Health care should be available for everyone in the United States because it is the right thing to do.
If the manufacturing plant can add a swing shift, production could increase.
The expansion of the shopping mall will attract more shoppers.
The development of a new freeway is not feasible, given the existing number of commuters.
Although the benefits of the bus tunnel do not immediately exceed the costs, it can be used for a future subway when growth dictates it.

Which are factors that both budget constraint diagrams and production possibilities frontier diagrams highlight? (Select all that apply.)

Tradeoffs
Positive statements
Efficiency
Scarcity
Opportunity cost
Utility
Law of diminishing returns
Normative statements

The marginal benefit of a slice of pizza is the:

total amount that a consumer is willing to pay for a whole pizza, divided by the number of slices
difference between the value of the slice to the consumer and the price of the slice.
maximum amount that a consumer is willing to pay for the slice.
price of the slice of pizza

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options.

marginal utility
sunk costs
marginal analysis
budget constraints

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible.

opportunity set
consumption choice
time value of money
risk premium

Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy:

is not using its resources efficiently.
is using its resources efficiently while producing clothing but no food.
is using its resources efficiently while producing food but no clothing.
is using its resources efficiently to produce both food and clothing.

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

Opportunity cost
productive efficiency
budget constraint
production possibilities frontier

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

personal preference
utility level
budget constraint
opportunity set

Refer to Figure 2-1. The most inefficient point depicted is:

Point A
Point C
Point D
Point G

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.

allocative efficiency
the production possibilities frontier
trade-offs
scarcity

Scarcity implies that:

consumers would be willing to purchase the same quantity of a good at a higher price.
it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce.
consumers are too poor to afford the goods and services available.

Why is there scarcity?

Because the opportunity set determines this.
Because theory dictates it.
Because our unlimited wants exceed our limited resources.
Because human wants are limited.

Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is:

Point B
Point C
Point D
All points on the production possibilities frontier are equally efficient.

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.

negative statements
positive statements
tradeoffs
utilitarianism

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

normative statement
budget constraint
trade-off
opportunity cost

The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.

consumption
marginal analysis
diminishing marginal utility
utility

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.

utility
marginal benefit
opportunity cost
sunk costs

Marginal thinking is best demonstrated by:

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.
deciding to never purchase a coat made with animal skins or furs
acquiring the information relevant to a choice before making that choice
measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake

Scarcity exists because of:

the market mechanism.
specialization and division of labor.
the allocation of goods by prices.
unlimited wants and limited resources.

The opportunity cost of an action:

can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action.
can be determined by adding up the bills incurred as a result of the action.
can be objectively determined only by economists.
is a subjective valuation that can be determined only by the individual who chooses the action.

In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income.

budget constraint
opportunity set
utility
production possibilities frontier

Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is:

10 points on the economics exam
8 points on the history exam
7 points on the economics exam
12 points on the economics exam