Microeconomics Ch 1&2

Which of the following is a capital resource?
A piece of software used by a firm.
Silicon (sand) used to make computer chips.
A computer programmer.
A corporate bond issued by a computer manufacturer.

Economics involves marginal analysis because:
much economic behavior is irrational.
most decisions involve changes from the present situation.
marginal benefits always exceed marginal costs.
marginal costs always exceed marginal benefits.

The advent of DVDs has virtually demolished the market for videocassettes. This is an example of:
creative destruction.
capital accumulation.
derived demand.
the difference between normal and economic profits.

Microeconomics is concerned with:
the establishing of an overall view of the operation of the economic system.
positive economics, but not normative economics.
a detailed examination of specific economic units that make up the economic system.
the aggregate or total levels of income, employment, and output.

The law of increasing opportunity costs is reflected in a production possibilities curve that is:
bowed in toward the origin.
an upsloping straight line.
a downsloping straight line.
bowed out from the origin.

The Latin term "ceteris paribus" means:
prosperity inevitably follows recession.
that if event A precedes event B, A has caused B.
other things equal.
that economics deals with facts, not values.

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially:
"Through trial and error."
"Through government leadership and direction."
"Through training and retraining programs."
"Through the guiding function of prices and the incentive function of profits."

The point on the production possibilities curve that is most desirable can be found by:
determining where least-cost production occurs.
calculating where economic growth will be greatest.
estimating the marginal costs of both products in real or physical terms.
comparing marginal benefits and marginal costs.

Opportunity costs exist because:
most decisions do not involve sacrifices or trade-offs.
households and businesses make rational decisions.
the decision to engage in one activity means forgoing some other activity.
wants are scarce relative to resources.

The economizing problem is:
the need to make choices because economic wants exceed economic means.
how to distribute resources equally among all members of society.
that people's means often exceed their wants.
that people do not know how to rationally allocate resources.

A normative statement is one that:
applies only to macroeconomics.
is based on the law of averages.
is based on value judgments.
applies only to microeconomics.

Refer to the diagram. Flow 1 represents:
wage, rent, interest, and profit income.
consumer expenditures.
goods and services.
land, labor, capital, and entrepreneurial ability.

The "coincidence of wants" problem associated with barter refers to the fact that:
money must be used as a medium of exchange or trade will never occur.
buyers in resource markets and sellers in product markets can never engage in exchange.
for exchange to occur, each seller must have a product that some buyer wants.
specialization is restricted by the size or scope of a market.

A production possibilities curve illustrates:
the distribution of income.
market prices.
scarcity.
consumer preferences.

Barter:
is the major means of exchange in centrally planned economies.
is used to circumvent the problem of a lack of coincidence of wants among potential buyers and sellers.
accounts for over 30 percent of the dollar volume of all exchange in the U.S. economy.
entails the exchange of goods for goods.

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially:
"Those willing and able to pay for them."
"Those who most need them."
"Those who physically produced them."
"Those who get utility from them."

The French term "laissez-faire" means:
"circular flow."
"there is no free lunch."
"public ownership."
"let it be."

The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of:
consumer sovereignty.
market failure.
the invisible hand.
derived demand.

The scientific method is:
not applicable to economics because economics deals with human beings.
also known as the economic perspective.
analysis that moves from broad generalizations called laws to theories and then to hypotheses.
used by economists and other social scientists, as well as by physical scientists and life scientists, to formulate and test hypotheses.

The term "other things equal" means that:
when variable X increases so does related variable Y.
a number of relevant variables are assumed to be constant.
many variables affect the variable under consideration.
the associated statement is normative.

Refer to the diagram. Flow 4 represents:
consumer expenditures.
goods and services.
wage, rent, interest, and profit income.
land, labor, capital, and entrepreneurial ability.

Which of the following is a labor resource?
A computer programmer.
A piece of software used by a firm.
A computer.
Silicon (sand) used to make computer chips.

Which of the following is a land resource?
An oil drilling rig.
A machine for detecting earthquakes.
Natural gas.
A farmer.

Which of the following is one of the Five Fundamental Questions?
How much should society save?
What goods and services will be produced?
Which products will be in scarce supply and which in excess supply?
Who should appoint the head of the central bank?

Which of the following is a distinguishing feature of a command system?
Central planning.
Heavy reliance on markets.
Private ownership of all capital.
Widespread dispersion of economic power

Competition means that:
there are independently acting buyers and sellers in each market.
a product can be purchased at a number of different prices.
sellers can manipulate market price by causing product scarcities.
there is more than one seller in a market.

Refer to the data. Assuming that the firm is motivated by self-interest and that the 20 units that can be produced with each technique can be sold for $2 per unit, the firm will:
realize an economic profit of $10.
realize an economic profit of $4.
shut down rather than incur a loss by producing.
not earn any economic profit.

The regulatory mechanism of the market system is:
private property.
competition.
self-interest.
specialization.

Macroeconomics can best be described as the:
analysis of how a consumer tries to spend income.
study of how supply and demand determine prices in individual markets.
analysis of how firms attempt to maximize their profits.
study of the large aggregates of the economy or the economy as a whole.

Which of the following is a distinguishing feature of laissez-faire capitalism?
Public ownership of all capital.
Minimal government intervention.
Central planning.
A circular flow of goods, resources, and money.

The study of economics is primarily concerned with:
determining the most equitable distribution of society's output.
keeping private businesses from losing money.
choices that are made in seeking the best use of resources.
demonstrating that capitalistic economies are superior to socialistic economies

The four factors of production are:
land, labor, capital, and entrepreneurial ability.
labor, capital, entrepreneurial ability, and money.
land, labor, capital, and money.
labor, capital, technology, and entrepreneurial ability.

In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market.
capital; product
resource; product
product; resource
product; financial

Economic resources are also called:
free gifts of nature.
units of money capital.
consumption goods.
factors of production.

Economic profits and losses:
equalize the distribution of income in the long run.
are both considered by economists to be a part of production costs.
are essential to the reallocation of resources from less desired to more desired goods.
have no influence on the composition of domestic output.

A positive statement is one that is:
subjective and is based on a value judgment.
objective and is based on facts.
derived by induction.
derived by deduction.

Refer to the diagram. Flow 2 represents:
wage, rent, interest, and profit income.
consumer expenditures.
land, labor, capital, and entrepreneurial ability.
goods and services.

Refer to the diagram. Flow 3 represents:
consumer expenditures.
land, labor, capital, and entrepreneurial ability.
wage, rent, interest, and profit income.
goods and services.

Which of the following is a fundamental characteristic of the market system?
Central planning by government.
Property rights.
Unselfish behavior.
Government-set wages and prices

Any point inside the production possibilities curve indicates:
the presence of inflationary pressures.
that more output could be produced with the available resources.
the presence of technological change.
that resources are imperfectly substitutable among alternative uses.