question
Economists assume that people are rational in the sense that...
answer
They use all available information as they take actions intended to achieve their goals
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Which of the following best describes scarcity?
answer
Unlimited wants exceed the limited resources available
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Scarcity is central to the study of economics because it implies that...
answer
Every choice involves an opportunity cost
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Consider the following statement: "The problem with economics is that it assumes that consumers and firms always make the correct decisions. But we know that everyone makes mistakes."
answer
Economics assume that consumers and firms are rational, not that they always make the right decisions
question
According to the FBI Bank Crime Statistics, they were nearly 4,000 bank robberies in the U.S in 2014. The FBI claims that banks have made themselves easy targets by refusing to install clear acrylic partitions, called bandit banners, that separate bank tellers from the public. According to a special agent with the FBI, "Bandit barriers are a great deterrent. We've talked to guys who rob banks and as soon as they see a bandit barrier, they go find another bank." Despite this finding, many banks have been reluctant to install these barriers, wouldn't banks have a strong incentive to install bandit barriers to deter robberies? Why, then do so many banks not do so?
answer
Banks have no economic incentive to install the barriers
question
The grading system used by a teacher can affect the incentives of students to learn the course material by...
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Altering the payoffs to achieving success on the various components of the course
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If teachers put too little weight in the grading scale on a certain part of the course, like readings outside the textbook, students might respond by __________ that part of the course
answer
De-empasizing
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Teachers often wish that students came to class prepared having read the upcoming material. A teacher could design the grading system to motivate students to come to class prepared by ________ the grade weight assigned to being prepared
answer
Increasing
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In 2011, President Obama convinced Congress to pass changes to the federal student loan programs: As a result of these changes in the federal student loan program, you would predict that the total amount students borrowed under these programs would have...
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Increased because the term of repayment have been made more generous
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President Obama was likely to have recommend changes that would...
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Increase the payments that borrowers would have to make so that the government would be paid back sooner
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President Obama and his advisors have failed to correctly forecast the effects of the 2011 changes to the loan program because they...
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Underestimated the number of students who would take advantage of the programs
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Corporations and universities are willing to pay employees to take care of themselves because a healthier work force...
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Translates into lower costs, import by reducing illness-related absenteeism and premature retirement and performs more efficiently, thereby improving overall productivity in the workforce
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The incentive that employees improve or maintain their health once they obtain health insurance may be ______ impacted.
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Negatively
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When an employer offers a wellness program to its employees, the health insurance premiums the employer pays on behalf of the employees are likely to ______
answer
Decrease
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Firms that provide workers with health insurance may pay a lower wage to obese workers than to workers who aren't obese because the former tend to be less healthy and consequently...
answer
Experience higher rates of absenteeism and early retirement, less productive at work, more costly to insure and therefore employ due to their higher claim submission rate
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Regarding the question of whether health insurance provides people with an incentive to become obese, the finding of Bhattacharya and Bundorf seems...
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Relevant since the link between insurance and obesity was established while holding many other variables constant
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From an economic perspective, to determine whether to serve breakfast all day at McDonalds should...
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Compare the marginal revenue from serving breakfast all day with the marginal cost of serving breakfast all day
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Would McDonalds decision have to be all or nothing- wither serve breakfast only up to 10:30 am or serve breakfast all day?
answer
No McDonalds could evaluate serving items from the breakfast menu that could be cooked in better coordination with the dinner menu for a period after 10:30 am
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"I was going to drop my psychology course so I could concentrate on my other courses, but I had already put so much time into the course I decided not to drop it" Your friends reasoning is ______
answer
Incorrect
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Why might studying Economics be particularly good preparation for being the top manager of a corporation or a leader in government?
answer
Economic teaches us how to look at the tradeoffs involved in every decision
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Which of the following statements about the idea that people are rational is correct?
answer
The idea assumes that consumers and firms use all available information as they act to achieve their goals
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Economists assume that the only reason people take the actions they do is in response to economic incentives.
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False
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What do economists mean by the word "marginal"?
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extra or additional
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Economists believe that an activity should be continued up to the point where...
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The marginal benefit from the activity is equal to the marginal cost
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An Optimal Decision occurs when...
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Marginal benefit equals marginal cost
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One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls...
answer
Scarcity
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_______ occurs when a good or service is produced at the lowest possible cost. ______ occurs when production is accordance with the consumer preferences
answer
Productive Efficiency
Allocative Efficiency
Allocative Efficiency
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_____ is concerned with what is, and _____ is concerned with what ought to be. Economics is about ______ which measures the cost and benefits of different courses of action
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Positive Analysis
Normative Analysis
Positive Analysis
Normative Analysis
Positive Analysis
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Economics is a social science because
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It applies the scientific method to the study of interactions among individuals, it is based on studying the actions of individuals, it considers human behavior, particularly decision making behavior
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Which of the following covers the study of topics such as inflation or unemployment?
answer
Macroeconomics
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In your Economics class, you scored a 64 on the first quiz, a 93 on the second quiz, and a 73 on the third quiz. Your average quiz grade is a _____
answer
76.7
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On the fourth quiz you scored a 82. Did that raise your average?
answer
Yes
question
A free market exists...
answer
When the government places few restrictions on how a good or service can be produced or sold or on how a factor of production can be employed
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The Scottish philosopher Adam Smith argued in 1776 that...
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Prices would do a better job of coordinating the activities of buyers and sellers that guilds could
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The primary difference between product markets and factor markets is that...
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Product Markets are markets for goods, while factor markets are markets for factors of production-labor, capital, natural resources, and entrepreneurial ability
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What is scarcity?
answer
The situation in which unlimited wants exceed the limited resources available to fulfill those wants
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What is Economics?
answer
The study of the choices people make to attain their goals, given their scarce resources
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What is Economic Model?
answer
A simplified version of reality used to analyze real world economic situations
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What is Market?
answer
A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade
question
What are the 3 important ideas we will come to in Economics?
answer
1.) People are rational
2.) People respond to economic incentives
3.) Optimal decisions are made at the margin
2.) People respond to economic incentives
3.) Optimal decisions are made at the margin
question
What is Marginal Analysis?
answer
Analysis that involves comparing marginal benefits and marginal costs
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What is Trade Off?
answer
The idea that because of scarcity, producing more of one good or service means producing less of another good or service
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What is Opportunity Cost?
answer
The highest valued alternative that must be given up to engage in an activity
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What are the 3 fundamental questions in Economics?
answer
1.) What goods and services will be produced?
2.) How will the goods and services be produced?
3.) Who will receive the goods and services produced?
2.) How will the goods and services be produced?
3.) Who will receive the goods and services produced?
question
What is a Mixed Economy?
answer
An economy in which the most economic decisions result from the interactions of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources
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What is Centrally Planned Economy?
answer
An economy in which the government decides how economic resources will be allocated
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What is Voluntary Exchange?
answer
The situation that occurs in markets when both the buyer and seller of a product are made better off by the transaction
question
Scarcity implies that every society and every individual face trade off because scarcity means that...
answer
Human wants are greater than what available resources can produce
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Centrally planned economies allocate resources baed on decisions by _____ while market economies answer 3 questions through decisions made by ______
answer
Government
Household and Firms
Household and Firms
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Productive Efficiency means that
answer
A good or service is produced at the lowest possible cost
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Allocative Efficiency means
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Every good or service is produced up to the point where marginal benefit is equal to marginal cost
question
Efficiency means that goods are distributed in a way that _____, while equity means that goods are distributed in a way that is _____
answer
Maximizes benefits to society
Is fair
Is fair
question
Does Bill Gates face scarcity?
answer
Yes because even though billionaires financial resources enable them to afford a much greater away of goods and services than those wealthy, their financial resources aren't infinite
question
Which of the following is true?
answer
All individuals face a scarcity of time and need to make choices and how to allocate it
question
A firm operating in a market economy has a strong incentive to be productively efficient and allocatively efficient because the former enables it to ____ while the latter ensures it of _____
answer
Minimize production cost
Ample Revenues
Ample Revenues
question
If a firm is productively and allocatively efficient, it earns ___ if it is not it ____
answer
A profit
Suffers a loss
Suffers a loss
question
Consider an organization that exists to help the poor. The members of the organization are discussing alternative methods of aiding the poor, when proponent of one particular :
" If only one poor person is helped with this method, then all our time and money would have been worth it."
If you were a member of the organization, what reply best represents clear economic thinking?
" If only one poor person is helped with this method, then all our time and money would have been worth it."
If you were a member of the organization, what reply best represents clear economic thinking?
answer
Ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people
question
A news story on declining attendance at college football games noted that schools in the central time zone had particular problems with attendance at games that started at 11 a.m. The athletic director at the University of Illinois was quoted saying, "I'm a big fan of evening games."
Playing games in the late afternoon or evening, rather than in the morning, would
Playing games in the late afternoon or evening, rather than in the morning, would
answer
Change the opportunity cost for students whose alternative activities vary throughout the day
question
Relative to a market economy, a centrally-planned economy would be expected to be
answer
Better at neither productive efficiency nor allocative efficiency because the absence of market-imposed competition negates the need of firms to satisfy consumer wants or produce using the lowest cost methods
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In a Market System, how does society decide what goods and services will be produced?
answer
Consumer, firms, and the government determine what goods and services will be produced by the choices they make
question
In a Market System, what determines how goods and services will be produced?
answer
Firms determine how goods and services will be produced
question
In a Market System, how does society decide who will receive the goods and services produced?
answer
Who receives the goods and services produced depends largely on how income is distributed
question
Today, which of the following countries has a centrally planned economy?
answer
North Korea
question
How are economic resources allocated in a market economy?
answer
By the decisions of households and firms interacting in markets
question
Which of the following is a correct statement about a Mixed economy?
answer
In a mixed economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources
question
When does productive efficiency occur?
answer
Productive efficiency occurs when a good or service is produced at the lowest possible cost
question
When does allocative efficiency occur?
answer
Allocative efficiency occurs when production is in accordance with consumer preferences
question
Alberto Chong of the University of Ottawa and several colleagues conducted an experiment to test the efficiency of government postal services around the world. They mailed letters to nonexistent businesses in 159 countries and kept track of how many of the letters were returned. Was this test most relevant to evaluating the productive efficiency or the allocative efficiency of these postal services ?
This test that Albert Chong and his colleagues carried out was most relevant for evaluating the...
This test that Albert Chong and his colleagues carried out was most relevant for evaluating the...
answer
Allocative efficiency of these postal services because the test was designed to measure how often and how quickly the letters sent were returned
question
Leonard Fleck a philosophy professor at Michigan State University has written, "When it comes to health care in America, we have limited resources for unlimited health care needs. We want everything contemporary medical technology can offer that will improve the length or quality of our lives as we age. But as presently healthy taxpayers, we want costs controlled."
Is it necessary for all economic systems to list services such as healthy care?
Is it necessary for all economic systems to list services such as healthy care?
answer
Yes
question
A market system prevents people from getting as many goods and services as they want due to which of the following?
answer
Their income
question
What is the actual cost and also the opportunity cost of distributing the tickets this way?
answer
1.) The cost of people blocking traffic in and around the departments office building
2.) The activities that cannot be done when one is standing in line
3.) The cost to travel to the departments office
2.) The activities that cannot be done when one is standing in line
3.) The cost to travel to the departments office
question
Suppose that your local police department recovers 100 tickets to a big Nascar race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 a.m. Monday morning at City Hall. Suppose that your college decides to give away 1,000 tickets to the football game against your schools biggest rival. The athletic department elects to distribute the tickets by giving them away to the first 1,000 students who show up at the departments office at 10 a.m. the following Monday.
The groups of people that are most likely to get the tickets will be those for whom the expected marginal _____ of going to the departments office on Monday morning are greater than the expected marginal _____.
The groups of people that are most likely to get the tickets will be those for whom the expected marginal _____ of going to the departments office on Monday morning are greater than the expected marginal _____.
answer
Benefits
Costs
Costs
question
Productive efficiency occurs when a good or service is produced at the lowest possible cost. Is this an efficient way to distribute the tickets?
answer
No
question
This is ____
answer
Not an equitable way to distribute the tickets because some students who really want them may be unable to go and get them
question
The FDA is part of federal governments Department of Health and Human Services. Among its other functions, the FDA evaluates the safety and effectiveness of drugs and medical devices. FDA approval had to be granted before OraSure was allowed to market its home HIV test. In a centrally planned economy, the government decides how resources will be allocated. In a market economy, the decisions of households and firms interacting in markets allocate resources.
The regulations of the production and sale of drugs and medical devices in the U.S is an example of how resources are allocated in a ____
The regulations of the production and sale of drugs and medical devices in the U.S is an example of how resources are allocated in a ____
answer
Market economy because the drug development, and the resources allocated to the development, occurs in the market
question
What is Product Market?
answer
Markets for goods such as computer and service such as medical treatment
question
What is Factor Markets?
answer
Markets for the factors of production such as labor, capital, natural resources and entrepreneurial ability
question
What is the Factor of Production?
answer
The inputs used to make goods and services
question
What are the four factors or production?
answer
Labor
Capital
Natural Resources
Entrepreneur
Capital
Natural Resources
Entrepreneur
question
What two groups participate in markets?
answer
Households and Firms
question
What is a Circular flow diagram?
answer
A model that illustrates how participants in markets are linked
question
What is the circular flow diagram in order?
answer
Households
Factor Markets
Firms
Product Markets
Factor Markets
Firms
Product Markets
question
What is Free Market?
answer
A market with few government restrictions on how a good or service can be produced or sold on how a factor of production can be employed
question
What was Adam Smith's famous quote?
answer
He said that firms would be led by the "invisible hand" of the market to provide consumers with what they wanted
question
What is an Entrepreneur?
answer
Someone who operates a business, brings together labor, capital, and natural resources to produce good and services. Entrepreneurs take on risks and lose everything if they lose.
question
What is property right?
answer
The rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it
question
What is Entrepreneurial Ability?
answer
The ability to bring together the other factors of production to successfully produce and sell goods and services
question
What is Natural Resources?
answer
Includes land, water, oil, iron ore, and other raw materials that are used in producing goods
question
What is Capital?
answer
Refers to physical capital, such as computers, marine tools, etc. that is used to produce other goods
question
What is Labor?
answer
Includes all types of work, from the part-time labor of teenagers working at McDonalds to the work of top managers in large corporations
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