Quiz 1

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For economists, the word "utility" means?

pleasure and satisfaction.

Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of?

opportunity costs.

A person should consume more of something when its marginal?

benefit exceeds its marginal cost.

Economics may best be defined as the?

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

Economic theories?

are generalizations based on a careful observation of facts.

The term "ceteris paribus" means?

other things equal.

Which of the following is a normative statement?

It is too hot to play tennis today.

Which of the following is a positive statement?

The temperature is 92 degrees today.

The problems of aggregate inflation and unemployment are?

major topics of macroeconomics.

Which of the following is a macroeconomic statement?

The gross profits of all U.S. businesses were $182 billion last year.

Microeconomics?

is concerned with individual economic units and specific markets.

The scarcity problem?

persists because economic wants exceed available productive resources.

The four factors of production are?

land, labor, capital, and entrepreneurial ability.

Money is not an economic resource because?

money, as such, is not productive.

The process of producing and accumulating capital goods is called?

investment.

The production possibilities curve illustrates the basic principle that?

if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.

Which of the following will not produce an outward shift of the production possibilities curve?

the reduction of unemployment.

A nation's production possibilities curve is bowed out from the origin because?

resources are not equally efficient in producing every good.

Refer to the above table. If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be? (see notes for chart)

1/3 of a unit of capital goods.

Refer to the above table. As compared to production alternative D, the choice of alternative C would? (see notes for chart)

tend to generate a more rapid growth rate.

Assume that a change in government policy results in greater production of both consumer goods and investment goods. We can conclude that?

the economy was not employing all of its resources before the policy change.

Assume an economy is operating at some point on its production possibilities curve, which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods?

must be decreased.

Refer to the above diagram. Other things equal, this economy will achieve the most rapid rate of growth if? (see notes for chart)

it chooses point A.

Refer to the above diagram. This economy will experience unemployment if it produces at point? (see notes for chart)

D.

Assume an economy is incurring unemployment. The effect of resolving this problem will be to?

move the level of actual output to the economy's production possibilities curve.

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