Econ 2020 Chapter 1

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The law of increasing opportunity costs is reflected in a production possibilities curve that is

Bowed out from the origin

Microeconomics is concerned with

A detailed examination of specific economic units that make up economic system

Products and services are scarce because resources are scarce

True

In economics, the pleasure, happiness, or satisfaction received from a product is called

Utility

The economizing problem is one of deciding how to make the best use of

Limited resources to satisfy virtually unlimited wants

(Consider this) At fast-food restaurants

Decisions entail comparisons of marginal costs and marginal benefits

A production possibilities curve illustrates

Scarcity

(Last Word) The fallacy of composition states that

What is true for the individual must necessarily be true for the group

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

The reduction of unemployment

Any combination of goods lying outside of the budget line

is unattainable, given the consumer's income

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

False

The slope of a line parallel to the vertical axis is

Infinite

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as

rational self-interest, because he attempting to increase his own income by identifying and satisfying someone else's wants.

The slope of the typical production possibilities curve:

increases as one moves southeast along the curve.

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

True

Which of the following is associated with macroeconomics?

an empirical investigation of the general price level and unemployment rates since 1990

The basic difference between consumer goods and capital goods is that

consumer goods satisfy wants directly while capital goods satisfy wants indirectly.

An economy will always operate at some point on its production possibilities curve.

False

A positive statement is concerned primarily with:

what is

The problems of aggregate inflation and unemployment are:

major topics of macroeconomics.

The optimal point on a production possibilities curve is achieved where:

each good is produced at a level where marginal benefits equal marginal costs.

(Last Word) If variables X and Y are positively correlated, this means that:

causation may or may not exist between X and Y.

(Last Word) The "after this, therefore because of this" fallacy states that:

because event A precedes event B, A is necessarily the cause of B.

The law of increasing opportunity costs is reflected in a production possibilities curve that is:

bowed out from the origin.

The production possibilities curve shows:

the various combinations of two goods that can be produced when society employs all of its scarce resources.

A typical concave (bowed out from the origin) production possibilities curve implies:

that society must choose among various attainable combinations of goods.

Any point inside the production possibilities curve indicates:

that more output could be produced with available resources.

The slope of a line parallel to the horizontal axis is

Zero

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

true

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

False

Any combination of goods lying outside of the budget line:

s unattainable, given the consumer's income.

ssume the price of product Y (the quantity of which is on the vertical axis) is $15 and the price of product X (the quantity of which is on the horizontal axis) is $3. Also assume that money income is $60. The absolute value of the slope of the resulting budget line:

is 1/5

Kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from day to day. For a couple of weeks she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the scientific method to better understand ice cream buying habits, her next step is to:

use the observed data to form an hypothesis about ice cream buying behavior.

(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:

confusion of correlation and causation.

n recent years the economy of Japan has grown, despite the fact that the population of Japan has declined. Which of the following would best explain Japan's economic growth despite having a smaller population?

Advancements in technology that make labor more productive.

The marginal cost curve is:

upsloping because of increasing marginal opportunity costs.

Which of the following will shift the production possibilities curve to the right?

a technological advance that allows farmers to produce more output from given inputs

Refer to the above diagram. The equation that shows the relationship between Y and X is:

Y = 50 + 1/4X.

Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:

all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.

If two variables are inversely related, then as the value of one variable:

ncreases, the value of the other decreases

If the equation y = 15 - 4x was plotted, the:

slope would be -4

(Last Word) The fallacy of composition is essentially the error of:

generalizing from the particular to the general.

A nation's production possibilities curve might shift to the left (inward) as a result of:

the depletion of its soil fertility due to overplanting and overgrazing.

(Last Word) A caller to a radio talk show states that protesters against globalization are a collection of "anarchist punks, naïve college students, and trade union radicals." This is an example of:

loaded terminology.

All of the following could immediately or eventually lead to an inward shift of a nation's production possibilities curve, except:

an increase in the average skill level of all occupational groups.

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

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

The negative slope of the production possibilities curve is a graphical way of indicating that:

to produce more of one product we must do with less of another.

The budget line shows:

all possible combinations of two goods that can be purchased, given money income and the prices of the goods.

Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:

all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.

Brinley says that "Gas prices are rising because there aren't enough oil refineries." Katie argues that "Gas prices are rising because of the growing demand for gasoline from China and India." We can conclude that:

Both statements are positive.

If a positive relationship exists between x and y:

the relationship will graph as an upsloping line.

The typical production possibilities curve is:

a downsloping line that is bowed out from the origin.

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

False

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

False

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

True

Which of the following is assumed in constructing a typical production possibilities curve?

production technology is fixed.

Microeconomics is concerned with:

a detailed examination of specific economic units that make up the economic system.

(Consider This) The economic perspective used in customer decision making at fast-food restaurants is reflected in

customers selecting the shortest line.

The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve indicates that:

the principle of increasing opportunity costs is relevant.

Answer the question on the basis of the following five data sets wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis.

data sets 2 and 4 only.

Economists contend that most economic decisions are:

purposeful

(Last Word) "The government deregulated the electricity industry in California and a shortage of electricity soon occurred. It is clear that the deregulation caused the shortage." This statement needs careful analysis because it may reflect the:

post hoc, ergo propter hoc fallacy.

The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve indicates that

the principle of increasing opportunity costs is relevant.

Answer the question on the basis of the following five data sets wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis

data sets 1 and 3 only

Last Word) "The government deregulated the electricity industry in California and a shortage of electricity soon occurred. It is clear that the deregulation caused the shortage." This statement needs careful analysis because it may reflect the

post hoc, ergo propter hoc fallacy

Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods:

would involve an inefficient use of the economy's scarce resources

Answer the question on the basis of the following five data sets wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis.

data sets 1 and 3 only.

Refer to the above diagram. Other things equal, which of the following positions relative to PP1 would be the most likely to result in a future production possibilities curve of PP3, rather than PP2

A

Refer to the above diagram. The movement down the production possibilities curve from point A to point E suggests that the production of

both bicycles and computers are subject to increasing opportunity costs.

Refer to the above graph. Using Qd for quantity demanded and P for price, which of the following equations correctly states the demand for this product?

P = 10 - .2Qd.

Positive statements are expressions of value judgments.

False

The production possibilities curve

is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced.

Which of the following is not a main function of the entrepreneur?

make routine pricing decisions.

Answer the question on the basis of the following information. Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment, so investment would be zero. But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion. If the interest rate were 12 percent, $20 billion would be invested. Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate.

Refer to the above information. Which of the following correctly expresses the indicated relationship as an equation?

i = 20 - .4I.

Other things equal, an increase in a consumer's money income:

shifts her budget line rightward because she can now purchase more of both products.

Refer to the above diagram. Which of the following is a normative statement

Point C is superior to point B because it is important to enhance the future of society.

Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is:

positive and correct.

Macroeconomics approaches the study of economics from the viewpoint of:

the entire economy.

Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income. Letting C represent consumption and Y represent income, the equation that summarizes this relationship is

C = 100 + .8Y.

Assume the price of product Y (the quantity of which is on the vertical axis) is $15 and the price of product X (the quantity of which is on the horizontal axis) is $3. Also assume that money income is $60. The absolute value of the slope of the resulting budget line

is 1/5

Refer to the above diagram. Technological advance in producing both capital goods and consumer goods is shown by the shift of the production possibilities curve from AB to:

cd

Suppose Elroy's budget line is as shown on the above diagram. If his tastes change in favor of Coke and against popcorn, the budget line will:

be unaffected.

Refer to the above diagram. Which line(s) show(s) a positive relationship between x and y?

C. A, B, and D.

The marginal benefit curve is:

downsloping because successive units of a specific product yield less and less extra benefit.

Refer to the above diagram. Other things equal, this economy will achieve the most rapid rate of growth if:

it chooses point A.

Refer to the above diagram. As it relates to production possibilities analysis, the law of increasing opportunity cost is reflected in curve:

C

Refer to the above diagram. Which line(s) show(s) a positive vertical intercept?

A, D, and E.

Economists:

are somewhat arbitrary in assigning independent and dependent variables to the horizontal and vertical axes.

Refer to the above diagram. Which of the following is a positive statement?

Given its resources and technology, this society is incapable of simultaneously producing 3 units of tractors and 15 units of bread.

(Last Word) Which of the following best illustrates the post hoc, ergo propter hoc fallacy?

I took the day off work to go to the beach and that's why it rained.

Refer to the above production possibilities curve. At the onset of the Second World War the Soviet Union was already at full employment. Its economic adjustment from peacetime to wartime can best be described by the movement from point:

c to point b.

(Consider This) Refer to the above diagram. The direct economic impact of the destruction and loss of lives caused by the terrorist attacks of September 11, 2001 is illustrated by the:

shift of the production possibilities curve from CD to AB.

Refer to the above diagram. Which line(s) show(s) a negative vertical intercept?

both B and C.

Refer to the above diagram. The concept of opportunity cost is best represented by the:

move from B on PP1 to C on PP1.

If an economy is operating inside its production possibilities curve for consumer goods and capital goods, it:

can produce more of both consumer goods and capital goods by using resources that are currently idle.

(Last Word) Which of the following has to do with the problem of distinguishing cause and effect in economic reasoning?

the post hoc, ergo propter hoc fallacy.

Which of the following is not a main function of the entrepreneur?

make routine pricing decisions.

Answer the question on the basis of the following information. Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment, so investment would be zero. But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion. If the interest rate were 12 percent, $20 billion would be invested. Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate.

Refer to the above information. Which of the following correctly expresses the indicated relationship as an equation?

i = 20 - .4I.

Other things equal, an increase in a consumer's money income:

shifts her budget line rightward because she can now purchase more of both products.

Refer to the above diagram. This production possibilities curve is constructed so that:

the opportunity cost of both bread and tractors increases as more of each is produced.

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