Exam 1: Limits, Alternatives, and Choices

Suppose that Julia receives a $30 gift card for the local coffee shop, where she only buys lattes and muffins. If the price of a latte is $3 and the price of a muffin is $2, then we can conclude that Julia

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

Economics is the social science concerned with the best use of scarce resources to achieve maximum satisfaction of economic wants.

Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. If the consumer spent all of her budget on just apples or just bananas, how many apples or bananas maximum would she be able to buy?

The scientific method does not apply to economics, because economics studies human behavior, which cannot be generalized.

In a curved graph that is dome-shaped, the tangent line at its maximum, or highest point, has an infinite slope.

Macroeconomics is concerned with the study of the nationwide market for specific goods like oranges.

Economic principles are value judgments about what the economy should be like or the way the economic world ought to be.

Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. This means that, in order to buy two bananas, this consumer must forgo

The resource category called "land" includes forests, animals, and water resources.

If society has overallocated resources to a particular activity, then the marginal benefits of the activity would be less than the marginal costs.

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

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

The lower the consumer's income, the higher his or her budget line.

The study of economics is not useful for consumers, because economic analysis focuses only on businesses and the economy.

The entrepreneur's sole function is to combine other resources (land, labor, and capital)in the production of some good or service.

Because economic generalizations are simplifications from reality, they are impractical and useless.

A reduction in the unemployment rate will cause the nation's production possibilities curve to shift outward.

Joe sold gold coins for $1,000 that he bought a year ago for $1,000. 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 $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of

An assumption is usually made in a two-axes (or two-dimensional)graph that, aside from the two variables under study, the influence of all other variables or factors is assumed to be constant.