Question 1

The economics approach portrays people as self-interested. Instead, the critics argue that people should be taught to care more deeply about others. Economists offer several answers to this concern. Offer two economist responses with explanation.

Accepted Answer

Philosophers draw a distinction between positive statements, which describe the
world as it is, and normative statements, which describe how the world should be. In the study of
economics, positive and normative arguments often blend into each other. Second, selfinterested behavior and profit-seeking can be labeled with other names, such as personal choice
and freedom. Third, self-interested behavior can lead to positive social results. For example,
when people work hard to make a living, they create economic output. Fourth, even people who
focus on their own self-interest in the economic part of their life often set aside their own narrow
self-interest in other parts of life

Question 2

The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.

Accepted Answer

A)   consumption
B)   marginal analysis
C)   diminishing marginal utility
D)   utility C

Question 3

Which of the following would most likely shift the production possibilities curve inward?

Accepted Answer

A)   an increase in the number of hours factories are in use
B)   a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time
C)   an increase in the production of capital goods
D)   technological progress B

Question 4

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

Accepted Answer

A)   personal preference
B)   utility level
C)   budget constraint
D)   opportunity set

Question 5

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

Accepted Answer

A)   utility
B)   marginal analysis
C)   the budget constraint
D)   consumption

Question 6

Scarcity exists because of:

Accepted Answer

A)   the market mechanism.
B)   specialization and division of labor.
C)   the allocation of goods by prices
D)   unlimited wants and limited resources.

Question 7

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

Accepted Answer

A)   Opportunity cost
B)   productive efficiency
C)   budget constraint
D)   production possibilities frontier

Question 8

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible.

Accepted Answer

A)   consumption set
B)   budget constraint
C)   original budget
D)   income cap

Question 9

When economists analyze how individuals make choices, they divide the decision process into two steps. Define these two steps and label the resultant model.

Accepted Answer

The answer of When economists analyze how individuals make choices,...

Question 10

The opportunity cost of attending university is likely to include all except which of the following?

Accepted Answer

A)   the cost of haircuts received during the school term
B)   the income you forgo in order to attend classes
C)   tuition fees
D)   the cost of required textbooks

Question 11

Why is there scarcity?

Accepted Answer

A)   Because the opportunity set determines this.
B)   Because theory dictates it.
C)   Because our unlimited wants exceed our limited resources
D)   Because human wants are limited.

Question 12

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

Accepted Answer

A)   normative statement
B)   budget constraint
C)   trade-off
D)   opportunity cost

Question 13

In many cases, it is reasonable to refer to the ________________ as the price.

Accepted Answer

A)   budget constraint
B)   sunk cost
C)   opportunity cost
D)   budget constraint.

Question 14

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.

Accepted Answer

A)   allocative efficiency
B)   the production possibilities frontier
C)   trade-offs
D)   scarcity

Question 15

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible.

Accepted Answer

A)   opportunity set
B)   consumption choice
C)   time value of money
D)   risk premium

Question 16

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:

Accepted Answer

A)   the economy moves along the production possibilities in the direction of a greater quantity of defense.
B)   the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve.
C)   the production possibilities frontier shifts outward due to an improvement in technology.
D)   either b)  or c)  occurs, but not as a result of a) .

Question 17

As a person receives more of a good, the _______________ from each additional unit of the good declines.

Accepted Answer

A)   utility
B)   sunk costs
C)   marginal utility
D)   budget constraint

Question 18

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

Accepted Answer

A)   $0
B)   $4
C)   $40
D)   $44

Question 19

Scarcity implies that:

Accepted Answer

A)   consumers would be willing to purchase the same quantity of a good at a higher price.
B)   it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
C)   at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce.
D)   consumers are too poor to afford the goods and services available.

Question 20

The marginal benefit of a slice of pizza is the:

Accepted Answer

A)   total amount that a consumer is willing to pay for a whole pizza, divided by the number of slices
B)   difference between the value of the slice to the consumer and the price of the slice.
C)   maximum amount that a consumer is willing to pay for the slice.
D)   price of the slice of pizza

Exam 2: Choice in a World of Scarcity

The economics approach portrays people as self-interested. Instead, the critics argue that people should be taught to care more deeply about others. Economists offer several answers to this concern. Offer two economist responses with explanation.

The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.

Which of the following would most likely shift the production possibilities curve inward?

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

Scarcity exists because of:

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible.

When economists analyze how individuals make choices, they divide the decision process into two steps. Define these two steps and label the resultant model.

The opportunity cost of attending university is likely to include all except which of the following?

Why is there scarcity?

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

In many cases, it is reasonable to refer to the ________________ as the price.

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible.

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:

As a person receives more of a good, the _______________ from each additional unit of the good declines.

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

Scarcity implies that:

The marginal benefit of a slice of pizza is the: