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Chapter 1: What Is Economics? Parkin Microeconomics, Ninth Edition © 2010 Pearson Addison-Wesley. All rights reserved. Economics is best defined as A. how people make money and profits in the stock market. B. making choices from an unlimited supply of goods and services. C. making choices with unlimited wants but facing a scarcity of resources. D. controlling a budget for a household. Parkin Microeconomics, Ninth Edition © 2010 Pearson Addison-Wesley. All rights reserved. An inducement to take a particular action is called A. B. C. D. the marginal benefit. the marginal cost. opportunity cost. an incentive. Parkin Microeconomics, Ninth Edition © 2010 Pearson Addison-Wesley. All rights reserved. Which of the following is an example of a microeconomic decision? A. How a trade agreement between the United States and Mexico affects both nations' unemployment rates. B. Comparing inflation rates across countries. C. How rent ceilings impact the supply of apartments. D. How a tax rate increase will impact total production. Parkin Microeconomics, Ninth Edition © 2010 Pearson Addison-Wesley. All rights reserved. What are the four categories into which factors of production are grouped? A. B. C. D. profit, wages, rent, and interest land, labor, capital, and entrepreneurship capital, human capital, land, and labor entrepreneurship, profit, labor, and wages Parkin Microeconomics, Ninth Edition © 2010 Pearson Addison-Wesley. All rights reserved. In a market economy, what people do in the pursuit of their self-interest A. B. C. D. is usually in conflict with the social interest. usually forwards the social interest. always forwards the social interest. is always in conflict with the social interest. Parkin Microeconomics, Ninth Edition © 2010 Pearson Addison-Wesley. All rights reserved. The concept of tradeoffs concerns all of the following questions except: A. What goods and services should be produced? B. How should goods and services be produced? C. For whom should goods and services be produced? D. Why should goods and services be produced? Parkin Microeconomics, Ninth Edition © 2010 Pearson Addison-Wesley. All rights reserved. The loss of the highest-valued alternative defines the concept of A. B. C. D. marginal benefit. scarcity. entrepreneurship. opportunity cost. Parkin Microeconomics, Ninth Edition © 2010 Pearson Addison-Wesley. All rights reserved. On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is A. working out at the gym, having breakfast with friends, and sleeping late. B. working out at the gym. C. zero because you do not have to pay money to use the library. D. not clear because not enough information is given. Parkin Microeconomics, Ninth Edition © 2010 Pearson Addison-Wesley. All rights reserved. A student is studying for an exam 2 hours a day and is debating whether to study an extra hour. The student’s marginal benefit A. depends on the grade the student earns on the exam. B. is the benefit the student receives from studying all 3 hours. C. is the benefit the student receives from studying the extra hour. D. is greater than the student’s marginal cost. Parkin Microeconomics, Ninth Edition © 2010 Pearson Addison-Wesley. All rights reserved. Fred and Ann are both given free tickets to see a movie. Both decide to see the same movie. We know that A. both bear an opportunity cost of seeing the movie because they could have done other things instead of seeing the movie. B. both bear the same opportunity cost of seeing the movie because they are doing the same thing. C. it is not possible to calculate the opportunity cost of seeing the movie because the tickets were free. D. it is possible to calculate the opportunity cost of seeing the movie and it is zero because the tickets were free. Parkin© 2010 Pearson Addison-Wesley. All rights reserved. Microeconomics, Ninth Edition The statement “Unemployment should be kept at or below a level of 6 percent” is A. B. C. D. a positive statement. a normative statement. a prediction. an assumption. Parkin Microeconomics, Ninth Edition © 2010 Pearson Addison-Wesley. All rights reserved.