Economics Chapter 1

Scarcity exists because

• human wants exceed the resources available to satisfy them.

• some individuals have low income.

• the costs of production are high.

•  some people make bad economic decisions.

The study of economics is best described as a study of

• the factors that influence the stock and bond markets.

• capitalism.

• the choices made in producing goods and services.

• coping with scarcity, and choices made as a result of scarcity in a society.

Microeconomics includes the study of the

• aggregate effects on the national economy.

• recessions and inflation in the global economy.

• choices made by individuals and businesses.

• reasons why the government changes interest rates.

Which of the following is a topic studied in macroeconomics?

• the effect on economic growth if the government raises taxes

• how the wheat industry determines how much wheat to grow

• the impact of labor unions on wages

• the impact of higher prices for gasoline on the number of SUVs people buy

When Ford decides to increase production of hybrid cars, it directly answers the

• how

• what

• where

• why

Increasing income tax rates will solve the "Social Security time bomb issue" is an example of

• business economic policy.

• marginal cost exceeding marginal benefit.

• a positive economic statement.

• answering the "how" question.

If Jisoo studies economics for two hours instead of going to the movies with her friends, then

• the benefit of studying is the missed movie.

• Jisoo definitely is making a rational choice.

•  Jisoo is ignoring a sunk cost.

• the opportunity cost of studying is the missed movie.

The opportunity cost of a decision is measured in terms of

• time

• the price of the alternative we choose.

• the next best thing given up.

• sunk cost

Suppose that, instead of taking this test, you could either have worked and earned income or partied and had a pleasurable time. Your opportunity cost of taking the test is the

• forgone work.

• forgone party.

• forgone working and partying.

• forgone working or partying, depending on which was your next best choice.

Microeconomics includes the study of

• how countries decide to fund their budget deficits.

• the choices that individuals and businesses make

• the effect on the national economy of the choices that individuals make.

• the overall amount of production within the economy.