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“Mediocre economists often consider only the immediate apparent effects of a change, whereas a good economist will also consider effects that may only become observable over time.” This statement most clearly emphasizes the importance of secondary effects.
“The money and resources currently being devoted to the War on Terrorism reduces the quantity of other goods that we are able to supply.” This statement most clearly illustrates which of the following? the concept of opportunity cost.
According to Adam Smith, individual self-interest is a powerful force for economic progress when it is directed by competitive markets.
According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study outweighs the extra cost.
Adam Smith believed that if people were free to pursue their own interests, public interest would be served quite well.
All but one of the following are elements of the economic way of thinking. Which one is not part of the economic way of thinking? The value of goods can be determined objectively.
Capital is a term economists use to refer to man-made resources used to produce other goods and services.
Criteria for rationing goods and resources must be established because of scarcity imposed by nature.
Economic analysis assumes that changes in the personal benefits and costs associated with a choice will exert a predictable influence on human behavior.
Economic choice and competitive behavior are the result of scarcity
Economics is primarily the study of how individuals make choices because of scarcity.
Economics is primarily the study of the allocation of scarce resources in an effort to satisfy wants that are virtually unlimited.
Economists use the term ceteris paribus to indicate that other things are assumed to be constant.
Every economy must ration goods in some way because of Scarcity
If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that fewer students will attempt to cheat.
If a good is scarce, the good will have a price in a market setting
If an airline company has several empty seats on a flight and the full price of an air ticket is $500 and the marginal cost per passenger is $100, then it will be profitable for the airline to charge a stand-by passenger more than $100
In economics the term utility refers to the subjective benefit or satisfaction a person expects to receive from a choice or course of action.
In economics, man-made resources such as tools, equipment, and structures that are used to produce other goods and services are referred to as capital
In economics, the term “scarcity” refers to the fact that no society can produce enough to satisfy fully the desires of people for goods and services
In economics, the term marginal refers to the change or difference between two alternatives.
Modern economics as a field of study is usually thought to have begun with Adam Smith and the writing of The Wealth of Nations.
The economic way of thinking is a set of basic concepts that helps one understand human choices.
The economic way of thinking stresses that incentives matter–individuals respond in predictable ways to changes in personal costs and benefits.
The expression, “There’s no such thing as a free lunch,” implies that opportunity costs are incurred when resources are used to produce goods and services.
The fallacy of composition is the fallacious view that what is true for the individual will also be true for the group.
The most fundamental concept in economics is that changes in incentives influence behavior in a predictable way–people will be less likely to choose an option as it becomes more expensive.
The opportunity cost of an action is the value of the best opportunity that must be sacrificed in order to take the action.
The opportunity cost of going to college is the value of the best opportunity a student gives up to attend college.
The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary’s statement is a(n) ____ economic statement, and the labor head’s statement is a(n) ____ economic statement. positive; normative
The unintended consequences of an economic change that are not immediately identifiable but are felt only with time are known in economics as secondary effects
The value of a good is subjective
What do economists mean when they state that a good is scarce? The amount of the good that people would like exceeds the supply freely available from nature.
What is the best test of an economic theory? its ability to predict real-world events, patterns, and changes
When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing scarcity
When economists say goods are scarce, they mean the desire for goods and services exceeds our ability to produce them with the limited resources available.
Which of the following best illustrates the fallacy of composition? If Susan had more money she could buy more. If everyone had more money they could buy more.
Which of the following is a normative statement? People would be better off if government expenditures were higher.
Which of the following is a positive economic statement? If taxes are over 50 percent of national income, job creation falls.
Which of the following is consistent with the implications of the economic guidepost that information is costly to acquire? All of the above are consistent with the economic way of thinking.
Which of the following is part of the economic way of thinking? All of the above are part of the economic way of thinking.
Which of the following is true of resources? All of the above are true.
Which of the following is true? Positive economic statements are testable, but normative statements are not.
Which of the following statements is correct? Opportunity costs will always be incurred when scarce resources are used to produce a good
Which of the following was a key belief of Adam Smith? he believed that individuals pursuing their own interests would direct economic activity in the most advantageous way.
Which one of the following is a positive economic statement? An increase in the minimum wage will reduce employment.
Which one of the following states a central element of the economic way of thinking? Incentives matter–human choice is influenced in predictable ways by changes in personal costs and benefits.
Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he has mistakenly inferred causation from observed correlation
A middleman promotes trade by lowering the transaction costs of buyers and sellers.
Which of the following is true regarding private ownership? With private ownership, owners are held accountable for using their resources in a manner that harms the resources of others.
Based on the idea of opportunity cost, which of the following students would be most likely to drop out of college before completing their degree?a star college football player in his junior year that just received a $5 million offer from a professional team
Which of the following most accurately states the economic significance of exchange?Exchange creates value by moving goods from parties who value them less to parties who value them more.