Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
1. Economics is a social science that studies how individuals, institutions, and society may:
2. The key economic concept that serves as the basis for the study of economics is:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
3. A recurring theme in economics is that people:
4. As a consequence of the problem of scarcity:
5. What is the economic meaning of the expression that “there is no such thing as a free
lunch”?
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
6. The idea in economics that “there is no free lunch” means that:
7. Opportunity cost is best defined as:
8. Tammie makes $150 a day as a bank clerk. She takes off two days off work without pay to
fly to another city to attend the concert of her favorite music group. The cost of transportation
for the trip is $250. The cost of the concert ticket is $50. The opportunity cost of Tammie’s
attending the concert is:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
9. When a state government chooses to build more roads, the required resources are no longer
available for spending on public education. This dilemma illustrates the concept of:
10. The opportunity cost of constructing a new public highway is the:
11. After graduating from high school, Ron Willis plans to go to college. The college tuition
is $15,000 a year. Instead of going to college, Ron could take a full-time job that pays
$20,000. If Ron decides to go to college, what is his opportunity cost of attending for one
year?
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
12. The opportunity cost to a consumer who smokes cigarettes is the:
13. One major assumption of the economic perspective is:
14. The observation that people compare the marginal benefits with the marginal costs in
making such decisions as how to spend time, which products to buy, whether or not to work,
and which goods to produce and sell, is most closely associated with:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
15. Which expression is another way of saying “marginal cost”?
16. Which expression is another way of saying “marginal benefit”?
17. Henry wants to buy a book. The economic perspective suggests that Henry will buy the
book if:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
18. From an economic perspective, when a consumer decides to buy more life insurance, the
consumer has most likely concluded that the:
19. From an economic perspective, when a student decides to attend another year of college,
the student has concluded that the marginal:
20. When an economist says that there is “too much of a good thing,” the economist is
suggesting that:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
21. The concept of “rational behavior” suggests that:
22. When studying human behavior, economists assume rational self-interest. This means
that:
23. The process of developing hypotheses, testing them against facts, and using the results to
construct theories is called:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
24. Developing economic principles or explanations about how individuals behave or
institutions act is referred to as:
25. The statement that “the unemployment rate will increase as the economy moves into a
recession” is an example of:
26. Economic models do not reflect the full complexity of reality, but instead are based on:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
27. The role of an assumption in an economic theory is to:
28. The ceteris paribus assumption is employed in economic analysis to:
29. Another description for ceteris paribus is:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
30. The purpose of the ceteris paribus assumption used in economic analysis is to:
31. A basic assumption used in most economic theories is that:
32. Economists have difficulty applying the scientific method because:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
33. Which is an illustration of a macroeconomic question?
34. Which is an illustration of a microeconomic question?
35. Which question is an example of a macroeconomic question?
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
36. Which question is an example of a microeconomic question?
37. Microeconomics focuses on:
38. Macroeconomics focuses on:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
39. The study of how a firm sets its prices in different regions of the nation would fall under:
40. Which question is an illustration of a microeconomic question?
41. Which question is an illustration of a macroeconomic question?
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
42. Which of the following is a normative economic statement?
43. Clara states that “there is a high correlation between the level of people’s education and
the level of their income.” Ellie replies that the correlation occurs because “more education is
the best way to earn more income in this country.”
44. The statement in a newspaper that “consumer prices rose last month by 1 percent, and if
this trend continues, the annual rate of inflation will be 12 percent for the year” is an example
of:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
45. Which would be a positive economic statement?
46. Which would be a normative economic statement?
47. Which one of the following would be a normative economic statement?
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
48. A U.S. senator states: “The minimum wage should be raised to give people a decent living
wage.” This quote is an example of:
49. The economizing problem for individuals is a consequence of the fact that:
50. A schedule or curve that shows the various combinations of two products a consumer can
purchase with a specific amount of money income is:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
51. Suppose that a consumer purchases just two goods, good X and good Y. The ratio of the
price of good Y to good X is the:
52. A point to the left of a budget line is:
53. If the consumer spent all of her money on either apples or bananas, how many apples or
how many bananas would she be able to buy?
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
54. What is the slope of the budget line for apples and bananas if apples were graphed on the
horizontal axis and bananas were graphed on the vertical axis?
55. If the consumer decides to buy 4 apples, how many bananas can she also buy with the rest
of her income?
56. For this consumer, the opportunity cost of buying one more apple is
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
57. For this consumer, the opportunity cost of buying two bananas is
58. Assume that a consumer purchases only two products and there is a decrease in the
consumer’s income. The prices of the two products stay the same. The change in income will
result in a
59. Assume that a consumer purchases only two products. Suppose that the consumer’s money
income doubles, and the prices of the two products also double. These changes in income and
prices will result in