Exam 1 Economics: Is It A Social Science That Studies Goods

Exam1 Economics Is Aa Social Science That Studies Goods With No Alt

Exam 1. Economics is a: a. social science that studies goods with no alternative uses. b. natural science that studies goods with no alternative uses. c. social science concerned chiefly with how people choose among alternatives. d. social science concerned chiefly with reasons why society has unlimited resources.

2. Scarcity exists when: a. a choice must be made among two or more alternatives. b. we face the notion of "all other things unchanged." c. countries and people find themselves facing poverty. d. the notions of normative economics come into play.

3. A free good is: a. also a scarce good. b. a relatively abundant good. c. a good with no opportunity cost. d. a good with relatively low opportunity cost.

4. Suppose that voters in your community pass a one-cent sales tax increase to fund education, knowing full well they will have to forgo other goods they typically consume. This primarily addresses the economic question of: a. How will each good be produced? b. For whom shall the goods be produced? c. Why will the resources be used to produce goods? d. What goods and services should a society produce?

5. A factor of production that has been produced for use in the production of other goods and services is: a. labor. b. money. c. capital. d. natural resources.

6. The textbook classifies technology as _______ and entrepreneurs as _______ . a. knowledge; persons who seek profit by finding new ways to organize factors of production b. capital; labor c. labor skills; capital d. a factor of production; a factor of production

7. The production possibilities curve represents the fact that: a. the economy will automatically end up at full employment. b. an economy's productive capacity increases proportionally with its population. c. if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. d. economic production possibilities have no limit.

8. An economy is said to have a comparative advantage in producing a particular good if it: a. can produce more of all goods than another economy. b. can produce less of all goods than another economy. c. has the highest cost for producing that good. d. has the lowest cost for producing that good.

9. A negative relationship between the quantity demanded and price is called the law of ______. a. demand b. diminishing marginal returns c. market clearing d. supply

10. If people demand more of product A when the price of B falls, then A and B are: a. not related. b. substitutes. c. complements. d. inferior.

11. The primary difference between a change in demand and a change in the quantity demanded is: a. a change in demand is a movement along the demand curve, and a change in quantity demanded is a shift in the demand curve. b. a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve. c. both a change in quantity demanded and a change in demand are shifts in the demand curve, only in different directions. d. both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions.

12. For most goods, purchases tend to rise with increases in buyers' incomes and to fall with decreases in buyers' incomes. Such goods are known as: a. inferior goods. b. direct goods. c. normal goods. d. luxury goods.

13. A supply curve that is upward sloping means that: a. demand is being ignored. b. consumers will buy less at lower prices. c. suppliers will want to sell more at higher prices. d. suppliers will want to sell less at higher prices.

14. The demand curve for stocks shows that: a. at lower prices, less stock will be purchased. b. at lower prices, more people calculate that the expected value of the firm's future earnings justify the stock's purchase. c. at lower prices, more stock will be offered on the market. d. A and B are true.

15. The equilibrium price in a market is established subject to the all other things unchanged condition and, therefore, very well may change due to: a. a change in the price of the good. b. a change in the quantity of the good. c. a change in the price of resource inputs used to produce the good. d. any of the above.

16. Price controls: a. always increase economic efficiency. b. always lead to more equitable results. c. can result in inequitable outcomes. d. all of the above statements are true.

17. A market price support policy establishes price ________ the market equilibrium. a. floors below b. floors above c. ceilings below d. ceilings above

18. Elasticity is: a. the change in a dependent variable divided by the change in an independent variable. b. the ratio of the percentage change in a dependent variable to the percentage change in an independent variable. c. the price of a good divided by its quantity. d. the quantity of a good divided by its price.

19. Assuming the law of demand holds for a good, its price elasticity of demand is: a. positive. b. greater than 1. c. equal to 1. d. negative.

20. If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, this indicates that, if other things are unchanged, the price elasticity of demand is: a. 0. b. -0.5. c. -1. d. -2.

21. The price elasticity of demand between points A and B is: a. elastic, since total revenue falls when price falls from $8 to $6. b. elastic, since total revenue increases when price falls from $8 to $6. c. inelastic, since the percentage change in quantity is less than the percentage change in price when price falls from $8 to $6. d. positive, because the slope is negative.

22. Economists assume that consumers seek to maximize: a. usefulness. b. profit. c. utility. d. time.

23. According to the marginal decision rule, if marginal benefit: a. exceeds marginal cost, an activity should be reduced. b. is less than marginal cost, an activity should be reduced. c. is equal to marginal cost, an activity should be reduced. d. exceeds marginal cost, net benefit is maximized.

24. In order to maximize net benefit, consumers and firms evaluate each activity at the: a. average. b. top. c. margin. d. end.

25. Suppose that the expected exam scores from studying economics for 0, 1, 2, or 3 hours are 65, 80, 90, and 95 points, respectively, while the expected exam scores for studying 0, 1, 2, or 3 hours of accounting are 50, 65, 70, and 70 points, respectively. With 3 total hours of study time, your combined scores can reach a maximum of _______ points. a.145 b. 150 c. 155 d.

26. An allocation of resources that achieves the maximum net benefit from all activities is: a. inefficient. b. external. c. internal. d. efficient.

27. The ability of a good to satisfy a want refers to its: a. utility. b. usefulness. c. worthiness. d. necessity.

28. Marginal utility is best computed as the: a. change in total utility from an additional unit consumed. b. total utility divided by the total quantity consumed. c. change in total utility divided by the total quantity consumed. d. total utility divided by the change in quantity consumed.

29. If the first four units of a good consumed have marginal utilities of 10, 9, 8, and 7, respectively, this trend is an indication of the: a. law of diminishing marginal utility. b. minimization of utility. c. law of consumer equilibrium. d. law of diminishing consumer surplus.

30. A change in the ability to purchase a good because its price has increased is most closely related to the: a. output effect. b. income effect. c. nominal effect. d. substitution effect.

Sample Paper For Above instruction

Economics, as a fundamental social science, explores how individuals and societies allocate their scarce resources among competing uses. It predominantly concerns itself with understanding the decision-making processes that govern the consumption, production, and distribution of goods and services, emphasizing how choices are made in the face of scarcity. This essay discusses core economic principles, including scarcity, opportunity costs, demand and supply dynamics, elasticity, and resource allocation, illustrating their relevance through real-world applications.

Understanding the Nature of Economics

At its core, economics is a social science that examines how people make choices with limited resources, which is captured by the concept of scarcity. Scarcity exists because resources are finite relative to human wants, compelling individuals and societies to prioritize their needs (Mankiw, 2014). For example, a community may face the decision of how to allocate a limited education budget among various programs. Economics explores these trade-offs, helping policymakers design efficient and equitable solutions (Samuelson & Nordhaus, 2010).

Basic Economic Questions and Resource Allocation

Fundamentally, economics seeks to answer four basic questions: What to produce? How to produce? For whom to produce? And why are resources allocated as they are? Market systems are driven by these questions, with prices acting as signals to guide resource distribution. Price controls, such as floors and ceilings, influence this allocation by either restricting or promoting certain market outcomes, which can lead to inefficiencies or inequities (Baumol & Blinder, 2015).

Supply, Demand, and Market Equilibrium

The laws of demand and supply are cornerstones of market economics. The law of demand states that, ceteris paribus, as the price of a good rises, the quantity demanded falls, reflecting consumer preferences and budget constraints (Krugman & Wells, 2018). Conversely, supply curves typically slope upward, indicating that higher prices incentivize producers to supply more. The intersection of demand and supply defines the market equilibrium price, where the quantity supplied equals the quantity demanded (Varian, 2014). However, external shocks or policy interventions can shift these curves, causing changes in market equilibrium (Carlton & Perloff, 2015).

Elasticity and Its Significance

Elasticity measures how responsive consumers or producers are to price changes. Price elasticity of demand, for example, quantifies the percentage change in quantity demanded resulting from a percentage change in price. When demand is elastic, consumers are sensitive to price changes; when inelastic, they are less responsive (Pindyck & Rubinfeld, 2013). Understanding elasticity aids businesses in setting prices strategically and policymakers in designing taxes or subsidies that optimize resource allocation (Hicks, 2018).

Marginal Utility and Consumer Choice

Consumers aim to maximize utility, the satisfaction derived from goods and services, by allocating their income among options. The law of diminishing marginal utility states that each additional unit consumed provides less satisfaction than the previous one (Case & Fair, 2012). Marginal utility guides decisions; consumers will continue to consume until the marginal utility per dollar spent is equalized across goods, achieving consumer equilibrium (Varian, 2014). For example, if the marginal utility of peanuts decreases with each additional bag, consumers will buy fewer as their marginal utility declines.

Resource Allocation and Efficiency

A resource allocation is considered efficient when it maximizes total net benefit, which is the sum of consumer and producer surpluses. Market equilibrium, under perfect competition, naturally leads to an efficient allocation. However, interventions like price controls can distort markets, leading to shortages or surpluses and reducing overall efficiency (Baumol & Blinder, 2015).

Conclusion

In sum, economics provides essential tools and frameworks for understanding how scarce resources are allocated in society. By analyzing demand and supply, elasticity, utility, and market efficiency, policymakers and individuals can make informed choices that promote economic well-being. Recognizing the interconnectedness of these concepts underscores the importance of sound economic policies that enhance societal welfare.

References

• Baumol, W., & Blinder, W. (2015). Economics: Principles and Policy. Cengage Learning.
• Case, K. E., & Fair, R. C. (2012). Principles of Economics. Pearson.
• Hicks, J. R. (2018). Value and Capital: An Inquiry into Some Fundamental Principles of Economic Theory. Oxford University Press.
• Krugman, P., & Wells, R. (2018). Economics. Worth Publishers.
• Mankiw, N. G. (2014). Principles of Economics. Cengage Learning.
• Pindyck, R. S., & Rubinfeld, D. L. (2013). Microeconomics. Pearson.
• Samuelson, P. A., & Nordhaus, W. D. (2010). Economics. McGraw-Hill Education.
• Varian, H. R. (2014). Intermediate Microeconomics: A Modern Approach. W. W. Norton & Company.
• Williamson, O. E. (2014). The Economics of Discretionary Behavior. Routledge.
• Friedman, M. (2002). Capitalism and Freedom. University of Chicago Press.