Economics Chapter 2 TEST REVIEW

When economists want to solve a problem, they first

• make an assumption

• collect data

• develop a theory

• identify the problem

Which of the following would be NORMATIVE ECONOMICS?

• If prices rise, the government SHOULD raise interest

• The economy has grown by 10%

• More Americans die from lunch cancer than anything else

• If unemployment reaches 9%, then 20 million people will be out of work.

Which of the following is the proper sequence?

• opportunity cost causes choice which leads to scarcity

• opportunity cost causes scarcity which leads to choice

• scarcity causes choice which leads to opportunity cost

• scarcity causes opportunity cost which leads to choice

The PPC assumes....

• resources do not change

• technology improves

• the economy doesn't use resources efficiently

• the economy cannot shift resources

On a PPC, you CANNOT produce....

• inside the PPC

• outside the PPC

• on the PPC

• on one of the axis

Economic growth on a PPC is evidenced by....

• a movement up the PPC

• a movement down the PPC

• an inward shift of the PPC

• outward shift of the PPC

A PPC of computers and textbooks will shift outward if....

• we produce more computers

• we produce more texbooks

• a faster machine for making computers is developed

• number of writers for textbooks declines

If X and Y have a DIRECT relationship, then...

• X and Y are positive things

• X is positive when Y is negative

• X rises when Y falls

• X falls when Y falls

Your favorite things to do with your free time in order are: sleep, read, watch TV, play hop scotch, and eat Snickers. When you choose to sleep, what is your opportunity cost?

• Watch TV and play hop scotch

• read

• eat Snickers

• Play basketball

The opportunity cost of a decision is the....

• Value of all options given up

• total dollar cost of the decision

• value of the next best option

• dollar cost of the next best option