Chapter 1 Quiz Review

What are the two major ways in which an economy can grow and push out its production possibilities curve?

• Better weather and nicer cars

• Higher taxes and lower spending

• Increases in resource supplies and advances in technology

• Decreases in scarcity and advances in auditing

• Lower taxes and government subsidies

Explain how the following event will affect the location of a country's production possibilities curve:

The quality of education increases

• The production possibilities curve should shift to the right

• The production possibilities curve should shift to the left

• The production possibilities curve will remain the same

For the following situation involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current amount of units:

5 Units at which MB < MC

• More

• Fewer

• Current Amount

Suppose that you are given a $100 budget at work that can be spent only on two items; staplers and pens. If staplers cost $10 each and pens cost $2.50 each, then the opportunity cost of purchasing one stapler is:

• 10 pens

• 5 pens

• 0 pens

• 4 pens

• 2 pens

Suppose that you initially have $100 to spend on books or movie tickets. The books start off costing $25 each and the movie tickets start off costing $10 each. For the following situation, would the attainable set of combinations that you can afford increase or decrease?

Your budget remains $100, and the price of movie tickets remains $10, but the price of a book falls to $15.

• Increase

• Decrease

For the following statement, indicate whether it applies to microeconomics or macroeconomics:

Last week Wells Fargo Bank lowered its interest rate on business loans by one-half of 1 percentage point.

• Microeconomics

• Macroeconomics

Match the term with the correct definition:

The pleasure, happiness, or satisfaction obtained from consuming a good or service.

• Economics

• Opportunity Cost

• Utility

• Marginal Analysis