Macro Exam #1

Which of the following is not a central focus of the "economic perspective"?

• Scarcity and choice

• The scientific method

• Purposeful behavior

• Marginal analysis

As a consequence of the condition of scarcity:

•  there is never enough of anything.

• production has to be centrally planned.

• things that are plentiful have relatively high prices.

•  individuals and communities have to make choices from among alternatives.

Which expression is another way of saying "marginal cost"?

• total cost

• additional cost

• average cost

• scarcity

From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the:

• marginal costs of more insurance coverage have increased.

• marginal benefits of more insurance coverage have decreased.

• marginal benefits of more insurance coverage are greater than the marginal costs.

• opportunity costs of more insurance coverage are greater than the payment for more insurance coverage.

When producers maximize their profits from the production of a good or service, they are:

• testing a hypothesis.

• exhibiting purposeful behavior.

• assuming that all other things are equal.

• making a trade-off between economic efficiency and economic freedom.

How is the economic perspective reflected in lines for fast food?

• Customers select the shortest line because they have perfect information.

• Customers select the shortest line because they believe it will reduce their time cost of obtaining food.

• Lines will typically be of unequal length because of the inefficiencies in counter service.

• The set of food choices is often too complex for customers and thus creates long lines.

Economic models do not reflect the full complexity of reality and instead are based on:

• trade-offs.

• purposeful simplifications.

• value judgments.

• the fallacy of composition.

The purpose of the ceteris paribus assumption used in economic analysis is to:

• make sure that all relevant factors are considered.

• avoid making normative statements

• avoid making positive statements.

•  restrict the analysis to the effect of a single economic factor.

A basic assumption used in most economic theories is that:

• what is true for a part of the whole must also be true for the whole.

• as price decreases, quantity demanded will decrease.

• whatever goes up must come down.

• all other things remain the same.

 An "aggregate":

•  treats a collection of specific units as one unit.

•  treats a single unit as if it were a collection of specific units.

• is the primary unit of analysis in microeconomics.

•  is too large to analyze using standard macroeconomic theories.