Economics Exam 1 Review

Scarcity exists because

• currently available resources are not sufficient to produce everything people want and need.

• resources are abundant and easily accessible

“The government should raise the minimum wage” is an example of a

• Ceteris paribus statement

• positive statement

• normative statement

Which of the following would most likely be studied in a microeconomics course

• The relationship between national output and the rate of unemployment

• The strategy used by the owners of a competitive firm to maximize profits

Incorrectly concluding that because tax reform benefits some individuals, tax reform is also
beneficial for the economy as a whole is an example of the

• fallacy of composition

• fallacy of division

Which of the following is not an example of the factor of production or economic resource
referred to as capital?

• An office building

• computers used by a tax preparation business

• lawn mowers owned by a landscaping business

• money used to start a new business

Scarcity forces society to address the basic economic questions of:

• what outputs to produce?

• how should outputs be produced?

• who gets to consume the outputs produced?

• scarcity forces society to address all of the above questions

The opportunity cost to Sam of working three hours of overtime at $30 per hour instead of
going to the park with friends is

• the $90 Sam earns by working overtime
  

• the foregone enjoyment from going to the park with friends.

• $0 because going to a park is free.

• higher than if he was not being paid overtime wages.

Which of the following is false regarding types of economic systems?

• Economic activity is mainly guided by self-interest and prices in a capitalist market
  economy

• Capitalism is a system in which government regulates the use of both physical and
  financial capital

• Centralized decision-making is a characteristic of a planned economy

• Many economies are mixed economies because they have elements of both market and
  planned economies

In the simple circular flow model, households (consumers)

• demand goods and services in product (output) markets and supply labor in resource (input) markets

• demand labor in resource (input) markets

Trey’s assumption that his baseball team wins whenever he wears his lucky socks is a possible
example of the

• sunk cost fallacy

• fallacy of false cause