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Unit I - Review
Unit I - Review
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Answers
1
Why are tradeoffs necessary?
Every product has flaws.
Advertisers promote products.
People want different things.
Resources are limited.
2
To an economist, the word capital includes
Time and effort people devote to producing goods/services
Tools, machines, buildings used in the production of goods
the natural resources used to produce goods and services
Money to invest in stocks/bonds to produce future wealth
3
You look at cars all day to find a used car.You spend hours, but none fit your budget. What sunk cost should you ignore?
The time it will take to drive home
The time you spent looking for cars that day
The cost of the warranty
The cost of the car
4
What does Adam Smith argue in "The Wealth of Nations"?
A free market economy is not an ideal system.
Competition is very damaging to the economy.
Government interference helps the economy.
Competition is crucial for a healthy economy.
5
People’s wants are unlimited. This fact means that which of the following is always present?
costs of production
scarcity
marginal utility
shortages
6
Investments of time, effort, and money that cannot be recovered are...
Avoidable costs
Sunk costs
Opportunity costs
Relevant costs
7
Which of the following is an example of a market?
all of the above
a family-owned store
an online auction site
a small fruit stand
8
People are compelled to buy MORE stuff for all of the following reasons EXCEPT...
The media portrays that the more stuff we have, the happier we will be
We tend to want more compared to those around us
Once the novelty of a purchase wears off, we look to buy the next new thing
Research proves that the more items we own, the happier we tend to be
9
An "experiential purchase" is...
Something that has a lot of monetary value
Something that was made by hand rather than at a factory
Something that commemorates an experience, like a souvenir
Something that creates or enhances an experience or connects us with people
10
What are the factors of production?
goods and services
land, labor, and capital
risk and opportunity
wages, salaries, and profits
11
A market that operates with limited government interference results in
a consumer centered market that often costs sellers
an efficient market that serves everybody's interests.
a collapsed market of very inconsistent transactions.
a corrupt and inefficient market that benefits sellers.
12
A ________ is a visual representation of the relationship between two given sets of data.
model
curve
graph
method
13
Which of these items is a measure of productivity?
bushels of corn per acre
dollars invested in new equipment
years of education
number of workers employed
14
Economics is often defined as the study of how people choose to
analyze the benefits and consequences of their decisions
sell goods and services that are produced domestically.
use their limited resources to satisfy their unlimited wants
measure efficiency with the production of luxury goods.
15
The opportunity cost of a decision is
the value of the next best thing you gave up for your choice
the benefit you receive from making that decision.
the loss of all the other options you could have chosen.
the loss of the chance to make that decision a different way
16
The famous economist who came up with the invisible hand theory is
Adam Smith
Steven Landsburg
Henry Hazlitt
Steven D. Levitt
17
Due to hedonic adaptation, what do you expect would happen to Anu's level of happiness after buying a new jacket?
It would remain at a baseline level, then decrease over time
It would initially decrease, then return to a baseline level
It would remain at a baseline level, then increase over time
It would initially increase, then return to a baseline level
18
You pay a hairdresser $40 to get a nice haircut. This demonstrates the
we-do-what-we-are-good-at principle
trade-makes-people-better-off principle
we-recognize-our-limitations principle
cash-in-exchange-for-benefit principle.
19
Research done on peoples' salaries and happiness levels has shown that...
Humans become accustomed to how much they earn and eventually want more
Most people need to earn at least $200,000 a year in order to be happy
Most people are satisfied with their current annual salaries
Increasing your salary is guaranteed to increase your long-term happiness
20
What does macroeconomics examine?
the economic functions of a household
the workings of an economy as a whole
an individual's economic decision making
the benefits and drawbacks of businesses
21
People who experience FOMO may...
donate money to a cause they care about
go into debt to keep up with everyone else
save a percentage of their paycheck each month
create and stick to a monthly budget
22
Which scenario would be an example of the law of diminishing marginal utility?
drinking your first glass of juice after a strenuous workout
a homeless person picking a dollar bill up from the sidewalk
eating the last slice of a large pizza after having four slices previously
putting on a warm coat when it's cold outside
23
Our wants are
unlimited.
scarce.
equal to our resources.
in short supply.
24
What is a marginal benefit?
what you gain by adding one more unit
the benefit of a cost when you make a choice
the benefit of one thing over another
two choices with equivalent benefits
25
What does it mean to maximize utility?
to become as efficient as possible
to strengthen a national infrastructure
to strengthen the skills of a workforce
to gain the most satisfaction possible
26
You consider the costs and benefits between seeing your friends and doing homework This is an example of
the no-free-lunch theory.
a cost-benefit analysis.
the invisible hand principle.
a scarcity-tradeoff idea.
27
A riddle or puzzle that can be explained through an economic analysis is called
a perfect competition.
a factor of production
an economic enigma.
a cost-benefit analysis
28
What do we do when we maximize the utility of our decisions?
We make the decisions that will only give us pleasure.
We make decisions that decrease our standard of living.
We make the decisions that we expect will make us better off
We make the easiest choice, regardless if it will benefit us
29
Unlike traditional economics, behavioral economics believes that
There is no way to predict how people will make economic decisions
People don't always behave in a rational way when making economic decisions
People will always update their viewpoints based on new information
People behave in a rational way when making economic decisions
30
An economic model, in the form of a line graph, shows how an economy produces two goods is
a tradeoff.
opportunity cost.
the law of diminishing utility.
a production possibilities frontier.
31
Why can't graphs show a complete picture of how two sets of information are related?
graphs depict hypotheses
graphs are rarely complete
graphs consist of variables
graphs are simplifications
32
What causes a shortage?
the discovery of new sources of supplies for goods
an increase in the production of goods
Permanent condition of too few resources to satisfy wants
Temporary increase in demand for a particular good/service
33
The term "Ceteris Paribus," when used in economic models, refers to the assumption that
all factors included in a model are never consistent.
all factors except for those considered stay the same.
all factors included in a model are subject to change.
all of the above
34
Mike felt the pain of losing $20 more than he felt the joy of finding it on the sidewalk the week before. This is...
Loss aversion
Sunk cost
Endowment effect
Overconfidence
35
When an economist uses objective analysis to find out how the economy actually works, this is
scarcity economics.
positive economics.
normative economics.
tradeoff economics.
36
How has social media marketing evolved over the past few decades?
Marketing utilizes detailed user data to create ads for each user
Marketing creates a less seamless shopping experience for consumers
Marketing urges you to make financial decisions that align with your goals
Marketing makes it easy to distinguish advertising from other content
37
What does every point outside a PPF represent?
a shrinking economy
an unattainable production possibility
a growing economy
a less efficient, but attainable, production possibility
38
Which scenario best illustrates the law of diminishing marginal utility?
Tim doesn't play sports so doesn't care about a ball
Josh's 10th hotdog doesn't taste as good as the first one
A car breaks down more often as it gets older.
A collector of china figurines is eager to get a new one.
39
When using social media, it's important to remember that...
The more likes a post has, you know the information is likely to be good
Marketers have your best interests in mind so you to be fin'ly responsible
Social ads want you to buy the stuff you NEED, not want
People typically post about the best parts of their lives on social media
40
Each of the following statements is an example of confirmation bias EXCEPT...
Seeking information that challenges your beliefs
Ignoring information that challenges your beliefs
interpreting info to support your existing beliefs
Only remembering details that uphold your beliefs
41
What do economists mean when they use the word "land"?
the money used to invest in order to produce future wealth
natural resources used to produce goods and services
Time and effort people devote to producing goods/services
real estate buildings where goods and services are produced
42
What is the best title for this list: innovator• strategist• risk taker?
Capitalist
Laborer
Investor
Entrepreneur
43
What must economists do when they construct models?
consider flaws
include details
make assumptions
not approximate
44
Goods are
our desires for things that meet our needs.
activities done for us by others.
physical objects produced for sale.
things produced for the betterment of all people.
45
When does a shortage end? When does scarcity end?
when supply is replenished / never
when you change you needs / when supply is replenished
when you notice you are low on something / when the shortage is corrected
when a deadline is met / when someone realizes it
