Vocab
The study of scarcity and choice.
What is Economics?
Which of the following is an example of a resource?
I. petroleum
II. a factory
III. a cheeseburger dinner
a. I only
b. II only
c. III only
d. I and II only
e. I, II, and III
D. I and II only
What are the four categories of resources?
The branch of economic analysis that describes the way economy actually works.
What is Positive Economics?
Which of the following situations represent(s) resource scarcity?
I. Rapidly growing economies experience increasing levels of water pollution.
II. There is a finite amount of petroleum in the physical environment.
III. Cassette tapes are no longer being produced.
a. I only
b. II only
c. III only
d. I and II only
e. I, II, and III
D. I and II only
What type of resource is each of the following?
a. time spent flipping burgers at a restaurant
b. a bulldozer
c. a river
A.labor
B.capital
C.land
Industry is publicly owned and a central authority makes production and consumption decisions.
What is command economy?
Suppose that you prefer reading a book you already own to watching TV and that you prefer watching TV to listening to music. If these are your only three choices, what is the opportunity cost of reading?
a. watching TV and listening to music
b. watching TV
c. listening to music
d. sleeping
e. the price of the book
B. Watching TV
You make $45,000 per year at your current job with Whiz Kids Consultants. You are considering a job offer from Brainiacs, Inc., which would pay you $50,000 per year. WHICH OF THE FOLLOWING ARE ELEMENTS OF THE OPPORTUNITY COST OF ACCEPTING THE NEW JOB AT BRAINIACS, INC.? Answer yes or no
a. the increased time spending commuting to your new job?
b. the $45,000 salary from your old job?
c. the more spacious office at your new job?
a) Yes. The increased time spent commuting is a cost you will incur if you accept the new job. That additional time you spent commuting- or equivalently, the benefit you would get from spending that time doing something else is an opportunity cost of the new job.
b) Yes. One of the benefits of the new job is that you will be making $50,000. But if you take the new job, you will have to give up your current job: that is, you have to give up your current salary of $45,000, so $45,000 is one of the opportunity costs of taking the new job.
c) No. A more spacious office is an additional benefit of your new job and does not involve forgoing something else, so it is not an opportunity cost.
a system for coordinating a society’s productive and consumptive activities.
What is Economy?
Which of the following statements is/are normative?
I. The price of gasoline is rising.
II. The price of gasoline is too high.
III.Gas prices are expected to fall in the near future.
a. I only
b. II only
c. III only
d. I and III only
e. I, II, and III
B. II only
Identify each of the following statements as POSITIVE or NORMATIVE
a. Society should take measures to prevent people from engaging in dangerous personal behavior.
b. People who engage in dangerous personal behavior impose higher cost on society
A. Normative (principle; no fact)
B. Positive (fact; can be proven with statistics)
the decisions of individual producers and consumers largely determine what, how, and for whom to produce, with little government involvement in the decisions.
What is market economy?
Which of the following questions is studied in microeconomics?
a. Should I go to college or get a job after I graduate?
b. What government policies should be adopted to promote employment in the economy?
c. How many people are employed in the economy this year?
d. Has the overall level of prices in the economy increased or decreased this year?
e. What determines the overall salary levels paid to workers in a given year?
A. Should I go to college or get a job after I graduate?
What is the difference between positive and normative economics?
Economic analysis that is used to answer questions about the way the world works, questions that have definite right and wrong answers, is known as positive economics. In contrast, economic analysis that involves saying how the world should work is known as normative economics.