Economics test questions

According to the text, economics is - answer-the science of how and why people, businesses, and governments amke the choices they do. Which of the following examples falls into the spehre of economics? - answer-the rise and fall of the stock market a mother's trip to the supermarket a university class on business management Which two basic economic principles create the need for choices? - answer-insatiability and scarcity What biblical concept refers to a person's responsibility to make proper choices with his resources? - answer-stewardship After twelve years of faithful service, your family's car finally collapses beyond the hope of repair and must be taken to the junkyard. Which economic term does this vehicle now best illustrate? - answer-a nuisance good The economic cost of a good or service is - answer-the value people place on it. A family must quickly leave its home due to a fire. On her way out the door, the mother grabs the family photo albums but leaves several expensive paintings behind. What economic concept do her actions best illustrate? - answer-subjective value Conservation of nautral resources primarily shows a grasp of which economic concept? - answer-scarcity Suppose you have $20. You will receive 6 utils if you spend the money on a new shirt and 10 utils if you purchase a new album. What will your net utility be if you finally decide to buy an album? - answer-4 utils Your family decides to take a trip to Europe this summer instead of next because airline rates are currently low. What economic concept do the lower airline rates illustrate in our family's decision-making process? - answer-opportunity benefit What principle does Henry Hazlitt remind readers of in his story about the broken window? - answer-hidden costs Which of the following statements is an example of postitive economics? - answer-The unemployment rate is 6 percent. What approach to economic study focuses on value judgments? - answer-normative economics According to the Austrian economist Carl Menger, what determins the value of an object? - answer-the utility for the user List two reasons that the study of economics is considered a science - answer-begin with observation, use observation to make predictions, control future events by altering important variables What is the difference between economic goods and services? - answer-An economic good is a tangible thing with a measurable life span. An economic service is an intangible item. Recycling is an application of what biblical principle? Explain. - answer-Stewardship. Recycling shows good management of the resources given by God both in nature and in material goods. Describe the problem postulated by the diamond-water paradox. What is the solution to the problem? - answer-The paradox seeks to describe which has more economic value--a diamond or a glass of water. Menger's answer pointed out that this is no right answer. The value of each good depends on the state of mind of the one answering the riddle, which is the subjective value. Choose one of the following pairs and tell which of the items would be more costly based on intrinsic value. Explain your answer. - answer-A gallon of milk and a block of cheese or a gold nugget and a gold necklace A block of cheese requires more time and labor to produce than a gallon of milk. so its intrinsic worth is greater of the two. A gold necklace takes additional time, resources, labor, and ingenuity to produce and so has more intrinsic value than a nugget. What is an economist's term for the usefulness of a good or service? - answer-utility What is the chief advantage of the line graph over the schedule? - answer-it contains more data On a PPC graph, any point on the graphed line represents - answer-production efficiency What are the two basic elements of the circular flow model - answer-households and business firms Which of the following would an economist not consider an example of land? - answer-machinery Which of the following is NOT an example of capital? - answer-a house What is the most important factor of production? - answer-entrepreneurship From whom do businesses ultimately receive the factors of production? - answer-households Which of the following does not qualify as a possible factor cost - answer-sales tax Which of the following is a transfer payment? - answer-governmental unemployment payments What is an example of dissavings - answer-taking out a mortgage What is the "heart" of the economy that circulates money? - answer-the financial market Ludwig von Mises is well-known for exploring the economic practice of - answer-free markets What are the two purposes for economic models? - answer-instruction and prediction of future events What does the acronym PPC stand for? What is the purpose of a PPC graph? - answer-Production possibilities curve. A PPC graph enables an economist to see the maximum feasible amounts of two commodities that a business can produce. What is the purpose of the circular flow model? What are it's four major components? - answer-The circular flow model attempts to visually explain how a complete national economy works. The four major components are households, business firms, the government, and financial markets. List and briefly define the factors of production. - answer-Land, labor, capital, and entrepreneurship. Plus definition How does discouraging entrepreneurship affect the flow of new products? - answer-It decreases the flow of new products.