Review Chapter 123

pdf

School

Kennesaw State University *

*We aren’t endorsed by this school

Course

1000

Subject

Economics

Date

Jun 10, 2024

Type

pdf

Pages

Uploaded by AmbassadorStrawRabbit18

Review Chapter 1-3 Positive Versus Normative Statement Because people have different values, normative statements often provoke disagreement . An economist whose values lead him or her to conclude that we should provide more help for the poor will disagree with one whose values lead to a conclusion that we should not. Because no test exists for these values, these two economists will continue to disagree, unless one persuades the other to adopt a different set of values. Many of the disagreements among economists are based on such differences in values and therefore are unlikely to be resolved. A normative statement is one that makes a value judgment. Such a judgment is the opinion of the speaker; no one can "prove" that the statement is or is not correct. Here are some examples of normative statements in economics: • We ought to do more to help the poor. • People in the United States should save more for retirement. • Corporate profits are too high. These statements are based on the values of the person who makes them and can't be proven false. Question. Which of the following is a "normative statement" ? a. The price of owl mascot is $5.25 each at the KSU bookstore. b. Inflation is bigger economic problem than unemployment. c. Barack Hussein Obama II, born August 4, 1961, is an American retired politician who served as the 44th president of the United States from 2009 to 2017 d. US Inflation Rate is at 6.45%, compared to 7.11% last month and 7.04% last year. Positive statements are objective statements that can be tested, improved or rejected by referring to the available evidence . Positive economics deals with objective explanation and the testing and rejection of theories. For example: ❖ If the government raises the tax on cigarettes, this will lead to a fall in profits of the tobacco industry. ❖ The rising price of crude oil on world markets will lead to an increase in cycling to work ❖ A reduction in income tax will improve the incentives of the unemployed to find work. ❖ A rise in average temperatures will increase the demand for sun screen products. ❖ Higher interest rates will reduce house prices. ❖ Cut-price alcohol has increased the demand for alcohol among teenagers ❖ A car scrappage scheme will lead to fall in the price of second hand cars Question. Consider the following two statements:

(I) "On Wednesday, February 28, 2018, Noel Gallagher (former songwriter of the defunct band Oasis) performed at the Tabernacle in Atlanta with his current band Noel Gallagher's High Flying Birds," (II) "Professional golfer Phil Mickelson is the most exciting and charismatic player to play on the PGA Tour in the last thirty years." Statement (I) is a ____________ statement, and Statement (II) is a ____________ statement a. Positive; Normative b. Normative; Normative c. Normative; Positive d. Positive; Positive Scarcity Scarcity => resources (e.g., time, personal income, amount of labor in economy) are available in finite, limited amounts is a universal phenomenon that arises because resources are limited. No society in history has ever had enough resources to satisfy all the desires of all of its people. Since resources are scarce, decision makers face tradeoffs: having more of one thing means getting by with less of something else. As a result of this scarcity, decision makers face tradeoffs – acquiring more of one thing can often only be done at the expense of getting by with less of something else Question. John went shopping with only $180 on him. He wants to buy a new pair of sneakers and a pair of designer pants. Each item costs exactly $180, so he can only purchase one of the two. This scenario directly illustrates the basic concept that a. most consumers are selfish b. irrational people never respond to incentives c. society can produce more output when workers "specialize" in production d. when resources are scarce, people face tradeoffs Question. Economics can be defined as the social science that studies how people make decisions in the face of scarcity. “Scarcity” refers to a. the recognition that private business owners are greedy and exploit workers, providing them with incomes so low that they can barely afford to survive. b. difficulties that arise when trying to get goods made by the industrial sector transported, delivered, and available to consumers for purchase in the commercial sector. c. a universal phenomenon that arises because resources are finite and limited. d. the observation that gasoline prices are determined primarily by policies implemented by the President of the United States Question. To say that "there is a scarcity of gasoline" means that

e. gasoline prices will go down. f. there is not enough gasoline to satisfy people's demand for it at a zero price. g. there are very few substitutes for gasoline . h. gasoline is very expensive. Macro versus Micro Micro-economics is the branch of economics which studies how individual decision- makers behave and interact with each other (often with a focus on how households and firms behave and interact with each other in markets). Examples: ❖ What determines how households and individuals spend their budgets? ❖ What combination of goods and services will best fit consumers’ needs and wants, given the budget they have to spend? ❖ How does an individual decide whether to work, and if so, whether to work full time or part time? ❖ How does individual decide how much to save for his/her future? ❖ What determines the products, and how many of each, a firm will produce and sell? ❖ What determines how many workers it will hire? ❖ How will a firm finance its business? Question. Micro-economists tend to focus on a. the consumption of a particular household b. small economic units c. direct consequences of rational human choice d. all of the above is correct Macroeconomics studies economic phenomena at aggregate levels. Macro-economists study the performance of the national economy as well as the global economy . Macroeconomics studies why some nations have a larger output compared to others ; why some nations experience a faster economic growth than the rest of the world; why some nations have to deal with a higher inflation rate or/and why unemployment rates in some nations are higher than the rest of the world. It also studies why a nation experiences different output growth rates, inflation rates, and unemployment rates in different time period. • What determines the level of economic activity in a society?

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

• What determines how many jobs are available in an economy? • What determines a nation's standard of living? • What causes the economy to speed up or slow down? • What causes firms to hire more workers or to lay workers off? Microeconomics: focuses on the individual unit (i.e., it examines the “trees”) Macroeconomics: focuses on the aggregate or whole (i.e., it examines the “forest”) Question. Macro-economists tend to focus on e. What determines the level of economic activity in a society? f. What determines how many jobs are available in an economy? g. What are the major sectors that make up the U.S. economy? h. all of the above is correct Self-Rational Decision Maker/Self-interested individual. Self-Interested Individual – someone who makes his own personal assessment of the benefits and costs associated with different outcomes, and who subsequently uses these measures as the basis for decision making • by definition, a self-interested person places more weight on his own priorities than on the priorities of others • further, most people care much more about their own well-being than they care about the well- being of others Question. This past Saturday, Atlanta born tennis player Coco Gauff lost to World #1 ranked Iga Świątek in the finals of the French Open by a score of 6-1, 6-3. Around the same time, an earthquake in Afghanistan killed 56 people. If Coco were more upset about the outcome of the French Open than about the loss of life from the earthquake, then it would seemingly suggest that she a. is an irrational individual. b. is a self-interested individual. c. does not care about anyone other than herself. d. is not as good of a person as Iga Świątek. Three fundamental questions that every society must answer Every society must address three basic economic questions:

1. What to produce? ( production decision – what mix of goods/services should be created?) 2. How to produce it? ( resource use decision – what resources should be used for the production of which goods/services?) 3. For whom to produce it? ( distributional decision – who gets to consume which goods/services?) Question. Consider a society consisting of only three people: Canan, Karim and John. Canan and Karim spend all day producing pen and pencil. At the end of each day John decides how much of their output each person in society gets to consume . The "fundamental economic question" that John is answering for this society is the: a. production decision b. resource use decision c. distributional decision d. none of the above is correct Cost-Benefit Analysis Question. Based upon the information conveyed in the following table, which states Coco's Total Benefits from consumption of "Good X" each week (measured in dollars). Each unit of "Good X" can be purchased for $c, so that her Total Costs of consuming "n units" of " Good X" would be "nc" dollars. Coco's Marginal Benefit of consuming the 5 th unit of "Good X" would be _______. e. $225 f. $35 g. $30 h. $690 Question. Based upon the information conveyed in the table above, which states Ari's Total Benefits from consumption of "Good X" each month (measured in dollars), Ari's Marginal Benefit of consuming (MB) the 6th unit of "Good X" would be _______. a. $220

b. $255 c. $30 d. $314 Question. Joe increased his consumption of “Good X” from 14 units to 15 units. For this 15 the unit consumed, his Marginal Benefit was $8 and his Marginal Cost was $10. From these observations, it follows that by consuming this unit his A. Total Benefits, Total Costs, and Total Economic Surplus all increased. B. Total Benefits and Total Costs both increased, but his Total Economic Surplus decreased. C. Total Benefits increased, but his Total Costs and Total Economic Surplus both decreased. D. Total Benefits, Total Costs, and Total Economic Surplus all decreased. Production Possibilities Frontier/Curve Question. Consider a society facing the Production Possibilities Frontier illustrated below which is "bowed-out" from the origin (in that it becomes steeper as one moves "down" the curve): Which of the following output combinations is "attainable/feasible" and characterized by "productive efficiency"? a. "A" (480 cars and 1,000 units of wheat). b. "C" (630 cars and 2,000 units of wheat). c. "E" (900 cars and 1,000 units of wheat). d. More than one (perhaps all) of the above answers is correct. Question. Consider a society facing the Production Possibilities Frontier illustrated below which is “bowed - out” from the origin (in that it becomes steeper as one moves “down” the curve):

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Which of the foll owing combinations of output is “attainable/feasible and characterized by productive efficiency”? a. “A” (525 units of corn and 815 trucks) b. “B” (525 units of corn and 1,620 trucks). c. “C” (680 units of corn and 1,620 trucks). d. None of the above answers is correct. Question. Consider a society facing the Production Possibilities Frontier illustrated below which is “bowed - out” from the origin (in that it becomes steeper as one moves “down” the curve): Which of the following combinations of output is “attainable/feasible and characterized by productive inefficiency”? a. “A” (525 units of corn and 815 trucks) b. “B” (525 units of corn and 1,620 trucks). c. “C” (680 units of corn and 1,620 trucks). d. None of the above answers is correct. Suppose that this society wanted to produce 175 units of corn. The maximum amount of trucks that they could produce would be e. more than 1,620 trucks but less than 1,980 trucks. f. exactly 1,980 trucks. g. more than 1,980 trucks but less than 2,160 trucks.

h. exactly 2,160 trucks. Opportunity Cost Question. Chipotle is Danny’s favorite restaurant. After recently joining their frequent diner club for free, he got a coupon by e-mail which can be redeemed for either a free side order of queso or a free fountain drink. When he went to Chipotle for dinner last night, he used the coupon to get a free side order of queso. His Opportunity Cost of the queso was equal to a. zero, since he received the coupon for free. b. the value he places on a fountain drink. c. the regular menu price of a side order of queso. d. the sum of the regular menu price of a side order of queso and the regular menu price of a fountain drink. Comparative Adv. & Absolute Adv. Question. Sam and Cat spend their time starring in webcasts and providing babysitting services. Cat’s opportunity cost for providing babysitting services is lower than Sam’s opportunity cost for providing babysitting services. The _________________ suggests that they can increase their total output if Cat focuses her production on babysitting while Sam focuses her production on webcasts. a. Cost-Benefit Principle b. Incentive Principle c. Law of Absolute Advantage d. Law of Comparative Advantage Question. Consider the following scenario. Greta and Henry spend their workdays producing bananas and cars. The table below provides a summary of the number of units of each good that each worker produces in a full week. Answer the following questions based upon these values. Henry's Opportunity Cost for producing a car is _____ units of bananas. a. 30 b. 90 c. 2 d. 0.033

Greta’ s Opportunity Cost for producing a car is _____ units of bananas. a. 3 b. 72 c. 12 d. 0.083 ____________ has a Comparative Advantage in the production of car, and ____________ has an Absolute Advantage in the production of car. a. Henry; Henry. b. Henry; Greta c. Greta; Henry d. Greta; Greta Three dimensions of Private Ownership of Property: (i) “right to control,” (ii) “right to transfer,” and (iii) “right to restitution.” • right to control – the right to decide how to use your property. • right to transfer – the right to obtain ownership of property from or relinquish ownership of property to another person. • right to restitution – the right to be compensated by another person when he damages your property or infringe upon your rights. Question. Rebecca owns 180 acres of land in northern Alabama. She has decided to sell this land to a housing developer. When selling this land, Rebecca is exercising a ________________ in regards to his property e. right to consumption f. right to control g. right to restitution h. right to transfer Question. Phil got the video game “New Pokémon Snap” for his birthday. His older brother George smashed the cartridge with a hammer (just for a joke), making the game unplayable. Their dad says, “George, you need to pay Phil $55, which is the replacement cost of the game.” In taking this position, their dad is essentially maintaining that Phil has a right to ______________ in regards to the video game. a. right to consumption b. right to control c. right to restitution d. right to transfer Three primary types of economic incentives : material rewards, moral suasion, and coercion.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

• material rewards – monetary rewards or direct increases in consumption from engaging in an activity. • moral suasion – attempts to convince individuals to behave in a certain manner because doing so is the right thing to do. • coercion – the use or threat of force or incarceration in order to obtain compliance. Question. John is concerned that his six-year-old son is not behaving well at school. He has asked his teacher to send home a daily report on his behavior and has told his son that he will get a spanking after school on any day that his teacher indicates that he has misbehaved in any way. John is trying to alter his son’s behavior by way of a. material reward. b. coercion. c. moral suasion. d. the Visible Hand Economic System • economic system – the rules and methods put in place by a society to answer the three fundamental economic questions of “What to produce?,” “How to produce it?,” and “For whom to produce it?” • comparative economic systems – the subfield of economics that compares and contrasts the structure and the performance of different types of economic organization (i.e., different economic systems). • Capitalism – economic system in which the means of production are privately owned and operated for a profit. • Socialism – economic system in which the means of production are owned by the government. • Communism – economic system in which the means of production are collectively owned by all people in a society (without intervention by a government or state) Question. ________________ is an economic system in which the means of production are owned by the government. a. Capitalism b. Communism c. Feudalism d. Socialism Question ________________ is economic system in which the means of production are collectively owned by all people in a society (without intervention by a government or state) a. Capitalism b. Communism c. Feudalism d. Socialism

Review Chapter 123

Related Documents