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1 Copyright © 2020 McGraw-Hill Education. All rights reserved.No reproduction or distribution without the prior written onsent of McGraw-Hill Education.Economics, 11e (Colander) Chapter 1 Economics and Economic Reasoning
1) The answers to an economy's three central economic problems are determined by the interaction of three forces: economic forces, political forces, and social forces.
Answer: TRUE
Explanation: Economic, political, and social forces determine how an economy operates and thus answers the three economic problems.
Difficulty: 1 Easy
Topic: Economic Forces, Social Forces, and Political Forces
Learning Objective: 01-03 Explain real-world events in terms of economic forces, social forces, and political forces.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2) Scarcity exists because economies cannot produce enough to meet the perceived desires of all individuals.
Answer: TRUE
Explanation: Scarcity exists because what people desire exceeds what they are able to produce.
Difficulty: 1 Easy
Topic: What Economics Is
Learning Objective: 01-01 Define economics and identify its components.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
3) Only marginal costs, not sunk costs, affect economic decisions if individuals are rational.
Answer: TRUE
Explanation: Sunk costs are costs that have already been incurred and cannot be recovered no matter what action is taken. Marginal costs represent the additional costs associated with undertaking an economic activity, and an individual must balance these costs against the marginal benefit from the activity to make a rational choice.
Difficulty: 2 Medium
Topic: A Guide to Economic Reasoning
Learning Objective: 01-02 Discuss various ways in which economists use economic reasoning.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
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2 Copyright © 2020 McGraw-Hill Education. All rights reserved.No reproduction or distribution without the prior written onsent of McGraw-Hill Education.4) The economic decision rule is to undertake an action only when the marginal benefits of that action are greater than its total costs.
Answer: FALSE
Explanation: The economic decision rule is to undertake an action only when the marginal benefits of that action are greater than its marginal costs.
Difficulty: 1 Easy
Topic: A Guide to Economic Reasoning
Learning Objective: 01-02 Discuss various ways in which economists use economic reasoning.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
5) The opportunity cost of undertaking an activity includes any sunk cost.
Answer: FALSE
Explanation: Sunk costs are costs that already have been incurred and cannot be recovered no matter what action is taken. Thus, they do not represent an opportunity cost, which are an additional cost.
Difficulty: 1 Easy
Topic: A Guide to Economic Reasoning
Learning Objective: 01-02 Discuss various ways in which economists use economic reasoning.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
6) The "invisible hand" is the price mechanism that guides people's actions in the market.
Answer: TRUE
Explanation: This statement matches the definition of the invisible hand in the text.
Difficulty: 1 Easy
Topic: Economic Forces, Social Forces, and Political Forces
Learning Objective: 01-03 Explain real-world events in terms of economic forces, social forces, and political forces.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
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3 Copyright © 2020 McGraw-Hill Education. All rights reserved.No reproduction or distribution without the prior written onsent of McGraw-Hill Education.7) Social and political forces affect the way in which the invisible hand works.
Answer: TRUE
Explanation: Social and political forces place cultural and legal limits on how the market mechanism works.
Difficulty: 1 Easy
Topic: Economic Forces, Social Forces, and Political Forces
Learning Objective: 01-03 Explain real-world events in terms of economic forces, social forces, and political forces.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
8) Macroeconomics is the study of how individual choices are affected by economic forces.
Answer: FALSE
Explanation: Macroeconomics is the study of the economy as a whole. This statement describes microeconomics.
Difficulty: 1 Easy
Topic: What Economics Is
Learning Objective: 01-01 Define economics and identify its components.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
9) Deciding what the distribution of income should be is an example of normative economics.
Answer: TRUE
Explanation: This statement questions what the goals of the economy should be and is thus an example of normative economics.
Difficulty: 2 Medium
Topic: Economic Policy Options
Learning Objective: 01-05 Distinguish among positive economics, normative economics, and the art of economics.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
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4 Copyright © 2020 McGraw-Hill Education. All rights reserved.No reproduction or distribution without the prior written onsent of McGraw-Hill Education.10) Say a pill existed that made people selfless. After taking it they were only interested in
others, not themselves. Under the coordination definition of economics:
- no economic problem would exist.
- there still would be an economic problem.
- there would be a political problem but not an economic problem.
- there would be a social problem but not an economic problem.
Answer: B
Explanation: The coordination definition of economics focuses on the need for the coordination of activities and resources. Even if everyone were selfless, there still would be the need for coordinating the selfless actions so that those actions and resources would be allocated efficiently.
Difficulty: 3 Hard
Topic: What Economics Is
Learning Objective: 01-01 Define economics and identify its components.
Bloom's: Analyze
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
11) According to the text, economics is the study of how:
- governments allocate resources in the face of constraints.
- government policies can be used to meet individuals' wants and desires.
- human beings coordinate their wants and desires.
- scarce resources are allocated between capitalists and workers.
Answer: C
Explanation: According to the text, economics "is the study of how human beings coordinate their wants and desires given a society's decision-making mechanisms, social customs, and political realities."
Difficulty: 1 Easy
Topic: What Economics Is
Learning Objective: 01-01 Define economics and identify its components.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
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