Exam 1: The Role and Method of Economics

The expected marginal benefit to you from purchasing a new sport utility vehicle is $30 000. If the price of the new sport utility vehicle is $32 000, what will you do?

The opportunity cost of a decision is the value of all of the available alternatives that were not chosen.

How should we judge the validity of a positive statement?

Most students expect that if they spend more time studying, the outcome will be improved grades in the course. What does this suppose?

Prices communicate information about relative availability of products. What does a decrease in the price of corn signal to consumers and producers?

Which of the following best illustrates the fallacy of composition?

"The hotter it gets, the more water people drink." What type of relationship, if any, does this statement imply?

Which of the following statements best describes the problem of scarcity?

How does an economist define a good economic theory?

According to the rule of rational choice, under what circumstances will you engage in more of an activity?

Which of the following is a statement of positive economics?

Identify whether each of the following topics would be primarily a concern of microeconomics or macroeconomics: a. The decision by a household to eat in rather than go out for dinner this evening. b. The unemployment rate increased from 4.5 to 4.8 percent. c. A decision by the Bank of Canada to decrease the supply of money in the economy. d. The general level of prices increased by 5 percent last year. e. The price of bicycles increased by $30 last year. f. The family restaurant chain closed down after losing much of its customer base to fast-food competitors over the last few years.

Marginal cost is the additional cost incurred as the result of producing one additional unit of a good or service.

The marginal benefit to you of drinking bottled iced tea is $1.50. If the price of a bottle of iced tea is $1.25, what will you do?

Henry must choose between going to his psychology class this evening or going on a date. If he chooses to go on the date, which of the following statements about the expected value of the psychology lecture is most accurate?

In a market system, how are decisions about how to allocate resources made?

What is the opportunity cost of an action equal to?

Which of the following is an example of physical capital?

You lose $20 from your wallet and decide to miss an hour from work in order to search for it. What would an economist conclude from your behaviour?

Which of the following describes the chain of events involved in creating a theory?