University of Lethbridge - Department of Economics
ECON 1012 – Introduction to Macroeconomics
Instructor: Michael G. Lanyi
Additional Help
Chapter # 1 & 1A –– Economics and Economic Reasoning
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CHAPTER 1
Economics and Economic Reasoning
POP QUIZ
1. According to Colander et al, the best definition of economics is:
a. the study of how limited resources are allocated among competing needs.
b. the study of scarcity and how people deal with the problem of scarcity.
c. the study of how choices are made.
d. the study of how human beings coordinate their wants and desires, given the decisionmaking mechanisms, social customs, and political realities of that society.
2. The three central coordination problems any economic system must solve are:
a. what to produce, why to produce, how to produce.
b. what to produce, why to produce, for whom to produce.
c. what to produce, how to produce, for whom to produce.
d. what to produce, where to produce, how to produce.
3. Rational decision making means that:
a. marginal benefits and marginal costs of a decision are always easy to measure.
b. if the marginal benefit of the last unit of an activity exceeds its marginal cost, then more of
that activity should be undertaken.
c. one should keep doing an activity until the total benefits are maximized.
d. one should keep doing an activity until the marginal costs are minimized.
4. An opportunity cost is:
a. easily measured in dollar terms.
b. the highest valued alternative that must be foregone whenever something is undertaken or
acquired.
c. only incurred when important and costly decisions are to be made.
d. not implicit in every decision we make.
5. Economic models, insights, or theories:
a. are always correct in their predictions.
b. once established as “true,” are always “true.”
c. are generalizations about the workings of an abstract theory.
d. always include as much detail as possible.
Page 1-2, Chapter 1: Economics and Economic Reasoning
6. Which of the following is a macroeconomic concern?
a. The wage rates of electricians in Toronto.
b. The effects of agricultural price supports on the income of farmers.
c. How profits are maximized by a firm.
d. The causes of unemployment in Canada.
7. Which of the following is a microeconomic concern?
a. Whether Air Canada is a monopoly or not.
b. Whether a new governmental policy is inflationary or not.
c. The effect that a new “police action” such as in Kosovo will have on national income.
d. Whether government can implement a policy that will eliminate unemployment.
8. Economic institutions:
a. always operate in ways that economic theory would predict.
b. are pretty much the same no matter what country you visit.
c. have social, political, and even religious dimensions.
d. seldom change.
9. Positive economics:
a. deals with subjective value judgments about “what ought to be.”
b. will make the economy positively better off.
c. is the exact opposite of negative economics.
d. deals with how the economy does in fact work.
10. The science of economics is:
a. the application of the knowledge learned in positive economics to the achievement of the goals
determined in normative economics.
b. the branch of economics most removed from practical application, since its goal is to develop
the most elaborate theoretical models.
c. trying to get government to act on a national problem as quickly and as cheaply as possible.
d. getting the other guy to pay.
Page 1-3, Chapter 1: Economics and Economic Reasoning
ANSWERS TO POP QUIZ
Please solve it first.
1. d 2. c 3. b 4. b 5. c 6. d 7. a 8. c 9. d 10. a
Page 1-4, Chapter 1: Economics and Economic Reasoning