Chapter 1

1. A normative economic statement:

is a statement of what ought to be, not what is.
2. In economics, the term marginal usually refers to:
a small, incremental change in an economic variable
3. The difference between a good and a service is that:
a good is tangible, but a service is not.
4. You currently subscribe to two magazines and are trying to decide whether you should subscribe to a third.
What should determine your decision if you are economically rational?
: the cost of the third magazine compared to the additional enjoyment (benefit)you would get from it.
5. Households supply ______resource______ to firms and demand _____products_______ from firms.
6. Which of the following is an example of a positive economic statement?
:an increase in the price of gasoline will cause a reduction in the amount of gasoline purchased.
7. Match the category of resources with the manner in which they are paid.
Labor wages
Capital interest
Natural resources rent
Entrepreneurial ability profit
8. The assumption that individuals act rationally implies that: people implicitly calculate the costs and benefits
of an activity to decide if it is worthwhile.
9. Macroeconomics is the study of: the behavior of the economy as a whole
10. Profit is: price of the products minus the cost of the resources to produce the product.
11. A fallacy of composition involves assuming that: what is true for any individual component in a group is
good for the whole.
12. Economics is best described as the: study of choice when scarcity exists.
13. Microeconomics is the study of: the economic behavior of individual decision makers
14. A resource is something that: is used to produce goods and services.
15. Rational economic decision makers will make a change only if: the expected marginal benefit exceeds the
expected marginal cost.