Question

Test 1-4 Part A 1. Scarcity as defined in economics: K. Occurs when there are not enough resources to produce all that a society desires L. Is a problem only faced by the Less Developed Countries (LDCs). M. Is not an issue for the affluent industrially-advanced nations. N. Refers to situations where the producer of a product is making its profit by creating fear. O. Refers to shortages of goods and services when the price level is too low 2. Economics is the study of how: N. To get rich in the shortest period of time. 0. Society's scarce resources are used. P. Government finances a war. Q. To provide people with the largest amount of goods and services for their immediate consumption. 3. Opportunity cost: E. Can only be defined in dollars and cents. F. Is the dollar cost of producing a product. G. Refers to the disappointment caused by less than satisfactory performance by a product. H. The alternative that must be given up in order to get something else. 4. Economists use the ceteris paribus assumption in their analysis because it: A. Allows them to develop one-to-one, cause-and-effect relationships among economic variables. B. Converts a macroeconomic issue to a more manageable micro economic level. C. Helps them disguise their ideological agenda. D. Improves economic efficiency. E. All of the above. 5. Economists use economic models to: life the real world to make it manageable for analysis

Answer 1

1. A society’s wants are unlimited. But the resources to satisfy these wants are limited. Thus scarcity in economic terms is that the available resources are not enough to satisfy the unlimited wants of the society.

Answer: K. Occurs when there are not enough resources to produce all that a society desires.

2. Human wants are unlimited. But the resources to satisfy these wants are limited and these limited resources have alternative uses. Thus economics is the study of how to use the limited resources which have alternative uses to satisfy the unlimited wants.

Answer: O. Society’s scarce resources are used.

3. As the resources are limited, when a society produce one good it has to satisfy one another good which can be produced with the same resources. Thus opportunity cost is the amount of other goods which is sacrificed in order to produce a given amount of one good.

Answer: H. The alternative that must be given up in order to get something else.

4. The assumption of ceteris paribus helps to isolate multiple independent variables to show their cause and effect. An economic variable is mostly affected by more than one cause. Thus to isolate one variable from the other, the economist use the assumption of ceteris paribus.

Answer: A. Allow them to develop one- to- one cause and effect relationship among economic variables.