Naked Economics Chapter 1 Study Guide

ASSIGNMENT 1
CHAPTER 1 – Limits, Alternative and Choices 1. Economics may best be defined as the:
A. interaction between macro and micro considerations.
B. social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.
C. empirical testing of value judgments through the use of logic.
D. use of policy to refute facts and hypotheses. 2. In economics, the pleasure, happiness, or satisfaction received from a product is called:
A. marginal cost.
B. rational outcome.
C. status fulfillment.
D. utility. 3. When economists say that people act rationally in their self interest, they mean that individuals:
A. look for and pursue opportunities to increase their utility.…show more content…
there can be a net gain to society by allocating either more or less resources to producing X.
D. resources are overallocated to the production of X. 9. The optimal point on a production possibilities curve is achieved where:
A. the smallest physical amounts of inputs are used to produce each good.
B. each good is produced at a level where marginal benefits equal marginal costs.
C. large amounts of capital goods are produced relative to consumer goods.
D. large amounts of consumer goods are produced relative to capital goods.

10. Refer to the above tables. If South Cantina is producing at production alternative D, the opportunity cost of the third unit of capital goods will be:
A. 3 units of consumer goods.
B. 4 units of consumer goods.
C. 5 units of consumer goods.
D. 6 units of consumer goods. 11. Refer to the above tables. Suppose that North Cantina is producing 2 units of capital goods and 17 units of consumer goods while South Cantina is producing 2 units of capital goods and 21 units of consumer goods. We can conclude that:
A. North Cantina is fully and efficiently using its resources, but South Cantina is not.
B. South Cantina is fully and efficiently using its resources, but North Cantina is…show more content…
The central concept underlying the production possibilities curve is that of limited resources. 18. Refer to the above diagram. Points A, B, C, D, and E show:
A. that the opportunity cost of bicycles increases, while that of computers is constant.
B. combinations of bicycles and computers that society can produce by using its resources efficiently.
C. that the opportunity cost of computers increases, while that of bicycles is constant.
D. that society's demand for computers is greater than its demand for bicycles. 19. Refer to the above diagram. This production possibilities curve is:
A. convex to the origin because opportunity costs are constant.
B. linear because opportunity costs are constant.
C. concave to the origin because of increasing opportunity costs.
D. convex to the origin because of increasing opportunity costs. 20. Which of the following will shift the production possibilities curve to the right?
A. an increase in the unemployment rate from 6 to 8 percent
B. a decline in the efficiency with which the present labor force is allocated
C. a decrease in the unemployment rate from 8 to 6 percent
D. a technological advance that allows farmers to produce more output from given