,ACCESS Test Bank for Macroeconomics 23rd Edition McConnel
f f f f f f f
Chapterf01f-fLimits,fAlternatives,fChoices
Chapterf01f-
fLimits,fAlternatives,fandfChoicesfMcConnellfB
ruefFlynnf23e
DISCUSSIONfQUESTIONS
1. Whatfisfanfopportunityfcost?fHowfdoesfthefideafrelateftofthefdefinitionfoffeconomics?fWh
ichfofftheffollowingfdecisionsfwouldfentailfthefgreaterfopportunityfcost:fallocatingfafsqua
refblockfinfthefheartfoffNewfYorkfCityfforfafsurfacefparkingflotforfallocatingfafsquarefbloc
kfatfthefedgefoffaftypicalfsuburbfforfsuchfaflot?fExplain.fLO1.1
Answer:fAnfopportunityfcostfisfwhatfwasfsacrificedftofdoforfacquirefsomethingfelse.
fThefconditionfoffscarcityfcreatesfopportunityfcost. fIfftherefwasfnofscarcity, ftherefwo
uldfbefnofneedftofsacrificefonefthingftofacquirefanother.fThefopportunityfcostfwouldfb
efmuchfhigherfinfNewfYorkfCityfasfthefalternativefusesfforfthatfsquarefblockfarefmuc
hfmorefvaluablefthanfforfaftypicalfsuburbanfcityfblock.
2. Citefthreefexamplesfoffrecentfdecisionsfthatfyoufmadefinfwhichfyou,fatfleastfim
plicitly,fweighedfmarginalfcostfandfmarginalfbenefit.fLO1.1
Answer:fAnswersfwillfvary,fbutfmayfincludefthefdecisionftofcomeftofclass,ftofskipfb
reakfastftofgetfaffewfextrafminutesfoffsleep,ftofattendfcollege,forftofmakefafpurchase.f
Marginalfbenefitsfoffattendingfclassfmayfincludefthefacquisitionfoffknowledge,fpart
icipationfinfdiscussion,fandfbetterfpreparationfforfanfupcomingfexamination.fMargi
nalfcostsfmayfincludeflostfopportunitiesfforfsleep,fmeals,forfstudyingfforfotherfclass
es.fInfevaluatingfthefdiscussionfoffmarginalfbenefitsfandfmarginalfcosts,fbefcarefulft
ofwatchfforfsunkfcostsfofferedfasfafrationalefforfmarginalfdecisions.
3. Whatfisf“utility”fandfhowfdoesfitfrelateftofpurposefulfbehavior?fLO1.1
Answer:f“Utility”frefersftofthefpleasure,fhappiness,forfsatisfactionfgainedffromfen
gagingfinfanfactivityf(eatingfafmeal,fattendingfafballfgame,fetc.).fItfisfanfimportantfc
omponentfoffpurposefulfbehaviorfbecausefpeoplefwillfallocateftheirfscarceftime,fe
nergy,fandfmoneyfinfanfattemptftofgainfthefmostfutilityfpossible.
4. Whatfarefthefkeyfelementsfoffthefscientificfmethod,fandfhowfdoesfthisfmethodfrelateftofe
conomicfprinciplesfandflaws?fLO1.2
Answer:fThefkeyfelementsfincludefthefgatheringfoffdataf(observation),fthefformula
tionfoffpossiblefexplanationsf(hypothesis),ftestingfthefhypothesis,fdeterminingfthefv
alidityfoffthefhypothesis,fandfrepeatedftestingfoffthefhypothesisfthatfhavefappearedft
ofbefvalidfinfpriorftests.
1-1
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mynursytest.store
,ACCESS Test Bank for Macroeconomics 23rd Edition McConnel
f f f f f f f
Chapterf01f-fLimits,fAlternatives,fChoices
Thefscientificfmethodfisftheftechniquefusedfbyfeconomistsftofdeterminefeconomicfla
wsforfprinciples.fTheseflawsforfprinciplesfarefformulatedftofexplainfand/orfpredictfbe
haviorfoffindividualsforfinstitutions.
5. Makef(a)fafpositivefeconomicfstatementfoffyourfchoice,fandfthenf(b)fafnormativefeco
nomicfstatementfrelatingftofyourffirstfstatement.fLO1.3
Answer:fAnswersfwillfvary.f Example:f(a)fThefunemploymentfratefisf4.8fpercent;
(b)fthefunemploymentfratefisftoofhigh.fInfgeneral,fweftreatf“whatfis”fstatementsfasfposi
tive,f“whatfshouldfbe”fasfnormative,fbutfkeepfanfeyefoutfforfstatementsflikef“atffullfe
mploymentfanfincreasefinfthefproductionfoffpizzasfshouldfcomefatfthefcostfofflessfrob
ots.”fSomefstudentsfmayfincorrectlyfidentifyfthefstatementfasfnormativefbecausefoffth
eftermf“should.”
6. Howfdoesfthefslopefoffafbudgetflinefillustratefopportunityfcostfandftrade-
offs?fHowfdoesfafbudgetflinefillustratefscarcityfandfthefeffectfofflimitedfincomes?fLO1.
4
Answer:fBudgetflinesfarefalwaysfslopedfdownward.fThisfdownwardfslopefshowsfanfi
nversefrelationshipfbetweenftheftwofgoods,fmeaningfthatfasfyoufincreasefone,fthefoth
erfmustfdecrease.fThisfdecreasefisfwhatfyoufarefgivingfup,forfthefopportunityfcost,fofft
hefgoodfyoufarefgettingfmorefof.
Budgetflinesfillustratefscarcityfinfthatftheyfshowfyoufareflimitedfbyfyourfincome.fSinc
eftheyfslopefdownward,ftheyfshowfyoufcannotfkeepfgettingfmorefandfmorefoffbothfgo
ods.fTherefisfalwaysfaftrade-
off.fThefareafbeyondfthefbudgetflinefrepresentsfcombinationsfoffthefgoodsfthatfarefbe
yondfyourfincome.
7. Whatfarefeconomicfresources?fWhatfcategoriesfdofeconomistsfuseftofclassifyfthem?fW
hyfarefresourcesfalsofcalledffactorsfoffproduction?fWhyfareftheyfcalledfinputs?fLfO1.5
Answer:fEconomicfresourcesfarefthefnatural,fhuman,fandfmanufacturedfinputsfus
edftofproducefgoodsfandfservices.
Economicfresourcesffallfintoffourfmainfcategories:f labor,flandf(naturalfresources),fre
alfcapitalf(machines,ffactories,fbuildings,fetc.,)fandfentrepreneurs.
Economicfresourcesfarefalsofcalledffactorsfoffproductionfbecauseftheyfarefusedftofpro
ducefgoodsfandfservices.fTheyfarefcalledfinputsfbecauseftheyfgofintofafproductionfpro
cessf(likefingredientsfgofintofafbowlftofmakefafcake),fwithfthefresultingfgoodsfandfser
vicesfalsofbeingfreferredftofasfoutput.
1-2
©fMcGrawfHillfLLC.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfconsentfoffMcGrawfHillfLLC.
mynursytest.store
, ACCESS Test Bank for Macroeconomics 23rd Edition McConnel
f f f f f f f
Chapterf01f-fLimits,fAlternatives,fChoices
8. Whyfisfmoneyfnotfconsideredftofbefafcapitalfresourcefinfeconomics?fWhyfisfentrepr
eneurialfabilityfconsideredfafcategoryfoffeconomicfresource,fdistinctffromflabor?fW
hatfrolesfdofentrepreneursfplayfinfthefeconomy?fLO1.5
Answer:fMoneyfisfnotfconsideredfafcapitalfresourcefbecausefmoneyfisfnotfproductiv
e.fItfprovidesfaccessftofresourcesfbutfbyfitself,fmoneyfdoesfnotfdirectlyfcontributeftoft
hefproductionfoffgoodsfandfservices.fAdditionally,fthefquantityfoffmoneyfinfcirculati
onfdoesfnotfdeterminefanfeconomy’sfproductivefcapacity,fwhilefthefamountfoffcapitalf
andfotherfresourcesfdoes.fDoublingfthefamountfoffmoneyfinfcirculationfdoesfnotfchan
gefthefeconomy’sfphysicalfcapacityftofproducefgoodsfandfservices.fMoneyfis,fhowev
er,freferredfasfaffinancialfresourcefandfasffinancialfcapital,freflectingfitsfabilityftofacq
uirefrealfeconomicfresources.
Entrepreneurialfabilityfandflaborfarefbothfhumanfresources,fbutftheyfperformfdif
ferentffunctionsfinfthefproductivefprocess.fEntrepreneurialfabilityfdoesfnotfdirect
lyfproducefgoodsfandfservices;fitforganizesfthefresourcesfthatfdo.f Laborfrefersftof
thefhumanfinputsfthatfdirectlyfengagefinfproduction.
Entrepreneursfarefrisk-
takers:ftheyfcoordinatefthefactivitiesfoffthefotherfthreefinputsfforfprofit—
orfloss,fwhichfisfwhyftheyfarefcalledfrisk-
takers.f Entrepreneursfsometimesfmanagefcompaniesfthatftheyfown,fbutfafmanagerfw
hofisfnotfanfownerfisfnotfnecessarilyfanfentrepreneurfbutfmayfbefperformingfsomefofft
hefentrepreneurialffunctionsfforfthefcompany.fEntrepreneursfarefalsofinnovators,forf
perhapsfinventors,fandfprofitsfhelpftofmotivatefsuchfactivities.
9. Explainftheftypicalfshapesfoffmarginal-benefitfandfmarginal-
costfcurves.fHowfarefthesefcurvesfusedftofdeterminefthefoptimalfallocationfoffresourcesft
ofafparticularfproduct?fIffcurrentfoutputfisfsuchfthatfmarginalfcostfexceedsfmarginalfbene
fit,fshouldfmoreforffewerfresourcesfbefallocatedftofthisfproduct?fExplain.fLO1.6
Answer:fThefmarginalfbenefitfcurvefisfdownwardfsloping,fMBffallsfasfmorefoffafpro
ductfisfconsumedfbecausefadditionalfunitsfoffafgoodfyieldflessfsatisfactionfthanfprevio
usfunits.fThefmarginalfcostfcurvefisfupwardfsloping,fMCfincreasesfasfmorefoffafproduc
tfisfproducedfsincefadditionalfunitsfrequirefthefusefoffincreasinglyfunsuitablefresource
s.fThefoptimalfamountfoffafparticularfproductfoccursfwherefMBfequalsfMC.fIffMCfex
ceedsfMB,ffewerfresourcesfshouldfbefallocatedftofthisfuse,fasfthefadditionalfcostfisfmo
refthanfthefadditionalfbenefit.fThefresourcesfarefmorefvaluablefinfsomefalternativefuse
f(asfreflectedfinfthefhigherfMC)fthanfinfthisfusef(asfreflectedfinftheflowerfMB).
1-3
©fMcGrawfHillfLLC.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfconsentfoffMcGrawfHillfLLC.
mynursytest.store
f f f f f f f
Chapterf01f-fLimits,fAlternatives,fChoices
Chapterf01f-
fLimits,fAlternatives,fandfChoicesfMcConnellfB
ruefFlynnf23e
DISCUSSIONfQUESTIONS
1. Whatfisfanfopportunityfcost?fHowfdoesfthefideafrelateftofthefdefinitionfoffeconomics?fWh
ichfofftheffollowingfdecisionsfwouldfentailfthefgreaterfopportunityfcost:fallocatingfafsqua
refblockfinfthefheartfoffNewfYorkfCityfforfafsurfacefparkingflotforfallocatingfafsquarefbloc
kfatfthefedgefoffaftypicalfsuburbfforfsuchfaflot?fExplain.fLO1.1
Answer:fAnfopportunityfcostfisfwhatfwasfsacrificedftofdoforfacquirefsomethingfelse.
fThefconditionfoffscarcityfcreatesfopportunityfcost. fIfftherefwasfnofscarcity, ftherefwo
uldfbefnofneedftofsacrificefonefthingftofacquirefanother.fThefopportunityfcostfwouldfb
efmuchfhigherfinfNewfYorkfCityfasfthefalternativefusesfforfthatfsquarefblockfarefmuc
hfmorefvaluablefthanfforfaftypicalfsuburbanfcityfblock.
2. Citefthreefexamplesfoffrecentfdecisionsfthatfyoufmadefinfwhichfyou,fatfleastfim
plicitly,fweighedfmarginalfcostfandfmarginalfbenefit.fLO1.1
Answer:fAnswersfwillfvary,fbutfmayfincludefthefdecisionftofcomeftofclass,ftofskipfb
reakfastftofgetfaffewfextrafminutesfoffsleep,ftofattendfcollege,forftofmakefafpurchase.f
Marginalfbenefitsfoffattendingfclassfmayfincludefthefacquisitionfoffknowledge,fpart
icipationfinfdiscussion,fandfbetterfpreparationfforfanfupcomingfexamination.fMargi
nalfcostsfmayfincludeflostfopportunitiesfforfsleep,fmeals,forfstudyingfforfotherfclass
es.fInfevaluatingfthefdiscussionfoffmarginalfbenefitsfandfmarginalfcosts,fbefcarefulft
ofwatchfforfsunkfcostsfofferedfasfafrationalefforfmarginalfdecisions.
3. Whatfisf“utility”fandfhowfdoesfitfrelateftofpurposefulfbehavior?fLO1.1
Answer:f“Utility”frefersftofthefpleasure,fhappiness,forfsatisfactionfgainedffromfen
gagingfinfanfactivityf(eatingfafmeal,fattendingfafballfgame,fetc.).fItfisfanfimportantfc
omponentfoffpurposefulfbehaviorfbecausefpeoplefwillfallocateftheirfscarceftime,fe
nergy,fandfmoneyfinfanfattemptftofgainfthefmostfutilityfpossible.
4. Whatfarefthefkeyfelementsfoffthefscientificfmethod,fandfhowfdoesfthisfmethodfrelateftofe
conomicfprinciplesfandflaws?fLO1.2
Answer:fThefkeyfelementsfincludefthefgatheringfoffdataf(observation),fthefformula
tionfoffpossiblefexplanationsf(hypothesis),ftestingfthefhypothesis,fdeterminingfthefv
alidityfoffthefhypothesis,fandfrepeatedftestingfoffthefhypothesisfthatfhavefappearedft
ofbefvalidfinfpriorftests.
1-1
©fMcGrawfHillfLLC.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfconsentfoffMcGrawfHillfLLC.
mynursytest.store
,ACCESS Test Bank for Macroeconomics 23rd Edition McConnel
f f f f f f f
Chapterf01f-fLimits,fAlternatives,fChoices
Thefscientificfmethodfisftheftechniquefusedfbyfeconomistsftofdeterminefeconomicfla
wsforfprinciples.fTheseflawsforfprinciplesfarefformulatedftofexplainfand/orfpredictfbe
haviorfoffindividualsforfinstitutions.
5. Makef(a)fafpositivefeconomicfstatementfoffyourfchoice,fandfthenf(b)fafnormativefeco
nomicfstatementfrelatingftofyourffirstfstatement.fLO1.3
Answer:fAnswersfwillfvary.f Example:f(a)fThefunemploymentfratefisf4.8fpercent;
(b)fthefunemploymentfratefisftoofhigh.fInfgeneral,fweftreatf“whatfis”fstatementsfasfposi
tive,f“whatfshouldfbe”fasfnormative,fbutfkeepfanfeyefoutfforfstatementsflikef“atffullfe
mploymentfanfincreasefinfthefproductionfoffpizzasfshouldfcomefatfthefcostfofflessfrob
ots.”fSomefstudentsfmayfincorrectlyfidentifyfthefstatementfasfnormativefbecausefoffth
eftermf“should.”
6. Howfdoesfthefslopefoffafbudgetflinefillustratefopportunityfcostfandftrade-
offs?fHowfdoesfafbudgetflinefillustratefscarcityfandfthefeffectfofflimitedfincomes?fLO1.
4
Answer:fBudgetflinesfarefalwaysfslopedfdownward.fThisfdownwardfslopefshowsfanfi
nversefrelationshipfbetweenftheftwofgoods,fmeaningfthatfasfyoufincreasefone,fthefoth
erfmustfdecrease.fThisfdecreasefisfwhatfyoufarefgivingfup,forfthefopportunityfcost,fofft
hefgoodfyoufarefgettingfmorefof.
Budgetflinesfillustratefscarcityfinfthatftheyfshowfyoufareflimitedfbyfyourfincome.fSinc
eftheyfslopefdownward,ftheyfshowfyoufcannotfkeepfgettingfmorefandfmorefoffbothfgo
ods.fTherefisfalwaysfaftrade-
off.fThefareafbeyondfthefbudgetflinefrepresentsfcombinationsfoffthefgoodsfthatfarefbe
yondfyourfincome.
7. Whatfarefeconomicfresources?fWhatfcategoriesfdofeconomistsfuseftofclassifyfthem?fW
hyfarefresourcesfalsofcalledffactorsfoffproduction?fWhyfareftheyfcalledfinputs?fLfO1.5
Answer:fEconomicfresourcesfarefthefnatural,fhuman,fandfmanufacturedfinputsfus
edftofproducefgoodsfandfservices.
Economicfresourcesffallfintoffourfmainfcategories:f labor,flandf(naturalfresources),fre
alfcapitalf(machines,ffactories,fbuildings,fetc.,)fandfentrepreneurs.
Economicfresourcesfarefalsofcalledffactorsfoffproductionfbecauseftheyfarefusedftofpro
ducefgoodsfandfservices.fTheyfarefcalledfinputsfbecauseftheyfgofintofafproductionfpro
cessf(likefingredientsfgofintofafbowlftofmakefafcake),fwithfthefresultingfgoodsfandfser
vicesfalsofbeingfreferredftofasfoutput.
1-2
©fMcGrawfHillfLLC.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfconsentfoffMcGrawfHillfLLC.
mynursytest.store
, ACCESS Test Bank for Macroeconomics 23rd Edition McConnel
f f f f f f f
Chapterf01f-fLimits,fAlternatives,fChoices
8. Whyfisfmoneyfnotfconsideredftofbefafcapitalfresourcefinfeconomics?fWhyfisfentrepr
eneurialfabilityfconsideredfafcategoryfoffeconomicfresource,fdistinctffromflabor?fW
hatfrolesfdofentrepreneursfplayfinfthefeconomy?fLO1.5
Answer:fMoneyfisfnotfconsideredfafcapitalfresourcefbecausefmoneyfisfnotfproductiv
e.fItfprovidesfaccessftofresourcesfbutfbyfitself,fmoneyfdoesfnotfdirectlyfcontributeftoft
hefproductionfoffgoodsfandfservices.fAdditionally,fthefquantityfoffmoneyfinfcirculati
onfdoesfnotfdeterminefanfeconomy’sfproductivefcapacity,fwhilefthefamountfoffcapitalf
andfotherfresourcesfdoes.fDoublingfthefamountfoffmoneyfinfcirculationfdoesfnotfchan
gefthefeconomy’sfphysicalfcapacityftofproducefgoodsfandfservices.fMoneyfis,fhowev
er,freferredfasfaffinancialfresourcefandfasffinancialfcapital,freflectingfitsfabilityftofacq
uirefrealfeconomicfresources.
Entrepreneurialfabilityfandflaborfarefbothfhumanfresources,fbutftheyfperformfdif
ferentffunctionsfinfthefproductivefprocess.fEntrepreneurialfabilityfdoesfnotfdirect
lyfproducefgoodsfandfservices;fitforganizesfthefresourcesfthatfdo.f Laborfrefersftof
thefhumanfinputsfthatfdirectlyfengagefinfproduction.
Entrepreneursfarefrisk-
takers:ftheyfcoordinatefthefactivitiesfoffthefotherfthreefinputsfforfprofit—
orfloss,fwhichfisfwhyftheyfarefcalledfrisk-
takers.f Entrepreneursfsometimesfmanagefcompaniesfthatftheyfown,fbutfafmanagerfw
hofisfnotfanfownerfisfnotfnecessarilyfanfentrepreneurfbutfmayfbefperformingfsomefofft
hefentrepreneurialffunctionsfforfthefcompany.fEntrepreneursfarefalsofinnovators,forf
perhapsfinventors,fandfprofitsfhelpftofmotivatefsuchfactivities.
9. Explainftheftypicalfshapesfoffmarginal-benefitfandfmarginal-
costfcurves.fHowfarefthesefcurvesfusedftofdeterminefthefoptimalfallocationfoffresourcesft
ofafparticularfproduct?fIffcurrentfoutputfisfsuchfthatfmarginalfcostfexceedsfmarginalfbene
fit,fshouldfmoreforffewerfresourcesfbefallocatedftofthisfproduct?fExplain.fLO1.6
Answer:fThefmarginalfbenefitfcurvefisfdownwardfsloping,fMBffallsfasfmorefoffafpro
ductfisfconsumedfbecausefadditionalfunitsfoffafgoodfyieldflessfsatisfactionfthanfprevio
usfunits.fThefmarginalfcostfcurvefisfupwardfsloping,fMCfincreasesfasfmorefoffafproduc
tfisfproducedfsincefadditionalfunitsfrequirefthefusefoffincreasinglyfunsuitablefresource
s.fThefoptimalfamountfoffafparticularfproductfoccursfwherefMBfequalsfMC.fIffMCfex
ceedsfMB,ffewerfresourcesfshouldfbefallocatedftofthisfuse,fasfthefadditionalfcostfisfmo
refthanfthefadditionalfbenefit.fThefresourcesfarefmorefvaluablefinfsomefalternativefuse
f(asfreflectedfinfthefhigherfMC)fthanfinfthisfusef(asfreflectedfinftheflowerfMB).
1-3
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