problem set 2 - ECON 2012: Spring 2008, 25 points Homework...

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ECON 2012: Spring 2008, 25 points Homework 2 Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The fundamental question in economics is how to 1) _______ A) how to reduce the consumption of oil in wealthy nations. B) make the best use of scarce resources to satisfy our unlimited wants. C) eliminate poverty. D) find more resources to satisfy everyone's wants. 2) Which of the following is not classified as a factor of production? 2)_______ A)Labor B) Entrepreneurship C) Money D) Land 3) When economists say that people act rationally, they mean that 3) _______ A) people consider only the benefits when making a decision. B) people consider both the relevant costs and relevant benefits of a decision and select actions for which relevant benefit exceeds or at best, equal the relevant cost. C) people rarely make errors when they are looking out for themselves. D) people select only those activities that minimize their costs. 4) The marginal benefit from consuming another unit of a good 4) _______ A) is the difference between the incremental benefit received and the incremental cost incurred in consuming that unit. B) is always the same thing as the total benefit received from consuming that unit. C) the additional benefit one gains from consuming that good. D) must always equal the marginal cost of consuming that good. 5) You currently subscribe to Time magazine and are trying to decide whether you should subscribe to the National Geographic as well. What variables should influence your decision, given that you are rational? 5) _______ A) The cost of the second magazine, including the time it takes to read it. B) The total cost of the both magazines compared to the total enjoyment I would receive. C) The additional cost of the second magazine compared to the additional enjoyment I would get from it. D) The enjoyment I would get out of the second magazine. 6) The difference between a positive economic analysis and a normative economic analysis is 6) _______ A) positive analysis adopts an optimistic forecast for an economy while normative analysis adopts a conservative forecast for an economy. B) positive analysis deals with issues that improve the welfare of individuals while normative analysis deals with issues that are
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problem set 2 - ECON 2012: Spring 2008, 25 points Homework...

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