Economics is a social science that involves the study of how individuals pursue happiness. develop their tastes and preferences. develop their goals and objectives in life. choose among alternatives to satisfy their unlimited wants. QUESTION 2 Macroeconomics is concerned with studying the wants of individual consumers. behavior of individual decision makers. prices of specific companies' stocks. performance of the economy as a whole. QUESTION 3 The basic economic problem is a situation of unlimited incomes and limited choices. limited resources and unlimited wants. both limited resources and limited wants. limited incomes and unlimited choices. QUESTION 4 Wants are the things people would consume if they had unlimited incomes. another term for needs. the things people consume with their income. all the things people really need in order to live comfortably. Positive externalities arise when an unprofitable firm is shut down. production of a good generates benefits that spill over to third parties. a profitable firm is regulated. tax rates are reduced. QUESTION 30 An example of a public good is the car I own. housing subsidies. software produced by Microsoft. the fire department. QUESTION 31 The largest spending category for state governments is highway construction. education. welfare. health care. QUESTION 32 Which of the following is NOT a transfer payment? Social Security retirement payments spending on national defense Social Security disability payments Medicare Which of the following is a benefit of economic growth? reduction in illiteracy reduction in poverty improved health All of these QUESTION 58 The reason that patents are granted is to encourage a high rate of consumption. to protect new techniques developed through research and development. to increase the labor force. to encourage free trade. QUESTION 59 The protection of property rights leads to more illiteracy. unemployment. more poverty. more capital formation. QUESTION 60 The concept of an open economy means that imports and exports should be restricted. a nation's borders are open to flows of imports and exports. exports should be controlled but imports should be allowed in without restriction. imports should be limited while exports should be expanded. The United States is best known as a command and control system. pure market system. dictatorship. mixed economic system. QUESTION 6 Economists assume people behave instinctively. rationally. greedily. irrationally. QUESTION 7 Ceteris paribus means the assumption of rational behavior as realistic as it can be other things constant. making all the necessary changes. QUESTION 8 Economic models are used to explore the thought processes of individuals or groups. are used to explain how people think. are used to explain how people behave. are essential representations of the real world