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ECON Unit 1 DECISIONS

True/False
Indicate whether the statement is true or false.
 

 1. 

Criteria in the PACED decision making model does not need to be specific.
 

 2. 

Economics is the study of getting the most of what you want, with the little that you have.
 

 3. 

When you decide to buy a Hershey’s Special Dark chocolate bar instead of a Hershey’s Milk chocolate bar, the Special Dark chocolate bar is the opportunity cost of your decision.
 

 4. 

Economists do not distinguish between needs and wants.
 

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 5. 

The condition that arises from unlimited wants and limited resources
a.
Trade-offs
c.
Scarcity
b.
Choice
d.
Costs
 

 6. 

A conclusion reached after considering alternatives and their results
a.
benefit
c.
resource
b.
capital
d.
decision
 

 7. 

The condition of not being able to have all the goods and services one wants
a.
stuck
c.
scarcity
b.
choice
d.
opportunity cost
 

 8. 

Desires that can be satisfied by consuming or using a good or service
a.
needs
c.
benefits
b.
wants
d.
resources
 

 9. 

The second-best alternative that must be given up when making a choice
a.
opportunity cost
c.
cost-benefit analysis
b.
occasional cost
d.
want-need analysis
 

 10. 

The giving up of one benefit or advantage in order to gain another regarded as more favorable
a.
cost-benefit analysis
c.
PACED decision making process
b.
trade-off
d.
marginal utility
 

 11. 

Monetary or non-monetary gain received because of an action taken or a decision made
a.
cost
c.
incentive
b.
benefit
d.
profit
 

 12. 

What must be given up to obtain something
a.
cost
c.
resource
b.
utility
d.
consequence
 

 13. 

PACED stands for:
a.
Problem, Alternative, Criteria, Evaluation, Decision
c.
Problem, Analysis, Criteria, Evaluation, Decision
b.
Problem, Alternative, Choice, Evaluation, Decision
d.
Problem, Analysis, Choice, Evaluation, Decision
 

 14. 

A process of evaluating benefits and costs of each available alternative in arriving at a decision
a.
cost accounting
c.
cost savings analysis
b.
benefit accounting
d.
cost-benefit analysis
 

 15. 

Relationship in which the additional satisfaction associated with consuming additional units of the same product in a given amount of time eventually declines
a.
Relationship Utility
c.
Declining Utility
b.
Diminishing Marginal Utility
d.
Diminishing Relationship Analysis
 

 16. 

A decision making tool for comparing the additional cost or marginal benefits of a course of action to the additional or marginal costs
a.
marginal analysis
c.
comparative analysis
b.
cost analysis
d.
cost-benefit analysis
 

 17. 

The additional gain from consuming or producing one more unity of a good or service; can be measure in dollars or satisfaction. 
a.
cost-benefit analysis
c.
marginal cost
b.
marginal analysis
d.
marginal benefit
 

 18. 

The increase in a producers total cost when it increase it output by one unit.
a.
marginal cost
c.
cost reduction
b.
total cost
d.
cost increase
 

 19. 

Unexpected and unplanned result of a decision or action
a.
intended cost
c.
intended consequence
b.
unintended cost
d.
unintended consequence
 

 20. 

People who take calculated risks in order to start a new business and develop innovative products and processes.
a.
economists
c.
risk-takers
b.
entrepreneurs
d.
developers
 

 21. 

The effort of people which is applied to the production of goods and services
a.
human resources
c.
land resources
b.
capital resources
d.
entrepreneurs
 

 22. 

The skills and knowledge a person has acquired through experience and/or education
a.
human capital
c.
natural resources
b.
human resources
d.
entrepreneurship
 

 23. 

Manmade goods, such as tools, which are used to produce other goods
a.
scarce resources
c.
capital
b.
incentives
d.
utility
 

 24. 

What of the following is not one of the four factors of production?
a.
natural resources
c.
entrepreneurship
b.
human resources
d.
monetary resources
 

 25. 

Labor is an example of what kind of resource?
a.
natural
c.
capital
b.
human
d.
entrepreneurship
 

 26. 

Which of the following is not true about working for yourself (entrepreneur)?
a.
Stability will depend on your own effort
c.
salary is in a pre-determined range
b.
You determine your own schedule
d.
you will succeed only if your business succeeds
 

Yes/No
Indicate whether you agree with the statement.
 

 27. 

I have 20 candy bars and 30 students in the class.  25 students want candy bars.  Are the candy bars scarce?
 

 28. 

I have 20 candy bars that are milk chocolate with almonds.  I have 30 students in the class.  15 students like milk chocolate with almonds.  Are the candy bars scarce?
 

 29. 

I’m in a big hurry to get to my friend house and decide to take a short cut with my car that takes me down a dirt road.  My car gets very dirty and I get big scratch on the back fender from an fallen branch that I run over.  Two years from now when I go to trade in my car, they deduct $100 from the value of my car because of the scratch.  This is an example of “consequences lie in the future.”
 

 30. 

An example of “voluntary trade creates wealth” is when I trade my yucky tuna fish sandwich with my friend for his yummy roast beef sandwich.
 

Short Answer
 

 31. 

Complete a PACED Decision Making analysis for the following problem:

Where will I complete 8 hours of volunteer work this Saturday in order to meet the requirements of my service club membership?

What is the problem? _____________________________________________________
      Your Criteria:



Your Alternatives:


Your Alternatives:
     
1.     
     
      
      
      
     
     

Decision: ____________________________________________________________________________
 

 32. 

Graph the following utility for Davis’ Donuts:

Quantity      Utility
00
18
29
310
46
54


sa032-1.jpg
Given the assumption of utility theory, after how many donuts should you stop eating?

_____________

Now graph the marginal utility of eating Davis’ Donuts:
sa032-2.jpg
Which direction is the slope of your curve?  (upwards or downwards?) _______________

Explain why: _______________________________________________________________
 



 
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