Question 1

Economics is primarily the study of: a. how scarcity can be eliminated b. how firms manipulate prices c. how government influence resource allocation decisions  d. the problem of scarce resources relative to human wants

Accepted Answer

d. the problem of scarce resources relative to human wants

Question 2

Macroeconomics mainly focuses upon: a. the economy as a whole b. international trade and foreign exchange markets c. specific product and resource markets d. individual consumers and producers

Accepted Answer

a. the economy as a whole

Question 3

The production possibilities curve: a. shows all combination\'s of goods that society most desires  b. indicates that any combination of goods lying outside the curve is attainable  c. is bowed out from the origin d. is bowed in toward the origin

Accepted Answer

c. Is bowed out from the origin

Question 4

Land, labor, capital, and entrepreneurial ability combined are called:  a. factors of production b. post hoc fallacy c. correlation d. marginal analysis

Accepted Answer

a. factors of production

Question 5

According to economists, human wants will never be fulfilled completely because: a. people are greedy  b. productive resources are scarce c. people are not capable of fully rational thought d. people\'s wants are manipulated by advertising

Accepted Answer

b. productive resources are scarce

Question 6

The unemployment rate in November 2010 was 9.8%. This statement is an example of a normative economic statement: a. True  b. False

Accepted Answer

b. False

Question 7

In studying economic principles, economists make use of:  a.both the economic perspective and the scientific method b. the economic perspective but not the scientific method c. the scientific method but not the economic perspective d. neither the scientific method nor the economic perspective

Accepted Answer

a. both the economic perspective and the scientific method

Question 8

The scarce resource of capital in economics, refers to: a. human labor b. management c. natural resources d. manufactured aids like machinery, tools, equipment, and facilities.

Accepted Answer

d. manufactured aids like machinery, tools, equipment, and facilities.

Question 9

Purposeful behavior and marginal analysis: a. explain why there is \"no free lunch\" b. are part of the economic perspective c. are relevant in short-term but not long-term analysis d. explain the \"fallacy of composition\"

Accepted Answer

b. are part of the economic perspective.

Question 10

Two rational individuals will always make the same choices when faced with the same circumstances. a. True b. False

Accepted Answer

b. False

Question 11

The scarcity problem: a.can be eliminated if all countries adopt laissez-faire capitalism b. will persist so long as productive resources are limited c. persists only in the developing countries d. will be eliminated if full employment is achieved

Accepted Answer

b. will persist so long as productive resources are limited.

Question 12

The unemployment rate in November 2010 should have been 2 percentage points lower. This statement is an example of: a. positive economics b. normative economics c. opportunity cost d. marginal analysis

Accepted Answer

b. normative economics

Question 13

You should decide to study an extra hour tonight a. if the marginal cost of studying an extra hour exceeds its marginal benefit b. if the marginal benefit of studying an extra hour exceeds its marginal cost c. if you got a lower than expected grade on your last exam d. because studying harder will improve your test scores

Accepted Answer

b. if the marginal benefit of studying an extra hour exceeds its marginal cost.

Question 14

When constructing a typical production possibilities curve, economists assume: a. economic resources are underutilized  b. resources are equally productive in many alternative uses  c. all available resources are fully employed d. production technology is allowed to vary

Accepted Answer

c. all available resources are fully employed

Question 15

Microeconomics: a. is particularly subject to the \"fallacy of composition\" b. is concerned with the economy as a whole  c. studies how supply and demand determine prices in individual markets d. describes the aggregate flows of output and income

Accepted Answer

c. studies how supply and demand determine prices in individual markets

Question 16

Consider the choice Marsha faces of how to allocate her weekly allowance between books and CDs. An increase in Marsha\'s income will:  a. shift her budget line to the right b. shift her budget line to the left c. rotate her budget line, allowing her to buy more books but not more CDs d. rotate her budget line, allowing her to buy more CDs but not more books

Accepted Answer

a. shift her budget line to the right

Question 17

The negative slope of the production possibilities curve illustrates that: a. some resources are always unemployed  b. an economy can produce more of one thing only by producing less of something else c. opportunity costs are constant d. business can sell more when prices are low

Accepted Answer

b. an economy can produce more of one thing only by producing less of something else.

Question 18

When society forgoes the opportunity of getting the next best thing, that sacrifice is: a. utility b. marginal analysis c. opportunity costs d. macroeconomics

Accepted Answer

c. opportunity costs

Question 19

The two major features of the economic perspective are:  a. purposeful behavior and marginal analysis b. normative and positive analysis c. benefit and cost d. consumers and producers

Accepted Answer

a. purposeful behavior and marginal analysis

Question 20

A nation\'s production possibilities curve is \"bowed out\" from the origin because:  a. resources are not perfectly adaptable to production of alternative goods b. capital goods and consumer goods utilize the same production technology  c. resources are scarce relative to human wants d. opportunity costs are decreasing

Accepted Answer

a. resources are not perfectly adaptable to production of alternative goods.

Question 21

A microeconomist would most likely study: a. how consumers respond to a change in gasoline prices b. the effects of an income tax reduction on the size of the national budget deficit c. the effects of aggregate consumer debt on overall consumption spending d. the relationship between the size of the money supply and the rate of inflation

Accepted Answer

a. how consumers respond to change in gasoline prices

Question 22

The satisfaction obtained from consuming a good or service is: a. marginal analysis b. factors of production c. scarcity d. utility

Accepted Answer

d. utility

Question 23

\"Rational self-interest is the same as selfishness.\" a. True   b. False

Accepted Answer

b. false

Question 24

When an economist concludes that there is not enough of some activity, the economist is suggesting that:  a. the marginal benefit of the activity exceeds its marginal cost b. the cost of the activity has increased c. the benefit of the activity has decreased d. the marginal cost of the activity exceeds its marginal benefit

Accepted Answer

a. the marginal benefit of the activity exceeds its marginal cost

Question 25

Suppose you can purchase milk for $3 a gallon or eggs for $1.50 per dozen. Your opportunity cost of a gallon of milk is: a. one dozen eggs  b. two dozen eggs c. one half dozen eggs d. $1.50

Accepted Answer

b. two dozen eggs

Question 26

Margaret decides to stay home and study for her exam rather than going out with her friends to a movie. Her dilemma is an example of: a. the economic perspective b. productive efficiency c. allocative efficiency  d. opportunity cost

Accepted Answer

d. opportunity cost

Question 27

Which of the following is a capital good? a. A steel fabrication facility b. A state highway construction bond c. A share of Microsoft stock d. A gallon of milk

Accepted Answer

a. a steel fabrication facility

Question 28

The \"command system\" is also known as: a. capitalism b. the market system c. the political system  d. socialism or communism

Accepted Answer

d. socialism or communism

Question 29

The \"market system\" is also known as:  a. capitalism b. socialism c. communism d. a mixed economy

Accepted Answer

a. capitalism

Question 30

Private ownership of resources is best captured by which of the following concepts? a. Freedom of choice b. Freedom of enterprise  c. Property rights d. Self-interest

Accepted Answer

c. property rights

Question 31

In a market system, which of the following ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services and to sell them in their chosen markets?  a. freedom of enterprise b. freedom of choice c. barter d. the invisible hand

Accepted Answer

a. freedom of enterprise

Question 32

Which of the following best exemplifies the \"guiding function\" of prices?  a. Milk production increases in response to an increase in consumer preferences for milk b. A firm produces output at lowest cost c. The market system encourages investment and technological change d. Maryann decides against purchasing a CD from her favorite band because she thinks it is priced too high

Accepted Answer

a. milk production increases in response to an increase in consumer preferences for milk.

Question 33

The command systems of the Soviet Union and eastern Europe failed in part because: a. previously abundant economic resources became scarce  b. central planners found it increasingly difficult to coordinate the economic decisions of consumers, resource suppliers, and business c. firms manufactured too much output for consumers to be able to buy, resulting in a general glut d. prices were set too low in all markets

Accepted Answer

b. central planners found it increasingly difficult to coordinate the economic decisions of consumers, resource suppliers, and business

Question 34

Competition is characterized by:  a. freedom of buyers to enter or leave markets b. a wide variety of prices at which to buy a product c. sellers manipulating prices by acting in concert with one another d. buyers manipulating prices by forming \"buyers\' groups\" and cooperatives

Accepted Answer

a. freedom of buyers to enter or leave markets

Question 35

It is in a firm\'s best interest to utilize the least-cost production technique because:  a. profitability requires that firms produce their output at minimum cost per unit. b. the operation of the \"invisible hand\" requires it c. doing so will prevent competition from other firms d. economic profits will be negative otherwise

Accepted Answer

a. profitability requires that firms produce their output at minimum cost per unit.

Question 36

Economic profits and losses: a. answer the question \"Who will get the output?\" b. answer the question \"How will the goods and services be produced?\" c. help determine which industries survive or fail d. are the expected outcomes of a decrease in dollar votes and an increase in dollar votes, respectively

Accepted Answer

c. help determine which industries survive or fail

Question 37

The competitive market system encourages innovation and technological advance, primarily through: a. the government\'s tax code b. the process of \"dollar voting\" c. the guiding function of consumer needs and preferences  d. profitable returns to innovative firms

Accepted Answer

d. profitable returns to innovative firms

Question 38

In a market system, \"those willing and able\" answers which fundamental question?  a. Who will get the goods and services? b. What goods and services will be produced? c. How will the goods and services be produced? d. How will the system promote progress?

Accepted Answer

a. who will get the goods and services?

Question 39

Human specialization, or the division of labor: a. reduces output by dehumanizing workers b. reduces output by discouraging workers from learning a wide variety of tasks  c. increases output by enabling workers to take advantage of differences in their skills d. increases output by allowing workers to each perform a wide variety of tasks

Accepted Answer

c. increases output by enabling workers to take advantage of differences in their skills

Question 40

In terms of the circular flow diagram, firms receive revenue in the _____ market and incur costs in the _____ market. a. product; financial b. resource; product  c. product; resource d. capital; resource

Accepted Answer

c. product; resource

Question 41

\"Through the guiding function of prices and the incentive function of profits\" is the market system\'s answer to which question? a. How will society allocate goods and services to consumers? b. How will the market restrain economic freedom? c. How will society produce goods and services at lowest cost?  d. How will the system accommodate change?

Accepted Answer

d. How will the system accommodate change?

Question 42

For a market system, which of the following best answers the question, \"What goods and services will be produced?\" a. Only those goods whose long-term economic profits are greater than average b. Any good for which consumers are willing to pay a positive price c. Any good whose production is characterized by the least-cost technology d. The goods and services produced at a continuing profit

Accepted Answer

d. the goods and services produced at a continuing profit

Question 43

The market system is characterized by: a. widespread use of government price controls b. centralized decision-making c. limited use of capital goods  d. private property rights

Accepted Answer

d. private property rights

Question 44

Barter: a. requires money to overcome the problem of coincidence of wants  b. is the direct exchange of goods for goods c. is a fundamental characteristic of the market system d. is generally a more efficient system than a monetary exchange system

Accepted Answer

b. is the direct exchange of goods for goods

Question 45

The term \"consumer sovereignty\" means: a. there are many independently acting consumers in society b. firms\' choices are constrained by the government through consumer voting blocs  c.consumer choices ultimately determine which goods and services are produced d. consumers have freedom of choice

Accepted Answer

c. consumer choices ultimately determine which goods and services are produced

Question 46

\"The pursuit of self-interest automatically promotes the social interest.\" This concept is known as: a. consumer sovereignty b. the rationing function of prices  c. the invisible hand d. the guiding function of prices

Accepted Answer

c. the invisible hand

Question 47

In the circular flow diagram, firms: a. receive revenue and supply resources in the resource market b. receive revenue and demand resources in the product market c. incur costs and demand resources in the resource market d. incur costs and supply goods and services in the product market

Accepted Answer

c. incur costs and demand resources in the resource market

Question 48

Compared to a command system, economists typically favor a competitive market system because it promotes:  a. efficiency b. an active government c. limited use of capital goods d. high economic profits

Accepted Answer

a. efficiency

Question 49

In a market system, which of the following enables owners to employ or dispose of their property and money as they see fit? a. freedom of enterprise  b. freedom of choice c. barter d. the invisible hand

Accepted Answer

b. freedom of choice

Question 50

A command system promotes the efficient use of resources by guiding them into the production of the goods and services most wanted by society.  a.True   b. False

Accepted Answer

b. false

Question 51

The government plays no role in the United States economy. a.True   b. False

Accepted Answer

b. false

Question 52

Refer to the following: Total Taxable Income Marginal Tax Rate $1-$15,100 10% $15,101-$61,300 15% $61,301-$123, 700 25%  The tax represented in the table above is: a.regressive b. proportional c. progressive d. optimal

Accepted Answer

c. progressive

Question 53

Production of good X creates substantial external costs in addition to private costs. Economic theory suggests X should be: a. prohibited  b. discouraged by taxing either its manufacture or its consumption c. encouraged by subsidizing either its manufacture or its consumption d. neither encouraged nor discouraged in a free market society

Accepted Answer

b. discouraged by taxing either its manufacture or its consumption

Question 54

A (an) ____________ occurs when some of the costs or the benefits of a good are passed on to or \"spill over to\" someone other than the immediate buyer or seller. a. externality b. bond c. nondurable good d. speculation

Accepted Answer

a. externality

Question 55

\"Tax Freedom Day\" is: a. the anniversary of the day the constitutional amendment allowing for a U.S. income tax was ratified b. April 15th of each year c. the day by which Congress must pass any new budget resolutions  d. the day by which the typical worker has earned enough money to pay his or her share of taxes

Accepted Answer

d. the day by which the typical worker has earned enough money to pay his or her share of taxes

Question 56

Which type of business organization provides limited liability to its owners? a. Sole proprietorship b. Partnership  c. Corporation d. Principal company

Accepted Answer

c. corporation

Question 57

Legal business forms, listed in order from fewest to greatest in number, are comprised of: a. partnership, sole proprietor, corporation b. monopolist, oligopolist, competitor c. corporation, partnership, sole proprietor d. partnership, corporation, sole proprietor

Accepted Answer

d. partnership, corporation, sole proprietor

Question 58

Government purchases and transfer payments: a. both contribute to total domestic output b. differ in that only government purchases contribute to total domestic output c. differ in that only transfer payments contribute to total domestic output d. do not contribute to total domestic output

Accepted Answer

b. differ in that only government purchases contribute to total domestic output

Question 59

At the state level: a. most spending is for police and fire protection b. most spending is for health care and hospital administration c. the largest source of revenue is taxes on income d. the largest sources of revenue are sales and excise taxes

Accepted Answer

d. the largest sources of revenue are sales and excise taxes

Question 60

A common stock: a. is another name for a corporate bond b. represents a share in the ownership of a corporation c. does not give its owner the right to vote in a corporation, as these rights are reserved for preferred stock d. cannot be transferred to another individual

Accepted Answer

b. represents a share in the ownership of a corporation

Question 61

A typical household uses the largest share of its total income for: a. personal consumption expenditures b. combined income, payroll, sales, and property taxes c. personal saving d. food

Accepted Answer

a. personal consumption expenditures

Question 62

In a corporation, one primary principal-agent relationship is exemplified by: a. owner-stockholder b. stockholder-manager c. hourly worker-salaried employee d. bond holder-stockholder

Accepted Answer

b. stockholder-manager

Question 63

Good X is characterized by nonrivalry and nonexcludability; good Y is characterized by neither. If both are economically desirable, then: a. both can be efficiently provided by private firms b. X can be efficiently provided by private firms but Y must be financed through taxes c. Y can be efficiently provided by private firms but X must be financed through taxes d. both must be financed through taxes

Accepted Answer

c. Y can be efficiently provided by private firms but X must be financed through taxes

Question 64

Creditors can sue a corporation as a legal entity but cannot sue the stockholders as individuals.  a. True   b. False

Accepted Answer

a. true

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