question

The economic way of thinking will help you A) make decisions in financing your home. B) decide whether the U.S. government should encourage or discourage immigration. C) make better decisions concerning your education. D) all of the above

answer

D

question

Economic analysis is used A) only in economics classrooms. C) only by policy makers. B) only by business people. D) in all decision making.

answer

D

question

Economic analysis is A) a tool that can aid all decision making. B) a tool that can be used in only macroeconomics. C) a tool that can be used in only microeconomics. D) an unnecessary complication to decision making.

answer

A

question

Economics is best defined as the A) study of how people make choices to satisfy their wants. B) study of individual self-interests. C) study of how government can most efficiently raise funds by taxation. D) process by which goods are sold in free markets.

answer

A

question

Economics can be described as the study of how people use ________ resources to satisfy ________ wants. A) unlimited; unlimited C) limited; unlimited B) unlimited; limited D) limited; limited

answer

C

question

In economics, items that are used to produce goods and services are known as A) wants. B) aggregates. C) factors of need. D) resources.

answer

D

question

In economics, all the items that people would consume if they had unlimited income are known as A) wants. B) aggregates. C) outputs. D) needs.

answer

A

question

In economics, ________ are limited but ________ are unlimited. A) wants; resources C) money; ideas B) resources; wants D) ideas; money

answer

B

question

Economics is the study of A) how to get rich. B) how people allocate their limited resources to satisfy their unlimited wants. C) how people spend their income. D) why people want certain goods and services rather than other goods and services.

answer

B

question

Economics is a part of the A) social sciences. B) natural sciences C) biological sciences. D) organizational sciences

answer

A

question

Resources are A) unlimited. B) able to be replicated in large quantities. C) what people would buy if their income was unlimited. D) used to produce goods and services to satisfy peopleʹs wants.

answer

D

question

Which of the following is NOT a focus of the study of economics? A) how individual preferences are formed C) inflation B) unemployment D) prices in particular markets

answer

A

question

Macroeconomics is the study of A) aggregate economic variables. B) output in particular industries C) prices in particular industries. D) all of the above

answer

A

question

Microeconomics is the study of A) the behavior of the economy as a whole. B) output in particular industries. D) all of the above. B) how rising prices affect the level of employment in the economy. C) how individuals and firms make decisions. D) the effect that money has in the economic system.

answer

C

question

Macroeconomics deals with ________ while microeconomics deals with ________. A) choices important to people; choices not important to people B) economywide choices; choices of individuals C) choices that involve money; choices that does not involve money D) choices of rich people; choices of poor people

answer

B

question

Which of the following would most likely NOT be taught in a microeconomics course? A) changes in prices of automobiles B) the effects of a gas tax on gas purchases C) the effects of an increase in wheat prices on farmersʹ behavior D) the unemployment rate

answer

D

question

The macroeconomist would most likely study A) the effects of changing apple prices on the market for oranges. B) the effects of an increase in wage rates on a womanʹs decision to enter the labor force. C) the effects of a lower income tax rates on the nationʹs total production of goods and services. D) the effect of increased union wages on the cost of producing automobiles.

answer

C

question

The impact of higher taxes would be examined by A) a microeconomist. B) a macroeconomist. C) both a macroeconomist and a microeconomist. D) neither a macroeconomist nor a microeconomist.

answer

C

question

Another word for ʺaggregateʺ is A) government. B) partial. C) public. D) total

answer

D

question

All of the following are examples of macroeconomic problems EXCEPT A) inflationary pressures caused by an increase in the cost of petroleum. B) unemployment caused by a fall off in the level of residential construction. C) a decline in the rate of overall economic growth. D) consumers deciding to buy more fish and less beef because of concerns about a healthier diet.

answer

D

question

Which of the following terms identifies something that macroeconomists would study but that microeconomists would NOT? A) incentives B) resources C) rationality D) aggregates

answer

D

question

An example of a microeconomic decision is a situation in which A) the Federal Reserve considers how much to increase the money supply during the coming month in an effort to constrain the rate of inflation. B) Congress and the president seek to reach a compromise on how much to increase government spending in an effort to influence national expenditures. C) a firm evaluates how much to reduce the price of its product in an effort to influence sales and boost its profits. D) the U.S. Treasury contemplates buying foreign currencies in an effort to influence exchange rates with an aim to boosting demand for U.S. goods and services.

answer

C

question

An economic system is A) the universe of all resources. B) a way to create new resources. C) a mechanism to allocate scarce resources. D) an organization that generates profits.

answer

C

question

The way that a society uses to allocate resources to satisfy human wants is called A) an economic system. B) an assumption. C) realism. D) a physical science.

answer

A

question

The issues that an economic system attempts to solve include: A) what to produce. B) how to produce items. C) for whom items are produced. D) all of the above.

answer

D

question

Which of the following is NOT one of the basic questions that an economic system attempts to answer? A) How to eliminate choices? B) What to produce? C) How much will goods and services be produced? D) For whom will goods and services be produced?

answer

A

question

What is the type of economic system that relies on one central authority to make economic decisions? A) Free market B) Price system C) Command and control D) Mixed economic system

answer

C

question

What is the type of mechanism that answers the basic economic questions through a decentralized decision making process? A) Market system B) Dictatorship C) Command and control D) Mixed economic system

answer

A

question

Central planning is a key characteristic of which economic system? A) Free market B) Price system C) Command and control D) Mixed economic system

answer

C

question

Under a pure price system, the decision of resource allocation is made by A) the head of the government. B) a queen or king. C) individuals who own the resources. D) no one.

answer

C

question

In a market system, the what, how and for whom questions in economics are determined by A) those who are not in the market. B) buyers and sellers together. C) the central authority. D) no one.

answer

B

question

The United States is best known as a A) pure price system. C) command and control system. B) dictatorship. D) mixed economic system.

answer

D

question

A mixed economic system is best described an economy with a mix of A) state and federal governments. B) domestic and foreign buyers. C) free markets and government control. D) for-profit organizations and not-for-profit organizations.

answer

C

question

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, economist Adam Smith argued that individuals A) always tend to act in an altruistic manner. B) always consider the impact of their actions on the welfare of others. C) are motivated by self-interest. D) are generally not concerned with economic questions.

answer

C

question

Economists assume that people are motivated by A) benevolence. C) greed. B) altruism. D) rational self-interest.

answer

D

question

One major assumption of economics is that people A) act as if they systematically pursue self-interest. B) behave randomly without any predictable pattern. C) are sometimes rational and sometimes irrational. D) always pursue the interests of others.

answer

A

question

The assumption that people do not intentionally make decisions that would leave them worse off is known as A) the rationality assumption. B) the microeconomic assumption. C) the ceteris paribus assumption. D) the normative assumption.

answer

A

question

When the text refers to rational self-interest, it means A) your looking out for what is best for you as an individual. B) your focus on your own contributions to society. C) behavior that makes society better off. D) behavior that helps your employer earn higher profits.

answer

A

question

Economists assume people behave rationally, which means that people A) never make a mistake. B) do not intentionally make decisions that make themselves worse off. C) have the necessary information to always make correct decisions. D) always understand the consequences of their decisions.

answer

B

question

Sara looks into her closet and discovers a pair of like-new shoes she no longer wears because they give her blisters. From the economistʹs perspective, was Sara behaving rationally when she bought those shoes? A) No. If any of a personʹs decisions have poor results, that person is irrational. B) Yes, as long as Sara didnʹt intentionally purchase blister-causing shoes. C) No. The rationality assumption states that rational people never make mistakes. D) Itʹs not clear because psychology, not economics, deals with the rationality assumption.

answer

B

question

Do economists analyze peopleʹs thought processes or do they look at what people actually do? A) Economists focus only on peopleʹs thought processes. B) Economists focus on what people do, not their thought processes. C) An economistʹs focus is about half-and-half between actions and thought processes. D) Macroeconomists focus on thought processes while microeconomists focus on actions.

answer

B

question

The potential rewards that are available to an individual if a particular activity is undertaken are known as A) premiums. B) gifts. C) incentives. D) intrinsic values.

answer

C

question

Father says, ʺEarn a B-average on your next report card and Iʹll help you buy a car.ʺ An economist would say that this parent is providing his child a(n) A) study disincentive. B) reason to slack off and not worry about her grades. C) bribe. D) incentive.

answer

D

question

Which of the following is true of incentives? A) Different people are motivated by different incentives. B) Money is the only measure of incentives. C) All of the people in a particular nation are motivated by the same incentives. D) In economics, people are assumed to respond to disincentives instead of incentives.

answer

A

question

Self-interest relates to A) only monetary objectives. B) both monetary and nonmonetary objectives. C) the ceteris paribus assumption. D) normative economic analysis and not positive economic analysis.

answer

B

question

A possible rational reason why older people, on average, show less interest in learning how to use new technologies is because A) older people are not as smart as (todayʹs) young people. B) they are acting irrationally. C) they have fewer years to gain a return from learning how to use new technologies. D) the financial cost for older people is greater than the cost to younger people.

answer

C

question

A politician says that the government should tax behavior they want less of and subsidize behavior they want more of. This is an example of A) cynical behavior in modern democracies. B) failing to consider the alternatives available to the government. C) a concern that people are not rational when they make decisions. D) using incentives to alter behavior.

answer

D

question

When we say that an individual behaves according to ʺrational self-interest,ʺ we mean that this individual A) is motivated by greed. B) will always buy the most fashionable items available. C) will always buy the cheapest products available on the market. D) is making choices that he or she believes will leave him or her better off.

answer

D

question

The author of the book An Inquiry into the Nature and Causes of the Wealth of Nations is A) Thorstein Veblen. B) Adam Smith. C) Milton Friedman. D) Alan Greenspan.

answer

B

question

How could Adam Smithʹs comment about the butcher, the brewer, and the baker be accurately rephrased in modern terms? A) The butcher, the brewer, and the baker give us our dinner because they want to be well liked in the community. B) The butcher, the brewer, and the baker give us our dinner because they will be sued if they donʹt do so. C) The butcher, the brewer, and the baker give us our dinner because they each earn a living by doing so. D) The butcher, the brewer, and the baker give us our dinner because they view doing so as a public service.

answer

C

question

Another term for ʺeconomic modelsʺ is A) economic designs. B) economic theories. C) economic science. D) economic maps.

answer

B

question

Economics is an empirical science, which means that economists A) must use laboratory experiments to test their theories. B) evaluate a model or theory by whether its assumptions are consistent with the real world. C) try to prove their models are true by referring to logic. D) look for evidence to determine whether the model is useful or not.

answer

D

question

Both the social sciences and the natural sciences employ ________ to help them understand the world around them. A) models B) designs C) traditional thinking D) implications

answer

A

question

Which is NOT true about the use of economic models? A) Economic models are simplified representations of the real world. B) Economists sometimes use laboratory experiments to test their theories. C) Economists use what has already happened in the real world to test their theories. D) Economists are employed to explain economic phenomena but are never used to predict what might happen next.

answer

D

question

Which of the following statements is FALSE? A) Economists empirically test their models. B) Economic models are not used to forecast. C) An economic model should capture only the essential relationships that are sufficient to analyze the particular problem being studied. D) Economic models relate to behavior rather than to individual thought processes.

answer

B

question

Which of the following statements concerning economic models is FALSE? A) Economic models must provide usable predictions. B) Economic models are based on pure fact and no assumptions. C) Economic models are tested empirically. D) Economic models relate to how people behave.

answer

B

question

Which of the following statements about economic models is true? A) Economic models are not empirically testable. B) The predictive power of models is not important. C) Economic models are designed so that every detail of the real world can be analyzed. D) Every economic model is based on a set of assumptions.

answer

D

question

Economic models A) are used to explain how people think. B) are used to explain how people behave. C) are essential representations of the real world. D) are never used for making economic projections or predictions.

answer

B

question

One reason why economists often use models in their analysis is that A) a model helps us to understand, explain, and predict economic phenomena in the real world. B) a model accurately pictures every detail of the real world economy. C) a model relates to individual thought processes rather than behavior. D) it is relatively easy to perfectly specify a model.

answer

A

question

An economic model should capture A) the essential relationships that help to analyze the problem. B) all possible variables that apply to the problem. C) only social value related variables. D) all of the above.

answer

A

question

One problem with constructing a perfectly complete realistic economic model is that A) it would be too simplistic to have any value. B) it would be far too complicated to analyze. C) politicians see little value in such a model. D) None of the above is true.

answer

B

question

Holding all variables constant but one and assessing the impact of the one variable that has changed is an example of using A) the ceteris paribus assumption. B) an economic model based on unrealistic assumptions. C) a flawed economic model. D) an untestable proposition.

answer

A

question

A map is an example of a model because a map A) realistically describes an area. B) is always as complex as space will permit. C) is two-dimensional. D) is a simplified representation of reality. Answer: D Diff: 2

answer

D

question

Which of the following is an example of an application of the ceteris paribus assumption? A) An analysis of how price changes affect how much of a good people will purchase when all other factors are held constant B) An analysis of how people purchase more goods when prices decline and income increases C) After reading an article on the dangers of high-fat diets, an individual buys less red meat when prices increase D) An analysis of how worker productivity increases when a firm invests in new machines and training programs

answer

A

question

Professorʹs economics students are constructing models for how gasoline prices change. Mariaʹs model has very realistic assumptions and is quite complex. Annaʹs model is less complicated and less realistic. Mariaʹs model correctly predicts gas price increases 5% of the time. Annaʹs model predicts correctly 15% of the time. On the basis of usefulness or ʺgoodness,ʺ Professor will give which studentʹs model the higher grade and why? A) Mariaʹs model gets the higher grade because it is more complex. B) Annaʹs model gets the higher grade because it is simpler. C) Mariaʹs model gets the higher grade because it is more realistic. D) Annaʹs model gets the higher grade because it predicts accurately more often.

answer

D

question

The usefulness of a model is determined by A) whether it helps to explain or predict real world phenomena. B) whether it possesses realistic assumptions. C) how well it uses the ceteris paribus assumption. D) how many of the possible relationships that exist are included in the model.

answer

A

question

When constructing economic models, economists are more concerned with A) what people say than what they do. B) what people think than what they say. C) what people do than what they say. D) what people say than what they do or think.

answer

C

question

Behavioral economics is an approach to the study of consumer behavior A) that emphasizes psychological limitations and complications that potentially interfere with rational decision making. B) that emphasizes the capabilities of individuals to succeed in attaining all their unlimited wants utilizing limited resources. C) that, in contrast to standard approaches in economics, utilizes the ceteris paribus assumption. D) that, in contrast to standard approaches in economics, relies on real-world data to evaluate the usefulness of economic models.

answer

A

question

The hypothesis that people are nearly, but not fully rational, cannot possibly fully examine every available choice, and utilize simple rules of thumb in making decisions is known as the A) irrationality hypothesis. C) individual aggregation hypothesis. B) ceteris paribus hypothesis. D) bounded rationality hypothesis.

answer

D

question

According to the bounded rationality hypothesis, an individual confronting a large number of complicated choices is most likely to respond by A) using a simple rule of thumb to choose among a subset of easiest-to-evaluate options. B) using the ceteris paribus assumption to assist in simplifying and examining each of the possible options. C) utilizing readily available empirical evidence to assist in evaluating every option. D) assessing every available choice by developing sophisticated theories regarding each option.

answer

A

question

A poll conducted by a national firm finds that most Americans say they care more about safety when buying a car than about fuel efficiency. As a result, a car maker produces a car with many safety features, but it doesnʹt sell well. This behavior A) contradicts economic theory because the people didnʹt do what they said they would do. B) contradicts economic theory because it is irrational not to purchase safer cars. C) does not contradict economic theory because economists focus on what people do rather than on what they say. D) does not contradict economic theory because economic theory only relates to prices and not to features such as safety.

answer

C

question

According to proponents of behavioral economics, because every possible choice cannot be considered, an individual will tend to fall back on methods of making decisions that are simpler than trying to sort through every single possibility, known as A) rules of thumb. C) irrational choices. B) rational options. D) normative decisions.

answer

A

question

Which of the following is NOT an alleged ʺunrealisticʺ assumption that proponents of behavioral economics suggest are commonly utilized in traditional economic models based on the rationality assumption? A) unbounded selfishness C) unbounded will power B) unbounded rationality D) unbounded resources

answer

D

question

Ceteris paribus means A) all men are created equal. B) wage parity between men and women is a worthy goal. C) there are an infinite number of factors affecting each human decision and they change all the time. D) economists isolate one or two factors that change when analyzing human decisions.

answer

D

question

Normative economic statements A) violate the law of ceteris paribus. B) contain value judgments. C) are usually irrational. D) are easily testable.

answer

B

question

Normative economics involves A) a statement of fact. B) a statement of "what should be." C) a statement of ʺwhat is.ʺ D) a statement that is purely descriptive.

answer

B

question

ʺIf A occurs then B will followʺ is a A) positive statement. B) normative statement. C) non-testable statement. D) statement lacking in logic.

answer

A

question

ʺIf the United States enters a war in the Middle East, the economy will go into a recessionʺ is an example of A) a positive statement. C) a normative statement. B) an easy to prove statement. D) a factual statement.

answer

A

question

Which of the following is an example of a positive economic statement? A) In order to reduce the budget deficit, tax rates should be increased. B) In order to increase employment, the minimum wage should be decreased. C) If payroll taxes are raised, then the Social Security crisis will be resolved. D) If gas prices fall, consumers should purchase more gas.

answer

C

question

Which of the following is a normative statement? A) An increase in consumer income will lead to increased sales of beef. B) A decrease in the rate of unemployment will lead to upward pressure on consumer prices. C) An increase in the income tax will cause a greater reduction in savings than an increase in the sales tax. D) An economy with high unemployment can be worse off than an economy with high inflation.

answer

D

question

Which of the following statements is a positive economic statement? A) The number of families living in poverty in the United States is too high. B) One in every five children in the United States is living in poverty. C) Government programs to help the poor are just making problems worse. D) Increases in poverty rates signify a deterioration of the U.S. economy.

answer

B

question

Which of the following statements is a normative as opposed to a positive economic statement? A) Consumer spending generates more jobs. B) If the price of gasoline goes up, people buy less. C) Labor unions should be allowed to organize in every industry. D) Government intervention in markets is common in many countries.

answer

C

question

Whenever statements embodying values are made, we enter the realm of A) positive economics. C) microeconomics. B) normative economics. D) macroeconomics.

answer

B

question

Normative economic analysis involves A) positive analysis. B) value judgments. C) if-then statements. D) objective descriptions of the way things are.

answer

B

question

Positive statements can contain A) opinions and conditions. B) facts and predictions. C) a mixture of facts and opinions. D) logical arguments mixed with statements of opinion.

answer

B

question

A relationship between two variables in which one variable increases at the same time as the other decreases is called A) nonlinear. B) constant. C) inverse. D) direct.

answer

C

question

A direct relationship occurs when A) the two variables being compared change in opposite directions, or when one goes up the other goes down. B) a change in one of the variables causes a change in the other variable in any direction. C) the two variables being compared change in the same direction, or when one goes up the other also goes up. D) the two variables have no identifiable relationship with each other.

answer

C

question

If an increase in one variable causes a decrease in another variable, this is 1.7 A) a direct relationship. C) an independent relationship. B) a dependent relationship. D) an inverse relationship.

answer

D

question

When two variables have a direct relationship, the slope is A) negative. B) positive. C) zero. D) infinity.

answer

B

question

Consider the statement, ʺThe number of beers consumed the night before a test affects the grade.ʺ In this statement A) beer is the dependent variable and test grade is the independent variable. B) beer is the independent variable and test grade is the dependent variable. C) both beer and grade are dependent variables. D) both beer and grade are independent variables.

answer

B

question

The relationship between beers consumed the night before an exam and test grade will be graphed as A) a line sloping down from upper right to lower left. B) a line sloping down from upper left to lower right. C) a circle. D) a u-shaped curve.

answer

B

question

Scarcity arises because A) resources are finite and are inadequate to meet all human wants and needs. B) import taxes depress the rate of growth of goods and services production. C) international companies are slow to explore for new resources. D) many countries waste goods because of inefficient political systems.

answer

A

question

Which of the following statements is TRUE about scarcity? A) Both rich and poor people face the problem of scarcity. B) Scarcity exists only when supply is insufficient to meet demand. C) Scarcity exists only when a shortage exists. D) Scarcity can be eliminated when a country becomes richer.

answer

A

question

The problem of economic scarcity applies A) only in industrially developed countries, because resources are scarce in these nations. B) only in underdeveloped countries, because there are no productive resources in these nations. C) only in economic systems that are just beginning to develop, because specialized resources are scarce in developing nations. D) to economic systems in all nations, regardless of their level of development.

answer

D

question

In every economic system, choices must be made because resources A) are unlimited, but human desires and wants are limited. B) are limited, but human desires and wants are unlimited. C) are unlimited, and so are human desires and wants. D) are limited, and so are human desires and wants.

answer

B

question

In 2006, hurricanes damaged many parts of Texas, destroying homes, businesses, schools, and infrastructure. In strictly economic terminology, these hurricanes are said to have caused A) scarcity, because the damages made food and shelter scarce. B) scarcity, because some goods were difficult to get. C) shortages, because supplies were cut off and goods were destroyed. D) tradeoffs, because some areas of the country were damaged when others were not.

answer

C

question

In the production of goods and services, trade-offs exist because A) not all production is efficient. B) society has only a limited amount of productive resources. C) buyers and sellers often must negotiate prices. D) human wants and needs are limited at a particular point in time.

answer

B

question

The difference between scarcity and a shortage is that A) scarcity is caused by poverty and shortages are caused by natural disasters. B) shortages are a type of scarcity caused by natural disasters while scarcity is caused by human errors. C) scarcity always is a part of human life while shortages usually are temporary. D) shortages are always part of human life while scarcity is usually temporary.

answer

C

question

Human resources that perform the functions of organizing, managing, and assembling the other factors of production are called A) physical capital. C) entrepreneurs. B) venture capital. D) productive capital.

answer

C

question

In economic terminology, when a resource is used to produce output it is referred to as A) an intangible. C) a service. B) a factor of production. D) a fifth element.

answer

B

question

All of the following are examples of physical capital EXCEPT A) buildings. C) company stocks and bonds. B) machinery. D) a hydroelectric power plant.

answer

C

question

Entrepreneurs are important to market economies because A) they engage in risk taking and innovation. B) they make up a large portion of low-skilled labor. C) they take few risks and thereby, suffer fewer bankruptcies. D) they represent the bulk of employment at large corporations.

answer

A

question

Which of the following are considered factors of production? I. Land II. Labor III. Physicalcapital IV. Entrepreneurship A) I and II only C) I, II and III only B) I and III only D)I,II,IIIandIV

answer

D

question

All of the following are economic resources, or factors of production EXCEPT A) land. C) money. B) physical capital. D) entrepreneurship.

answer

C

question

n economics, the term physical capital A) refers to funds used by businesses to acquire goods and services. B) refers to all manufactured resources used for production. C) refers to the process of raising funds through the stock market. D) defines the stock of merchandise already produced.

answer

B

question

Human capital is A) what people get from physical capital. B) the accumulation of skills, training and education of workers. C) the value obtained from selling stocks and bonds. D) the human resources that perform the function of raising capital.

answer

B

question

The conversion of resources into consumer goods or services is called A) human capital. B) production C) opportunity cost. D) absolute advantage

answer

B

question

Services can be thought of as A) unvalued goods. B) unwanted goods. C) free goods. D) intangible goods.

answer

D

question

Economic goods are defined as A) tangible items only. B) production. D) absolute advantage. B) unwanted goods. D) intangible goods. B) services only. C) anything from which an individual derives satisfaction. D) any item which is available in sufficient quantity at zero price.

answer

C

question

If the quantity desired of something exceeds the amount available at zero price, that item is called A) a service. C) an intangible good. B) an economic good. D) a bad.

answer

B

question

At a zero price, which of the following conditions is TRUE for an economic good? A) Its quantity supplied exceeds its quantity demanded. B) Its quantity demanded exceeds its quantity supplied. C) Its quantity demanded equals its quantity supplied. D) Scarcity disappears.

answer

B

question

Extremely cold winter weather has destroyed oranges in Florida. The freeze has caused A) scarcity because there are less oranges now than people want. B) scarcity because people have to switch to other types of citrus fruits. C) a shortage because people cannot obtain as many oranges as they wish to buy at the pre-freeze price. D) a shortage because the orange growers will have less income.

answer

C

question

Economic goods are A) abundant goods, about which we must constantly make decisions about their best use. B) all imaginable items from which individuals derive satisfaction or happiness. C) goods that are scarce, for which the quantity demanded exceeds the quantity supplied at a zero price. D) goods that are scarce, for which the quantity demanded exceeds the quantity supplied at any price.

answer

C

question

Scarcity exists because A) the majority of people in the world are poor. B) people are too greedy and refuse to share what they have with others. C) human wants exceed what can be produced with the limited resources available. D) not enough new technology is being used to eliminate scarcity.

answer

C

question

Production refers to A) physically producing material goods only. B) any activity carried on by a firm, whether a corporation, partnership, or sole proprietorship. C) any activity that results in the conversion of resources into goods and services that can be consumed. D) any activity that causes a material conversion of manufactured goods.

answer

C

question

Which of the following activities are production? A) Combining flour, milk, and eggs to make cookies. B) Moving coal from southern Illinois to an electrical power plant in northern Illinois. C) Taking ice cubes from a tray to put in a drink. D) All of the above are production.

answer

D

question

By going to school an individual will obtain which resource? A) Money C) Knowledge B) Physical capital D) Human capital

answer

D

question

Naturally occurring diamonds are an example of A) land. C) physical capital. B) labor. D) human capital.

answer

A

question

A man-made resource such as a building or a machine is an example of which resource? A) Entrepreneurial ability C) Physical capital B) Labor D) Human capital

answer

C

question

Which of the following is NOT an economic resource? A) Money C) Coal B) Low-skilled labor D) An engineer

answer

A

question

Bonnie is a self employed. She makes floral arrangements in a building she rents. She owns the delivery vehicle and has hired a delivery driver. She is an example of A) Entrepreneurial ability C) Physical capital B) Labor D) Human capital

answer

A

question

Which of the following is a true statement? A) All goods are economic goods. B) All economic goods are goods, but not all goods are economic goods. C) Economic goods and goods mean the same thing. D) Economic goods do not include services while goods do include services.

answer

B

question

Economic bads are items A) for which the produced quantity is less than the amount desired at a positive price. B) for which the desired quantity is less than what nature provides at a zero price. C) that individuals desire but which receive social disapproval. D) that receive social approval but which governments dislike.

answer

B

question

From the economistʹs point of view, A) wants and needs are exactly the same. B) a want is a lifesaving necessity. C) needs are objectively undefinable. D) we all have wants but only very poor people have needs.

answer

C

question

A friend says, ʺI really, really need a new car.ʺ As an economist, youʹre thinking A) Right! Everyone needs a new car. B) This is an example of how objectively undefinable needs are. Many would argue that this friend could get along just fine with a reliable used car. C) If this friend says she needs a new car, then we must all agree that a new car is a need and not just a want. D) that a new car can only be considered a need if at least 51% of the public agrees.

answer

B

question

Why is it that all of our wants cannot be satisfied? A) Because of shortages B) Because we cannot seem to decide what we really want C) Because other people try to change your mind about what you want D) Because limited resources mean all the goods we want cannot be obtained

answer

D

question

Economists are concerned with an individualʹs A) needs because needs represent the most important goods to an individual. B) needs because economists define needs to be the goods people need to survive. C) wants because, unlike needs, wants lead to shortages in the economy. D) wants because the existence of wants leads to scarcity.

answer

D

question

The opportunity cost of attending college might best be described as A) the money that must be paid in order to attend college. B) the lowest-valued alternative use of the studentʹs time. C) the highest-valued alternative use of the studentʹs time. D) the value that the student attaches to not working.

answer

C

question

The value of the best alternative sacrificed to obtain something you want is referred to as A) explicit cost. B) opportunity cost. C) marginal cost. D) sunk cost.

answer

B

question

Bill Bonecrusher graduates from college with a choice of playing professional football at $2 million a year or coaching for $50,000 a year. He decides to play football, but eight years later he quits football to make movies for $3 million a year. His opportunity cost at graduation was ________ and eight years later was ________. A) $50,000; $2 million C) $2 million; $3 million B) $2 million; $2 million D) $50,000; $50,000

answer

A

question

Fred and Ann both decide to see the same movie when they are given free movie tickets. We know that A) both bear an opportunity cost since they could have done other things instead of see the movie. B) both bear the same opportunity cost since they are doing the same thing. C) the cost of going to the movie is greater for the one who had more choices to do other things. D) neither bears an opportunity cost because the tickets were free.

answer

A

question

For every choice a person makes it can be assumed that A) the chooser has full knowledge of the situation. B) some opportunity cost was involved. C) there is a fifty-fifty chance the choice was the wrong one. D) a good is involved and satisfaction is gained.

answer

B

question

Which of the following statements is FALSE about opportunity cost? A) Cost is always foregone opportunity. B) Opportunity cost is the next best alternative. C) John wants a burger and fries. The concept of opportunity cost applies even though he has enough funds to buy both. D) Opportunity cost exists only for goods with monetary values.

answer

D

question

Stephanie has decided to eat lunch between classes. She has ranked her choices, from highest to lowest as, (1) turkey sandwich, (2) tuna sandwich, (3) slice of cheese pizza, (4) cheeseburger. The opportunity cost of the eating turkey sandwich is A) the combined value of the tuna sandwich, slice of cheese pizza and cheeseburger. B) the value of tuna sandwich, the next best choice. C) the value of the cheeseburger. D) zero since she has satisfied a want.

answer

B

question

Opportunity cost exists because of A) poverty. B) scarcity. C) greed. D) self-interest.

answer

B

question

Opportunity cost is illustrated on the production possibilities curve by a A) bowed-out shape of the curve. C) shift to the left of the curve. B) shift to the right of the curve. D) movement along the curve.

answer

D

question

If opportunity costs are constant, then A) the production possibilities curve does not exist. B) the production possibilities curve bows outward. C) the production possibilities curve is a negatively sloped straight line. D) factors of production must not be fully employed.

answer

C

question

The production possibilities curve represents A) the maximum amount of labor and capital available to society. B) the combinations of goods and services among which consumers are indifferent. C) the maximum combination of goods and services that can be produced with fixed resources and technology, given efficient use of the resources. D) the maximum rate of growth of capital and labor in a country.

answer

C

question

If all resources were perfectly adaptable for alternative uses, the production possibilities curve would A) be bowed out. C) be a straight line. B) be bowed in. D) not exist.

answer

C

question

A straight-line production possibilities curve takes this shape because A) the opportunity cost of producing a good is constant. B) the opportunity cost of producing more of a good is decreasing. C) resources are better suited for producing one output than another. D) resources are fixed.

answer

A

question

Using the above table but now the bakery bakes 30 pizzas and 240 loaves of bread (alternative B), moving from alternative B to alternative D (90 pizzas and 120 loaves of bread), what is the opportunity cost of one pizza pie? A) 2.5 loaves of bread C) 0.5 loaf of bread B) 2 loaves of bread D) 150 loaves of bread

answer

B

question

Which of the following statements indicates the idea of trade-offs? A) ʺI chose the road less traveled.ʺ C) ʺYouʹve got me under your spell.ʺ B) ʺThe devil made me do it.ʺ D) ʺAlways give it the best that you can.ʺ

answer

A

question

The production possibilities curve shows all possible combinations of A) two goods that are desired by society. B) two goods that can be efficiently produced with a given set of resources. C) two goods that can be purchased given the prices of the goods. D) two goods that two countries can trade with each other.

answer

B

question

Which of the following would result in a movement along the production possibilities curve? A) A fall in the unemployment rate B) Growth in the capital stock C) Population growth D) A change in the outputs of two goods that a society chooses to produce

answer

D

question

A movement along the production possibilities curve would imply that A) the labor force has grown. B) productivity has increased. C) society has chosen a different set of outputs. D) productivity has declined because workers are demanding more leisure.

answer

C

question

If the production possibilities curve is a downward sloping straight line, then A) resources are highly specialized, making it difficult to use them for alternative uses. B) technological change has increased. C) production is efficient only when producing at the mid-point. D) all resources must be perfectly adaptable for alternative uses.

answer

D

question

Suppose an acre of land yields 100 bushels of corn and that one bushel of corn provides enough seed for one-quarter of an acre of land. The opportunity cost of consuming another 100 bushels of corn today is A) 100 bushels of corn next year. C) 10 bushels of corn next year. B) 25 bushels of corn next year. D) 2.5 bushels of corn next year.

answer

B

question

If an economy is operating at a point inside the production possibilities curve, then A) societyʹs resources are being inefficiently utilized. B) the curve will move to the left. C) societyʹs resources are being used to produce too many consumer goods. D) economic policy must implemented to slow growth of the economy further.

answer

A

question

The production possibilities curve bows out because A) production is efficient. C) production is inefficient. B) of the law of increasing additional cost. D) resources are not being fully utilized.

answer

B

question

All points inside the production possibilities curve indicate A) a lack of sufficient supply. C) the law of increasing relative cost. B) inefficiency in production. D) the law of decreasing relative cost.

answer

B

question

How does an economy represented by a straight-line production possibilities curve differ from one represented by a traditional production possibilities curve with a bowed shape? A) In the economy represented by a straight-line production possibilities curve, there is no opportunity cost. B) In the economy represented by a straight-line production possibilities curve, neither good is scarce. C) In the economy represented by a straight-line production possibilities curve, the law of increasing relative cost does not apply. D) In the economy represented by a straight-line production possibilities curve, changing the amount of resources devoted to the production of each good will not alter the amount of each good actually produced.

answer

C

question

Which of the following will most likely happen when better technology is used in production? A) an upward movement along the production possibilities curve B) an outward shift of the production possibilities curve C) an inward shift of the production possibilities curve D) a downward movement along the production possibilities curve

answer

B

question

Which of the following statements is NOT an assumption underlying the production possibilities curve? A) Resources are fully and efficiently employed. B) Technology is fixed. C) Production occurs over some specified time period. D) The amount of resources available for production can be changed quickly.

answer

D

question

A production possibilities curve with quantities of clothing and food on the axes shows which of the following? I. A society cannot have an unlimited amount of each good. II. For an efficient society, an increase in clothing production will necessitate a decrease in food production. III. Asocietywillalwaysproducethemaximumamountofbothclothingandfood. A) I only B) II only C) III only D) Both I and II

answer

D

question

Technology is best defined as A) societyʹs pool of applied knowledge concerning the production of goods and services. B) the maximum output that can be obtained from a stock of physical capital. C) output inside the production possibilities curve. D) the utilization of more resources for the same amount of production.

answer

A

question

Suppose the current unemployment rate is 15 percent. If it rises to 20 percent, A) the economy will move up along the production possibilities curve. B) the economy will move closer to the production possibilities curve. C) the production possibilities curve will shift inward. D) the economy will operate farther inside the production possibilities curve.

answer

D

question

The law of increasing additional costs is due to A) taxes. B) scarcity. C) the fact that it is more difficult to use resources efficiently the more society produces. D) the fact that resources are not perfectly adaptable for alternative uses.

answer

D

question

All mutually beneficial trades have taken place. This implies that A) the production possibilities curve is bowed out. B) society is inside the production possibilities curve. C) economic efficiency prevails in the society. D) society is on the constant cost portion of its production possibilities curve.

answer

C

question

Some resources are better suited to produce certain goods than other resources. This fact leads to A) a linear production possibilities curve. C) the law of increasing additional cost. B) inefficiency in the economy. D) increases in technology.

answer

C

question

During periods of unemployment A) the economy operates at a point inside the production possibilities curve. B) the economy operates at a point outside the production possibilities curve. C) the production possibilities curve shifts inward. D) the production possibilities curve shifts outward.

answer

A

question

Which of the following is assumed when constructing a production possibilities curve? A) a fixed amount of resources C) resources of a given quality B) the efficient use of resources D) All of the above are correct.

answer

D

question

In order for an economy to increase its production possibilities, the economy must A) be very efficient. B) increase inputs. C) increase its wants. D) reduce output.

answer

B

question

The discovery of new natural resources will cause A) the economy to move closer to the production possibilities curve. B) the production possibilities curve to shift up and to the right. C) an upward movement along the curve. D) the curve to shift back and to the left.

answer

B

question

The production possibilities curve can shift inward when A) production increases. B) employment increases. C) the stock of productive capital rises. D) a country experiences a natural disaster.

answer

D

question

Economic growth can be pictured in a production possibilities curve diagram by A) making the production possibilities curve more bowed out. B) making the production possibilities curve less bowed out. C) shifting the production possibilities curve out. D) shifting the production possibilities curve in.

answer

C

question

All of the following would cause the production possibilities curve to shift outward EXCEPT A) an improvement in technology. B) an increase in the amount of labor available. C) a decline in the unemployment rate. D) an increase in the level of capital stock.

answer

C

question

The production possibilities curve shifts outward when A) the law of increasing additional cost takes hold. B) the economy is producing efficiently. C) we produce more consumption goods over productive investment in equipment. D) there is an increase in resources or technology.

answer

D

question

If an economy produces only steel and wheat, a new fertilizer will A) cause the production of wheat to increase at every point on a production possibilities curve but not affect the production of steel, that is the curve moves outward on the wheat axis only. B) cause the production of both wheat and steel to increase at every point along the production possibilities curve, that is the curve moves outward on both the wheat axis and the steel axis. C) not affect the production of either wheat or steel. D) cause the production of steel to increase at every point along the production possibilities curve but not affect the production of wheat, that is the curve moves outward on the steel axis only.

answer

A

question

A production possibilities curve will shift inward A) when the unemployment rate increases. B) when production is inefficient. C) when resources are expanding. D) when a war destroys the capital goods of a country.

answer

D

question

Generally, if a nation produces more consumer goods than capital goods A) more of all goods may be produced in the future. B) less of all goods may be produced in the future. C) about the same amount of capital goods may be produced in the future as are being produced today. D) society will have to forego future consumption of capital goods .

answer

B

question

The use of goods and services for personal satisfaction is known as A) the law of increasing relative cost. B) specialization. C) comparative advantage. D) consumption.

answer

D

question

A country that must reduce current consumption to increase future consumption possibilities A) must be allocating resources inefficiently. B) must be producing along the production possibilities curve. C) must be producing outside the production possibilities curve. D) must not have private ownership of property.

answer

B

question

Whenever a society forgoes current consumption to invest in capital goods, A) it will have less to consume next year. B) it will be easier for that society to consume less in the future because people will become accustomed to less. C) that society can consume more in the future. D) it will be forced to produce fewer capital goods in the future.

answer

C

question

At a point on a production possibilities curve, opportunity cost of more capital goods today is A) fewer capital goods in the future. B) fewer consumer goods in the future. C) fewer consumer goods today. D) more unemployed resources in the future.

answer

C

question

When an economy sacrifices production of consumption goods to produce more capital goods, we would expect that the production possibilities curve will A) shift outward. B) shift inward. C) become a straight line. D) shift about in random fashion.

answer

A

question

Capital goods A) are a special type of consumption goods. B) are consumed because they enhance the enjoyment consumers obtain from other goods and services. C) are goods used to make consumer goods and services. D) lead to inward shifts of a production possibilities curve.

answer

C

question

If a country increased the production of its capital goods, then A) the more consumption of goods we can have today. B) the less consumption we can have today, but we will have more in the future. C) the more unemployed resources there will be in the future. D) the more unemployed resources there are today.

answer

B

question

The opportunity cost of more consumption of goods today is A) lower consumption of goods in the future. B) fewer capital goods in the future. C) more capital goods today. D) more unemployment both today and in the future.

answer

A

question

Using productive resources to make capital goods requires that we A) get everyone to agree on the best use of those resources. B) get government approval of our plan to make capital goods. C) forgo some level of current consumption. D) prove that the existence of the capital goods will not cause any environmental damage.

answer

C

question

Trading off capital goods for increasing amounts of consumer goods today will most likely result in A) increased long-term growth. B) decreased long-term growth. C) decreased prices in consumer goods. D) increases in the quantity of consumer goods.

answer

B

question

If the production of capital goods is shown along the horizontal axis of a production possibilities curve, and the production of consumer goods is shown along the vertical axis of a production possibilities curve, and the economy desires to have a rapid rate of economic growth, then the economy should produce at a point A) near the middle of the curve dividing resources equally between the production of consumer and capital goods. B) at a point near the vertical axis concentrating on the production of consumer goods. C) at a point near the horizontal axis concentrating on the production of capital goods. D) at a point inside the curve allowing the economy to adjust rapidly to changes in economic activity.

answer

C

question

If a country wants to promote future growth, it should A) produce more capital goods today. B) produce more consumer goods today. C) produce only economic goods. D) produce only needed goods.

answer

A

question

Comparative advantage is A) when a country can produce a good at a lower opportunity cost compared to other countries. B) when a country can produce all goods more quickly than any other country. C) when the production possibilities curve shifts outward to the right. D) only for individuals and not countries.

answer

A

question

If a person can make $70,000 as an accountant, $60,000 as a chef, $20,000 as a mechanic, and nothing as an opera singer, he or she has a comparative advantage in A) accounting. B) being a chef. C) being a mechanic. D) opera singing.

answer

A

question

Carlos is an executive of a major corporation. Boris is a baker. Carlos earns a salary ten times as large as the salary Boris earns, and Carlos has a much larger oven for baking break. Carlos can make a loaf of bread that tastes better than Borisʹs bread but Boris can bake faster. A) Carlos has an absolute and comparative advantage over Boris in making bread. B) Carlos has an absolute but not comparative advantage over Boris in making bread. C) Carlos had a comparative but not absolute advantage over Boris in making bread. D) Carlos does not have an absolute or comparative advantage over Boris in making bread.

answer

B

question

Which is the best example of specialization? A) A high school math teacher who teaches only calculus. B) A firm that produces both luggage and cooking oil. C) A person whose job includes accounting, personnel and maintenance tasks. D) A high school math teacher who teaches algebra and calculus.

answer

A

question

Specialization can occur because A) governments pass laws that require it. B) varying skills differentiate workers. C) absolute advantage creates specialization among laborers. D) managers and laborers share job tasks.

answer

B

question

If a countryʹs production possibilities curve gets more bowed out over time, it is an indication that A) technological change has taken place. B) society is learning to use its resources more efficiently. C) the quantity of labor and capital have increased. D) resources have become more highly specialized.

answer

D

question

Absolute advantage is A) producing at a lower opportunity cost. B) producing a good using the fewest inputs. C) producing a good only when demand is high. D) producing a good that requires imported components.

answer

B

question

A person has a comparative advantage in an activity whenever she A) has an absolute advantage in the activity. B) can perform the activity at a lower opportunity cost than another person can. C) can do the activity in less time than anyone else. D) can do everything better than anyone else.

answer

B

question

Comparative advantage is always a(n) ________ concept. A) absolute B) efficiency C) relative D) monetary

answer

C

question

Comparative advantage implies choosing the activity that A) has a high opportunity cost. B) is inside the production possibilities frontier. C) has the lowest opportunity cost. D) does not demand any specialization.

answer

C

question

The division of labor refers to A) workers being assigned specific tasks. B) workers performing multiple tasks. C) separating men and women in the workforce. D) creating jobs that all people can perform at the same level.

answer

A

question

Suppose that at a bicycle shop, instead of having each worker assemble an entire bicycle themselves, one person welds the frames, another person works on the braking system, another person works on the tires, and another person works on the gears. This best demonstrates the concept of A) division of labor. B) microeconomics. C) comparative advantage. D) absolute advantage.

answer

A

question

John and Mary work at a bakery. John can decorate either 10 ice-cream cakes or 4 wedding cakes; Mary can decorate either 8 ice-cream cakes or 2 wedding cakes. According to this scenario, A) the opportunity cost of decorating a wedding cake for Mary is 4 ice-cream cakes. B) the opportunity cost of decorating a wedding cake for Mary is 1/4 ice -cream cake. C) the opportunity cost of decorating a wedding cake for Mary is 2 1/2 ice-cream cakes. D) the opportunity cost of decorating a wedding cake for Mary is 2/5 ice -cream cake.

answer

A

question

John and Mary work eight hours at a bakery. John can decorate either 10 ice -cream cakes or 4 wedding cakes; Mary can decorate either 8 ice-cream cakes or 2 wedding cakes. According to this scenario, A) Mary has the absolute advantage in decorating wedding cakes. B) John has the absolute advantage in decorating wedding cakes. C) Mary has the comparative advantage in decorating wedding cakes. D) John has the comparative advantage in decorating ice-cream cakes.

answer

B

question

John and Mary work eight hours at a bakery. John can decorate either 10 ice -cream cakes or 4 wedding cakes; Mary can decorate either 8 ice-cream cakes or 2 wedding cakes. According to this scenario, A) Mary has the absolute advantage in decorating wedding cakes. B) Mary has the absolute advantage in decorating ice-cream cakes. C) Mary has the comparative advantage in decorating ice-cream cakes. D) John has the comparative advantage in decorating ice-cream cakes.

answer

C

question

One of the benefits of specialization is A) greater output. B) people enjoy doing one repetitive task over and over. C) specialists cost less to hire. D) training costs are higher.

answer

A

question

When Adam Smithʹs ten pin workers specialized, they were able to increase output of pins in a day from 200 to 48,000. One reason for the increase in pin output was due to A) the time saved when workers do not need to shift from one task to another. B) the boredom the workers suffered when they stopped making a whole pin and only concentrated on one task such as painting the heads white. C) new machinery. D) the bonus they received when they produced more pins.

answer

A

question

Two factories make wooden chairs. If the workers in factory A make each chair from start to finish and the workers in factory B divide labor, one would assume A) the chairs in factory A are of higher quality. B) the workers in factory B have more job satisfaction. C) factory B can take advantage of division of labor and produce more efficiently. D) factory A can take advantage of division of labor and produce more efficiently

answer

C

question

Assuming Vice President Smith has to sacrifice more than his assistant in order to engage in full-time typing, we would say that his assistant has a(n) ________ advantage in typing versus Mr. Smith. A) absolute B) comparative C) pecuniary D) overwhelming

answer

B

question

If Vice President Smith is a better typist than his assistant, he is said to have a(n) ________ advantage in typing over his assistant. A) absolute B) unusual C) relative D) overwhelming

answer

A

question

When a country or a region of a country specializes in producing the product that has the lower opportunity cost compared to another country or region, it is practicing A) absolute advantage. B) cost disadvantage. C) regional advantage. D) comparative advantage.

answer

D

question

You should specialize in the production of a good if you have A) an absolute advantage. B) more capital resources than your trading partner. C) more human resources than your trading partner. D) a comparative advantage.

answer

D

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