question

Resources are A. plentiful for households but scarce for economies. B. plentiful for households and plentiful for economies. C. scarce for households and scarce for economies. D. scarce for households but plentiful for economies.

answer

C. scarce for households and scarce for economies.

question

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that A. trade can make everyone better off. B. rational people think at the margin. C. people face trade-offs. D. decisions made at the margin are not particularly important.

answer

C. people face trade-offs.

question

When computing the opportunity cost of attending a basketball game you should include A. the value of your time, but not the price you pay for the ticket. B. the price you pay for the ticket, but not the value of your time. C. the price you pay for the ticket and the value of your time. D. neither the price of the ticket nor the value of your time.

answer

C. the price you pay for the ticket and the value of your time.

question

Rational people make decisions at the margin by A. behaving in a random fashion. B. following marginal traditions. C. comparing marginal costs and marginal benefits. D. thinking in black-and-white terms.

answer

C. comparing marginal costs and marginal benefits.

question

Cole is refinishing an antique china cabinet and has already spent $180 on the restoration. He expects to be able to sell the cabinet for $360. Cole discovers that he needs to do an additional $200 worth of work to make the cabinet worth $360 to potential buyers. He could also sell the cabinet now, without completing the additional work, for $100. What should Cole do? A. He should complete the additional work and sell the cabinet for $360. B. He should sell the cabinet now for $100. C. It does not matter which action he takes since the outcome will be the same either way. D. He should keep the cabinet since it wouldn't be rational to spend $380 restoring a cabinet and then sell it for only $360.

answer

A. He should complete the additional work and sell the cabinet for $360.

question

Which of the following statements exemplifies a principle of individual decisionmaking? A. Governments can sometimes improve market outcomes. B. Trade can make everyone better off. C. The cost of something is what you give up to get it. D. All of the above are correct.

answer

C. The cost of something is what you give up to get it.

question

Which of the following statements about markets is most accurate? A. Markets fail and are therefore not an acceptable way to organize economic activity. B. Markets are a good way to organize economic activity in developed nations, but not in less developed nations. C. Markets are usually a good way to organize economic activity. D. Markets are usually inferior to central planning as a way to organize economic activity.

answer

C. Markets are usually a good way to organize economic activity.

question

Which of the following statements does not apply to a market economy? A. The "invisible hand" usually maximizes the well-being of society as a whole. B. Government policies are the primary forces that guide the decisions of firms and households. C. Households decide which firms to work for and what to buy with their incomes. D. Firms decide whom to hire and what to produce.

answer

B. Government policies are the primary forces that guide the decisions of firms and households.

question

In a market economy, economic activity is guided by A. central planners. B. prices and self-interest. C. large businesses. D. the government.

answer

B. prices and self-interest.

question

Prices direct economic activity in a market economy by A. allocating goods and services in the most equitable way. B. eliminating the need for government intervention. C. influencing the actions of buyers and sellers. D. reducing scarcity of the goods and services produced.

answer

C. influencing the actions of buyers and sellers.

question

Market failure can be caused by A. equilibrium prices. B. low consumer demand. C. high prices and foreign competition. D. externalities and market power.

answer

D. externalities and market power.

question

low growth in US incomes during the 1970s and 1980s was primarily due to A. slow productivity growth in the US. B. increased competition from Japan. C. increased competition from European countries. D. a rapid decrease in the quantity of money in the economy.

answer

A. slow productivity growth in the US.

question

In a particular country in 2000, the average worker needed to work 40 hours to produce 55 units of output. In that same country in 2008, the average worker needed to work 30 hours to produce 45 units of output. In that country, the productivity of the average worker A. increased by about 18 percent between 2000 and 2008. B. increased by about 9 percent between 2000 and 2008. C. remained unchanged between 2000 and 2008. D. decreased by about 6 percent between 2000 and 2008.

answer

B. increased by about 9 percent between 2000 and 2008.

question

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to decrease the money supply. This is likely because the Federal Reserve is A. worried about inflation. B. worried that the economy is growing too slowly. C. worried about unemployment. D. hoping to increase the demand for goods and services.

answer

A. worried about inflation.

question

The relatively low inflation experienced in the United States in the 1990s is attributable to A. the eight-year presidency of William Jefferson Clinton during the 1990s. B. low levels of government spending in the U.S. in the 1980s and 1990s. C. slow growth of U.S. productivity during the 1990s. D. slow growth of the quantity of money in the U.S. in the 1990s.

answer

D. slow growth of the quantity of money in the U.S. in the 1990s.

question

It costs a company $35,000 to produce 700 graphing calculators. The company's cost will be $35,070 if it produces an additional graphing calculator. The company is currently producing 700 graphing calculators. A customer is willing to pay $60 for the 701th calculator. Should the company produce and sell it? a. yes b. no

answer

b. no

question

Equality means distributing society's resources in the most efficient manner. a. TRUE b. FALSE

answer

b. FALSE

question

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie. a. TRUE b. FALSE

answer

a. TRUE

question

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality. a. TRUE b. FALSE

answer

a. TRUE

question

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs. a. TRUE b. FALSE

answer

a. TRUE

question

The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior. a. TRUE b. FALSE

answer

b. FALSE

question

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars. a. TRUE b. FALSE

answer

a. TRUE

question

Inflation increases the value of money. a. TRUE b. FALSE

answer

b. FALSE

question

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation. a. TRUE b. FALSE

answer

b. FALSE

question

The broken window fallacy states that when a window breaks and someone spends money to repair it, they have created new economic activity that would not have otherwise taken place. a. TRUE b. FALSE

answer

a. TRUE

question

The language of economics is A. easy to learn within a day. B. needlessly arcane. C. unnecessary to learn for a thorough understanding of economics. D. valuable because it provides a new and useful way of learning about the world.

answer

D. valuable because it provides a new and useful way of learning about the world.

question

Economists face an obstacle that many other scientists do not face. What is that obstacle? A. It is often difficult to formulate theories in economics. B. It is often impractical to perform experiments in economics. C. The scientific method cannot be applied to the study of economics. D. Economics cannot be addressed objectively; it must be addressed subjectively.

answer

B. It is often impractical to perform experiments in economics.

question

Instead of conducting laboratory experiments to generate data to test their theories, economists often A. argue that data is impossible to collect in economics. B. assume that data would support their theories. C. ask winners of the Nobel Prize in Economics to evaluate their theories. D. gather data from historical episodes of economic change.

answer

D. gather data from historical episodes of economic change.

question

The art in scientific thinking is A. deciding which assumptions to make. B. the ability to make an abstract subject easy to understand. C. finding the right problem to study. D. not something in which economists have to be skilled.

answer

A. deciding which assumptions to make.

question

Which of the following statements about models is correct? A. The more details a model includes, the better the model. B. Models cannot be used to explain how the economy functions. C. Models cannot be used to make predictions. D. Models assume away irrelevant details.

answer

D. Models assume away irrelevant details.

question

Which of the following statements is correct? A. Economic models, to be accepted, must be tested by conducting experiments. B. Good economic models attempt to mimic reality as closely as possible. C. Different economic models employ different sets of assumptions. D. Few economic models incorporate assumptions.

answer

C. Different economic models employ different sets of assumptions.

question

Which of the following statements about the circular-flow diagram is correct? A. The government cannot be excluded as a decision maker in a circular-flow diagram. B. The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms. C. One must imagine that the economy operates without money in order to make sense of the diagram. D. All of the above are correct.

answer

B. The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms.

question

In economics, capital refers to A. the money households use to purchase firms' output. B. stocks and bonds. C. the finances necessary for firms to produce their products. D. buildings and machines used in the production process

answer

D. buildings and machines used in the production process

question

Figure 2-1 Refer to Figure 2-1. Which arrow represents the flow of goods and services? A. D B. A C. B D. C

answer

c. B

question

C. own and sell factors of production

answer

Which of the following is an activity undertaken by the actors in rectangle 2? A. produce and sell goods and services B. hire and use factors of production C. own and sell factors of production D. exchange goods and services between firms and households

question

The production possibilities frontier is used to illustrate some basic economic ideas, including A. economic growth. B. opportunity cost. C. scarcity. D. All of the above are correct.

answer

D. All of the above are correct.

question

A. 225 burgers

answer

What is the opportunity cost to Picnicland of increasing the production of hotdogs from 450 to 900? A. 225 burgers B. 150 burgers C. 300 burgers D. 450 burgers

question

D. 450 hotdogs

answer

What is the opportunity cost to Picnicland of increasing the production of burgers from 450 to 750? A. 150 hotdogs B. 225 hotdogs C. 300 hotdogs D. 450 hotdogs

question

D. 180 bushels of apples and 0 sweaters.

answer

Consider the production possibilities curve for a country that can produce sweaters, apples (in bushels), or a combination of the two If this economy devotes all of its available resources to producing apples, then it will produce A. 80 bushels of apples and 160 sweaters B. 180 bushels of apples and 200 sweaters. C. 0 bushels of apples and 200 sweaters. D. 180 bushels of apples and 0 sweaters.

question

Which of the following statements best captures the relationship between microeconomics and macroeconomics? A. Microeconomics is oriented toward policy studies, whereas macroeconomics is oriented toward theoretical studies. B. Microeconomics and macroeconomics are distinct from one another, yet they are closely related. C. Microeconomists study markets for small products, whereas macroeconomists study markets for large products. D. For the most part, microeconomists are unconcerned with macroeconomics, and macroeconomists are unconcerned with microeconomics.

answer

B. Microeconomics and macroeconomics are distinct from one another, yet they are closely related.

question

Economists speaking like scientists make A. claims about how the world should be. B. positive statements. C. prescriptive statements. D. More than one of the above is correct.

answer

B. positive statements.

question

Normative conclusions A. involve value judgments. B. reflect the economist's role as scientist. C. come from positive analysis alone. D. are based on ignorance of positive analysis.

answer

A. involve value judgments.

question

Which of the following statements is an example of a positive, as opposed to normative, statement? A. Economic policies should focus on improving equality. B. Americans deserve a cleaner environment. C. Reducing emissions reduces days missed from school due to asthma. D. All Americans are entitled to quality health care.

answer

C. Reducing emissions reduces days missed from school due to asthma.

question

The Council of Economic Advisers A. advises the president of the United States on economic policy matters. B. was created in 1946. C. writes the annual Economic Report of the President. D. All of the above are correct.

answer

D. All of the above are correct.

question

A duty of economists at the Department of Labor is to A. enforce the nation's antitrust laws. B. schedule federal holidays. C. analyze data on workers. D. All of the above are correct.

answer

C. analyze data on workers.

question

Congress relies on economists at the Congressional Budget Office to A. provide evidence that incumbent members of Congress are performing well in their jobs. B. set the nation's monetary policy. C. provide independent evaluations of policy proposals. D. enforce the nation's antitrust laws.

answer

C. provide independent evaluations of policy proposals.

question

One difference between a hypothetical benevolent king implementing the best policy and the president implementing the best policy in the real world is the president has to be concerned about A. All of the above are correct. B. whether the policy will affect his standing among different groups in the electorate. C. what amendments will be suggested by members of Congress. D. any misunderstandings in communicating the policy to the public.

answer

A. All of the above are correct.

question

The use of the coordinate system allows A. for the display of how labor and other resources are organized in the production process. B. for the display of the flows of dollars, goods and services, and factors of production in an economic system. C. for the creation of pie charts and bar graphs. D. for the display of two variables on a single graph.

answer

D. for the display of two variables on a single graph.

question

B. scatterplot.

answer

The graph shown is known as a A. bar graph. B. scatterplot. C. pie chart. D. time-series graph.

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