Question 1

In order to prosper, what must entrepreneurs do?

Accepted Answer

Undertake projects that create wealth and increase the value of resources.

Question 2

If an economy operates at a point within its production possibilities curve, which of the following is true?

Accepted Answer

It is not efficiently using all of its resources.

Question 3

A local restaurant offers an \"all you can eat\" Sunday brunch for $12. Susan eats four servings but leaves half of a fifth helping uneaten. Why?

Accepted Answer

Her marginal value of food has fallen to zero.

Question 4

For a college student who wishes to calculate the true costs of going to college, the costs of room and board

Accepted Answer

should be counted only to the extent that they are more expensive at college than elsewhere.

Question 5

What is the opportunity cost of an action?

Accepted Answer

The value of the best opportunity that must be sacrificed in order to take the action.

Question 6

Which of the following is true In an informed and voluntary exchange?

Accepted Answer

Both parties receive something they value more than what they gave up.

Question 7

Which of the following is true regarding private ownership?

Accepted Answer

With private ownership, owners are held accountable for using their resources in a manner that harms the resources of others.

Question 8

When price is the rationing criterion, individuals have a strong incentive to

Accepted Answer

provide services to others in exchange for income.

Question 9

The law of demand refers to the

Accepted Answer

inverse relationship between the price of a good and the willingness of consumers to buy it.

Question 10

When economists say the demand for a product has increased, they mean the

Accepted Answer

demand curve has shifted to the right.

Question 11

At a price of $5, Sam buys 10 units of a product; when the price increases to $6, Sam buys 8 units. Which of the following is correct about Sam\'s behavior?

Accepted Answer

Sam\'s quantity demanded has decreased, and his demand has not changed.

Question 12

According to the invisible hand principle, competitive markets generally

Accepted Answer

bring the self-interest of individuals into harmony with the efficient allocation of resources, even though centralized planning of economic activities is absent.

Question 13

Economic debates that focus on the distribution of a nation\'s income are generally associated with which basic economic question?

Accepted Answer

For whom will the goods be produced?

Question 14

Land used to grow alfalfa could also be used to grow hay. Which of the following is true when the farmer plants hay and the market price of alfalfa rises?

Accepted Answer

The opportunity cost of producing hay increases.

Question 15

Which of the following most clearly distinguishes between positive and normative economics?

Accepted Answer

Positive economics is the study of the facts; normative economics is concerned with what ought to be.

Question 16

The fallacy of composition is the incorrect view that

Accepted Answer

if something is true for an individual, then it must also be true for the group.

Question 17

Which of the following would reduce the price of DVD players and increase the quantity sold?

Accepted Answer

an increase in the supply of DVD players

Question 18

In a competitive market economy, a resource in short supply will be allocated

Accepted Answer

to those firms that can make the most profitable use of it.

Question 19

If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?

Accepted Answer

Encourage farmers to produce less milk.

Question 20

Economic analysis suggests that gains from specialization and exchange

Accepted Answer

will be realized if individuals are allowed to pursue goals that are in their own self-interest.

Question 21

According to the law of comparative advantage,

Accepted Answer

individuals and nations gain when they specialize in producing those items for which they are the low opportunity cost producers and exchange for other desired goods they can\'t produce as cheaply.

Question 22

If there is both an increase in the supply of a good and a decrease in demand for a good, which of the following will definitely occur?

Accepted Answer

The price of the good will decrease.

Question 23

Suppose demand decreases and supply increases. Which of the following will happen?

Accepted Answer

Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease.

Question 24

In which statement(s) are \"supply\" and \"quantity supplied\" used correctly? (I) \"An increase in the price of computers will increase the quantity supplied of computers.\" (II) \"A technological advance that lowers the cost of producing computers will increase the supply of computers.\"

Accepted Answer

in both statements I and II

Question 25

According to the law of supply, which of the following is true?

Accepted Answer

More of a good will be offered by suppliers as the price rises.

Question 26

The highest valued alternative that must be given up in order to choose an option is called

Accepted Answer

opportunity cost.

Question 27

What is positive economics?

Accepted Answer

Postulates about relationships among economic variables that are potentially refutable by real-world events.

Question 28

What are the three major categories of resources?

Accepted Answer

Human resources, physical resources, and natural resources.

Question 29

What is the fallacy of composition?

Accepted Answer

The error that if something is true for an individual, then it must also be true for the group.

Question 30

Modern economics as a field of study is usually thought to have begun with

Accepted Answer

Adam Smith and the writing of The Wealth of Nations.

Question 31

As defined by economists, what is capital?

Accepted Answer

Man-made resources used to produce other goods and services.

Question 32

What are the basic ingredients in any economic decision?

Accepted Answer

Scarcity and choice.

Question 33

Which of the following is the best definition of economics?

Accepted Answer

An analysis of how individuals and societies deal with the problem of scarcity

Question 34

The benefit (or satisfaction) that an individual expects to derive from an activity is called

Accepted Answer

utility.

Question 35

What does the term ceteris paribus mean?

Accepted Answer

All variables except those specified are constant.

Question 36

The economic principle that states that individuals or nations can gain by specializing in the production of goods that they produce cheaply and exchanging for other desired goods that they could only produce at a higher cost is

Accepted Answer

the law of comparative advantage.

Question 37

A point outside the production possibilities curve represents a combination of goods that is

Accepted Answer

unattainable.

Question 38

What is the opportunity cost of choosing an alternative?

Accepted Answer

The value of the highest valued alternative forgone as the result of the choice.

Question 39

Which of the following is true of the production possibilities curve?

Accepted Answer

It assumes a fixed level of technology.

Question 40

In economics, what are transaction costs?

Accepted Answer

The time, effort, and other resources needed to search out and negotiate an exchange.

Question 41

Which basic principle does the production possibilities curve illustrate?

Accepted Answer

If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.

Question 42

Why is specialization in production beneficial?

Accepted Answer

It permits people to expand production and achieve rates of output that would otherwise be unattainable.

Question 43

Which of the following is true when there is excess demand for a product in a market?

Accepted Answer

Price must be below the equilibrium price.

Question 44

The curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price is the

Accepted Answer

demand curve.

Question 45

When the quantity demanded and quantity supplied in a market are equal, the market is said to be in

Accepted Answer

equilibrium.

Question 46

In his book The Wealth of Nations, which famous economist argued that economic activity was directed by an \"invisible hand\"?

Accepted Answer

Adam Smith

Question 47

When there is excess supply of a product in a market, which of the following is true?

Accepted Answer

Price must be above the equilibrium price.

Question 48

Which of the following is true if equilibrium is present in a market?

Accepted Answer

Quantity demanded equals quantity supplied.

Question 49

The total economic cost of producing a good or service is called the

Accepted Answer

opportunity cost of production.

Question 50

Each point on the demand curve indicates

Accepted Answer

the quantity demanded at that price.

Question 51

When does a shortage occur?

Accepted Answer

When price is less than equilibrium price.

Question 52

Economics is primarily the study of

Accepted Answer

the allocation of scarce resources in an effort to satisfy wants that are virtually unlimited.

Question 53

The most fundamental concept in economics is that

Accepted Answer

changes in incentives influence behavior in a predictable way--people will be less likely to choose an option as it becomes more expensive.

Question 54

Because information is costly to acquire, how does the cost change decision making?

Accepted Answer

People will rationally choose not to become fully informed when making decisions.

Question 55

Which of the following best describes the economic way of thinking?

Accepted Answer

A set of basic concepts that helps one understand human choices.

Question 56

Which of the following is true about economic thinking?

Accepted Answer

Changes in personal costs and benefits will exert a predictable influence on the choices of people.

Question 57

A restaurant offers an \"all you can eat\" lunch buffet for $12. Jim has eaten three servings and is trying to decide whether or not to go back for a fourth. The economic way of thinking suggests that Jim should go back for the fourth serving if and only if

Accepted Answer

his marginal benefit of the additional serving is greater than zero.

Question 58

Modern economics as a field of study is usually thought to have begun with which of the following?

Accepted Answer

Adam Smith and the writing of The Wealth of Nations.

Question 59

How is the value of a good determined?

Accepted Answer

It depends on many factors, including who uses it and under what circumstances.

Question 60

Economists use the term ceteris paribus to indicate which of the following?

Accepted Answer

Other things are assumed to be constant.

Question 61

Which of the following activities describes the opportunity cost of watching a play in a theater?

Accepted Answer

the value of the highest valued alternative that must be forgone because of the time and money required to watch the play

Question 62

If Sean sells Tom a tennis racket for $50, we would expect

Accepted Answer

both parties to gain from this transaction.

Question 63

Given freedom of movement for both goods and resources, if Florida producers specialize in oranges and Georgia producers specialize in peaches, it would be reasonable to conclude that

Accepted Answer

Florida has a comparative advantage in producing oranges.

Question 64

Using a production possibilities curve, a technological advance that increases the amount of output for both goods while using the same amount of inputs would be illustrated by which of the following?

Accepted Answer

An outward shift of the curve.

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