Question 1

Economics is primarily the study of

Accepted Answer

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

Question 2

when economists say an individual has made a rational choice, they mean the individual has

Accepted Answer

made a \"good\" decision

Question 3

The three major categories of resources are

Accepted Answer

*human resources, physical resources, and natural resources.

Question 4

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 5

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 6

In economics, secondary effects refer to the

Accepted Answer

*unintended consequences of a change that are not immediately identifiable but are felt only with time.

Question 7

To say that people make marginal decisions means that

Accepted Answer

* they weigh the additional costs and additional benefits of various activities before they make a decision

Question 8

In economics, man-made resources such as tools, equipment, and structures that are used to produce other goods and services are referred to as

Accepted Answer

* capital.

Question 9

The economic way of thinking is

Accepted Answer

* a set of basic concepts that helps one understand human choices.

Question 10

The unintended consequences of an economic change that are not immediately identifiable but are felt only with time are known in economics as

Accepted Answer

* secondary effects.

Question 11

Which of the following was a key belief of Adam Smith?

Accepted Answer

*he believed that individuals pursuing their own interests would direct economic activity in the most advantageous way.

Question 12

Economic choice and competitive behavior are the result of

Accepted Answer

*scarcity.

Question 13

Andre, a wheat farmer, is deciding whether or not to add fertilizer to his crops. If he adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, Andre should add fertilizer if it costs less than

Accepted Answer

* $20 per pound.

Question 14

When deciding whether to buy a second car, the economic way of thinking indicates that the purchaser should compare

Accepted Answer

* the additional benefits of the second car with the additional cost of the second car.

Question 15

Which of the following is most consistent with economizing behavior?

Accepted Answer

*Even if you know how to paint, hiring someone to do the job is consistent with economizing behavior, if your opportunity cost is high enough.

Question 16

Which of the following statements best describes the scientific method?

Accepted Answer

*The unbiased development and testing of theories about how the world works.

Question 17

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 18

People are willing to pay more for a diamond than for a bottle of water because

Accepted Answer

*the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.

Question 19

Which of the following is part of the economic way of thinking?

Accepted Answer

*When an option becomes more expensive, people will be less likely to choose it.

Question 20

The expression \"There\'s no such thing as a free lunch\" means

Accepted Answer

*the use of resources to produce a good has an opportunity cost because of scarcity.

Question 21

Which of the following is an example of a normative economic statement? The inflation rate in the United States decreased from 4 percent last year to 3 percent this year as a result of lower energy prices.

Accepted Answer

*The minimum wage should be increased so that low income workers can afford to keep up with the cost of living.

Question 22

Which of the following is a positive economic statement?

Accepted Answer

*Government control of rent decreases the number of new apartments constructed.

Question 23

Which one of the following statements is correct?

Accepted Answer

*Government programs can be implemented with good intentions but can lead to undesirable outcomes because of unintended consequences.

Question 24

Senator DuMonde favors a government program that he believes will help save endangered species. Economic analysis indicates that

Accepted Answer

*Senator DuMonde\'s new program could have unintended consequences that might result in an outcome different from what was intended.

Question 25

Which of the following best illustrates the fallacy of composition?

Accepted Answer

*If Aisha stood up at a basketball game, she could get a better view of the game; if everyone stood up at a basketball game, everyone could have a better view of the game.

Question 26

A form of economic organization that relies primarily on private ownership of productive assets, freedom of exchange, and market prices to allocate goods and resources is often called

Accepted Answer

*capitalism.

Question 27

Middlemen are individuals who

Accepted Answer

* provide services that reduce the cost of transactions and help achieve additional gains from trade.

Question 28

The process by which new products and methods of production are continuously replacing old ones is known as

Accepted Answer

*creative destruction.

Question 29

Three basic decisions must be made by all economies. What are they?

Accepted Answer

*What goods will be produced; how will goods be produced; for whom will goods be produced?

Question 30

Entrepreneurs are

Accepted Answer

* profit-seeking decision makers who decide which business projects to undertake.

Question 31

The notion that specialization in goods that one can produce at a low opportunity cost will make it possible for trading partners to produce a larger joint output is called

Accepted Answer

*the law of comparative advantage.

Question 32

The opportunity cost of an action is

Accepted Answer

* the highest valued alternative forgone as the result of choosing an option.

Question 33

Private property rights involve

Accepted Answer

*all of the above.  the right to transfer, sell, exchange, or mortgage the property.  the right to exclusive use of the property. legal protection against those who would seek to use or abuse the property without the owner\'s permission.

Question 34

\"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.\" What famous economist made this statement?

Accepted Answer

*Adam Smith

Question 35

The law of demand refers to the

Accepted Answer

*inverse relationship between the price of a good and the quantity demanded

Question 36

A shortage occurs whenever

Accepted Answer

*price is less than equilibrium price.

Question 37

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

Accepted Answer

*consumer surplus.

Question 38

If equilibrium is present in a market,

Accepted Answer

*quantity demanded equals quantity supplied.

Question 39

\"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.\" What is the \"invisible hand\" referred to in this statement?

Accepted Answer

*the incentive structure accompanying market prices

Question 40

Market prices are

Accepted Answer

* all of the above.  conveyors of information.  indicators of the relative scarcity of resources and products.  determined by the interactions of supply and demand in voluntary exchange.

Question 41

Profit can be defined as the

Accepted Answer

*difference between the sales revenue of a business firm and the opportunity cost of the resources required to produce the goods supplied by the firm.

Question 42

Which of the following activities describes the opportunity cost of attending an economics class?

Accepted Answer

*the value of the highest valued alternative that must be forgone because of attending the class

Question 43

The opportunity cost of building a park in your hometown would be the

Accepted Answer

*highest valued bundle of other goods and services that must be forgone because of the park construction.

Question 44

Internet sites such as eBay make it easier for sellers and buyers to find one another and, by doing so,

Accepted Answer

*reduce transactions costs.

Question 45

Mateo values his camper at $4,000, and Nicole values it at $9,000. If Nicole buys it from Mateo for $7,000, which of the following is true?

Accepted Answer

*Mateo gains $3,000 of value, and Nicole gains $2,000 of value.

Question 46

Which of the following most accurately states the economic significance of exchange?

Accepted Answer

* Exchange creates value by moving goods from parties who value them less to parties who value them more.

Question 47

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 48

Suppose that in Australia, the government allows private ownership of chickens but not of cows. If the people of Australia permanently increase their desire to purchase more chicken and beef, in the long run, we would expect

Accepted Answer

*the population of chickens to rise and the population of cows to fall.

Question 49

If an economy uses its resources inefficiently, this situation would be illustrated on a production possibilities diagram as

Accepted Answer

*operating at a point inside the production possibilities curve.

Question 50

Other things constant, which of the following would you expect to increase the output growth rate of a country?

Accepted Answer

* an increase in the rate of investment as a share of total output

Question 51

Which of the following most accurately states the economic significance of exchange?

Accepted Answer

Physical goods have value because they exist; exchange can neither increase nor decrease their value.  Exchange creates value by moving goods from people who value the goods less to people who value the goods more.

Question 52

Opportunity costs differ among nations primarily because

Accepted Answer

*nations have different amounts of land, labor skills, capital, and technology.

Question 53

Jayden can produce 10 pens or 20 pencils in one hour while Alexander can produce 15 pens or 5 pencils in one hour. Which of the following statements is correct?

Accepted Answer

*Alexander has a comparative advantage over Jayden in the production of pens

Question 54

When collective decision making is utilized to resolve economic questions regarding the allocation of resources,

Accepted Answer

*central planning and political bargaining will replace market forces.

Question 55

Sebastian drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.50 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Sebastian is rational in deciding how many cans to buy. His consumer surplus is

Accepted Answer

*$0.85.

Question 56

The price of chicken increases as the result of higher beef prices. This indicates that

Accepted Answer

*chicken and beef are substitutes.

Question 57

Other things constant, a decrease in consumer income will

Accepted Answer

* decrease the demand for large-screen television sets.

Question 58

If a decrease in the price of good Y causes the demand for good Z to decrease, this indicates that

Accepted Answer

*Y and Z are substitutes.

Question 59

Which of the following events would decrease producer surplus?

Accepted Answer

*Sellers\' costs increase and the price of the good stays the same.

Question 60

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will

Accepted Answer

*decrease the supply of soybeans.

Question 61

How will an increase in lumber prices influence the home construction market?

Accepted Answer

*The supply of newly constructed homes will decrease.

Question 62

When there is excess demand for a product in a market,

Accepted Answer

*price must be below the equilibrium price.

Question 63

If you were a government official and wanted to raise the price of wheat, which of the following actions would you take?

Accepted Answer

*Encourage farmers to grow less wheat.

Question 64

Between 1994 and 2004, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?

Accepted Answer

*technological improvements that reduced the cost of supplying cellular phone service

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