Module 1: Practice Self Test

An opportunity cost arises: a. only when a monetary cost is incurred b. only when a time cost is incurred c. whenever any choice is made d. only when the wrong decision is made

Suppose you get a college scholarship that will pay all of your tuition. The college education will increase you income by $500,000 over your lifetime. Your other alternative is to work in a job after high school that pays $35,000 per year. In both scenarios, room and board cost you $20,000 per year. When you compare the opportunity cost of the two activities, the opportunity cost of college is: a. less than the opportunity cost of working b. the same as the opportunity cost of working c. greater than the opportunity cost of working d. zero

Scarcity of resources occurs: a. when choices have to be made b. only in a market economy c. only in developed countries d. when society does not allow the free market to work

Suppose that you have a choice between two activities. The first activity is going to the movies, which costs $10 for a ticket and $15 for popcorn, candy, and a drink. The second activity is going to a football game where your ticket is free but food and drinks cost you $15. What is the opportunity cost of going to the movies? a. $25 plus the enjoyment of the football game b. $10 and the enjoyment of a football game c. enjoyment of the football game d. $15 plus the enjoyment from the football game

Macroeconomics is the branch of economics that studies: a. how prices are determined b. why trade-offs exist c. how decisions are made at the margin d. fluctuation in the overall level of business activity

All of these statements are positive EXCEPT: a. the wealthiest individuals pay taxes at a higher marginal rate than do lower-income earners b. no one should be allowed to earn more than $1 million dollars a year c. nearly 50% of individuals pay no federal income tax d. tax revenue decreases during recessions

All economic activities involve: a. collective indecision b. individual choice c. irrational choice d. group coercion

Which of the following is a normative statement? a. an increase in the price of cameras will decrease the number of cameras sold b. a decrease in the price of digital cameras will decrease the demand for camera film c. a camera makes a good wedding gift d. the united states imports most of its cameras from asia

After finishing high school, LeBron James decided to enter the NBA rather than going to college to begin his premed studies. This choice between two careers can best be described by: a. equilibrium b. scarcity c. market failure d. opportunity costs

With which one of the following statements would most economists likely DISAGREE? a. people respond to incentives b. making a choice involves opportunity costs c. markets move toward equilibrium d. resources and inputs used in production are unlimited

Which of the following is NOT one of the categories of the factors of production? a. land b. labor c. entrepreneurship d. economic aggregates

The focal point of economic activity is: a. the stock market b. the value of the dollar c. individual choice d. business ethics

Which of the following would be considered a question about macroeconomics and not microeconomics? a. what determines where starbucks will locate its next store in your town b. why is the salary of a college football coach greater than the salary paid to your economics professor c. which policy change (raising government spending or decreasing taxes) is more effective in decreasing the overall unemployment rate in a recession d. will more firms decide to locate within your city's boundaries if the city council offers a property tax to break to firms for locating here

The condition of scarcity means that: a. when the government produces something, there is no opportunity cost b. choices must be made in the allocation of productive resources c. you will not incur an opportunity cost if you make the right choice d. only a command economy can make a efficient use of resources

The purpose of an economic system is to: a. eliminate scarcity b. increase the amount of useful resources c. distribute goods and services to people who want them d. create an equal distribution of wealth