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- 1. Multiple Choice
Economics may best be defined as the:
Interaction between macro and micro considerations
Social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity
Empirical testing of value judgements through the use of logic
Use of policy to refute facts and hypothesis
- 2. Multiple Choice
For economists, the word “utility” means:
Versatility and flexibility
Rationality
Pleasure and satisfaction
Purposefulness
- 3. Multiple Choice
The problems of aggregate inflation and unemployment are:
Major topics of macroeconomics
Not relevant to the U.S. economy
Major topics of microeconomics
Peculiar toco,and economics
- 4. Multiple Choice
Scarcity refers to:
The ability of society to employ all of its resources
The ability of society to consume all that it produces
The inability of society to satisfy all human wants because of Limite der resources
The inability of society to eliminate poverty
- 5. Multiple Choice
People always face trade-offs because
They always have more than one use for their time and money
They buy goods with money
Trading takes place in a market economy
They can make themselves better off through trade
- 6. Multiple Choice
The phrase “no such thing as a free lunch” means
People must face trade offs
Rational people think at the margin
People respond to incentives
Trade can make everyone better off
- 7. Multiple Choice
The value of the best alternative sacrificed to obtain something you want is referred to as
Explicit cost
opportunity cost
Marginal cost
Sunk cost
- 8. Multiple Choice
All of the following are examples of physical capital except
Buildings
Machines
Company stocks and bonds
A hydroelectric powerplant
- 9. Multiple Choice
Economic activity
is peculiar to the U.S. economy
Applies to all economies
Is peculiar to command systems
Is peculiar to market systems
- 10. Multiple Choice
Which of the following is a fundamental characteristic of the market system
Property rights
Central planning by government
Unselfish behavior
Government-sat wages and prices
- 11. Multiple Choice
The presence of market failures implies that:
Money is not an effective tool for exchange in a market system
individuals and firms should strive to be self-sufficient rather than specialize
There is an active role for government, even in a market system
Command systems are superior to market systems in the allocation of resources
- 12. Multiple Choice
In a market economy the distribution of output will be determined primarily by:
Consumer needs and preferences
The quantities and prices of the resources that households supply
Government regulations that provide a minimum income for all
A social consensus as to what distribution of income is most equitable
- 13. Multiple Choice
The market system’s answer to the fundamental question “what will be produced?” is essentially:
“Goods and services that are profitable”
“Low cost goods and services”
“Goods and services that can be produced using large amounts of capital”
“Goods and evinces that possess lasting value”
- 14. Multiple Choice
The market system’s answer to the fundamental question “who will get the goods and services?” is essentially:
“Those willing and able to pay for them”
“Those who physical.y produced them”
“Those who most need them”
“Those who get utility from them”
- 15. Multiple Choice
The field of economics is traditionally divided into two broad sub fields,
National economics and international economics
Consumer economics and producer economics
Private sector economics and public sector economics
Microeconomics and macroeconomics
- 16. Multiple Choice
The problems of aggregate inflation and unemployment are:
Major topics of macroeconomics
Not relevant to the U.S. economy
Major topics of microeconomics
Peculiar to command economics
- 17. Multiple Choice
Which of the following is an example of using the scientific method with a natural experiment?
Measuring how long it takes a marble to fall from a ten story building
Comparing plant growth with and without a soil additive
Tracking the price of oil when a war in the Middle East interrupts the flow of crude oil
Observing the reaction when two chemicals are mixed together
- 18. Multiple Choice
Economists face an obstacle that many other scientists do not face. What is that obstacle?
It is often difficult to formulate theories in economics
It is often impractical to perform experiments in economics
Economics cannot be addressed objectively; it must be addressed subjectively
The scientific method cannot be applied to the study of economics
- 19. Multiple Choice
Which of the following statements is correct?
Economists almost always find it easy to conduct experiments in order to test their theories
Economics is not a true science because economists are not usually allowed to conduct experiments to test their theories
Economics is a social science rather than a true science because it cannot employ the scientific method
Economists are usually not able to conduct experiments, so they must rely on natural experiments offered by History
- 20. Multiple Choice
Which of the following is a normative statement?
The temperature is high today
The humidity is high today
It is too hot to play tennis today
It will cool off later this evening
- 21. Multiple Choice
Which of the following is a positive statements?
The humidity is too high today
It is too hot to jog today
the temperature is 92 degrees today
Summer evenings are nice when it cools off
- 22. Multiple Choice
The simple circular flow model shows that:
Households are on the buying side of both product and resource markets
Businesses are on the selling side of both the product and resource market
Households are n the selling side of the resource market and the buying side of the product market
Businesses are on the buying side of the product market and the selling side of the resource market
- 23. Multiple Choice
Flow 1 represents:
Wage, Rent, interest, and profit income
Land, labor, capital, and entrepreneurial ability
Goods and services
Consumer expenditures
- 24. Multiple Choice
Flow 3 represents
Wage, rent, interest, and profit income
Land, labor, capital, and entrepreneurial ability
Goods and services
consumer expenditures
- 25. Multiple Choice
The production possibilities frontier illustrates the basic principle that:
The production of more of any one good will I’m time require smaller and smaller sacrifices of other goods
An economy will automatically obtain full employment of its resources
If all the resources of an economy are in use, more of one good can be produced only if less of another good is produced
An economy’s capacity to produce increases in proportion to its population size
- 26. Multiple Choice
Assume an economy is operating at some point on its production possibilities curve, which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods
Will remain unchanged
May either be increased or decreased
Must be decreased
Must also be increased
- 27. Multiple Choice
other things equal, this economy will achieve the most rapid rate of growth if:
The ratio of capital to consumer goods is minimized
It chooses point C
It chooses point B
It chooses point A
- 28. Multiple Choice
This economy will experience unemployment if it
produces at point:
A
B
C
D
- 29. Multiple Choice
An economic theory about international trade that is based on the assumption that there are only two countries trading two goods
Is useless, since the real world has many countries trading many goods
Can be useful only in situations involving two countries and two goods
Can be useful in the classroom, but is useless in the real world
Can be useful in helping economists understand the complex world of international trade involving many countries and many goods
- 30. Multiple Choice
The physical import of DVD players to the U.S. from Japan best illustrates a :
Resource flow
Financial flow
Trade flow
Technology flow
- 31. Multiple Choice
The spending by Americans while traveling in Europe best illustrates a:
Trade flow
Labor flow
Financial flow
Technology flow
- 32. Multiple Choice
The asset most commonly traded is:
Land
Buildings
Corporate stock
Money
- 33. Multiple Choice
Which of the following concepts provides the best rationale for international trade?
Increasing opportunity costs
Consumer sovereignty
Comparative advantage
The law of supply
- 34. Multiple Choice
The terms of trade reflect the:
Rate at which gold exchanges internationally for any domestic currency
Ratio at which nations will exchange two goods
Fact that the gains from trade will be equal divided
Cost conditions embodied in a single country’s production possibilities curve
- 35. Multiple Choice
The most obvious benefit of specialization and trade is that they allow us to
Work more hours per week than we otherwise would be a lemme to work
Consume more goods than we otherwise would be able to consume
Spend more money on goods that are beneficial to society, and less money on goods that are harmful to society
Consume more goods by forcing people in other countries to consume fewer goods
- 36. Multiple Choice
According to the concept of comparative advantage, a good should be produced in the nation where:
It’s domestic opportunity cost is greatest
Money is used as a medium of exchange
It’s domestic opportunity cost is least
The terms of trade are maximized
- 37. Multiple Choice
Suppose a gardener produces both tomatoes and squash in his garden. If he must give up 8 bushels of squash to get 5 bushels of tomatoes, then his opportunity cost of 1 bushel of tomatoes is:
.63 bushels of squash
1.6 bushels of squash
3 bushels of squash
5 bushels of squash
- 38. Multiple Choice
If Shawn can produce more donuts in one day than Süden can produce in one day, then
Shawn has a comparative advantage in the production of donuts
Sue has a comparative advantage in the production of donuts
Shawn has an absolute advantage in the production of donuts
Sue has an absolute advantage in the production of donuts
- 39. Multiple Choice
A nation’s true gain from international trade is:
Increased employment in export industries
An overall increase in output obtained through specialization and exchange
Added technological knowledge
The tariff revenue that goes to the national treasury
- 40. Multiple Choice
A production possibilities frontier is a straight line when
The more resources the economy uses to produce one good, the fewer resources it has available to produce the other good
An economy is interdependent and engaged in trade instead of self-sufficient
The rate of trade off between the two goods being produced is constant
The rate of trade off between the two goods being produced depends on how much of each good is being produced
- 41. Multiple Choice
For a self-sufficient producer, the production possibilities frontier
Is the same as the consumption possibilities frontier
Is greater than the consumption possibilities frontier
Is less than the consumption possibilities frontier
Is always a straight line
- 42. Multiple Choice
If Dina must work .25 hour to produce each taco, then her production possibilities frontier is based on how many hours of work?
40 hours
100 hours
400 hours
1600 hours
- 43. Multiple Choice
If the production possibilities frontier shown for Arturo is for 100 hours of production, then how long does it take Arturo to make one burrito?
1/4 hour
1/3 hour
3 hours
4 hours
- 44. Multiple Choice
If Arturo and Dina both spend all of their time producing tacos, then the total production is
400 tacos and 0 burritos
400 tacos and 250 burritos
800 tacos and 0 burritos
800 tacos and 500 burritos
- 45. Multiple Choice
If Arturo and Dina each divided his/her time equally between the production of tacos and burritos, then the total production is
200 tacos and 150 burritos
400 tacos and 250 burritos
400 tacos and 300 burritos
800 tacos and 500 burritos
- 46. Multiple Choice
If the production possibilities frontiers shown are each for one day of production, then which of the following combinations of tacos and burritos could Arturo and Dina together produce in a given day?
400 tacos and 350 burritos
500 tacos and 250 burritos
600 tacos and 150 burritos
700 tacos and 100 burritos
- 47. Multiple Choice
If the production possibilities frontiers shown are each for one day of production, then which of the following combinations of tacos and burritos could Arturo and Dina together NOT produce?
200 tacos and 400 burritos
300 tacos and 350 burritos
400 tacos and 300 burritos
600 tacos and 250 burritos
- 48. Multiple Choice
When a country has a comparative advantage in producing a certain good,
The country should import that good
The country should produce just enough of that good for its own consumption
The country’s opportunity cost of that good is high relative to other countries’ opportunity costs of that same good
None of the above is correct
- 49. Multiple Choice
Since 1970, U.S. exports and imports have
Grown absolutely, but remained a constant proportion of GDP
Grown absolutely. But declined as a proportion of GDP
Grown both absolutely and as a percentage of GDP
Declined both absolutely and as a percentage of GDP
- 50. Multiple Choice
A market
Reflects upslopojg demand and downsloping supply curves
Entails the exchange of goods, but not services
Is an institution that brings together buyers and sellers
always requires face to face contact between buyer and seller
- 51. Multiple Choice
A competitive market is a market in which
An auctioneer helps set prices and arrange sales
There are only a few sellers
The forces of supply and demand do not apply
No individual buyer or seller has any significant impact on the market price
- 52. Multiple Choice
Which of the following is least likely to Ben a competitive market?
Ice cream
Soybeans
Cable television
New house
- 53. Multiple Choice
The law of demand states that
price and quantity demanded are inversely related
The larger number of buyers in a market, the lower will be product price
Price and quantity demanded are directly related
Consumers will buy more of a product at high prices than at low prices
- 54. Multiple Choice
A rightward shift in the demand curve for product C might be caused by
An increase in income if C is an inferior good
A decrease in income if C is a normal good
A decrease in the price of a product that is a substitute for Product C
A decrease in the price of a product that is complementary to product C
- 55. Multiple Choice
If X is a normal good, a rise in money income will shift the
Supply curve to the left
Supply curve to the right
Demand curve to the left
Demand curve to the right
- 56. Multiple Choice
Digital cameras and memory cards are
Substitute goods
Complementary goods
Independent goods
Inferior goods
- 57. Multiple Choice
The law of supply indicates that, other things equal
Producers will offer more of a product at high prices than low prices
The product supply curve is downsloping
Consumers will purchase less of a good at high prices than low prices
Producers will offer more of a product at low prices than at high prices
- 58. Multiple Choice
A leftward shift of a product supply curve might be caused by
An improvement in the relevant technique of production
a decline in the prices of needed inputs
An increase in consumer incomes
Some Firm leaving an industry
- 59. Multiple Choice
Equilibrium price will be
$4
$3
$2
$1
- 60. Multiple Choice
One can say with certainty that equilibrium price will decline when supply
And demand both decrease
Increases and demand decreases
Decreases and demand increases
And demand both increase
- 61. Multiple Choice
Overtime, the equilibrium price of a gigabyte of computer memory has fallen while the equilibrium quantity purchased had increased. Based on this we can conclude that
Decreases in demand have exceeded increases in supply
Decreases in the supply have exceeded increase in demand
increases in the Demand have exceeded increases supply
Increases in supply have exceeded increases in demand
- 62. Multiple Choice
A price of $20 in this market will result in
Shortage of 50 units
Surplus of 50 units
Surplus of 100 units
Shortage of 100 units
- 63. Multiple Choice
If we say 5e price is too high to clear the market, we mean that
Quantity demanded exceeds quantity supplied
The equilibrium price is above the current price
Quantity supplied exceeds quantity demanded
The price of the good isn’t likely to rise
- 64. Multiple Choice
Suppose that there is an improvement in technology in the market for iPhones. Which of the following is true?
Supply will increase and the market clearings price will fall
Supply will increase and the market clearing price will rise
Demand will increase and the market clearing price will rise
Demand will increase and the Arme the clearing price will fall
- 65. Multiple Choice
The price elasticity of demand for widgets is .80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a
1 percent reduction
12 percent reduction
40 percent reduction
20 percentage reduction
- 66. Multiple Choice
The basic formula for the price elasticity of demand coefficient is
Absolute decline in quantity to demanded/absolute increase in price
Percent change in quantity / percent change in price
Absolute decline in price / absolute increase in quantity demanded
Percent change in price/percent change in quantity demanded
- 67. Multiple Choice
Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be
inelastic for price declines that increase sales quantity demanded from units 6 to 7
Eleastic because units 6 to 7
Inelastic because units 4 to 3
Elastic because units 8 to 7
- 68. Multiple Choice
Total revenue at price P1 is indicated by areas
C + D
A + B
a + C
A
- 69. Multiple Choice
The decline in price from P1 to P2 will
Increase total revenue by D
Increase total revenue by B + D
Decrease total revenue by A
Increase total revenue by D - A
- 70. Multiple Choice
If price falls from $10 to $2, total revenue
Rises from a + b to a + b + d + c and demand is elastic
Falls from a+d to b+c and demand is inelastic
Rises from c+d to b+a and demand is elastic
Falls from a+b to b+c an den demand is inelastic
- 71. Multiple Choice
The price elasticity of supply measure how
Easily labor a d capital can be substituted for one anothe
responsive the quantity supplied of X is to changed in the Price of X
responsive the quantity supplied of Y is to changed in the Price of X
Responsive quantity supplied sim to a change in income
- 72. Multiple Choice
The main determinant of elasticity of supply is the
Number of close Substitutes
Amount of time
Urgency of consumer
Number of uses for the product
- 73. Multiple Choice
It takes a considerable amount of time to increase the production of pork. This implies that
Not affect price in short run
Short run supply curve is less elastic that long run
Increase in demand will elicit a larger supply response in short run
Long run supply curve is less eslastic than short run
- 74. Multiple Choice
Assume that a 4 percent increase in income across the economy produces an 8 percent increase in quantity demanded of good X. The coefficient of income elasticity of demand is
Negative, inferior good
negative, Normal good
Positive, inferior good
Positive, normal good
- 75. Multiple Choice
Wage determination in labor markets isn’t important because
Wages are a major determinate of money income
wages allocate scarece resources among alternative uses
Wages are important to firmament in minimizing their costs
All of the above
- 76. Multiple Choice
Which of the following statements best illustrates th concept of derive demand?
As income goes up for farm products, demand will increase by a smaller relative amount
a decline in the price of margarine will reduce the meandering for butter
A decline in the demand for shoes will cause the demand for leather to decline
When the price of gasoline goes up, the demand for motor oil Willi decrease
- 77. Multiple Choice
The labor demand curve of a firm
Will shift to the left if the price of the product labor is producing falls
I should perfectly elastic if the firm selling it’s product in a purely competitive market
Reflects a direct relationship between workers hired and money wage rate
Is the same as it’s marginal product curve
- 78. Multiple Choice
Employers will hire more units of a resource if
Price of resource rises
Productivity of resources increases
Price of good produced declines
Price of complementary resource rises
- 79. Multiple Choice
The real wage will rise if the nominal wage
Falls more rapidly than general price level
Increase at the same rate as labor productivity
Increases more rapidly than the general price level
- 80. Multiple Choice
Price ceilings and price floors
Cause surpluses and shortages respectively
Make rationing more efficient
Interfere with rationing Function of prices
Shift demand and supply curve so and have no effect in rationing of prices
- 81. Multiple Choice
An effective price floor on wheat will
Force profitable farmers out of business
Shortage of wheat
Surplus of wheat
Clear the market for wheat
- 82. Multiple Choice
In its most ideal form, a price system allows
Firms to act in such a way thay elimate scarcity
Consumers to satisfy all their wants
Resources to move from lower valued uses to higher valued through voluntary exchange
Government policy makers to allocate resources to the uses which hey can insider to be in the best interests of society
- 83. Multiple Choice
Market failure occurs when
A good is too expensive for the market to provide
An unrestrained market economy leads to too few of too many resources going to a specific aconimic activity
One good is superior to another and drives it out of the market
The stock market experiences a very large loss
- 84. Multiple Choice
A negative externality such a short pollution can’t be corrected by
Subsidy on producer
Tax on producer
Subsidy to consumers
Stimulus to production
- 85. Multiple Choice
A government subsidy isn’t typically used
Correct negative externality
Provides givernment inhibited good
Reduce inflation
Correct positive externality
- 86. Multiple Choice
public goods are
Rival and exclusives
Rival, not exclusive
exclusive, not rival
Neither rival or exclusive
- 87. Multiple Choice
An important characteristic of private goods is
Non exclusion
Rival
Joint consumption
Conspicuous consumption
- 88. Multiple Choice
The market and publicity sector are similar in that
There is competition in both
the resources are scarce in both
The participants both react to incentives
All of the above
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