Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. |
| 1. | There would be no subject of economics (and you would have to drop this course immediately!) if a. | wants were finite. | b. | resources were finite. | c. | wants were infinite. | d. | resources were infinite. | | |
|
| 2. | In every economy people vie for the economy's rationing device, a process called a. | competition. | b. | entrepreneurship. | c. | marginal benefit. | d. | positive economics. | | |
|
| 3. | The __________ the opportunity cost of doing something, the __________ likely a person will do that something. a. | lower; less | b. | lower; more | c. | higher; more | d. | higher; less | e. | b and d | | |
|
| 4. | Which of the following is good policy to follow when building and testing a theory? a. | If the theory sounds reasonable, use it. | b. | If the theory is logical, use it. | c. | If the theory is built on realistic assumptions, use it. | d. | If the theory is built on variables that can be quantified precisely, use it. | e. | If the theory predicts well, use it. | | |
|
| 5. | The scientific method and the functioning of a market system are similar in that a. | they are based on experimentally proven tenets. | b. | only rich people benefit from them. | c. | their success is based on eliminating failures. | d. | they are based on a strict religious moral code. | | |
|
| 6. | Which of the following is an illustration of the law of increasing opportunity costs? a. | As more cars are produced, the opportunity cost of each additional car is greater than for the preceding unit. | b. | As more cars are produced, the opportunity cost of each additional car is less than for the preceding unit. | c. | As more cars are produced, the opportunity cost of each additional car is the same as for the preceding unit. | d. | People pay higher prices for cars the higher the costs of cars. | | |
|
| 7. | Points inside (or below) the PPF are a. | unattainable. | b. | attainable and efficient. | c. | attainable but inefficient. | d. | attainable and neither efficient nor inefficient. | | |
|
| | Exhibit 2-5
|
| 8. | Refer to Exhibit 2-5. As more fax machines are produced, the opportunity cost of producing them a. | increases. | b. | decreases. | c. | remains constant. | d. | first decreases and then increases. | | |
|
| 9. | Refer to Exhibit 2-5. "In order to produce one more television set, we must forfeit the production of one fax machine." This statement describes a movement from a. | point C to point D. | b. | point D to point E. | c. | point E to point F. | d. | point E to point D. | e. | point D to point C. |
|
| 10. | An increase in resources a. | shifts the PPF inward. | b. | shifts the PPF outward. | c. | moves the economy up a given PPF. | d. | moves the economy down a given PPF. | | |
|
| 11. | A PPF is more likely to be a downward-sloping curve that is bowed outward than a downward-sloping straight line because most resources are a. | better suited for the production of some goods than others. | b. | used efficiently. | c. | relatively cheap at low levels of output. | d. | used to produce consumption goods. | | |
|
| 12. | In the production possibilities framework, economic growth is depicted by a. | a shift inward (or to the left) of the frontier. | b. | a shift outward (or to the right) of the frontier. | c. | the frontier becoming a straight line. | d. | the frontier becoming bowed outward. | | |
|
| | Exhibit 2-6
|
| 13. | Refer to Exhibit 2-6. Which graph depicts the consequence of acts of war? a. | (1) | b. | (2) | c. | (3) | d. | (4) | e. | none of the above | | |
|
| 14. | Which scenario below most accurately describes the process by which a technological change can affect employment patterns across industries? a. | A technological advance makes it possible to produce more of good X with less labor. As a result, labor is released from producing good X. Some of this labor ends up producing goods Y and Z. | b. | A technological advance makes it possible to produce less of good X with less labor. As a result, labor is released from producing good X. Some of this labor ends up producing good Y. | c. | A technological advance makes it possible to produce more of good X with more labor. As a result, more labor is needed to produce good X. There is less labor available to produce goods Y and Z. | d. | A technological advance makes it possible to produce more of good X with less labor. As a result, labor becomes more important to the production of good X. More labor ends up producing good X. | e. | none of the above | | |
|
| 15. | Capitalist thinkers believe that prices a. | are useful in helping to ration goods and services. | b. | convey information to the buyer. | c. | provide incentives. | d. | a and b | e. | a, b and c | | |
|
| 16. | A socialist thinker believes that private property is economically undesirable because a. | it cannot provide incentives to its owners. | b. | it often provides unfair political or social power to its owners. | c. | it shields its owners from the incentives provided by price changes. | d. | the government cannot effectively manage property. | | |
|
| 17. | In the simple circular flow model of economic activity, a. | consumption occurs in the Final Goods and Services Market. | b. | production occurs in the Factor Market. | c. | "What" to produce is determined in the Final Goods and Services Market. | d. | income distribution is determined by business firms. | e. | All of the above. | | |
|
| 18. | In a market system, "To whom" output will be distributed is determinded in the a. | Factor Market. | b. | Final Goods and Services Market. | c. | Government sector. | d. | The Private Business sector. | | |
|
| 19. | In a barter economy, a. | money is a medium of exchange. | b. | coins are used to facilitate trade. | c. | money is a store of value. | d. | goods and services are traded directly for each other. | e. | the money supply consists entirely of precious metals such as gold. | | |
|
| 20. | The U.S. dollar is a. | backed by gold. | b. | backed by the trust that you can exchange it for something of value. | c. | an example of fiat money. | d. | worthless. | e. | b and c. | | |
|
| 21. | The law of demand states that price and quantity demanded are a. | directly related, ceteris paribus. | b. | inversely related, ceteris paribus. | c. | independent. | d. | positively related, ceteris paribus. | | |
|
| 22. | If the demand curve for a good shifts leftward, a. | quantity demanded is less at each price. | b. | quantity demanded remains constant at each price. | c. | quantity demanded is greater at each price. | d. | demand is greater at each price. | | |
|
| 23. | The fundamental reason why most supply curves are upward sloping is that a. | people substitute lower-priced goods for higher-priced goods. | b. | the quantity supplied increases as more firms enter the market. | c. | a higher price never reduces quantity supplied by enough to lower total revenue and so higher production is motivated. | d. | higher production raises per-unit production cost and so must be motivated by a higher once. | | |
|
| 24. | If a supply curve shifts rightward, this means a. | suppliers are willing and able to offer less of the good for sale at every price. | b. | suppliers are willing and able to offer more of the good for sale at every price. | c. | quantity supplied is greater at every price. | d. | suppliers are willing and able to offer more of the good for sale only at a particular price. | e. | b and c | | |
|
| 25. | On a supply-and-demand diagram, equilibrium is found a. | where the supply curve intercepts the vertical axis. | b. | where the demand curve intercepts the horizontal axis. | c. | where the demand and supply curves intersect. | d. | at every point on either curve | | |
|
A | 26. | At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced, which pushes the price __________ toward its equilibrium value. a. | surplus; downward | b. | surplus; upward | c. | shortage; downward | d. | shortage; upward | | |
|
| | Exhibit 3-16
|
| 27. | Refer to Exhibit 3-16. If there are empty seats for a basketball game at the price P*, the situation is best depicted on graph a. | (1), with P* = P1. | b. | (2), with P* = P3. | c. | (3), with P* = P2. | d. | (3), with P* = P3. | e. | (4), with P* = P1. | | |
|
| 28. | A market is said to be in disequilibrium if a. | it exhibits either a surplus of a shortage. | b. | the number of units that individuals are willing to buy exceeds the number of units they can afford. | c. | it is a market for an inferior good. | d. | none of the above. | ` | |
|
| 29. | Price ceilings and price floors a. | shift demand and supply curves and therefore have no effect upon the rationing function of prices | b. | interfere with the rationing function of prices. | c. | make the rationing function of free markets more efficient. | d. | cause surpluses and shortages, respectively. | | |
|
| 30. | An effective price floor will a. | clear the market. | b. | result in a shortage. | c. | result in a surplus. | d. | force some firms in this industry to go out of business. | | |
|