Multiple Choice questions
1.1. An economic model is
a. a mechanical machine that replicates the functioning of the economy.
b. a fully detailed, realistic description of the economy.
c. a simplified representation of some aspect of the economy.
d. a computer program that predicts the future of the economy.
1.2. The circular-flow diagram illustrates that, in markets for the factors of production,
a. households are sellers, and firms are buyers.
b. households are buyers, and firms are sellers.
c. households and firms are both buyers.
d. households and firms are both sellers.
1.3. A point inside the production possibilities frontier is
a. efficient but not feasible.
b. feasible but not efficient.
c. both efficient and feasible.
d. neither efficient nor feasible.
1.4.In an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3 cars or mow 1 lawn.
Who has the absolute advantage in car washing, and who has the absolute advantage in lawn
mowing?
a. Mateo in washing, Tyler in mowing.
b. Tyler in washing, Mateo in mowing.
c. Mateo in washing, neither in mowing.
d. Tyler in washing, neither in mowing.
1.5.A change in which of the following will NOT shift the demand curve for hamburgers?
a. the price of hot dogs
b. the price of hamburgers
c. the price of hamburger buns
d. the income of hamburger consumers
1.6. An economy produces hot dogs and hamburgers. If a discovery of the remarkable health
benefits of hot dogs were to change consumers’ preferences, it would
a. expand the production possibilities frontier.
b. contract the production possibilities frontier.
c. move the economy along the production possibilities frontier.
d. move the economy inside the production possibilities frontier.
1.7. All of the following topics fall within the study of microeconomics EXCEPT
a. the impact of cigarette taxes on the smoking behavior of teenagers.
b. the role of Microsoft’s market power in the pricing of software.
c. the effectiveness of antipoverty programs in reducing homelessness.
d. the influence of the government budget deficit on economic growth.
1.8. Which of the following is a positive, rather than a normative, statement?
a. Law X will reduce national income.
b. Law X is a good piece of legislation.
c. Congress ought to pass law X.
d. The president should veto law X.
1.9. Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and
producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000 hours of labor
and producing a shirt takes 4 hours of labor. What will these nations trade?
a. China will export aircraft, and the United States will export shirts.
b. China will export shirts, and the United States will export aircraft.
