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1. The author of the textbook defines economics as the
a.
science of efficiency.
b.
science of scarcity.
c.
study of markets.
d.
study of human activity.
2. When economists speak of scarcity, they are referring to the
a.
condition in which society is not employing all its resources in an efficient way.
b.
condition in which people's wants outstrip the limited resources available to satisfy those wants.
c.
economic condition that exists in only very poor countries of the world.
d.
condition in which society produces too many frivolous goods and not enough socially desirable goods.
3. Which of the following is not one of the four broad categories of resources?
a.
labor
b.
government
c.
capital
d.
entrepreneurship
e.
land
4. Produced goods used as inputs for the production of other goods comprise the resource known as
a.
natural resources.
b.
services.
c.
capital.
d.
entrepreneurship.
5. Entrepreneurship is
a.
the talent for organizing the use of land, labor and capital, among other things.
b.
skill in influencing government regulators and legislators.
c.
accumulated technical knowledge in using labor and capital.
d.
knowledge of the particular natural resources to be found in a given area.
6. Some years ago, chemists at 3M Corporation were trying to create a super-strong glue. Somehow they got their
molecules twisted and came up with one of the weakest glues ever made. But, rather than pouring it down the drain, they
tried coating some paper with it, and the "Post-It Note" was born. In this case, 3M was acting as a(n)
a.
utility.
b.
rationer.
c.
entrepreneur.
d.
abstraction.
7. The physical and mental talents people bring to production processes comprise the resource called
a.
entrepreneurship.
b.
natural resources.
c.
capital.
d.
labor.
8. The headline in the newspaper reads "County Supervisors Debate Building New Schools." The headline relates closest
to which economic concept?
a.
goods and bads
b.
utility
c.
choice
d.
efficiency
9. The opportunity cost of attending college is
a.
the money one spends on college tuition, books, and so forth.
b.
the highest valued alternative one forfeits to attend college.
c.
the least valued alternative one forfeits to attend college.
d.
equal to the salary one will earn when one graduates from college.
10. Here are three things you could do if you do not attend your economics class: watch television with some friends (you
value this at $25), read a good novel (you value this at $13), or go in to work (you could earn $20 during the economics
class). The opportunity cost of going to your economics class is
a.
$20, because this is the only alternative of the three where you actually receive a monetary payment.
b.
$13, because this is the lowest valued alternative forfeited.
c.
$25, because this is the highest valued alternative forfeited.
d.
$58, because this is the total dollar sum of the alternatives forfeited.
11. It usually takes less time to buy a six-pack of 7-Up, a loaf of bread, and a half-gallon of ice cream at a small
convenience store (such as a 7-Eleven) than at a large, full-service grocery store. Which of the following persons is most
likely to buy these items at a convenience store?
a.
a person with a high opportunity cost of time
b.
a person with a low opportunity cost of time
c.
a person who is out of work
d.
a person who works at a full-service grocery store
12. Minerals, animals, water and forests are all considered to be part of the resource category known as
a.
capital
b.
entrepreneurship
c.
labor
d.
land
e.
none of the above
13. The higher the opportunity cost of attending college,
a.
the more likely an individual will go to college.
b.
the more economics classes an individual will take at college.
c.
the fewer economics classes an individual will take at college.
d.
the less likely an individual will go to college.
14. Which of the following is an example of a positive economic statement?
a.
The U.S. public should devote more resources to education.
b.
The poor should pay lower taxes and the rich should pay higher taxes.
c.
Soap operas should be taken off television.
d.
If you drop a ball from the top of a building, it will fall to the ground.
15. Attempts to determine "what is" are part of __________ economics.
a.
positive
b.
normative
c.
positive and normative
d.
neither positive nor normative
16. Microeconomics is the branch of economics that deals with
a.
highly aggregated markets or the entire economy.
b.
the production side of the economy, exclusively.
c.
the buying side of the economy, exclusively.
d.
human behavior and choices as they relate to relatively small units --- an individual, a firm, an industry.
17. Which of the following is a microeconomics topic?
a.
the study of how prices are determined in the computer industry
b.
the study of unemployment in the economy
c.
the study of how changes in the nation's money supply affect the nation's output
d.
a and c
e.
b and c
18. Which of the following is a positive macroeconomics statement?
a.
The central bank should increase the nation's money supply.
b.
The increase in the nation's money supply helped push the nation's unemployment rate down in the short run.
c.
Ford Motor Company's new advertising campaign ended up hurting General Motors' sales.
d.
The local government ought to spend more on recreational facilities.
19. Which of the following is a normative macroeconomics statement?
a.
The central bank should increase the nation's money supply.
b.
The increase in the nation's money supply helped push the nation's unemployment rate down in the short run.
c.
Ford Motor Company's new advertising campaign ended up hurting General Motors' sales.
d.
The local government ought to spend more on recreational facilities.
20. Which of the following is a positive microeconomics statement?
a.
The central bank should increase the nation's money supply.
b.
The increase in the nation's money supply helped push the nation's unemployment rate down in the short run.
c.
Ford Motor Company's new advertising campaign ended up hurting General Motors's sales.
d.
The local government ought to spend more on recreational activities.
21. The condition in an economy that makes a "rationing device" a necessity is:
a.
the economy is organized around free markets.
b.
the economy is centrally planned by the government.
c.
scarcity exists.
d.
there are fewer types of goods than there are people in the economy.
22. The latest Taylor Swift album is available to be downloaded for $18.99. Is this price a rationing device?
a.
No, the album will be sold to anyone having the required number of dollars.
b.
Yes, because the album will only be purchased by people who are willing and able to pay $18.99.
c.
No, for price to be a rationing device, it must be so high that only one unit of the item is sold.
d.
Yes, since that is a reasonable price.
23. What is the most prominent rationing device you will likely find at your campus bookstore?
a.
dollar price
b.
brute force
c.
anti-theft tags on the high-priced items
d.
none of the above
24. Economists believe that people's wants are
a.
finite.
b.
infinite.
c.
irrational.
d.
unimportant because needs are more important than wants.
25. In every economy people vie for the economy's rationing device, a process called
a.
competition.
b.
entrepreneurship.
c.
marginal benefit.
d.
positive economics.
26. Scarcity means
a.
wants are greater than the limited resources available to satisfy these wants.
b.
wants are less than the limited resources available to satisfy these wants.
c.
resources are infinite.
d.
wants are limited.
e.
both c and d
27. The need to make choices is most closely related to the economic concept of
a.
opportunity cost.
b.
efficiency.
c.
inefficiency.
d.
utility.
e.
disutility.
28. Opportunity cost is the value of
a.
the best (or most highly valued) forfeited alternative.
b.
the chosen alternative.
c.
a free good.
d.
all forfeited alternatives.
29. In all cases, positive economics deals with
a.
what is.
b.
what should be.
c.
relatively small units in the economy.
d.
aggregates or the entire economy.
30. In all cases, normative economics deals with
a.
what is.
b.
what should be.
c.
relatively small units in the economy.
d.
the entire economy.
31. In all cases, microeconomics deals with
a.
what is.
b.
what should be.
c.
relatively small units in the economy.
d.
the entire economy.
32. In all cases, macroeconomics deals with
a.
what is.
b.
what should be.
c.
relatively small units in the economy.
d.
the entire economy.
33. Positive economics is concerned with
a.
value judgments.
b.
cause-effect relationships.
c.
observations that cannot be proved.
d.
both b and c
34. Normative economics is concerned with
a.
value judgments.
b.
opinions.
c.
cause-effect relationships.
d.
observations that can be proved.
e.
both a and b
35. In economics, a synonym for utility is
a.
usefulness.
b.
satisfaction.
c.
sacrifice.
d.
a service.
36. The synonym economists commonly use for additional is
a.
capital.
b.
rational.
c.
marginal.
d.
economic.
37. Decision making "at the margin" means making a choice based on __________ of a decision.
a.
the total benefits
b.
the total costs
c.
comparing the total benefits and costs
d.
comparing the additional benefits and costs
38. Several years ago, a bookstore chain extended its closing time from 9 p.m. to 10 p.m. Now it is considering a further
extension to 11 p.m. In making this marginal decision, the results of having gone from 9 p.m. to 10 p.m. are
a.
no longer relevant to the current decision.
b.
relevant if the marginal costs and benefits were unequal.
c.
relevant since they are part of the calculation of total costs and benefits.
d.
relevant if the marginal costs and benefits were equal.
39. At the optimal or efficient level of an activity, the activity’s marginal benefit must
a.
be zero.
b.
be greater than zero.
c.
equal the marginal cost of the activity.
d.
exceed the marginal cost of the activity.
40. Which of the following is a positive economic statement?
a.
The temperature is too high today.
b.
The temperature is 105 degrees today.
c.
It is too hot to jog today.
d.
I enjoy summer evenings when it cools off.
41. In economics, scarcity implies
a.
disutility.
b.
utility.
c.
choice.
d.
inefficiency.
e.
a, c, and d
42. All sellers may be tempted to raise the price of what they sell, but a negative unintended effect of raising the price
could be __________ in units sold large enough to __________ the seller's total revenue earned.
a.
an increase; raise
b.
an increase; lower
c.
a decrease; raise
d.
a decrease; lower
43. Most states have instituted mandatory seatbelt laws to reduce traffic fatalities. An economist may point out that an
unintended effect of these laws is
a.
an increase in the price of automobiles, further reducing fatalities.
b.
an increase in driving speed, reducing the number of accidents.
c.
a decrease in driving speed, further reducing fatalities.
d.
an increase in risky driving behavior, increasing fatalities.
44. A mandatory seatbelt law ends up raising the number of traffic fatalities if it lowers fatalities per accident from 0.12 to
0.08 while raising the number of accidents per period from 400,000 to any more than
a.
480,000.
b.
600,000.
c.
660,000.
d.
770,000.
45. A mandatory seatbelt law ends up raising the number of traffic fatalities if it lowers fatalities per accident from 0.11 to
0.08 while raising the number of accidents per period from 100,000 to any more than
a.
108,000.
b.
111,111.
c.
137,500.
d.
110,000.
46. A mandatory seatbelt law ends up raising the number of traffic fatalities if it lowers fatalities per accident from 0.10 to
0.07 while raising the number of accidents per period from 35,000 to any more than
a.
35,000.
b.
38,500.
c.
37,450.
d.
50,000.
47. The branch of economics that studies the decisions of individuals and firms is called
a.
macroeconomics.
b.
microeconomics.
c.
microeconomics and macroeconomics.
d.
positive economics.
e.
normative economics.
48. Which of the following would NOT be considered a macroeconomic topic?
a.
the reasons for a decline in the price of crude oil
b.
the cause of a downturn in the economy
c.
the effect of the government budget deficit on inflation
d.
the causes of inflation and unemployment
49. Which of the following statements is false?
a.
There are always opportunity costs to making choices.
b.
Because of scarcity, choices must be made.
c.
Elementary education at public schools is free.
d.
When government builds a new highway, taxpayers end up with less of some of the things they would
otherwise have.
50. Which of the following issues is most unlikely to be addressed by an economist practicing positive economics?
a.
the relationship between the minimum wage and the number of unemployed unskilled workers
b.
the effect of a minimum wage increase on inner-city crime rates
c.
the desirability of a minimum wage increase
d.
the consequences of implementing a minimum wage law in China
51. The question of how a tax change might impact U.S. economic output is most closely associated with the study of
a.
microeconomics.
b.
managerial economics.
c.
macroeconomics.
d.
consumer economics.
52. Amy's opportunity cost of going to the movies is
a.
the price of the ticket.
b.
zero, if she has a free pass to the movie.
c.
the price of the ticket plus the value to Amy of what she would have chosen to do with her time had she not
chosen to go to the movies.
d.
both b and c
53. The opportunity cost of attending college
a.
consists of the tuition costs only.
b.
consists of the tuition costs plus the costs of room and board and other expenses.
c.
is zero, if the student receives a scholarship that covers the costs of tuition, room and board, and other
expenses.
d.
varies from person to person.
e.
both b and c
54. Prior to attending college, Marvin is offered a lucrative four-year contract as an actor in a daytime soap opera.
Assuming that acting and attending college are Marvin's preferred alternatives and that he must choose between the two,
his opportunity cost of attending college after receiving the offer ________________, making him ____________ likely
to attend college than before he received the offer.
a.
increases; less
b.
decreases; more
c.
stays the same; equally likely
d.
increases; more
e.
decreases; less
55. If it is discovered that using drugs enhances a person's chance of contracting a lethal disease, the cost of using drugs
a.
increases.
b.
decreases.
c.
is not affected.
d.
is irrelevant, since they are illegal anyway.
56. The study of an economy's price level is explicitly a part of
a.
macroeconomics.
b.
microeconomics.
c.
positive economics.
d.
normative economics.
57. Opportunity cost is the __________ alternative forfeited when a choice is made.
a.
least-valued
b.
most highly-valued
c.
most convenient
d.
most recently considered
58. In an interview an economist states, "This problem should be of greater concern to the federal government." We can
explicitly put this statement in the category of
a.
microeconomics.
b.
macroeconomics.
c.
positive economics.
d.
normative economics.
59. The absence of value judgments is the essence of
a.
normative economics.
b.
positive economics.
c.
microeconomics.
d.
macroeconomics.
60. If variable X goes up as result of variable Y going down, then X and Y are
a.
directly related.
b.
inversely related.
c.
independent.
d.
positively related.
61. If variable X goes down as a result of variable Y going down, then X and Y are
a.
directly related.
b.
negatively related.
c.
inversely related.
d.
independent.
62. Two variables are independent if as one variable __________, the other variable __________.
a.
rises; rises.
b.
falls; falls.
c.
rises; falls.
d.
changes; does not change.
63. The concept that relates how much one variable changes as another variable changes is
a.
slope.
b.
line.
c.
curve.
d.
graph.
64. Let X be the number of hours you spend studying for an exam on Wednesday afternoon and Y be your chances of
winning the Wednesday night state lottery. What kind of a relationship do you most likely expect between X and Y?
a.
direct
b.
inverse
c.
linear
d.
45-degree line
e.
independent
65. Scarcity is defined as the condition in which
a.
both wants and resources are limited.
b.
wants are finite and resources infinite.
c.
both wants and resources are infinite.
d.
wants are infinite and resources finite.
66. The reason people can't have everything they want is because
a.
people are selfish.
b.
scarcity exists.
c.
there is not enough economic growth in the world.
d.
none of the above
67. In the textbook, economics is defined as the science of
a.
money and business.
b.
choices.
c.
scarcity.
d.
price.
e.
individuals' actions.
68. Something that provides utility is called a
a.
good.
b.
bad.
c.
want.
d.
need.
e.
a and d
69. Something that provides disutility is called a
a.
good.
b.
want.
c.
need.
