Question 1

Assume an economy is incurring unemployment and failing to realize least-cost production.The immediate effect of resolving these problems will be to:

Accepted Answer

A) move the level of actual output closer to the economy's production possibilities curve. 
B) create a less equal distribution of income. 
C) shift its production possibilities curve to the left. 
D) shift its production possibilities curve to the right. 
A) move the level of actual output closer to the economy's production possibilities curve. 
B) create a less equal distribution of income. 
C) shift its production possibilities curve to the left. 
D) shift its production possibilities curve to the right. A

Question 2

If we say that two variables are inversely related, this means that:

Accepted Answer

A) the two graph as an upsloping line. 
B) an increase in one variable is associated with a decrease in the other. 
C) an increase in one variable is associated with an increase in the other. 
D) the resulting relationship can be portrayed by a straight line parallel to the horizontal axis. 
A) the two graph as an upsloping line. 
B) an increase in one variable is associated with a decrease in the other. 
C) an increase in one variable is associated with an increase in the other. 
D) the resulting relationship can be portrayed by a straight line parallel to the horizontal axis. B

Question 3

The slope of a line parallel to the horizontal axis is:

Accepted Answer

A) zero. 
B) one. 
C) infinite. 
D) one-half. 
A) zero. 
B) one. 
C) infinite. 
D) one-half. A

Question 4

Microeconomics is concerned with:

Accepted Answer

A) the aggregate or total levels of income, employment, and output. 
B) a detailed examination of specific economic units which comprise the economic system. 
C) the concealing of detailed information about specific segments of the economy. 
D) the establishing of an overall view of the operation of the economic system. 
A) the aggregate or total levels of income, employment, and output. 
B) a detailed examination of specific economic units which comprise the economic system. 
C) the concealing of detailed information about specific segments of the economy. 
D) the establishing of an overall view of the operation of the economic system.

Question 5

Production possibilities tables for two countries, North Cantina and South Cantina: North Cantina
Production possibilities (alternatives)
  South Cantina
Production possibilities (alternatives)
  Refer to the above tables.If South Cantina is producing at production alternative D, the opportunity cost of the third unit of capital goods is:

Accepted Answer

A) 3 units of consumer goods. 
B) 4 units of consumer goods. 
C) 5 units of consumer goods. 
D) 6 units of consumer goods. 
A) 3 units of consumer goods. 
B) 4 units of consumer goods. 
C) 5 units of consumer goods. 
D) 6 units of consumer goods.

Question 6

If we say that two variables are directly related, this means that:

Accepted Answer

A) the relationship between the two is purely random. 
B) an increase in one variable is associated with a decrease in the other variable. 
C) an increase in one variable is associated with an increase in the other variable. 
D) the two graph as a downsloping line. 
A) the relationship between the two is purely random. 
B) an increase in one variable is associated with a decrease in the other variable. 
C) an increase in one variable is associated with an increase in the other variable. 
D) the two graph as a downsloping line.

Question 7

Refer to the above graph.Which of the following statements is correct?

Accepted Answer

A) Quantity demanded and quantity supplied are independent of price. 
B) Price and quantity demanded are directly related. 
C) Price and quantity supplied are directly related. 
D) Price and quantity supplied are inversely related. 
A) Quantity demanded and quantity supplied are independent of price. 
B) Price and quantity demanded are directly related. 
C) Price and quantity supplied are directly related. 
D) Price and quantity supplied are inversely related.

Question 8

Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment so that investment would be zero.But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion.If the interest rate were 12 percent, $20 billion would be invested.Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate.Refer to the above information.Which of the following correctly expresses the indicated relationship as an equation?

Accepted Answer

A) i = 20 - 4I. 
B) i = 20 -.4I. 
C) i = 24 -.4I. 
D) i = 20 - 10I. 
A) i = 20 - 4I. 
B) i = 20 -.4I. 
C) i = 24 -.4I. 
D) i = 20 - 10I.

Question 9

The individuals and society both face an economic problem.This problem arises from the fact that:

Accepted Answer

A) wants are limited but the resources are not. 
B) resources are scarce relative to individual's wants. 
C) individuals and institutions behave only in their self-interest. 
D) both wants and resources are unlimited. 
A) wants are limited but the resources are not. 
B) resources are scarce relative to individual's wants. 
C) individuals and institutions behave only in their self-interest. 
D) both wants and resources are unlimited.

Question 10

The study of economics exists because:

Accepted Answer

A) government interferes with the efficient allocation of scarce resources. 
B) resources are scarce in relation to human material wants. 
C) the market system is an obstacle to the efficient use of plentiful resources to satisfy constrained wants. 
D) resources are overly abundant as compared to wants; thus, an allocation problem exists. 
A) government interferes with the efficient allocation of scarce resources. 
B) resources are scarce in relation to human material wants. 
C) the market system is an obstacle to the efficient use of plentiful resources to satisfy constrained wants. 
D) resources are overly abundant as compared to wants; thus, an allocation problem exists.

Question 11

The above data suggest that:

Accepted Answer

A) consumption varies inversely with after-tax income. 
B) consumption varies directly with after-tax income. 
C) consumption and after-tax income are unrelated. 
D) a tax increase will increase consumption. 
A) consumption varies inversely with after-tax income. 
B) consumption varies directly with after-tax income. 
C) consumption and after-tax income are unrelated. 
D) a tax increase will increase consumption.

Question 12

Slope of lines are especially important in economics because:

Accepted Answer

A) they measure marginal changes. 
B) they always tell us something about profits. 
C) positive slopes are always preferred to negative slopes. 
D) they always relate to resource and output scarcity. 
A) they measure marginal changes. 
B) they always tell us something about profits. 
C) positive slopes are always preferred to negative slopes. 
D) they always relate to resource and output scarcity.

Question 13

Positive statements are expressions of value judgments.

Accepted Answer

A) True 
 B)False

Question 14

A typical concave production possibilities curve implies:

Accepted Answer

A) that economic resources are scarce. 
B) that society must choose among various attainable combinations of goods. 
C) increasing opportunity costs. 
D) all of the above. 
A) that economic resources are scarce. 
B) that society must choose among various attainable combinations of goods. 
C) increasing opportunity costs. 
D) all of the above.

Question 15

Refer to the diagram below.The concept of opportunity cost is best represented by the:

Accepted Answer

A) shift of the production possibilities curve from PP1 to PP2. 
B) move from B on PP1 to E on PP2. 
C) move from B on PP1 to C on PP1. 
D) move from D inside PP1 to B on PP1. 
A) shift of the production possibilities curve from PP1 to PP2. 
B) move from B on PP1 to E on PP2. 
C) move from B on PP1 to C on PP1. 
D) move from D inside PP1 to B on PP1.

Question 16

Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

Accepted Answer

A) Ben's statement is normative, but Holly's is positive. 
B) Holly's statement is normative, but Ben's is positive. 
C) Both statements are normative. 
D) Both statements are positive. 
A) Ben's statement is normative, but Holly's is positive. 
B) Holly's statement is normative, but Ben's is positive. 
C) Both statements are normative. 
D) Both statements are positive.

Question 17

Certain inherently desirable products such as education and health care should be produced so long as resources are available.

Accepted Answer

A) True 
 B)False

Question 18

The future location of the economy's production possibilities curve will be affected by:

Accepted Answer

A) the current division of domestic output between consumption and capital goods. 
B) the rate of technological progress. 
C) the growth of the economy's supplies of resources. 
D) all of the above. 
A) the current division of domestic output between consumption and capital goods. 
B) the rate of technological progress. 
C) the growth of the economy's supplies of resources. 
D) all of the above.

Question 19

The production possibilities curve below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy.   Refer to the above table.What is the total opportunity cost of producing three units of capital goods?

Accepted Answer

A) 6 units of consumer goods 
B) 7 units of consumer goods 
C) 15 units of consumer goods 
D) 22 units of consumer goods 
A) 6 units of consumer goods 
B) 7 units of consumer goods 
C) 15 units of consumer goods 
D) 22 units of consumer goods

Question 20

A positive statement is concerned with:

Accepted Answer

A) some goal which is desirable to society. 
B) what should be. 
C) what is. 
D) the formulation of economic policy. 
A) some goal which is desirable to society. 
B) what should be. 
C) what is. 
D) the formulation of economic policy.

Exam 1: Part B: Limits, Alternatives, and Choices

Assume an economy is incurring unemployment and failing to realize least-cost production.The immediate effect of resolving these problems will be to:

If we say that two variables are inversely related, this means that:

The slope of a line parallel to the horizontal axis is:

Microeconomics is concerned with:

If we say that two variables are directly related, this means that:

Refer to the above graph.Which of the following statements is correct?

The individuals and society both face an economic problem.This problem arises from the fact that:

The study of economics exists because:

The above data suggest that:

Slope of lines are especially important in economics because:

Positive statements are expressions of value judgments.

A typical concave production possibilities curve implies:

Refer to the diagram below.The concept of opportunity cost is best represented by the:

Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

Certain inherently desirable products such as education and health care should be produced so long as resources are available.

The future location of the economy's production possibilities curve will be affected by:

The production possibilities curve below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy. Refer to the above table.What is the total opportunity cost of producing three units of capital goods?

A positive statement is concerned with:

Part A: Limits, Alternatives, and Choices

Part A: The Market System and the Circular Flow

Part B: The Market System and the Circular Flow

Part A: Demand, Supply, and Market Equilibrium

Part B: Demand, Supply, and Market Equilibrium

Part A: Market Failures: Public Goods and Externalities

Part B: Market Failures: Public Goods and Externalities

Part A: Governments Role and Government Failure

Part B: Governments Role and Government Failure

Part A: An Introduction to Macroeconomics

Part B: An Introduction to Macroeconomics

Part A: Measuring the Economys Output

Part B: Measuring the Economys Output

Part A: Economic Growth

Part B: Economic Growth

Part A: Business Cycles, Unemployment, and Inflation

Part B: Business Cycles, Unemployment, and Inflation

Part A: Basic Macroeconomic Relationships

Part B: Basic Macroeconomic Relationships

Part A: The Aggregate Expenditures Model

Part B: The Aggregate Expenditures Model

Part A: Aggregate Demand and Aggregate Supply

Part B: Aggregate Demand and Aggregate Supply

Part A: Fiscal Policy, Deficits, Surpluses, and Debt

Part B: Fiscal Policy, Deficits, Surpluses, and Debt

Part A: Money, Banking, and Money Creation

Part B: Money, Banking, and Money Creation

Part A: Interest Rates and Monetary Policy

Part B: Interest Rates and Monetary Policy

Part A: Long-Run Macroeconomic Adjustments

Part B: Long-Run Macroeconomic Adjustments

Part A: International Trade

Part B: International Trade

Part C: Financial Economics

Part A: The Balance of Payments and Exchange Rates

Part B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

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