Question 1

The economizing problem is

Accepted Answer

A) the need to make choices because economic wants exceed economic means. 
B) how to distribute resources equally among all members of society. 
C) that people's means often exceed their wants. 
D) that people do not know how to rationally allocate resources. 
A) the need to make choices because economic wants exceed economic means. 
B) how to distribute resources equally among all members of society. 
C) that people's means often exceed their wants. 
D) that people do not know how to rationally allocate resources.

Question 2

Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas.The price of an apple is $1.50 and the price of a banana is $0.75.If the consumer spent all of her budget on just apples or just bananas, how many apples or bananas maximum would she be able to buy?

Accepted Answer

A) 12 apples or 8 bananas 
B) 8 apples or 12 bananas 
C) 16 apples or 12 bananas 
D) 8 apples or 16 bananas 
A) 12 apples or 8 bananas 
B) 8 apples or 12 bananas 
C) 16 apples or 12 bananas 
D) 8 apples or 16 bananas

Question 3

An economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy.

Accepted Answer

A) True 
 B)False

Question 4

Consider an economy that is producing inside its production possibilities curve.This economy could move closer toward its production possibilities curve by

Accepted Answer

A) distributing incomes more equally. 
B) employing more of its available resources. 
C) increasing the levels of wages and prices. 
D) acquiring additional resources. 
A) distributing incomes more equally. 
B) employing more of its available resources. 
C) increasing the levels of wages and prices. 
D) acquiring additional resources.

Question 5

A well-tested economic theory is often called

Accepted Answer

A) a hypothesis. 
B) a prototype. 
C) a principle. 
D) an anomaly. 
A) a hypothesis. 
B) a prototype. 
C) a principle. 
D) an anomaly.

Question 6

Which of the following statements is correct?

Accepted Answer

A) The value of the independent variable is determined by the value of the dependent variable. 
B) The value of the dependent variable is determined by the value of the independent variable. 
C) The dependent variable designates the "cause" and the independent variable the "effect." 
D) Dependent variables graph as upsloping lines; independent variables graph as downsloping lines. 
A) The value of the independent variable is determined by the value of the dependent variable. 
B) The value of the dependent variable is determined by the value of the independent variable. 
C) The dependent variable designates the "cause" and the independent variable the "effect." 
D) Dependent variables graph as upsloping lines; independent variables graph as downsloping lines.

Question 7

If an inverse relationship exists between two variables, then

Accepted Answer

A) as one variable increases, the other decreases. 
B) as one variable increases, so does the other. 
C) the two variables are close substitutes for each other. 
D) both variables increase over time. 
A) as one variable increases, the other decreases. 
B) as one variable increases, so does the other. 
C) the two variables are close substitutes for each other. 
D) both variables increase over time.

Question 8

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 9

Suppose that a consumer purchases just two goods, X and Y.The slope of the budget line would indicate the

Accepted Answer

A) opportunity cost of good Y in terms of good X given up for each unit of Y. 
B) opportunity cost of good X in terms of good Y given up for each unit of X. 
C) maximum quantity of good Y that the consumer could buy with a given budget. 
D) maximum quantity of good X that the consumer could buy with a given budget. 
A) opportunity cost of good Y in terms of good X given up for each unit of Y. 
B) opportunity cost of good X in terms of good Y given up for each unit of X. 
C) maximum quantity of good Y that the consumer could buy with a given budget. 
D) maximum quantity of good X that the consumer could buy with a given budget.

Question 10

All of the following would affect the position and shape of a nation's production possibilities curve, except

Accepted Answer

A) the amount of labor available. 
B) the level of unemployment. 
C) the amount of the capital resources. 
D) the rate of technological progress. 
A) the amount of labor available. 
B) the level of unemployment. 
C) the amount of the capital resources. 
D) the rate of technological progress.

Question 11

(Consider This) An exception to the advice "go to college, stay in college, and earn a degree" occurs when

Accepted Answer

A) tuition expenses are high and rising. 
B) the opportunity cost of attending college is extraordinarily high. 
C) the price of textbooks is high and rising. 
D) the economy is growing rapidly and jobs are plentiful. 
A) tuition expenses are high and rising. 
B) the opportunity cost of attending college is extraordinarily high. 
C) the price of textbooks is high and rising. 
D) the economy is growing rapidly and jobs are plentiful.

Question 12

Suppose that Julia receives a $20 gift card for the local coffee shop, where she only buys lattes and muffins.If the price of a latte is $4 and the price of a muffin is $2, then we can conclude that Julia

Accepted Answer

A) should only buy muffins. 
B) should only buy lattes. 
C) can buy 5 lattes or 10 muffins if she chooses to buy only one of the two goods. 
D) can buy 5 lattes and 10 muffins with her $20 gift card. 
A) should only buy muffins. 
B) should only buy lattes. 
C) can buy 5 lattes or 10 muffins if she chooses to buy only one of the two goods. 
D) can buy 5 lattes and 10 muffins with her $20 gift card.

Question 13

Which of the following will enable a nation to obtain a combination of consumer goods and capital goods outside its production possibilities curve?

Accepted Answer

A) full employment 
B) international specialization and trade 
C) full production 
D) productive efficiency 
A) full employment 
B) international specialization and trade 
C) full production 
D) productive efficiency

Question 14

The slope of the typical production possibilities curve

Accepted Answer

A) is positive. 
B) increases as one moves southeast along the curve. 
C) is constant as one moves down the curve. 
D) decreases as one moves southeast along the curve. 
A) is positive. 
B) increases as one moves southeast along the curve. 
C) is constant as one moves down the curve. 
D) decreases as one moves southeast along the curve.

Question 15

A nation's production possibilities curve shows the maximum combinations of resources that a nation can use.

Accepted Answer

A) True 
 B)False

Question 16

(Last Word) If variables X and Y are positively correlated, this means that

Accepted Answer

A) X is the cause of Y. 
B) Y is the cause of X. 
C) causation necessarily exists, but we don't know whether X or Y is the cause. 
D) causation may or may not exist between X and Y. 
A) X is the cause of Y. 
B) Y is the cause of X. 
C) causation necessarily exists, but we don't know whether X or Y is the cause. 
D) causation may or may not exist between X and Y.

Question 17

Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income.Letting C represent consumption and Y represent income, the equation that summarizes this relationship is

Accepted Answer

A) C = 80 + 100Y. 
B) C = 100 + .8Y. 
C) C = 100 + 80Y. 
D) C = 80 + .1Y. 
A) C = 80 + 100Y. 
B) C = 100 + .8Y. 
C) C = 100 + 80Y. 
D) C = 80 + .1Y.

Question 18

Which of the following most closely relates to the idea of opportunity costs?

Accepted Answer

A) trade-offs 
B) economic growth 
C) technological change 
D) capitalism 
A) trade-offs 
B) economic growth 
C) technological change 
D) capitalism

Question 19

The production possibilities curve illustrates the basic principle that

Accepted Answer

A) the production of more of any one good will in time require smaller and smaller sacrifices of other goods. 
B) an economy will automatically obtain full employment of its resources. 
C) 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. 
D) an economy's capacity to produce increases in proportion to its population size. 
A) the production of more of any one good will in time require smaller and smaller sacrifices of other goods. 
B) an economy will automatically obtain full employment of its resources. 
C) 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. 
D) an economy's capacity to produce increases in proportion to its population size.

Question 20

One basic difference between "labor" and "entrepreneur" is that

Accepted Answer

A) labor is hired by a firm, whereas the entrepreneur owns the firm. 
B) an entrepreneur has high-level skills, whereas labor does not. 
C) labor performs manual work, whereas an entrepreneur performs mental work. 
D) education is important for an entrepreneur but not for labor. 
A) labor is hired by a firm, whereas the entrepreneur owns the firm. 
B) an entrepreneur has high-level skills, whereas labor does not. 
C) labor performs manual work, whereas an entrepreneur performs mental work. 
D) education is important for an entrepreneur but not for labor.

Exam 1: Limits, Alternatives, and Choices

The economizing problem is

An economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy.

Consider an economy that is producing inside its production possibilities curve.This economy could move closer toward its production possibilities curve by

A well-tested economic theory is often called

Which of the following statements is correct?

If an inverse relationship exists between two variables, then

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

Suppose that a consumer purchases just two goods, X and Y.The slope of the budget line would indicate the

All of the following would affect the position and shape of a nation's production possibilities curve, except

(Consider This) An exception to the advice "go to college, stay in college, and earn a degree" occurs when

Suppose that Julia receives a $20 gift card for the local coffee shop, where she only buys lattes and muffins.If the price of a latte is $4 and the price of a muffin is $2, then we can conclude that Julia

Which of the following will enable a nation to obtain a combination of consumer goods and capital goods outside its production possibilities curve?

The slope of the typical production possibilities curve

A nation's production possibilities curve shows the maximum combinations of resources that a nation can use.

(Last Word) If variables X and Y are positively correlated, this means that

Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income.Letting C represent consumption and Y represent income, the equation that summarizes this relationship is

Which of the following most closely relates to the idea of opportunity costs?

The production possibilities curve illustrates the basic principle that

One basic difference between "labor" and "entrepreneur" is that

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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