Question 1

The idea in economics that "there is no free lunch" means that

Accepted Answer

A) businesses would go bankrupt if they offered free lunches. 
B) the thought of a free lunch is often better than the reality of consuming it. 
C) there are opportunity costs involved even in free lunches. 
D) free lunches used by businesses to attract customers are an inefficient marketing ploy. 
A) businesses would go bankrupt if they offered free lunches. 
B) the thought of a free lunch is often better than the reality of consuming it. 
C) there are opportunity costs involved even in free lunches. 
D) free lunches used by businesses to attract customers are an inefficient marketing ploy.

Question 2

The law of increasing opportunity costs states that

Accepted Answer

A) if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so. 
B) the sum of the costs of producing a particular good cannot rise above the current market price of that good. 
C) if the sum of the costs of producing a particular good rises by a specified percentage, the price of that good must rise by a greater relative amount. 
D) if the prices of all the resources used to produce goods increase, the cost of producing any particular good will increase at the same rate. 
A) if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so. 
B) the sum of the costs of producing a particular good cannot rise above the current market price of that good. 
C) if the sum of the costs of producing a particular good rises by a specified percentage, the price of that good must rise by a greater relative amount. 
D) if the prices of all the resources used to produce goods increase, the cost of producing any particular good will increase at the same rate.

Question 3

The economizing problem for individuals arises from the conflict between having relatively unlimited time and relatively limited jobs to do.

Accepted Answer

A) True 
 B)False

Question 4

The concept of opportunity cost

Accepted Answer

A) is irrelevant in socialistic economies because of central planning. 
B) suggests that the use of resources in any particular line of production means that alternative outputs must be forgone. 
C) is irrelevant if the production possibilities curve is shifting to the right. 
D) suggests that insatiable wants can be fulfilled. 
A) is irrelevant in socialistic economies because of central planning. 
B) suggests that the use of resources in any particular line of production means that alternative outputs must be forgone. 
C) is irrelevant if the production possibilities curve is shifting to the right. 
D) suggests that insatiable wants can be fulfilled.

Question 5

A recurring theme in economics is that people

Accepted Answer

A) have unlimited resources but limited economic wants. 
B) can increase resources by limiting their economic wants. 
C) have limited economic wants and limited resources. 
D) have unlimited economic wants but limited resources. 
A) have unlimited resources but limited economic wants. 
B) can increase resources by limiting their economic wants. 
C) have limited economic wants and limited resources. 
D) have unlimited economic wants but limited resources.

Question 6

The production possibilities curve has

Accepted Answer

A) a positive slope that increases as we move along it from left to right. 
B) a negative slope that increases as we move along it from left to right. 
C) a negative slope that decreases as we move along it from left to right. 
D) a negative slope that is constant as we move along it from left to right. 
A) a positive slope that increases as we move along it from left to right. 
B) a negative slope that increases as we move along it from left to right. 
C) a negative slope that decreases as we move along it from left to right. 
D) a negative slope that is constant as we move along it from left to right.

Question 7

Through specialization and international trade, a nation

Accepted Answer

A) can attain some combination of goods lying outside its production possibilities curve. 
B) can move from a high consumption-low investment to a high investment-low consumption point on its production possibilities curve. 
C) will only attain some combination of goods lying within its production possibilities curve. 
D) will cause its production possibilities curve to shift leftward. 
A) can attain some combination of goods lying outside its production possibilities curve. 
B) can move from a high consumption-low investment to a high investment-low consumption point on its production possibilities curve. 
C) will only attain some combination of goods lying within its production possibilities curve. 
D) will cause its production possibilities curve to shift leftward.

Question 8

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.What is the slope of the budget line if the quantity of apples were measured on the horizontal axis and bananas on the vertical axis?

Accepted Answer

A) -0.5 
B) -0.8 
C) -1.6 
D) -2.0 
A) -0.5 
B) -0.8 
C) -1.6 
D) -2.0

Question 9

If an economy is operating inside its production possibilities curve for consumer goods and capital goods, it

Accepted Answer

A) can only produce more consumer goods by producing fewer capital goods. 
B) can only produce more capital goods by producing fewer consumer goods. 
C) can produce more of both consumer goods and capital goods by using resources that are currently idle. 
D) must improve its technology to produce more output. 
A) can only produce more consumer goods by producing fewer capital goods. 
B) can only produce more capital goods by producing fewer consumer goods. 
C) can produce more of both consumer goods and capital goods by using resources that are currently idle. 
D) must improve its technology to produce more output.

Question 10

Which one of the following is a normative economic statement?

Accepted Answer

A) The unemployment rate fell for the fourth straight month, reflecting the effects from stronger economic growth in the second quarter. 
B) The worsening balance of trade must be corrected if this nation is to remain competitive in the world economy. 
C) Consumer prices are rising at a faster rate than in past months, indicating a renewal of inflationary pressures on the economy. 
D) To help balance the Federal budget, Congress increased the tax on gasoline to its highest level in the past 10 years. 
A) The unemployment rate fell for the fourth straight month, reflecting the effects from stronger economic growth in the second quarter. 
B) The worsening balance of trade must be corrected if this nation is to remain competitive in the world economy. 
C) Consumer prices are rising at a faster rate than in past months, indicating a renewal of inflationary pressures on the economy. 
D) To help balance the Federal budget, Congress increased the tax on gasoline to its highest level in the past 10 years.

Question 11

An assumption is usually made in a two-axes (or two-dimensional) graph that, aside from the two variables under study, the influence of all other variables or factors is assumed to be constant.

Accepted Answer

A) True 
 B)False

Question 12

The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment.

Accepted Answer

A) True 
 B)False

Question 13

In a linear equation relating income and consumption, you know that the intercept is $1,000 and the slope of the line is 4.If income is $20,000, then consumption is

Accepted Answer

A) $8,000. 
B) $9,000. 
C) $10,000. 
D) $11,000. 
A) $8,000. 
B) $9,000. 
C) $10,000. 
D) $11,000.

Question 14

Suppose that a consumer purchases just two goods, X and Y.The Y-intercept of the budget line in this case would indicate the

Accepted Answer

A) maximum dollar amount of budget that the consumer has for good Y. 
B) price that the consumer has to pay for each unit of good Y. 
C) maximum quantity of good Y that the consumer could buy with a given budget. 
D) quantity of good Y that the consumer would want to buy. 
A) maximum dollar amount of budget that the consumer has for good Y. 
B) price that the consumer has to pay for each unit of good Y. 
C) maximum quantity of good Y that the consumer could buy with a given budget. 
D) quantity of good Y that the consumer would want to buy.

Question 15

If society has overallocated resources to a particular activity, then the marginal benefits of the activity would be less than the marginal costs.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is an explanation for the law of increasing opportunity costs?

Accepted Answer

A) Many economic resources are better at producing one product rather than another. 
B) The economy is employing all of its available resources. 
C) In any economy, the state of technology is changing and resources are variable. 
D) The economy is achieving productive efficiency by producing goods at the least cost. 
A) Many economic resources are better at producing one product rather than another. 
B) The economy is employing all of its available resources. 
C) In any economy, the state of technology is changing and resources are variable. 
D) The economy is achieving productive efficiency by producing goods at the least cost.

Question 17

The issues of inflation, unemployment, and business cycles are

Accepted Answer

A) major topics of macroeconomics. 
B) not relevant to the U.S.economy. 
C) the primary focus of microeconomics. 
D) positive economic issues, but not normative issues. 
A) major topics of macroeconomics. 
B) not relevant to the U.S.economy. 
C) the primary focus of microeconomics. 
D) positive economic issues, but not normative issues.

Question 18

If a nation is operating at a point inside the production possibilities curve, it indicates that the nation could

Accepted Answer

A) increase its production of both goods X and Y simultaneously. 
B) increase its production of one good, but only at the expense of reducing the other good. 
C) not produce any more of one of the goods X or Y. 
D) not employ any more resources, because all resources are now employed. 
A) increase its production of both goods X and Y simultaneously. 
B) increase its production of one good, but only at the expense of reducing the other good. 
C) not produce any more of one of the goods X or Y. 
D) not employ any more resources, because all resources are now employed.

Question 19

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 that make up the economic system. 
C) positive economics, but not normative economics. 
D) establishing 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 that make up the economic system. 
C) positive economics, but not normative economics. 
D) establishing an overall view of the operation of the economic system.

Question 20

Which of the following statements is true?

Accepted Answer

A) Microeconomics focuses on specific decision-making units of the economy; macroeconomics examines the economy as a whole. 
B) Macroeconomics focuses on specific decision-making units of the economy; microeconomics examines the economy as a whole. 
C) Every topic in economics is either a microeconomic or a macroeconomic issue; a topic cannot be both. 
D) Topics in microeconomics have public policy implications; topics in macroeconomics do not. 
A) Microeconomics focuses on specific decision-making units of the economy; macroeconomics examines the economy as a whole. 
B) Macroeconomics focuses on specific decision-making units of the economy; microeconomics examines the economy as a whole. 
C) Every topic in economics is either a microeconomic or a macroeconomic issue; a topic cannot be both. 
D) Topics in microeconomics have public policy implications; topics in macroeconomics do not.

Exam 1: Limits, Alternatives, and Choices

The idea in economics that "there is no free lunch" means that

The law of increasing opportunity costs states that

The economizing problem for individuals arises from the conflict between having relatively unlimited time and relatively limited jobs to do.

The concept of opportunity cost

A recurring theme in economics is that people

The production possibilities curve has

Through specialization and international trade, a nation

If an economy is operating inside its production possibilities curve for consumer goods and capital goods, it

Which one of the following is a normative economic statement?

An assumption is usually made in a two-axes (or two-dimensional) graph that, aside from the two variables under study, the influence of all other variables or factors is assumed to be constant.

The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment.

In a linear equation relating income and consumption, you know that the intercept is $1,000 and the slope of the line is 4.If income is $20,000, then consumption is

Suppose that a consumer purchases just two goods, X and Y.The Y-intercept of the budget line in this case would indicate the

If society has overallocated resources to a particular activity, then the marginal benefits of the activity would be less than the marginal costs.

Which of the following statements is an explanation for the law of increasing opportunity costs?

The issues of inflation, unemployment, and business cycles are

If a nation is operating at a point inside the production possibilities curve, it indicates that the nation could

Microeconomics is concerned with

Which of the following statements is true?

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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