Question 1

The marginal cost curve is

Accepted Answer

A)  upsloping because of increasing marginal opportunity costs. 
B)  upsloping because successive units of a specific product yield less and less extra utility. 
C)  downsloping because of increasing marginal opportunity costs. 
D)  downsloping because successive units of a specific product yield less and less extra utility. 
A)  upsloping because of increasing marginal opportunity costs. 
B)  upsloping because successive units of a specific product yield less and less extra utility. 
C)  downsloping because of increasing marginal opportunity costs. 
D)  downsloping because successive units of a specific product yield less and less extra utility.

Question 2

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 3

The term "other things equal" means that

Accepted Answer

A)  the associated statement is normative. 
B)  many variables affect the variable under consideration. 
C)  a number of relevant variables are assumed to be constant. 
D)  when variable X increases, so does related variable Y. 
A)  the associated statement is normative. 
B)  many variables affect the variable under consideration. 
C)  a number of relevant variables are assumed to be constant. 
D)  when variable X increases, so does related variable Y.

Question 4

Rational individuals may make different choices because their preferences and circumstances differ.

Accepted Answer

A) True 
 B)False

Question 5

A person observes that consumer prices often fall when a nation experiences economic growth. The person then concludes that falling consumer prices lead to economic growth. This would be an example of

Accepted Answer

A)  the fallacy of composition. 
B)  biases. 
C)  confusing correlation and causation. 
D)  the use of loaded terminology. 
A)  the fallacy of composition. 
B)  biases. 
C)  confusing correlation and causation. 
D)  the use of loaded terminology.

Question 6

Economic theories

Accepted Answer

A)  are useless because they are not based on laboratory experimentation. 
B)  that are true for individual economic units are never true for the economy as a whole. 
C)  are generalizations based on hypotheses tested and supported with observed facts. 
D)  are abstractions and therefore of no application to real situations. 
A)  are useless because they are not based on laboratory experimentation. 
B)  that are true for individual economic units are never true for the economy as a whole. 
C)  are generalizations based on hypotheses tested and supported with observed facts. 
D)  are abstractions and therefore of no application to real situations.

Question 7

According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because

Accepted Answer

A)  people are greedy. 
B)  productive resources are limited. 
C)  human beings are inherently insecure. 
D)  people are irrational. 
A)  people are greedy. 
B)  productive resources are limited. 
C)  human beings are inherently insecure. 
D)  people are irrational.

Question 8

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 9

Suppose that Scoobania, which has full employment, can obtain 1 unit of capital goods by sacrificing 2 units of consumer goods domestically but can obtain 1 unit of capital goods from another country by trading 1 unit of consumer goods for it. This reality illustrates

Accepted Answer

A)  a rightward (outward) shift of the production possibilities curve. 
B)  increasing opportunity costs. 
C)  achieving points beyond the production possibilities curve through international specialization and trade. 
D)  productive efficiency. 
A)  a rightward (outward) shift of the production possibilities curve. 
B)  increasing opportunity costs. 
C)  achieving points beyond the production possibilities curve through international specialization and trade. 
D)  productive efficiency.

Question 10

Answer the question on the basis of the following production possibilities tables for two countries, North Cantina and South Cantina.   Refer to the tables. If South Cantina is producing at production alternative D, the opportunity cost of the third unit of capital goods will be

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 11

Answer the question on the basis of the following information. 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 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 information. Which of the following is an accurate verbal statement of the described relationship?

Accepted Answer

A)  There is no regular or dependable relationship between business investment and the interest rate. 
B)  The amount of business investment is unaffected by changes in the interest rate. 
C)  Investment spending by businesses varies inversely with the interest rate. 
D)  Investment spending by businesses varies directly with the interest rate. 
A)  There is no regular or dependable relationship between business investment and the interest rate. 
B)  The amount of business investment is unaffected by changes in the interest rate. 
C)  Investment spending by businesses varies inversely with the interest rate. 
D)  Investment spending by businesses varies directly with the interest rate.

Question 12

The production possibilities curve is a graph of

Accepted Answer

A)  the maximum amounts of labor and capital resources available for production. 
B)  various combinations of goods and services among which consumers are indifferent in terms of preference. 
C)  the maximum combinations of products that can be produced with the available resources. 
D)  the maximum amount of capital and labor that the economy can employ. 
A)  the maximum amounts of labor and capital resources available for production. 
B)  various combinations of goods and services among which consumers are indifferent in terms of preference. 
C)  the maximum combinations of products that can be produced with the available resources. 
D)  the maximum amount of capital and labor that the economy can employ.

Question 13

A reduction in the level of unemployment would have which effect with respect to the nation's production possibilities curve?

Accepted Answer

A)  It would shift the curve to the right. 
B)  It would shift the curve to the left. 
C)  It would not shift the curve; it would be represented by a movement from a point inside the curve toward a point on the curve. 
D)  It would not shift the curve; it would be represented by a movement from a point on the curve to a point outside the curve. 
A)  It would shift the curve to the right. 
B)  It would shift the curve to the left. 
C)  It would not shift the curve; it would be represented by a movement from a point inside the curve toward a point on the curve. 
D)  It would not shift the curve; it would be represented by a movement from a point on the curve to a point outside the curve.

Question 14

The process of observing real-world behavior, developing hypotheses, testing them against facts, then using the results to construct theories is called

Accepted Answer

A)  opportunity cost estimation. 
B)  the scientific method. 
C)  marginal analysis. 
D)  normative analysis. 
A)  opportunity cost estimation. 
B)  the scientific method. 
C)  marginal analysis. 
D)  normative analysis.

Question 15

Because economic generalizations are simplifications from reality, they are impractical and useless.

Accepted Answer

A) True 
 B)False

Question 16

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities schedule.   According to the production possibilities schedule, a combination of 4 tanks and 650 autos is

Accepted Answer

A)  attainable and involves an efficient use of society's resources. 
B)  attainable but would not be in the best interests of a strong national defense. 
C)  less than (or below) the maximum attainable output combination. 
D)  not attainable because the nation does not have sufficient resources. 
A)  attainable and involves an efficient use of society's resources. 
B)  attainable but would not be in the best interests of a strong national defense. 
C)  less than (or below) the maximum attainable output combination. 
D)  not attainable because the nation does not have sufficient resources.

Question 17

Answer the question on the basis of the data given in the following production possibilities table.   Refer to the table. If the economy is producing at production alternative C, the opportunity cost of the 10th unit of consumer goods will be

Accepted Answer

A)  4 units of capital goods. 
B)  2 units of capital goods. 
C)  3 units of capital goods. 
D)  ⅓ of a unit of capital goods. 
A)  4 units of capital goods. 
B)  2 units of capital goods. 
C)  3 units of capital goods. 
D)  ⅓ of a unit of capital goods.

Question 18

If an economy is operating on its production possibilities curve for consumer goods and capital goods, this means that

Accepted Answer

A)  it is impossible to produce more consumer goods. 
B)  resources cannot be reallocated between the two goods. 
C)  it is impossible to produce more capital goods. 
D)  more consumer goods can only be produced at the cost of fewer capital goods. 
A)  it is impossible to produce more consumer goods. 
B)  resources cannot be reallocated between the two goods. 
C)  it is impossible to produce more capital goods. 
D)  more consumer goods can only be produced at the cost of fewer capital goods.

Question 19

Which of the following is a microeconomic statement?

Accepted Answer

A)  The real domestic output increased by 1.6 percent last year. 
B)  Unemployment was 5.2 percent of the labor force last year. 
C)  The price of smartphones declined 2.8 percent last year. 
D)  The general price level increased by 1.1 percent last year. 
A)  The real domestic output increased by 1.6 percent last year. 
B)  Unemployment was 5.2 percent of the labor force last year. 
C)  The price of smartphones declined 2.8 percent last year. 
D)  The general price level increased by 1.1 percent last year.

Question 20

The notion of "purposeful behavior" in the economic perspective suggests that

Accepted Answer

A)  people will tend to stick with a particular choice for a long period of time. 
B)  economic analysis will provide people with a single "right" way to behave. 
C)  economists do not believe that people can sometimes behave impulsively. 
D)  one person's choice may differ from another's if their circumstances and information differ. 
A)  people will tend to stick with a particular choice for a long period of time. 
B)  economic analysis will provide people with a single "right" way to behave. 
C)  economists do not believe that people can sometimes behave impulsively. 
D)  one person's choice may differ from another's if their circumstances and information differ.

Exam 1: Limits, Alternatives, and Choices

The marginal cost curve is

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

The term "other things equal" means that

Rational individuals may make different choices because their preferences and circumstances differ.

A person observes that consumer prices often fall when a nation experiences economic growth. The person then concludes that falling consumer prices lead to economic growth. This would be an example of

Economic theories

According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because

The law of increasing opportunity costs states that

Suppose that Scoobania, which has full employment, can obtain 1 unit of capital goods by sacrificing 2 units of consumer goods domestically but can obtain 1 unit of capital goods from another country by trading 1 unit of consumer goods for it. This reality illustrates

Answer the question on the basis of the following production possibilities tables for two countries, North Cantina and South Cantina. Refer to the tables. If South Cantina is producing at production alternative D, the opportunity cost of the third unit of capital goods will be

The production possibilities curve is a graph of

A reduction in the level of unemployment would have which effect with respect to the nation's production possibilities curve?

The process of observing real-world behavior, developing hypotheses, testing them against facts, then using the results to construct theories is called

Because economic generalizations are simplifications from reality, they are impractical and useless.

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities schedule. According to the production possibilities schedule, a combination of 4 tanks and 650 autos is

Answer the question on the basis of the data given in the following production possibilities table. Refer to the table. If the economy is producing at production alternative C, the opportunity cost of the 10th unit of consumer goods will be

If an economy is operating on its production possibilities curve for consumer goods and capital goods, this means that

Which of the following is a microeconomic statement?

The notion of "purposeful behavior" in the economic perspective suggests 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

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters