Question 1

The following graph is the production possibilities curve of a nation.   The marginal opportunity cost of the fourth unit of bread is

Accepted Answer

A)  0 unit of drill presses. 
B)  1 unit of drill presses. 
C)  3 units of drill presses. 
D)  4 units of drill presses. 
A)  0 unit of drill presses. 
B)  1 unit of drill presses. 
C)  3 units of drill presses. 
D)  4 units of drill presses.

Question 2

(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 3

Other things equal, which of the following would shift an economy's production possibilities curve to the left?

Accepted Answer

A)  the discovery of a low-cost means of generating and storing solar energy 
B)  the entrance of more women into the labor force 
C)  a law requiring mandatory retirement from the labor force at age 55 
D)  an increase in the proportion of total output that consists of capital or investment goods 
A)  the discovery of a low-cost means of generating and storing solar energy 
B)  the entrance of more women into the labor force 
C)  a law requiring mandatory retirement from the labor force at age 55 
D)  an increase in the proportion of total output that consists of capital or investment goods

Question 4

In economics, the pleasure, happiness, or satisfaction received from a product is called

Accepted Answer

A)  marginal cost. 
B)  rational outcome. 
C)  status fulfillment. 
D)  utility. 
A)  marginal cost. 
B)  rational outcome. 
C)  status fulfillment. 
D)  utility.

Question 5

The slope of a graph with "income" on the horizontal axis and "saving" on the vertical axis is +0.2. This means that if

Accepted Answer

A)  income is $100, then saving is $20. 
B)  income is 0.20, then saving is zero. 
C)  income increases by $100, then saving will rise by $20. 
D)  saving rises by $100, then income will rise by $20. 
A)  income is $100, then saving is $20. 
B)  income is 0.20, then saving is zero. 
C)  income increases by $100, then saving will rise by $20. 
D)  saving rises by $100, then income will rise by $20.

Question 6

Which of the following is a positive economic statement?

Accepted Answer

A)  Government must maintain the current level of defense spending to keep the nation safe. 
B)  The minimum wage should be increased to give people a decent wage. 
C)  Americans should buy American products in order to boost the national economy. 
D)  Stock prices rose to a new record last month for the fourth month in a row. 
A)  Government must maintain the current level of defense spending to keep the nation safe. 
B)  The minimum wage should be increased to give people a decent wage. 
C)  Americans should buy American products in order to boost the national economy. 
D)  Stock prices rose to a new record last month for the fourth month in a row.

Question 7

Economics may best be defined as the

Accepted Answer

A)  interaction between macro and micro considerations. 
B)  social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity. 
C)  empirical testing of value judgments through the use of logic. 
D)  study of why people are rational. 
A)  interaction between macro and micro considerations. 
B)  social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity. 
C)  empirical testing of value judgments through the use of logic. 
D)  study of why people are rational.

Question 8

In constructing the demand graph to show how the price of a good price affects how much of it the buyers will buy, the convention that economists follow is to measure price on the

Accepted Answer

A)  horizontal axis because it is the independent variable. 
B)  vertical axis because it is the dependent variable. 
C)  vertical axis even though it is the independent variable. 
D)  horizontal axis even though it is the dependent variable. 
A)  horizontal axis because it is the independent variable. 
B)  vertical axis because it is the dependent variable. 
C)  vertical axis even though it is the independent variable. 
D)  horizontal axis even though it is the dependent variable.

Question 9

The slope of a graph measures the rate of change in one variable as the other variable changes.

Accepted Answer

A) True 
 B)False

Question 10

Rosa works at a gelato shop and observes that the number of people buying gelato varies greatly from day to day. For a couple of weeks, she has recorded the number of people at the shop each day, as well as the daily temperature, and has observed a positive relationship between temperature and the number of customers. Based on her observations, Rosa should

Accepted Answer

A)  conclude definitively that people buy more gelato when the temperature rises. 
B)  determine if there are other relevant factors and attempt to hold these constant before drawing conclusions. 
C)  continue to gather data on the number of visitors and daily temperatures, because eventually other relevant variables will not matter. 
D)  throw out the data if it does not show a perfect relationship between buying habits and temperature. 
A)  conclude definitively that people buy more gelato when the temperature rises. 
B)  determine if there are other relevant factors and attempt to hold these constant before drawing conclusions. 
C)  continue to gather data on the number of visitors and daily temperatures, because eventually other relevant variables will not matter. 
D)  throw out the data if it does not show a perfect relationship between buying habits and temperature.

Question 11

Which of the following statements, if any, is correct for a nation that is producing only consumer and capital goods?

Accepted Answer

A)  Other things equal, the more consumer goods a nation produces, the greater will be its future growth rate. 
B)  Other things equal, the more capital goods a nation produces, the greater will be its future growth rate. 
C)  There is no general relationship between the current division of output between consumer and capital goods and the future growth rate. 
D)  None of these statements are correct. 
A)  Other things equal, the more consumer goods a nation produces, the greater will be its future growth rate. 
B)  Other things equal, the more capital goods a nation produces, the greater will be its future growth rate. 
C)  There is no general relationship between the current division of output between consumer and capital goods and the future growth rate. 
D)  None of these statements are correct.

Question 12

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 13

Money is not considered to be an economic resource because

Accepted Answer

A)  as such it is not productive. 
B)  money is not a free gift of nature. 
C)  money is made by humans. 
D)  idle money balances do not earn interest income. 
A)  as such it is not productive. 
B)  money is not a free gift of nature. 
C)  money is made by humans. 
D)  idle money balances do not earn interest income.

Question 14

Mia wants to buy a book. The economic perspective suggests that Mia will buy the book if

Accepted Answer

A)  she has enough money to pay for the marginal cost of the book. 
B)  the marginal benefit of the book is a positive value. 
C)  the marginal cost of the book is greater than its marginal benefit. 
D)  the marginal benefit of the book is greater than its marginal cost. 
A)  she has enough money to pay for the marginal cost of the book. 
B)  the marginal benefit of the book is a positive value. 
C)  the marginal cost of the book is greater than its marginal benefit. 
D)  the marginal benefit of the book is greater than its marginal cost.

Question 15

The "other things equal" assumption is employed when

Accepted Answer

A)  the graph of a given relationship is shifting up or down. 
B)  economists draw a two-dimensional (or two-axes) graph. 
C)  the relationship is direct, but not when it is inverse. 
D)  the relationship is inverse, but not when it is direct. 
A)  the graph of a given relationship is shifting up or down. 
B)  economists draw a two-dimensional (or two-axes) graph. 
C)  the relationship is direct, but not when it is inverse. 
D)  the relationship is inverse, but not when it is direct.

Question 16

A nation's consumption is strictly limited by its production possibilities, even with specialization and international trade.

Accepted Answer

A) True 
 B)False

Question 17

Suppose that a nation can only make two products: defense goods and civilian goods. In a graph of the marginal benefit (MB) and marginal cost (MC) of defense goods, a leftward shift of the MB curve will cause the optimal quantity of

Accepted Answer

A)  civilian goods to decrease. 
B)  both civilian goods and defense goods to decrease. 
C)  defense goods to decrease. 
D)  defense goods to increase. 
A)  civilian goods to decrease. 
B)  both civilian goods and defense goods to decrease. 
C)  defense goods to decrease. 
D)  defense goods to increase.

Question 18

The basic purpose of the other-things-equal assumption is to

Accepted Answer

A)  allow one to reason about the relationship between variables X and Y without the intrusion of variable Z. 
B)  allow one to focus upon micro variables by ignoring macro variables. 
C)  allow one to focus upon macro variables by ignoring micro variables. 
D)  determine whether X causes Y or vice versa. 
A)  allow one to reason about the relationship between variables X and Y without the intrusion of variable Z. 
B)  allow one to focus upon micro variables by ignoring macro variables. 
C)  allow one to focus upon macro variables by ignoring micro variables. 
D)  determine whether X causes Y or vice versa.

Question 19

The construction of a production possibilities curve assumes

Accepted Answer

A)  the quantities of all resources are unlimited. 
B)  technology is fixed. 
C)  some resources are unemployed. 
D)  there is no inflation in the economy. 
A)  the quantities of all resources are unlimited. 
B)  technology is fixed. 
C)  some resources are unemployed. 
D)  there is no inflation in the economy.

Question 20

Macroeconomics approaches the study of economics from the viewpoint of

Accepted Answer

A)  the entire economy. 
B)  governmental units. 
C)  the operation of specific product and resource markets. 
D)  individual firms. 
A)  the entire economy. 
B)  governmental units. 
C)  the operation of specific product and resource markets. 
D)  individual firms.

Exam 1: Limits, Alternatives, and Choices

The following graph is the production possibilities curve of a nation. The marginal opportunity cost of the fourth unit of bread is

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

Other things equal, which of the following would shift an economy's production possibilities curve to the left?

In economics, the pleasure, happiness, or satisfaction received from a product is called

The slope of a graph with "income" on the horizontal axis and "saving" on the vertical axis is +0.2. This means that if

Which of the following is a positive economic statement?

Economics may best be defined as the

In constructing the demand graph to show how the price of a good price affects how much of it the buyers will buy, the convention that economists follow is to measure price on the

The slope of a graph measures the rate of change in one variable as the other variable changes.

Which of the following statements, if any, is correct for a nation that is producing only consumer and capital goods?

Money is not considered to be an economic resource because

Mia wants to buy a book. The economic perspective suggests that Mia will buy the book if

The "other things equal" assumption is employed when

A nation's consumption is strictly limited by its production possibilities, even with specialization and international trade.

Suppose that a nation can only make two products: defense goods and civilian goods. In a graph of the marginal benefit (MB) and marginal cost (MC) of defense goods, a leftward shift of the MB curve will cause the optimal quantity of

The basic purpose of the other-things-equal assumption is to

The construction of a production possibilities curve assumes

Macroeconomics approaches the study of economics from the viewpoint of

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