Question 1

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 2

The opportunity cost to a consumer who smokes cigarettes consists of the

Accepted Answer

A)  costs imposed on others who inhale second-hand smoke. 
B)  products that the consumer could have bought instead of cigarettes. 
C)  amount of cigarette taxes paid by this consumer. 
D)  cost of complementary products such as lighters, ashtrays, and cigarette holders. 
A)  costs imposed on others who inhale second-hand smoke. 
B)  products that the consumer could have bought instead of cigarettes. 
C)  amount of cigarette taxes paid by this consumer. 
D)  cost of complementary products such as lighters, ashtrays, and cigarette holders.

Question 3

Which of the following terms implies the greatest degree of confidence in an economic generalization?

Accepted Answer

A)  hypothesis 
B)  comparison 
C)  theory 
D)  anomaly 
A)  hypothesis 
B)  comparison 
C)  theory 
D)  anomaly

Question 4

What is the best economic explanation for why a person would drop out of college in order to start a business?

Accepted Answer

A)  The person has a good idea for starting a business. 
B)  The person has to pay a higher tuition to attend college. 
C)  The expected future benefits from starting a business now are greater than the costs. 
D)  The opportunity cost of starting a business is high now but will be low later in life. 
A)  The person has a good idea for starting a business. 
B)  The person has to pay a higher tuition to attend college. 
C)  The expected future benefits from starting a business now are greater than the costs. 
D)  The opportunity cost of starting a business is high now but will be low later in life.

Question 5

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 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 6

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule.   The marginal opportunity cost of the third unit of steel is

Accepted Answer

A)  18.3 units of wheat. 
B)  25 units of wheat. 
C)  20 units of wheat. 
D)  55 units of wheat. 
A)  18.3 units of wheat. 
B)  25 units of wheat. 
C)  20 units of wheat. 
D)  55 units of wheat.

Question 7

The law of increasing opportunity costs states that

Accepted Answer

A)  costs of production increase for one good, but costs decrease for the other good. 
B)  increases in wages and other resource costs is what the increasing opportunity costs refer to. 
C)  increases in the production of one good require larger and larger sacrifices of the other good. 
D)  increases in the production of one good make the production of that good easier. 
A)  costs of production increase for one good, but costs decrease for the other good. 
B)  increases in wages and other resource costs is what the increasing opportunity costs refer to. 
C)  increases in the production of one good require larger and larger sacrifices of the other good. 
D)  increases in the production of one good make the production of that good easier.

Question 8

In drawing a particular budget line, money income and the prices of the two products are fixed.

Accepted Answer

A) True 
 B)False

Question 9

The question below is based on the following four sets of data-pairs: (1) A and B, (2) C and D, (3) E and F, and (4) G and H. In each set, the independent variable is in the left column and the dependent variable is in the right column.   The vertical intercept is 6 in which of the above data sets?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 10

The role of the entrepreneur in society is to

Accepted Answer

A)  provide capital to the firm, which the management combines with labor. 
B)  bring the factors of production together and take the risks of producing output. 
C)  control the land upon which all production takes place and to get the most rent. 
D)  regulate what products are considered safe to market. 
A)  provide capital to the firm, which the management combines with labor. 
B)  bring the factors of production together and take the risks of producing output. 
C)  control the land upon which all production takes place and to get the most rent. 
D)  regulate what products are considered safe to market.

Question 11

"Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is

Accepted Answer

A)  positive but incorrect. 
B)  positive and correct. 
C)  normative but incorrect. 
D)  normative and correct. 
A)  positive but incorrect. 
B)  positive and correct. 
C)  normative but incorrect. 
D)  normative and correct.

Question 12

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities schedule.   The marginal opportunity cost of the fourth unit of tanks is

Accepted Answer

A)  4 units of tanks. 
B)  300 units of autos. 
C)  350 units of autos. 
D)  1,000 units of autos. 
A)  4 units of tanks. 
B)  300 units of autos. 
C)  350 units of autos. 
D)  1,000 units of autos.

Question 13

The best output or the optimal production of the nation is

Accepted Answer

A)  a combination of products at the midpoint of the production possibilities curve. 
B)  a combination of products at either of the two endpoints of the production possibilities curve. 
C)  determined by equalizing the marginal benefits and marginal costs of each product. 
D)  the production combination where the opportunity costs are minimized. 
A)  a combination of products at the midpoint of the production possibilities curve. 
B)  a combination of products at either of the two endpoints of the production possibilities curve. 
C)  determined by equalizing the marginal benefits and marginal costs of each product. 
D)  the production combination where the opportunity costs are minimized.

Question 14

Which question is an illustration of a microeconomic question?

Accepted Answer

A)  Is the volume of wine produced in one year dependent upon the price of wine? 
B)  Does government spending influence interest rates in the economy? 
C)  Is the purchasing power of the dollar higher or lower today than it was in 2008? 
D)  Which economic system is better for consumers and firms? 
A)  Is the volume of wine produced in one year dependent upon the price of wine? 
B)  Does government spending influence interest rates in the economy? 
C)  Is the purchasing power of the dollar higher or lower today than it was in 2008? 
D)  Which economic system is better for consumers and firms?

Question 15

If a nation is initially on its production possibilities curve, then it can increase its production of one good only by

Accepted Answer

A)  decreasing the production of the other good. 
B)  increasing the production of the other good. 
C)  holding constant the production of the other good. 
D)  decreasing the price of the other good. 
A)  decreasing the production of the other good. 
B)  increasing the production of the other good. 
C)  holding constant the production of the other good. 
D)  decreasing the price of the other good.

Question 16

In a graph with "crop yield" on the vertical axis and "rainfall" on the horizontal axis, the vertical intercept refers to the

Accepted Answer

A)  steepness or flatness of the graph. 
B)  amount of rainfall when "crop yield" is zero. 
C)  amount of crop yield when "rainfall" is zero. 
D)  total crop yield during a given period of time. 
A)  steepness or flatness of the graph. 
B)  amount of rainfall when "crop yield" is zero. 
C)  amount of crop yield when "rainfall" is zero. 
D)  total crop yield during a given period of time.

Question 17

Which of the following is considered a firm's "factor of production"?

Accepted Answer

A)  money or cash balances of the firm 
B)  the firm's shares of common stock 
C)  U.S. Treasury bonds owned by the firm 
D)  the office building occupied by the firm 
A)  money or cash balances of the firm 
B)  the firm's shares of common stock 
C)  U.S. Treasury bonds owned by the firm 
D)  the office building occupied by the firm

Question 18

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 19

From an economic perspective, when a student decides to go to the movies instead of studying for a test, it indicates that in the student's thinking, the marginal

Accepted Answer

A)  benefit of studying is greater than the marginal cost of studying. 
B)  cost of going to the movies is less than the marginal benefit of going to the movies. 
C)  benefit of studying are greater than the marginal benefit of going to the movies. 
D)  cost of going to the movies is greater than the marginal cost of studying. 
A)  benefit of studying is greater than the marginal cost of studying. 
B)  cost of going to the movies is less than the marginal benefit of going to the movies. 
C)  benefit of studying are greater than the marginal benefit of going to the movies. 
D)  cost of going to the movies is greater than the marginal cost of studying.

Question 20

The optimal point on a production possibilities curve is achieved where

Accepted Answer

A)  the smallest physical amounts of inputs are used to produce each good. 
B)  each good is produced at a level where marginal benefits equal marginal costs. 
C)  large amounts of capital goods are produced relative to consumer goods. 
D)  large amounts of consumer goods are produced relative to capital goods. 
A)  the smallest physical amounts of inputs are used to produce each good. 
B)  each good is produced at a level where marginal benefits equal marginal costs. 
C)  large amounts of capital goods are produced relative to consumer goods. 
D)  large amounts of consumer goods are produced relative to capital goods.

Exam 1: Limits, Alternatives, and Choices

The production possibilities curve has

The opportunity cost to a consumer who smokes cigarettes consists of the

Which of the following terms implies the greatest degree of confidence in an economic generalization?

What is the best economic explanation for why a person would drop out of college in order to start a business?

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule. The marginal opportunity cost of the third unit of steel is

The law of increasing opportunity costs states that

In drawing a particular budget line, money income and the prices of the two products are fixed.

The question below is based on the following four sets of data-pairs: (1) A and B, (2) C and D, (3) E and F, and (4) G and H. In each set, the independent variable is in the left column and the dependent variable is in the right column. The vertical intercept is 6 in which of the above data sets?

The role of the entrepreneur in society is to

"Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities schedule. The marginal opportunity cost of the fourth unit of tanks is

The best output or the optimal production of the nation is

Which question is an illustration of a microeconomic question?

If a nation is initially on its production possibilities curve, then it can increase its production of one good only by

In a graph with "crop yield" on the vertical axis and "rainfall" on the horizontal axis, the vertical intercept refers to the

Which of the following is considered a firm's "factor of production"?

Which of the following statements is correct?

From an economic perspective, when a student decides to go to the movies instead of studying for a test, it indicates that in the student's thinking, the marginal

The optimal point on a production possibilities curve is achieved where

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

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