Question 1

(Consider This) Consumers might leave a fast-food restaurant without being served because

Accepted Answer

A)  they are misinformed about the marginal cost and marginal benefits of the food being served. 
B)  they conclude that the marginal cost (monetary plus time costs) exceeds the marginal benefit. 
C)  the environment is not conducive to a rational choice. 
D)  the lines waiting for service are not of equal length. 
A)  they are misinformed about the marginal cost and marginal benefits of the food being served. 
B)  they conclude that the marginal cost (monetary plus time costs) exceeds the marginal benefit. 
C)  the environment is not conducive to a rational choice. 
D)  the lines waiting for service are not of equal length.

Question 2

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.

Question 3

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule.   In moving from combination E to F, the opportunity cost of an additional unit of steel is

Accepted Answer

A)  5 units of steel. 
B)  0 units of wheat. 
C)  1 unit of steel. 
D)  30 units of wheat. 
A)  5 units of steel. 
B)  0 units of wheat. 
C)  1 unit of steel. 
D)  30 units of wheat.

Question 4

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. Using i and I to indicate the interest rate and investment (in billions of dollars) respectively, which of the following is the correct tabular presentation of the described relationship?

Accepted Answer

A)  option A 
B)  option B 
C)  option C 
D)  option D 
A)  option A 
B)  option B 
C)  option C 
D)  option D

Question 5

Which of the following is considered an economic resource?

Accepted Answer

A)  the ice cream that kids buy at the ice cream parlor 
B)  the HD-TV sets in people's homes 
C)  the land that is designated as national parks by the government 
D)  shoppers buying stuff at the mall 
A)  the ice cream that kids buy at the ice cream parlor 
B)  the HD-TV sets in people's homes 
C)  the land that is designated as national parks by the government 
D)  shoppers buying stuff at the mall

Question 6

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 7

The economizing problem for individuals is a consequence of the fact that

Accepted Answer

A)  economic means or incomes are greater than economic wants. 
B)  economic wants are greater than economic means or incomes. 
C)  positive economics is more important than normative economics. 
D)  normative economics is more important than positive economics. 
A)  economic means or incomes are greater than economic wants. 
B)  economic wants are greater than economic means or incomes. 
C)  positive economics is more important than normative economics. 
D)  normative economics is more important than positive economics.

Question 8

(Last Word) The post hoc, ergo propter hoc fallacy suggests that

Accepted Answer

A)  positive statements are always followed by normative judgments. 
B)  positive statements can never be proven true or false. 
C)  if one acts on one's expectations, those expectations will always be fulfilled. 
D)  cause and effect can be determined merely by observing the sequence of events. 
A)  positive statements are always followed by normative judgments. 
B)  positive statements can never be proven true or false. 
C)  if one acts on one's expectations, those expectations will always be fulfilled. 
D)  cause and effect can be determined merely by observing the sequence of events.

Question 9

Which of the following is a labor resource?

Accepted Answer

A)  a computer programmer 
B)  a computer 
C)  silicon (sand) used to make computer chips 
D)  software used by a firm 
A)  a computer programmer 
B)  a computer 
C)  silicon (sand) used to make computer chips 
D)  software used by a firm

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. Suppose that North Cantina is producing 2 units of capital goods and 17 units of consumer goods, while South Cantina is producing 2 units of capital goods and 21 units of consumer goods. We can conclude that

Accepted Answer

A)  North Cantina is fully and efficiently using its resources, but South Cantina is not. 
B)  South Cantina is fully and efficiently using its resources, but North Cantina is not. 
C)  neither South Cantina nor North Cantina is fully and efficiently using its resources. 
D)  both South Cantina and North Cantina are fully and efficiently using their resources. 
A)  North Cantina is fully and efficiently using its resources, but South Cantina is not. 
B)  South Cantina is fully and efficiently using its resources, but North Cantina is not. 
C)  neither South Cantina nor North Cantina is fully and efficiently using its resources. 
D)  both South Cantina and North Cantina are fully and efficiently using their resources.

Question 11

If someone produced too little of a good, this would suggest that

Accepted Answer

A)  rational choice cannot be applied to many economic decisions. 
B)  the good was produced past the point where its marginal cost exceeded its marginal benefit. 
C)  government should intervene to produce more of the good. 
D)  the good was produced to the point where its marginal benefit exceeded its marginal cost. 
A)  rational choice cannot be applied to many economic decisions. 
B)  the good was produced past the point where its marginal cost exceeded its marginal benefit. 
C)  government should intervene to produce more of the good. 
D)  the good was produced to the point where its marginal benefit exceeded its marginal cost.

Question 12

Economic analysis assumes "purposeful behavior," which means that people will pursue decisions or actions

Accepted Answer

A)  that will increase their well-being. 
B)  always based on full or complete information. 
C)  with minimal consideration for their emotions. 
D)  without making any logical mistakes. 
A)  that will increase their well-being. 
B)  always based on full or complete information. 
C)  with minimal consideration for their emotions. 
D)  without making any logical mistakes.

Question 13

Which question is an illustration of a macroeconomic question?

Accepted Answer

A)  Is a corporation unresponsive to the demands of its customers? 
B)  Is a consumer boycott an effective means of reducing a product's price? 
C)  How will the government's budget deficit be affected by public infrastructure projects? 
D)  Are oil companies ripping off consumers by charging exorbitantly high prices for gasoline? 
A)  Is a corporation unresponsive to the demands of its customers? 
B)  Is a consumer boycott an effective means of reducing a product's price? 
C)  How will the government's budget deficit be affected by public infrastructure projects? 
D)  Are oil companies ripping off consumers by charging exorbitantly high prices for gasoline?

Question 14

Unemployment

Accepted Answer

A)  causes the production possibilities curve to shift outward. 
B)  can exist at any point on a production possibilities curve. 
C)  is illustrated by a point outside the production possibilities curve. 
D)  is illustrated by a point inside the production possibilities curve. 
A)  causes the production possibilities curve to shift outward. 
B)  can exist at any point on a production possibilities curve. 
C)  is illustrated by a point outside the production possibilities curve. 
D)  is illustrated by a point inside the production possibilities curve.

Question 15

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of

Accepted Answer

A)  resource scarcity and the necessity of choice. 
B)  purposeful behavior. 
C)  marginal costs that exceed marginal benefits. 
D)  the trade-off problem that exists between competing goals. 
A)  resource scarcity and the necessity of choice. 
B)  purposeful behavior. 
C)  marginal costs that exceed marginal benefits. 
D)  the trade-off problem that exists between competing goals.

Question 16

Which of the following is a normative economic statement?

Accepted Answer

A)  The poverty rate hit a new high last year and income distribution also worsened. 
B)  Health care accounts for roughly a third of total spending in the economy. 
C)  The government needs to revamp the Social Security program to make it sustainable. 
D)  Retail sales are expected to continue on their downward trend in the next three quarters. 
A)  The poverty rate hit a new high last year and income distribution also worsened. 
B)  Health care accounts for roughly a third of total spending in the economy. 
C)  The government needs to revamp the Social Security program to make it sustainable. 
D)  Retail sales are expected to continue on their downward trend in the next three quarters.

Question 17

"The role of government in the economy should be kept to a minimum" is an example of a positive economic statement.

Accepted Answer

A) True 
 B)False

Question 18

(Last Word) "The government deregulated the electricity industry in California, and a shortage of electricity soon occurred. It is clear that the deregulation caused the shortage." This statement needs careful analysis because it may reflect the

Accepted Answer

A)  fallacy of composition. 
B)  post hoc, ergo propter hoc fallacy. 
C)  use of loaded terminology. 
D)  law of averages. 
A)  fallacy of composition. 
B)  post hoc, ergo propter hoc fallacy. 
C)  use of loaded terminology. 
D)  law of averages.

Question 19

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

Accepted Answer

A)  hypothesis 
B)  theory 
C)  principle 
D)  law 
A)  hypothesis 
B)  theory 
C)  principle 
D)  law

Question 20

The four factors of production are

Accepted Answer

A)  land, labor, capital, and money. 
B)  land, labor, capital, and entrepreneurial ability. 
C)  labor, capital, technology, and entrepreneurial ability. 
D)  labor, capital, entrepreneurial ability, and money. 
A)  land, labor, capital, and money. 
B)  land, labor, capital, and entrepreneurial ability. 
C)  labor, capital, technology, and entrepreneurial ability. 
D)  labor, capital, entrepreneurial ability, and money.

Exam 1: Limits, Alternatives, and Choices

(Consider This) Consumers might leave a fast-food restaurant without being served because

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

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule. In moving from combination E to F, the opportunity cost of an additional unit of steel is

Which of the following is considered an economic resource?

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

The economizing problem for individuals is a consequence of the fact that

(Last Word) The post hoc, ergo propter hoc fallacy suggests that

Which of the following is a labor resource?

If someone produced too little of a good, this would suggest that

Economic analysis assumes "purposeful behavior," which means that people will pursue decisions or actions

Which question is an illustration of a macroeconomic question?

Unemployment

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of

Which of the following is a normative economic statement?

"The role of government in the economy should be kept to a minimum" is an example of a positive economic statement.

(Last Word) "The government deregulated the electricity industry in California, and a shortage of electricity soon occurred. It is clear that the deregulation caused the shortage." This statement needs careful analysis because it may reflect the

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

The four factors of production are

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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