Question 1

Which of the following contributed to the downfall of the Soviet Union in 1991?

Accepted Answer

A)  government dissatisfaction with high living standards and political freedom 
B)  an inability to produce low-cost consumer goods that households wanted 
C)  an overabundance of high-quality goods and services 
D)  the lack of a strong dictator who can coordinate economic activities 
A)  government dissatisfaction with high living standards and political freedom 
B)  an inability to produce low-cost consumer goods that households wanted 
C)  an overabundance of high-quality goods and services 
D)  the lack of a strong dictator who can coordinate economic activities

Question 2

Which of the following statements is true about competition in a market?

Accepted Answer

A)  Competition forces firms to outsource the production of their labor-intensive products. 
B)  Competition forces firms to undercut their selling price, thus benefiting consumers who will be able to purchase products at the lowest price possible. 
C)  Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production. 
D)  Competition forces firms to add only low profit margins to their costs of production. 
A)  Competition forces firms to outsource the production of their labor-intensive products. 
B)  Competition forces firms to undercut their selling price, thus benefiting consumers who will be able to purchase products at the lowest price possible. 
C)  Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production. 
D)  Competition forces firms to add only low profit margins to their costs of production.

Question 3

The relationship between sales and revenue is

Accepted Answer

A)  an inverse relationship. 
B)  a direct relationship. 
C)  a negative relationship. 
D)  independent. 
A)  an inverse relationship. 
B)  a direct relationship. 
C)  a negative relationship. 
D)  independent.

Question 4

Which of the following is a normative economic statement?

Accepted Answer

A)  Falling global demand for pesticides has led to decreases in the price of pesticides. 
B)  With falling mortgage rates and falling unemployment rates, the number of new homes being built has increased. 
C)  The state of Florida's unemployment rate dropped when several large companies relocated to the Miami area. 
D)  Global warming should be at the top of every economic agenda. 
A)  Falling global demand for pesticides has led to decreases in the price of pesticides. 
B)  With falling mortgage rates and falling unemployment rates, the number of new homes being built has increased. 
C)  The state of Florida's unemployment rate dropped when several large companies relocated to the Miami area. 
D)  Global warming should be at the top of every economic agenda.

Question 5

In a market economy, ________ interact in markets to decide the answers to the fundamental economic questions.

Accepted Answer

A)  state and local governments 
B)  large corporations 
C)  households and firms 
D)  the judicial and legislative branches of the federal government 
A)  state and local governments 
B)  large corporations 
C)  households and firms 
D)  the judicial and legislative branches of the federal government

Question 6

The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of

Accepted Answer

A)  optimization. 
B)  efficiency. 
C)  trade-off. 
D)  equity. 
A)  optimization. 
B)  efficiency. 
C)  trade-off. 
D)  equity.

Question 7

Explain why economics is considered a social science.

Accepted Answer

Economics is a social science

Question 8

What are the five steps by which economists arrive at a useful economic model?

Accepted Answer

1. Decide on the assumptions to use in d

Question 9

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum. What is the opportunity cost of his decision?

Accepted Answer

A)  0 since he will no longer be earning a salary 
B)  depends on the "going rate" of museum employees 
C)  at least $80,000 
D)  the value he attributes to the joy of working at a museum 
A)  0 since he will no longer be earning a salary 
B)  depends on the "going rate" of museum employees 
C)  at least $80,000 
D)  the value he attributes to the joy of working at a museum

Question 10

Which of the following is a normative economic statement?

Accepted Answer

A)  The price of milk is too high. 
B)  The current high price of milk is the result of reduced worldwide supply. 
C)  When the price of milk rises, the quantity of milk purchased falls. 
D)  When the price of milk rises, the cost of milk-based products rises. 
A)  The price of milk is too high. 
B)  The current high price of milk is the result of reduced worldwide supply. 
C)  When the price of milk rises, the quantity of milk purchased falls. 
D)  When the price of milk rises, the cost of milk-based products rises.

Question 11

Which of the following is a positive economic statement?

Accepted Answer

A)  Everyone should live at the same standard of living. 
B)  If the price of gasoline rises, a smaller quantity of it will be bought. 
C)  The government should close income tax loopholes. 
D)  U.S. firms should not be allowed to outsource production of goods and services. 
A)  Everyone should live at the same standard of living. 
B)  If the price of gasoline rises, a smaller quantity of it will be bought. 
C)  The government should close income tax loopholes. 
D)  U.S. firms should not be allowed to outsource production of goods and services.

Question 12

Which of the following is an example of an activity undertaken by an entrepreneur?

Accepted Answer

A)  deciding whether to purchase a gasoline-powered automobile or an electric vehicle 
B)  being appointed as the head of a charitable organization 
C)  running for a seat on the city council 
D)  starting your own cigar manufacturing business 
A)  deciding whether to purchase a gasoline-powered automobile or an electric vehicle 
B)  being appointed as the head of a charitable organization 
C)  running for a seat on the city council 
D)  starting your own cigar manufacturing business

Question 13

How are the fundamental economic decisions determined in Cuba?

Accepted Answer

A)  Individuals, firms, and the government interact in a market to make these economic decisions. 
B)  These decisions are made by the country's elders who have had much experience in answering these questions. 
C)  The government decides because Cuba is a centrally planned economy. 
D)  The United Nations decides because Cuba is a developing economy. 
A)  Individuals, firms, and the government interact in a market to make these economic decisions. 
B)  These decisions are made by the country's elders who have had much experience in answering these questions. 
C)  The government decides because Cuba is a centrally planned economy. 
D)  The United Nations decides because Cuba is a developing economy.

Question 14

Mrs. Lovejoy decides to invest in companies which she believes can produce its goods at the lowest possible cost. Mrs. Lovejoy is investing in companies that are

Accepted Answer

A)  productively efficient. 
B)  allocatively efficient. 
C)  both productively and allocatively efficient. 
D)  always going to be profitable. 
A)  productively efficient. 
B)  allocatively efficient. 
C)  both productively and allocatively efficient. 
D)  always going to be profitable.

Question 15

Economists assume that rational behavior is useful in explaining choices people make

Accepted Answer

A)  because irrational people do not make economic choices. 
B)  even though people may not behave rationally all the time. 
C)  because individuals act rationally all the time in all circumstances. 
D)  even though people rarely, if ever, behave in a rational manner. 
A)  because irrational people do not make economic choices. 
B)  even though people may not behave rationally all the time. 
C)  because individuals act rationally all the time in all circumstances. 
D)  even though people rarely, if ever, behave in a rational manner.

Question 16

How does the study of microeconomics differ from that of macroeconomics? Give one example each of an issue studied in microeconomics and in macroeconomics.

Accepted Answer

Microeconomics is the study of how house

Question 17

Mrs. Lovejoy decides to invest in companies which she believes are producing its goods based on the preferences of consumers. Mrs. Lovejoy is investing in companies that are

Accepted Answer

A)  productively efficient. 
B)  allocatively efficient. 
C)  both productively and allocatively efficient. 
D)  always going to be profitable. 
A)  productively efficient. 
B)  allocatively efficient. 
C)  both productively and allocatively efficient. 
D)  always going to be profitable.

Question 18

Suppose the extra cost to a doctor of keeping his office open on Saturdays is $1,200. Then, the doctor should stay open on Saturdays if keeping the office open brings in additional revenue of $1,200 or more.

Accepted Answer

A) True 
 B)False

Question 19

Allocative efficiency is achieved when firms produce goods and services

Accepted Answer

A)  at the lowest possible cost. 
B)  that consumers value most. 
C)  at the lowest opportunity cost. 
D)  at a marginal cost of zero. 
A)  at the lowest possible cost. 
B)  that consumers value most. 
C)  at the lowest opportunity cost. 
D)  at a marginal cost of zero.

Question 20

Economics is the study of the ________ people make to attain their goals, given their ________ resources.

Accepted Answer

A)  purchases; unlimited 
B)  choices; scarce 
C)  income; available 
D)  decisions; household 
A)  purchases; unlimited 
B)  choices; scarce 
C)  income; available 
D)  decisions; household

Exam 1: Economics: Foundations and Models

Which of the following contributed to the downfall of the Soviet Union in 1991?

Which of the following statements is true about competition in a market?

The relationship between sales and revenue is

Which of the following is a normative economic statement?

In a market economy, ________ interact in markets to decide the answers to the fundamental economic questions.

The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of

Explain why economics is considered a social science.

What are the five steps by which economists arrive at a useful economic model?

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum. What is the opportunity cost of his decision?

Which of the following is a normative economic statement?

Which of the following is a positive economic statement?

Which of the following is an example of an activity undertaken by an entrepreneur?

How are the fundamental economic decisions determined in Cuba?

Mrs. Lovejoy decides to invest in companies which she believes can produce its goods at the lowest possible cost. Mrs. Lovejoy is investing in companies that are

Economists assume that rational behavior is useful in explaining choices people make

How does the study of microeconomics differ from that of macroeconomics? Give one example each of an issue studied in microeconomics and in macroeconomics.

Mrs. Lovejoy decides to invest in companies which she believes are producing its goods based on the preferences of consumers. Mrs. Lovejoy is investing in companies that are

Suppose the extra cost to a doctor of keeping his office open on Saturdays is $1,200. Then, the doctor should stay open on Saturdays if keeping the office open brings in additional revenue of $1,200 or more.

Allocative efficiency is achieved when firms produce goods and services

Economics is the study of the ________ people make to attain their goals, given their ________ resources.

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Economics is the study of the people make to attain their goals, given their resources.