Deck 1: What Economics Is About

Question 1

Microeconomics is the branch of economics that deals with

A) highly aggregated markets or the entire economy.
B) the production side of the economy, exclusively.
C) the buying side of the economy, exclusively.
D) human behavior and choices as they relate to relatively small units --- an individual, a firm, an industry.

Answer 1

D

Question 2

Which of the following is a positive microeconomics statement?

A) The central bank should increase the nation's money supply.
B) The increase in the nation's money supply helped push the nation's unemployment rate down in the short run.
C) Ford Motor Company's new advertising campaign ended up hurting General Motors's sales.
D) The local government ought to spend more on recreational activities.

Answer 2

C

Question 3

The opportunity cost of attending college is

A) the money one spends on college tuition, books, and so forth.
B) the highest valued alternative one forfeits to attend college.
C) the least valued alternative one forfeits to attend college.
D) equal to the salary one will earn when one graduates from college.

Answer 3

B

Question 4

Minerals,animals,water and forests are all considered to be the resource known as

A) capital
B) entrepreneurship
C) labor
D) land
E) none of the above

Question 5

Here are three things you could do if you do not attend your neighbor's barbecue: watch television with some friends (you value this at $17),read a good novel (you value this at $14),or go in to work (you could earn $16 during the barbecue).The opportunity cost of going to your neighbor's barbecue is

A) $16, because this is the only alternative of the three where you actually receive a monetary payment.
B) $14, because this is the lowest valued alternative forfeited.
C) $17, because this is the highest valued alternative forfeited.
D) $47, because this is the total dollar sum of the alternatives forfeited.

Question 6

The higher the opportunity cost of attending college,

A) the more likely an individual will go to college.
B) the more economics classes an individual will take at college.
C) the fewer economics classes an individual will take at college.
D) the less likely an individual will go to college.

Question 7

Entrepreneurship is

A) the talent for organizing the use of land, labor and capital, among other things.
B) skill in influencing government regulators and legislators.
C) accumulated technical knowledge in using labor and capital.
D) knowledge of the particular natural resources to be found in a given area.

Question 8

Which of the following is a microeconomics topic?

A) the study of how prices are determined in the computer industry
B) the study of unemployment in the economy
C) the study of how changes in the nation's money supply affect the nation's output
D) a and c
E) b and c

Question 9

Which of the following is a normative macroeconomics statement?

A) The central bank should increase the nation's money supply.
B) The increase in the nation's money supply helped push the nation's unemployment rate down in the short run.
C) Ford Motor Company's new advertising campaign ended up hurting General Motors' sales.
D) The local government ought to spend more on recreational facilities.

Question 10

It usually takes less time to buy a six-pack of 7-Up,a loaf of bread,and a half-gallon of ice cream at a small convenience store (such as a 7-Eleven)than at a large,full-service grocery store.Which of the following persons is most likely to buy these items at a convenience store?

A) a person with high opportunity cost of time
B) a person with low opportunity cost of time
C) a person who is out of work
D) There is not enough information to answer the question.

Question 11

The physical and mental talents people bring to production processes comprise the resource called

A) entrepreneurship.
B) natural resources.
C) capital.
D) labor.

Question 12

Which of the following is a positive macroeconomics statement?

A) The central bank should increase the nation's money supply.
B) The increase in the nation's money supply helped push the nation's unemployment rate down in the short run.
C) Ford Motor Company's new advertising campaign ended up hurting General Motors' sales.
D) The local government ought to spend more on recreational facilities.

Question 13

Attempts to determine "what is" are part of __________ economics.

A) positive
B) normative
C) positive and normative
D) neither positive nor normative

Question 14

The author of the text defines economics as the

A) science of efficiency.
B) science of scarcity.
C) study of markets.
D) study of human activity.

Question 15

When economists speak of scarcity,they are referring to the

A) condition in which society is not employing all its resources in an efficient way.
B) condition in which people's wants outstrip the limited resources available to satisfy those wants.
C) economic condition that exists in only very poor countries of the world.
D) condition in which society produces too many frivolous goods and not enough socially desirable goods.

Question 16

The headline in the newspaper reads "County Supervisors Debate Building New Schools." The headline relates closest to which economic concept?

A) goods and bads
B) utility
C) choice
D) efficiency

Question 17

Produced goods used as inputs for the production of other goods comprise the resource known as

A) natural resources.
B) services.
C) capital.
D) entrepreneurship.

Question 18

Which of the following is not one of the four broad categories of resources?

A) labor
B) government
C) capital
D) entrepreneurship
E) land

Question 19

Which of the following is an example of a positive economic statement?

A) The U.S. public should devote more resources to education.
B) The poor should pay lower taxes and the rich should pay higher taxes.
C) Soap operas should be taken off television.
D) If you drop a ball from the top of a building, it will fall to the ground.

Question 20

Some years ago,chemists at 3M Corporation were trying to create a super-strong glue.Somehow they got their molecules twisted and came up with one of the weakest glues ever made.But,rather than pouring it down the drain,they tried coating some paper with it,and the "Post-It Note" was born.In this case,3M was acting as a(n)

A) utility.
B) rationer.
C) entrepreneur.
D) abstraction.

Question 21

At the optimal or efficient level of an activity,the activity's marginal benefit must

A) be zero.
B) be greater than zero.
C) equal the marginal cost of the activity.
D) exceed the marginal cost of the activity.

Question 22

The synonym economists commonly use for additional is

A) capital.
B) rational.
C) marginal.
D) economic.

Question 23

Economists believe that people's wants are

A) finite.
B) infinite.
C) irrational.
D) unimportant because needs are more important than wants.

Question 24

In economics,a synonym for utility is

A) usefulness.
B) satisfaction.
C) sacrifice.
D) a service.

Question 25

The latest Lady Gaga album is available to be downloaded for $12.99.Is this price a rationing device?

A) No, the album will be sold to anyone having the required number of dollars.
B) Yes, because the album will only be purchased by people who are willing and able to pay $12.99.
C) No, for price to be a rationing device, it must be so high that only one unit of the item is sold.
D) Yes, since that is a reasonable price.

Question 26

Scarcity means

A) wants are greater than the limited resources available to satisfy these wants.
B) wants are less than the limited resources available to satisfy these wants.
C) resources are infinite.
D) wants are limited.
E) both c and d

Question 27

Opportunity cost is the value of

A) the best (or most highly valued) forfeited alternative.
B) the chosen alternative.
C) a free good.
D) all forfeited alternatives.

Question 28

The condition in an economy that makes a "rationing device" a necessity is the fact that

A) the economy is organized around free markets.
B) the economy is centrally planned by the government.
C) scarcity exists.
D) there are fewer types of goods than there are people in the economy.

Question 29

Positive economics is concerned with

A) value judgments.
B) cause-effect relationships.
C) observations that cannot be proved.
D) both b and c

Question 30

Decision making "at the margin" means making a choice based on __________ of a decision.

A) the total benefits
B) the total costs
C) comparing the total benefits and costs
D) comparing the additional benefits and costs

Question 31

Which of the following is a positive economic statement?

A) The temperature is too high today.
B) The temperature is 105 degrees today.
C) It is too hot to jog today.
D) I enjoy summer evenings when it cools off.

Question 32

Several years ago,a bookstore chain extended its closing time from 9 p.m.to 10 p.m.Now it is considering a further extension to 11 p.m.In making this marginal decision,the results of having gone from 9 p.m.to 10 p.m.are

A) no longer relevant to the current decision.
B) relevant if the marginal costs and benefits were unequal.
C) relevant since they are part of the calculation of total costs and benefits.
D) relevant if the marginal costs and benefits were equal.

Question 33

Normative economics is concerned with

A) value judgments.
B) opinions.
C) cause-effect relationships.
D) observations that can be proved.
E) both a and b

Question 34

In all cases,microeconomics deals with

A) what is.
B) what should be.
C) relatively small units in the economy.
D) the entire economy.

Question 35

In all cases,positive economics deals with

A) what is.
B) what should be.
C) relatively small units in the economy.
D) aggregates or the entire economy.

Question 36

In all cases,normative economics deals with

A) what is.
B) what should be.
C) relatively small units in the economy.
D) the entire economy.

Question 37

In all cases,macroeconomics deals with

A) what is.
B) what should be.
C) relatively small units in the economy.
D) the entire economy.

Question 38

What is the most prominent rationing device you will likely find at your campus bookstore?

A) dollar price
B) brute force
C) anti-theft tags on the high-priced items
D) none of the above

Question 39

The need to make choices is most closely related to the concept of

A) opportunity cost.
B) efficiency.
C) inefficiency.
D) utility.
E) disutility.

Question 40

In every economy people vie for the economy's rationing device,a process called

A) competition.
B) entrepreneurship.
C) marginal benefit.
D) positive economics.

Question 41

Most states have instituted mandatory seatbelt laws to reduce traffic fatalities.An economist may point out that an unintended effect of these laws is

A) an increase in the price of automobiles, further reducing fatalities.
B) an increase in driving speed, reducing the number of accidents.
C) a decrease in driving speed, further reducing fatalities.
D) an increase in risky driving behavior, increasing fatalities.

Question 42

Which of the following would NOT be considered a macroeconomic topic?

A) the reasons for a decline in the price of crude oil
B) the cause of a downturn in the economy
C) the effect of the government budget deficit on inflation
D) the causes of inflation and unemployment

Question 43

Opportunity cost is the __________ alternative forfeited when a choice is made.

A) least-valued
B) most highly-valued
C) most convenient
D) most recently considered

Question 44

A mandatory seatbelt law ends up raising the number of traffic fatalities if it lowers fatalities per accident from 0.10 to 0.07 while raising the number of accidents per period from 35,000 to any more than

A) 35,000.
B) 38,500.
C) 37,450.
D) 50,000.

Question 45

Amy's opportunity cost of going to the movies is

A) the price of the ticket.
B) zero, if she has a free pass.
C) the price of the ticket plus the value to Amy of what she would have chosen to do with her time had she not chosen to go to the movies.
D) both b and c

Question 46

Which of the following statements is false?

A) There are always opportunity costs to making choices.
B) Because of scarcity, choices must be made.
C) Elementary education at public schools is free.
D) When government builds a new highway, taxpayers end up with less of some of the things they would otherwise have.

Question 47

If variable X goes up as variable Y goes down,then X and Y are

A) directly related.
B) inversely related.
C) independent.
D) positively related.

Question 48

If it is discovered that using drugs enhances a person's chance of contracting a lethal disease,the cost of using drugs

A) increases.
B) decreases.
C) is not affected.
D) is irrelevant, since they are illegal anyway.

Question 49

Which of the following issues is most unlikely to be addressed by an economist practicing positive economics?

A) the relationship between the minimum wage and the number of unemployed unskilled workers
B) the effect of a minimum wage increase on inner-city crime rates
C) the desirability of a minimum wage increase
D) the consequences of implementing a minimum wage law in China

Question 50

Prior to attending college,Darius is offered a lucrative four-year contract as an actor in a daytime soap opera.Assuming that acting and attending college are Darius' preferred alternatives and that he must choose between the two,his cost of attending college after receiving the offer

A) increases.
B) decreases.
C) stays the same.
D) increases or stays the same depending on whether he accepts the offer.

Question 51

A mandatory seatbelt law ends up raising the number of traffic fatalities if it lowers fatalities per accident from 0.11 to 0.08 while raising the number of accidents per period from 100,000 to any more than

A) 108,000.
B) 111,111.
C) 137,500.
D) 110,000.

Question 52

A mandatory seatbelt law ends up raising the number of traffic fatalities if it lowers fatalities per accident from 0.12 to 0.08 while raising the number of accidents per period from 400,000 to any more than

A) 480,000.
B) 600,000.
C) 660,000.
D) 770,000.

Question 53

In economics,scarcity implies

A) disutility.
B) utility.
C) choice.
D) inefficiency.
E) a, c, and d

Question 54

The opportunity cost of attending college

A) consists of the tuition costs only.
B) consists of the tuition costs plus the costs of room and board and other expenses.
C) is zero, if the student receives a scholarship that covers the costs of tuition, room and board, and other expenses.
D) varies from person to person.
E) both b and c

Question 55

In an interview an economist states,"This problem should be of greater concern to the federal government." We can explicitly put this statement in the category of

A) microeconomics.
B) macroeconomics.
C) positive economics.
D) normative economics.

Question 56

All sellers may be tempted to raise the price of what they sell,but a negative unintended effect of raising the price could be __________ in units sold large enough to __________ their total revenue earned.

A) an increase; raise
B) an increase; lower
C) a decrease; raise
D) a decrease; lower

Question 57

The question of how a tax change might impact U.S.economic output is most closely associated with the study of

A) microeconomics.
B) managerial economics.
C) macroeconomics.
D) consumer economics.

Question 58

The branch of economics that studies the decisions of individuals and firms is called

A) macroeconomics.
B) microeconomics.
C) microeconomics and macroeconomics.
D) positive economics.
E) normative economics.

Question 59

The absence of value judgments is the essence of

A) normative economics.
B) positive economics.
C) microeconomics.
D) macroeconomics.

Question 60

The study of an economy's price level is explicitly a part of

A) macroeconomics.
B) microeconomics.
C) positive economics.
D) normative economics.

Question 61

If variable X goes down as variable Y goes down,then X and Y are

A) directly related.
B) negatively related.
C) inversely related.
D) independent.

Question 62

If people want more cars than there are cars available,then it is necessarily true that

A) cars are scarce.
B) there is a surplus of cars.
C) there is a decreased supply of cars.
D) none of the above

Question 63

How is scarcity related to competition?

A) Competition is an effect of scarcity.
B) Scarcity is an effect of competition.
C) Both scarcity and competition are effects of a rationing device.
D) Both scarcity and competition are effects of opportunity cost.
E) Scarcity produces disutility and competition produces utility.

Question 64

Something that provides disutility is called a

A) good.
B) want.
C) need.
D) bad.
E) none of the above

Question 65

The concept that relates how much one variable changes as another variable changes is

A) slope.
B) line.
C) curve.
D) graph.

Question 66

The __________ the opportunity cost of doing something,the __________ likely a person will do that something.

A) lower; less
B) lower; more
C) higher; more
D) higher; less
E) b and d

Question 67

Two variables are independent if as one variable __________,the other variable __________.

A) rises; rises.
B) falls; falls.
C) rises; falls.
D) changes; does not change.

Question 68

Every time you make a __________,you incur a (an)__________.

A) decision; unintended effect
B) choice; opportunity cost
C) competitive move; price
D) decision; mistake
E) none of the above

Question 69

Scarcity is defined as the condition in which

A) both wants and resources are limited.
B) wants are finite and resources infinite.
C) both wants and resources are infinite.
D) wants are infinite and resources finite.

Question 70

Let X be the number of hours you spend studying for an exam on Wednesday afternoon and Y be your chances of winning the Wednesday night state lottery.What kind of a relationship do you most likely expect between X and Y?

A) direct
B) inverse
C) linear
D) 45-degree line
E) independent

Question 71

Something that provides utility is called a

A) good.
B) bad.
C) want.
D) need.
E) a and d

Question 72

The reason people can't have everything they want is because

A) people are selfish.
B) scarcity exists.
C) there is not enough economic growth in the world.
D) none of the above

Question 73

A good provides __________ and a bad provides __________.

A) utility; satisfaction
B) disutility; utility
C) dissatisfaction; satisfaction
D) utility; disutility
E) satisfaction; utility

Question 74

Why do societies need rationing devices?

A) Because people have too many needs and not enough wants.
B) Because price exists.
C) Because scarcity exists.
D) Because people have opportunity costs.

Question 75

A person goes into a store and buys a computer for $1,210.In this case,price is acting as a

A) resource.
B) good.
C) rationing device.
D) capital instrument.
E) factor of production.

Question 76

If scarcity didn't exist,neither would

A) rationing devices.
B) competition.
C) labor.
D) capital.
E) a and b

Question 77

Which of the following statements is false?

A) To an economist, the resource land includes natural resources such as minerals, forests, water and unimproved land.
B) To an economist, the resource capital consists of unproduced goods that can be turned into produced goods.
C) To an economist, the resource labor consists of the physical and mental talents people contribute to the production process.
D) To an economist, the resource entrepreneurship refers to a particular talent that some people have for organizing the resources of land, labor, and capital to produce goods, seek new business opportunities, and develop new ways of doing things.

Question 78

"If you hadn't gone to dinner with your friends,you would have stayed home and surfed the Internet." It follows that

A) surfing the Internet is the opportunity cost of having dinner with your friends.
B) the price of having dinner with your friends is more than the price you would have had to pay to surf the Internet.
C) the opportunity cost of having dinner with your friends is lower than the opportunity cost of surfing the Internet.
D) it is less costly to surf the Internet than to have dinner with your friends.

Question 79

The cost of building a new interstate highway system is reported to be high at $25 billion.Does it necessarily follow that the interstate highway is not worth building?

A) Yes, because it is better to spend $25 billion on ending poverty than on building another interstate highway system.
B) No, because building a new interstate highway system promotes economic growth, which helps everyone.
C) No, because the benefits of building a new interstate highway system may be greater than $25 billion.
D) Yes, because the benefits of building a new interstate highway system may be greater than $25 billion.

Question 80

In the text,economics is defined as the science of

A) money and business.
B) choices.
C) scarcity.
D) price.
E) individuals' actions.