Deck 1: Introducing the Economic Way of Thinking

Question 1

An inverse relationship exists when:

A) there is no association between two variables.
B) one variable increases and there is no change in the other variable.
C) one variable increases and the other variable increases.
D) one variable increases and the other variable decreases.

Answer 1

D

Question 2

Distinguish a direct and an inverse relationship. Provide an example of each type of relationship.

Answer 2

A direct relationship between two variables means an increase in the value of the independent variable will cause an increase in the value of the dependent variable; and vice versa. An example would be the relationship between the selling price of a good and the amount of the good put up for sale by producers. An inverse relationship between two variables means an increase in the value of the independent variable will cause a decrease in the value of the dependent variable; and vice versa. An example would be the relationship between the price of a good and the amount of the good consumers want to purchase.

Question 3

If the amount of time spent procrastinating and the performance on an exam are inversely related, then

A) more procrastination leads to lower exam grades.
B) more procrastination leads to higher exam grades.
C) a graph with this relationship would be positively sloped.
D) the slope of the line reflecting this relationship will be 0.

Answer 3

A

Question 4

When an inverse relationship is graphed, the resulting line or curve is:

A) horizontal.
B) vertical.
C) upward-sloping.
D) downward-sloping.

Question 5

Suppose two variables are inversely related. If one variable rises, then the other variable:

A) also rises.
B) falls.
C) remains unchanged.
D) reacts unpredictably.

Question 6

Which of the following statements is correct?

A) Slope is the ratio of the vertical change (the rise or fall) to the horizontal change (the run).
B) A direct relationship is one in which two variables change in the opposite direction.
C) An inverse relationship is one in which two variables change in same directions.
D) An independent relationship is one in which two variables are upward sloping.

Question 7

Which of the following pairs is the most likely to exhibit a direct relationship?

A) The price of gasoline and the amount of gasoline that people purchase.
B) Cholesterol levels and the likelihood of developing heart disease.
C) Outdoor temperature and heating oil sales.
D) Annual income and weekly pawn shop visits.

Question 8

Exhibit 1A-7 Straight line relationship
According to Exhibit 1A-7, the relationship between annual income and air-travel expenditures is:

A) direct.
B) inverse.
C) complex.
D) independent.

Question 9

Exhibit 1A-3 Straight line
Straight line AB in Exhibit 1A-3 is a downward sloping line illustrating:

A) a direct relationship between X and Y.
B) an inverse relationship between X and Y.
C) X and Y are unrelated variables.
D) the ceteris paribus assumption.

Question 10

An upward-sloping line or curve is used to illustrate:

A) a direct relationship.
B) an inverse relationship.
C) two unrelated variables.
D) the ceteris paribus assumption.

Question 11

Measured between two points on a curve, the ratio of the change in the variable on the vertical axis to the change in the variable on the horizontal axis is the:

A) axis.
B) slope.
C) dependent curve.
D) independent curve.

Question 12

A direct relationship exists when:

A) there is no association between two variables.
B) one variable increases and there is no change in the other variable.
C) one variable increases and the other variable increases.
D) one variable increases and the other variable decreases.

Question 13

Exhibit 1A-5 Straight line
In Exhibit 1A-5, as X increases along the horizontal axis, from point C to point D on the line, the Y values

A) increase so the relationship between X and Y is direct.
B) decrease so the relationship between X and Y is inverse.
C) remain unchanged so the relationship between X and Y is independent.
D) change so the relationship between X and Y is variable.

Question 14

Graphically express a direct and an inverse or negative relationship. What could cause a shift in a line or curve expressing a relationship between two variables?

Question 15

Exhibit 1A-1 Straight line
In Exhibit 1A-1, as X increases along the horizontal axis, from point A to point B on the line, the Y values

A) increase so the relationship between X and Y is direct.
B) decrease so the relationship between X and Y is inverse.
C) remain unchanged so the relationship between X and Y is independent.
D) change so the relationship between X and Y is variable.

Question 16

A direct relationship is expressed graphically as a:

A) positively sloped line or curve.
B) negatively sloped line or curve.
C) horizontal line.
D) vertical line.

Question 17

Which of the following pairs is the most likely to exhibit an inverse relationship?

A) The amount of time you study and your grade point average.
B) People's annual income and their expenditure on personal computers.
C) Baseball players' salaries and their batting averages.
D) The price of a concert and the number of tickets people want to purchase .

Question 18

Exhibit 1A-8 Straight line relationship
According to the Exhibit 1A-8, the relationship between the price and quantity purchased of pizza is:

A) direct.
B) inverse.
C) complex.
D) independent.

Question 19

Suppose two variables are directly related. If one variable rises, then the other variable:

A) also rises.
B) falls.
C) remains unchanged.
D) reacts unpredictably.

Question 20

If the amount of lemonade purchased and the outdoor temperature are directly related, then

A) when temperature rises, the amount of lemonade purchased rises.
B) a graph with this relationship would be negatively sloped.
C) sellers of lemonade hope for cooler temperatures.
D) the slope of the line reflecting this relationship will be 0.

Question 21

Assume there is a relationship between two variables and the other-variables-held constant assumption (ceteris paribus) is relaxed. We would expect that the line representing this relationship would:

A) change from inverse to direct.
B) change from direct to inverse.
C) have a greater number of data points.
D) change its location.

Question 22

Which of the following is used to illustrate an independent relationship between two variables?

A) An upward-sloping curve
B) A downward-sloping curve
C) A hill-shaped curve
D) A horizontal or vertical line

Question 23

Exhibit 1A-8 Straight line relationship
Which of the following would cause a shift in the relationship shown in Exhibit 1A-8?

A) A fall in household incomes.
B) A fall in the price of pizza.
C) A fall in the quantity of pizza that people wish to purchase.
D) A rise in the price of pizza.

Question 24

Exhibit 1A-4 Straight line
Straight line A-D in Exhibit 1A-4 shows that:

A) as the X value increases by 80, the Y value increases by 40 so the slope is 2.
B) as the Y value increases by 40, the X value increases by 80 so the slope is 1/2.
C) increasing values for X do not affect the value of Y.
D) increasing values for Y do not affect the value of X.

Question 25

When economists say goods are scarce, they mean:

A) consumers are too poor to afford the goods and services available.
B) consumers are unwilling to buy goods unless they have very low prices.
C) goods are generally freely available from nature in most countries.
D) the desire for goods and services exceeds our ability to produce them with the limited resources available.

Question 26

Exhibit 1A-1 Straight line
In Exhibit 1A-1, the slope of straight line AB is:

A) positive.
B) zero.
C) negative.
D) variable.

Question 27

Exhibit 1A-2 Straight line
In Exhibit 1A-2, explain the slope of straight line CD.

A) As the X value increases by 20, the Y value increases by 5, so the slope is 4.
B) As the Y value increases by 5, the X value increases by 20, so the slope is 1/4.
C) As the X value increases by 10, the Y value increases by 5, so the slope is 2.
D) As the Y value increases by 5, the X value increases by 10, so the slope is 1/2.

Question 28

Scarcity is a problem:

A) measured by the amount of goods available.
B) of the poor, but not the rich.
C) because human wants are unlimited while resources are limited.
D) only in industrialized economies.

Question 29

Exhibit 1A-9 Multi-curve graph
Exhibit 1A-9 represents a three-variable relationship. As the annual income of consumers falls from $50,000 (line A) to $30,000 (line B), the result is a:

A) rightward movement along each curve.
B) leftward movement along each curve,.
C) leftward shift from curve A to curve B.
D) rightward shift from curve B to curve A.

Question 30

Exhibit 1A-1 Straight line
As shown in Exhibit 1A-1, the slope of straight line AB:

A) decreases with increases in X.
B) increases with increases in X.
C) increases with decreases in X.
D) remains constant with changes in X.

Question 31

Exhibit 1A-5 Straight line
In Exhibit 1A-5, the slope for straight line CD is:

A) 5.
B) 1.
C) − 1.
D) − 5.

Question 32

A shift in a curve represents a change in:

A) the variable on the horizontal axis.
B) the variable on the vertical axis.
C) a third variable that is not on either axis.
D) any variable that is relevant to the relationship being graphed.

Question 33

Exhibit 1A-7 Straight line relationship
Which of the following would cause a shift in the relationship shown in Exhibit 1A-7?

A) A rise in people's annual income.
B) A rise in people's expenditure on air travel.
C) A rise in the price of air travel.
D) Nothing will shift the line in the graph.

Question 34

Exhibit 1A-8 Straight line relationship
For the relationship shown in Exhibit 1A-8, suppose the price of hamburgers increases and hamburgers are a substitute for pizza. What change would occur on the graph?

A) There will be a movement upward and to the left along the curve.
B) There will be a movement downward and to the right along the curve.
C) The curve will shift.
D) The slope of the curve will become steeper.

Question 35

Exhibit 1A-10 Multi-curve graph
Exhibit 1A-10 represents a three-variable relationship. As the annual income of consumers rises from $20,000 (line A) to $40,000 (line B), the result is a:

A) rightward movement along each curve.
B) leftward movement along each curve.
C) leftward shift from curve B to curve A.
D) rightward shift from curve A to curve B.

Question 36

When economists say scarcity, they mean:

A) there are only a limited number of consumers who would be interested in purchasing goods.
B) human wants exceed the available supply of time, goods and resources.
C) most people in poorer countries do not have enough goods.
D) goods are so expensive that only the rich can afford it.

Question 37

Scarcity:

A) is a problem only in industrialized economies.
B) is a condition measured by the quantity of goods available.
C) exists everywhere because human wants can never be satisfied.
D) is a problem only in poor economies.

Question 38

Scarcity:

A) exists because resources are unlimited while human wants are limited.
B) means we are unable to have as many goods and services or as much time for activities as we would like to have.
C) will likely be eliminated as technology continues to expand.
D) is not an issue addressed in economics.

Question 39

Exhibit 1A-4 Straight line
In Exhibit 1A-4, as X increases along the horizontal axis, corresponding to points A-D on the line, the Y value remains unchanged at 40 units. The relationship between the X and Y variables is:

A) direct.
B) inverse.
C) independent.
D) undefined.

Question 40

Exhibit 1A-7 Straight line relationship
Using the relationship shown in Exhibit 1A-7, suppose the price of air travel increases. How would you revise the graph to show this change?

A) Draw a new point on the graph upward and to the left.
B) Draw a new point on the graph downward and to the right.
C) Draw a new line on the graph.
D) Change the current line so that its slope is flatter.

Question 41

Human wants:

A) are unfilled only in the poorer countries of the world.
B) can be completely satisfied by advancing technology.
C) can never be fully satisfied.
D) only apply to necessities.

Question 42

Which of the following is true of resources?

A) Resources are outputs from the production of goods and services.
B) A $1,000 investment is an example of a capital resource.
C) Entrepreneurship organizes resources to produce goods and services.
D) Land resources do not include water.

Question 43

The services of farmers are an example of:

A) capital.
B) a natural resource.
C) labor.
D) entrepreneurship.

Question 44

All of the following are examples of capital except :

A) the robot used to help produce your car.
B) the classroom in which you learn.
C) the factory that produces the costume jewelry you buy.
D) an uncut diamond that you discover in your backyard.

Question 45

Which of the following is not an example of a capital input?

A) A person's skills and abilities, which can be employed to produce valuable goods and services.
B) Factories and offices where goods and services are produced.
C) Tools and equipment.
D) Computers used by a company to record inventory, sales, and payroll.

Question 46

100 shares of stock in General Motors is considered which type of resource?

A) land
B) labor
C) capital
D) It is not a resource.

Question 47

The perpetual problem in economics is:

A) our inability to work together effectively.
B) our inability to satisfy everyone's wants with the available resources.
C) likely to be solved in resource-rich countries.
D) our inability to utilize resources efficiently.

Question 48

Which of the following is an example of scarcity?

A) Adam has more than enough food to eat each day.
B) Benito is wealthy so he has everything he could ever want.
C) Camden would like to have more designer clothes than he can afford.
D) Dennis takes as many vacations as he would like since he won the lottery.

Question 49

The finite nature of the economy's resource base:

A) will be solved if only we would learn to conserve.
B) is only a problem in developing countries.
C) will be solved as technology advances.
D) will always be with us.

Question 50

Relate the term scarcity to the action(s) it causes.

A) Scarcity causes developed nations to have more material goods than developing nations.
B) Scarcity causes fewer technological advances.
C) Scarcity forces people to want more material goods.
D) Scarcity forces everyone to make choices.

Question 51

Natural resources are:

A) not considered scarce because no one pays for them.
B) rarely used in production.
C) included in the category of resources called land.
D) available in unlimited quantities.

Question 52

Which of the following is the best example of a nonrenewable resource?

A) forests
B) oil
C) solar power
D) clean air

Question 53

Which of the following is not an example of a factor of production?

A) A forest.
B) A computer program.
C) A n assembly-line worker .
D) Dollars.

Question 54

Which of the following would an economist classify as capital?

A) 100 shares of Microsoft stock.
B) $50 bill.
C) credit card.
D) lawyer's personal computer.

Question 55

An economics textbook is an example of:

A) capital.
B) labor.
C) a natural resource.
D) entrepreneurship.

Question 56

The mental and physical capacity of workers to produce goods and services is known as:

A) labor.
B) entrepreneurship.
C) value judgment.
D) product sensitivity.

Question 57

Wealthy families wanting finer homes and nicer vacations exemplify

A) capital.
B) production.
C) resources.
D) scarcity.

Question 58

People are forced to make choices because of:

A) unlimited wants and unlimited resources.
B) limited wants and unlimited resources.
C) unlimited wants and limited resources.
D) limited wants and limited resources.

Question 59

A factor of production is the same as:

A) the amount of a good produced.
B) the price of a good.
C) an opportunity cost.
D) a resource.

Question 60

An entrepreneur is a(n):

A) individual who has much education.
B) organizer who seeks profitable opportunities and is willing to accept risks.
C) business organization that uses inputs to produce output.
D) depot or warehouse for commercial products.

Question 61

Determining the price of mobile phones is a concern of:

A) macroeconomics.
B) microeconomics.
C) both macroeconomics and microeconomics.
D) neither macroeconomics nor microeconomics.

Question 62

The basic difference between macroeconomics and microeconomics is:

A) microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade.
B) microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms.
C) microeconomics concentrates on the behavior of individual consumers, firms, and industries while macroeconomics focuses on the performance of the entire economy.
D) microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

Question 63

The television network newscaster reports that the national inflation rate the past year equaled 4 percent. This report would be of particular interest to a

A) microeconomist.
B) normative economist.
C) macroeconomist.
D) social science economist.

Question 64

The price of milk would be of particular interest to

A) a microeconomist.
B) a macroeconomist.
C) neither a microeconomist nor a macroeconomist.
D) both a microeconomist and a macroeconomist.

Question 65

Microeconomics deals with the analysis of all the following questions except how:

A) the wages of carpenters are determined.
B) high did unemployment rise during the Great Depression.
C) does Ford decide how to price its cars.
D) does a college student decide how to spend her income.

Question 66

The study of microeconomics and macroeconomics differ in that:

A) microeconomics is concerned with the domestic economy and macroeconomics is concerned only with the international economy.
B) microeconomics examines the individual markets of the economy while macroeconomics studies the whole economy.
C) microeconomics studies the actions of households and macroeconomics studies the actions of business firms.
D) microeconomics examines the whole economy while macroeconomics studies the individual units of the economy.

Question 67

Which of the following is the best example of a microeconomic topic?

A) The impact that the money supply has on inflation.
B) The reasons for increases in the price of soft drinks.
C) The effect that federal budget deficits have on the interest rate.
D) The tradeoff between inflation and unemployment.

Question 68

Economics is the study of how people:

A) vote for political leaders.
B) make choices to produce and consume goods and services.
C) establish social institutions that maximize well-being.
D) develop value systems.

Question 69

Arrange the following topics into lists of microeconomic and macroeconomic topics:  - wages of textile workers
 - cost of producing 10,000 bookcases
 - the economy's annual growth rate
 - national demand for fish
 - the unemployment rate
 - the gold futures market
 - money supply
 - projected inflation rate next year

A) Microeconomics: wages of textile workers, the unemployment rate, cost of producing 10,000 bookcases, the gold futures market Macroeconomics: the economy's annual growth rate, money supply, national demand for fish, projected inflation rate next year
B) Microeconomics: wages of textile workers, cost of producing 10,000 bookcases, the economy's annual growth rate, unemployment rate Macroeconomics: national demand for fish, the gold futures market, money supply, projected inflation rate next year
C) Microeconomics: wages of textile workers, cost of producing 10,000 bookcases, the gold futures market, national demand for fish Macroeconomics: the economy's annual growth rate, the unemployment rate, money supply, projected inflation rate next year
D) Microeconomics: the economy's annual growth rate, the unemployment rate, money supply, projected inflation rate next year Macroeconomics: wages of textile workers, cost of producing 10,000 bookcases, the gold futures market, national demand for fish

Question 70

An entrepreneur is:

A) an employee in a factory.
B) the manager of a factory.
C) the person who conceives and starts a business.
D) the person who does not assume any risk in business.

Question 71

Macroeconomics deals with the analysis of all of the following questions except:

A) why do national economies grow.
B) how does Microsoft price its software packages.
C) how does a central bank influence inflation.
D) why does a country experience recessions.

Question 72

Which of the following is included in the study of macroeconomics?

A) wage rate of Ford's assembly-line workers
B) prices of automobiles
C) unemployment in the nation
D) price of silver and gold

Question 73

The central question in economics is how to:

A) deal with the problem of scarcity.
B) change government economic policy.
C) change people's wants to match their needs.
D) manage money and become wealthy.

Question 74

The silly clothes worn by a circus clown are an example of:

A) a natural resource.
B) capital goods.
C) labor.
D) entrepreneurship.

Question 75

Entrepreneurs can delegate every one of the following tasks to labor except:

A) hiring and training new employees.
B) assuming business risk and uncertainty.
C) supervision of the production process.
D) marketing the goods and services produced.

Question 76

Which of the following is the best example of a microeconomics topic?

A) a price of a new home
B) the inflation rate
C) the economy's growth rate
D) forecasts of a recession next year

Question 77

The subject of economics is primarily the study of:

A) the government decision-making process.
B) how to operate a business successfully.
C) decision-making because of the problem of scarcity.
D) how to make money in the stock market.

Question 78

Microeconomics approaches the study of economics from the viewpoint of:

A) inflation, unemployment, and economic growth.
B) the federal government.
C) individual economic units, such as consumers, firms, industries, and units of government.
D) the economy as a whole.

Question 79

Which of the following would be studied by a macroeconomist rather than a microeconomist?

A) shipping rates
B) price of corporate stock
C) market price of Japanese cars
D) unemployment rate in the nation

Question 80

Labor resources:

A) include only physical activities.
B) include human effort involved in the production of goods, but not services.
C) include only skilled labor.
D) include both physical and mental activities.