Deck 1: What is Economics

Question 1

Labor productivity is measured by the

A) unemployment rate divided by the employment rate.
B) output per hour of labor.
C) ratio of labor to capital with a given technology.
D) labor force participation rate.
E) size of the labor force.

Answer 1

B

Question 2

Economic problems arise because

A) the number of free resources is quite limited.
B) human wants and desires are limited.
C) the world's population is not growing as fast as output is expanding.
D) there is too much money in the world.
E) too many people are self-sufficient and thus do not produce enough.

Answer 2

A

Question 3

The expression "there's no such thing as a 'free lunch'" is

A) generally untrue.
B) irrelevant to the subject of economics.
C) a recognition that our capacity to produce goods is limited.
D) an example of normative economics.
E) applicable solely to the inefficient use of resources.

Answer 3

C

Question 4

Economic analysis is

A) widely understood by all in our society.
B) important for solving problems in developing and socialist societies but of little use in Western capitalist systems.
C) a set of mathematical rules to ensure a society's happiness and prosperity.
D) a framework for understanding issues that arise because societies need to make allocational decisions.
E) a natural science concerned with biological growth and change of the social system.

Question 5

Proposed causes of the Great Recession include all of the following EXCEPT

A) irresponsible lending practices.
B) the bubble mentality.
C) high interest rates implemented by the Federal Reserve.
D) legislation promoting home ownership.
E) unencumbered access to global capital markets.

Question 6

The poor performance of the U.S.economy relative to other industrialized countries during the 1970s,1980s,and early 1990s was called

A) disflation.
B) reflation.
C) a competitiveness problem.
D) unflation.
E) proflation.

Question 7

Over time the U.S.economy has had

A) fluctuations in growth.
B) full employment without serious inflation.
C) continuous growth in output per person.
D) persistent deflation.
E) steadily increasing unemployment.

Question 8

The basic characteristic of an economic resource is that it

A) is made by machine.
B) is free.
C) is relatively scarce.
D) consists of buildings, equipment, and inventories.
E) comes from the earth.

Question 9

The existence of relative scarcity

A) refers to the fact that people only desire what they cannot have.
B) is no longer relevant to the U.S. economy.
C) creates the need to choose how to allocate resources.
D) emphasizes the need to conserve free resources.
E) means that every country can produce enough to fully satisfy every citizen's wants.

Question 10

Understanding poverty involves understanding those social mechanisms underlying the

A) banking system.
B) distribution of income.
C) stock market.
D) rate of inflation.
E) balance of payments.

Question 11

Human wants and desires

A) are rarely influenced by advertising or cultural factors.
B) can be classified into the categories of land, labor, and capital.
C) are more readily satisfied when labor productivity declines.
D) appear to be insatiable in the aggregate.
E) fall dramatically as incomes rise in the economy.

Question 12

Economics is best defined as the study of how

A) to classify resources used to produce final goods and services.
B) resources are apportioned to satisfy human wants.
C) modern businesses have grown and prospered.
D) technology can be used to change scarce resources into free resources.
E) pure capitalism has become the best system for satisfying basic human wants.

Question 13

The following question is based on the following table:
Percentage Distribution of Households by Annual Income, United States, 2009

Using the table above,82 percent of the households in 2009 had annual incomes of

A) less than $15,000.
B) more than $25,000.
C) between $35,000 and $50,000.
D) at least $75,000.
E) more than $100,000.

Question 14

Economic resources have a price above zero because

A) there are no other uses for them.
B) they cannot be easily moved from place to place.
C) otherwise they would not be able to satisfy human wants.
D) they are relatively scarce.
E) they are unlimited in supply.

Question 15

In recent years,one characteristic of the growth process in the emerging market economies has been the

A) volatility of and bumpiness experienced in the growth path.
B) inability of any of these countries to close the gap.
C) need to rely heavily on central planning and state-owned enterprises to make it work.
D) fact that it has been limited exclusively to economies in the Western Hemisphere.
E) absence of any currency crises.

Question 16

A country's standard of living is closely correlated with its

A) physical size.
B) population density.
C) mineral resources
D) cultural diversity.
E) labor force productivity.

Question 17

The activities of a self-employed physician in running a medical practice would be considered

A) free resources.
B) labor.
C) land.
D) capital.
E) technology.

Question 18

Societies must choose how to use available resources because

A) most resources are not owned by anyone.
B) the capacity to produce goods and services is unlimited.
C) in the aggregate human wants are insatiable.
D) otherwise resource prices would be zero.
E) technological progress wastes resources.

Question 19

There would be no economic problems in a world in which all resources were

A) free.
B) natural.
C) bought and sold for a price.
D) owned by the government.
E) scarce.

Question 20

The average yearly income per family in the United States is about $60,000.To more meaningfully interpret this figure,we would need information on the

A) output per hour of labor.
B) amount of household consumption expenditures.
C) exchange rate.
D) number of families.
E) distribution of income.

Question 21

Technology

A) concentrates on the fine arts and literature.
B) is another name for capital.
C) permits society to ignore problems of allocation.
D) is a specific managerial technique.
E) sets limits on the ability to satisfy human wants with existing resources.

Question 22

The purpose of an economic model is to

A) be a complex, exact replica of reality.
B) demonstrate which values and beliefs are best for the economy.
C) make predictions about the real world.
D) manage the economy like an automatic pilot.
E) set the prices in a price system.

Question 23

Statements,propositions,or predictions about economic issues that can be tested in principle by an appeal to the facts are called ________ economics.

A) positive
B) passive
C) normative
D) mechanical
E) comparative

Question 24

Answers to economic issues that depend on an individual's values or preferences are called ________ economics.

A) positive
B) passive
C) normative
D) mechanical
E) comparative

Question 25

Which of the following is the best example of land?

A) mineral deposits
B) human efforts
C) buildings and equipment that contribute to production
D) accounts receivable
E) goods and services purchased by households for their enjoyment

Question 26

The central questions in economics

A) pertain solely to centrally planned economies.
B) reflect concerns arising from the problem of relative scarcity.
C) are statements about what ought to be.
D) eliminate the necessity of computing opportunity costs.
E) represent economic theories that become obsolete with the rise of capitalism.

Question 27

Propositions in positive economics

A) can be tested by comparisons with facts.
B) yield results that depend on individual values or preferences.
C) are rarely agreed to by both conservative and liberal economists.
D) make statements about what ought to be.
E) are generally identical to those of normative economics.

Question 28

Another term for opportunity cost is ________ cost.

A) irrelevant
B) unnecessary
C) normative
D) disappearing
E) alternative

Question 29

A full-time college student could drop out in his senior year and get a job paying $19,500.By finishing school,he incurs an opportunity cost equal to

A) the college degree he gave up to take the job.
B) the college tuition he would otherwise pay.
C) the difference between the cost of tuition and $19,500.
D) $19,500.
E) zero.

Question 30

Which of the following is the best example of labor?

A) eating a Big Mac
B) attending a rock concert
C) watching a late-night TV show
D) planning a corporate merger
E) sleeping in Economics class

Question 31

Opportunity cost

A) is the production forgone from the best alternative use of a resource.
B) reduces the need to make choices.
C) applies only to allocating capital.
D) is another name for the "invisible hand."
E) is greater for free resources than for economic resources.

Question 32

The distinction between positive and normative economics is that positive economics deals with

A) inflation; normative economics deals with unemployment.
B) human wants; normative economics deals with resources.
C) economic benefits; normative economics deals with economic costs.
D) opportunity costs; normative economics deals with choice.
E) descriptive statements and predictions about the world; normative economics deals with what ought to be.

Question 33

To suggest that the United States should take measures to preserve jobs in the steel industry is an example of ________ economics.

A) positive
B) passive
C) normative
D) mechanical
E) comparative

Question 34

When a decision is made to undertake a particular course of action,its opportunity cost

A) is either zero or irrelevant.
B) disappears if the course of action is chosen voluntarily.
C) is measured by the amount of gain from the course of action.
D) may be computed by adding the gain from that action to the gains possible from alternate actions.
E) is that which is made impossible by the course of action.

Question 35

Normative economics frequently plays a valid role when

A) making an economic forecast.
B) formulating economic theory.
C) gathering data.
D) considering economic policy questions.
E) testing an economic model.

Question 36

Which of the following is the best example of capital?

A) mineral deposits
B) human effort
C) buildings and equipment that contribute to production
D) accounts receivable
E) goods and services purchased by households for their enjoyment

Question 37

Economists generally classify economic resources into what three categories?

A) men, money, and machines
B) savings, spending, and investment
C) land, labor, and capital
D) physical, human, and technological
E) employed, unemployed, and free

Question 38

Society's pool of knowledge concerning the industrial arts is called

A) labor.
B) land.
C) capital.
D) opportunity cost.
E) technology.

Question 39

Cutting an English class to prepare for an economics exam is an example of

A) normative economics.
B) the fallacy of composition.
C) a nonproductive activity.
D) an inverse relationship.
E) opportunity cost.

Question 40

In addition to its fertility,the value of land as an economic resource may stem from its

A) location.
B) mobility.
C) omniscience.
D) gender.
E) conscience.

Question 41

One of the four basic tasks any economic system must perform is

A) measuring the size of its production possibilities curve.
B) conducting a population census.
C) eliminating free resources.
D) classifying economic resources.
E) determining the kinds of goods to be produced and the amount of each.

Question 42

The following questions are based on the following diagram:

If the economy currently produces 4 million units of consumer goods and 2 million units of defense goods

A) it is operating on its production possibilities curve.
B) there must be unemployment of resources.
C) it is producing a combination that requires more resources than it has.
D) it is achieving economic but not technical efficiency.
E) defense goods are preferred to consumer goods.

Question 43

An economy operating inside its production possibilities curve is most likely

A) at full employment.
B) using resources inefficiently.
C) being forced to give up the production of one good to get more of another good.
D) facing a bowed-in curve.
E) producing no capital goods.

Question 44

A theory composed of a number of assumptions from which predictions are deduced is called a(n)

A) statistic.
B) event.
C) conclusion.
D) model.
E) allegory.

Question 45

According to Adam Smith,economic progress results from

A) government ownership of productive resources.
B) a perfectly equal distribution of income in a society.
C) allowing firms to achieve great economic power by monopolizing markets.
D) the division of labor and increased specialization.
E) rapid rates of population growth.

Question 46

The following questions are based on the following diagram illustrating the results of a study of food expenditures and income for a group of families:

The evidence presented in the graph indicates that

A) all families at a given income level spend the same amount on food.
B) the amount of household income depends on the amount of household food expenditures.
C) an inverse relationship exists between the two variables.
D) for the families included in the study, no relationship exists between food expenditures and income.
E) if income falls an average of $15,000, annual food expenditures will fall an average of $2,500.

Question 47

Measurement is necessary in economics to

A) construct diagrams depicting economic models.
B) evaluate the predictions of economic models.
C) help distinguish positive from normative statements.
D) identify the tasks an economy must perform.
E) construct mathematical models of the economy.

Question 48

When Adam Smith described the invisible hand,he was talking about

A) the price system.
B) central planning.
C) opportunity cost.
D) the division of labor.
E) disguised unemployment.

Question 49

The following question is based on the following table:

The relationship between household income and number of DVD players is

A) nonexistent.
B) direct.
C) negative.
D) fluctuating.
E) terminal.

Question 50

The following questions are based on the following diagram illustrating the results of a study of food expenditures and income for a group of families:

If a graph of two variables shows a downward-sloping relationship,that relationship is considered to be

A) inverse.
B) positive.
C) normative.
D) variable.
E) independent.

Question 51

The following questions are based on the following diagram illustrating the results of a study of food expenditures and income for a group of families:

From the graph it can be seen that,on average,a lower-income family spends

A) a higher percentage of its income on food than a higher-income family.
B) a lower percentage of its income on food than a higher-income family.
C) the same percentage of its income on food as a higher-income family.
D) a different percentage of its income on food than any other family with the same income.
E) too much of its income on food.

Question 52

Adam Smith wrote that

A) the economic problems of eighteenth-century Britain were in part caused by overspecialization.
B) the government should control the economy with an invisible hand.
C) the pursuit of private self-interest tends to promote the public interest.
D) the owners of resources should be given subsidies to induce them to employ those resources in the most efficient way.
E) eighteenth-century Britain needed a better-planned economy.

Question 53

The idea that the pursuit of private self-interest by consumers and firms also promotes the public interest is called

A) roundabout production.
B) the circular flow.
C) opportunity cost.
D) the invisible hand.
E) innovation.

Question 54

A basic task of any economic system is to

A) ensure that producers and consumers have the maximum freedom of choice in their economic decisions.
B) increase the size of its population relative to its annual output.
C) estimate its per capita output annually.
D) promote the use of money for exchanging goods and services.
E) make decisions regarding the degree of economic egalitarianism.

Question 55

The following questions are based on the following diagram illustrating the results of a study of food expenditures and income for a group of families:

Family B

A) spends less than family A on food.
B) has a higher income than family A.
C) spends more than its income on food.
D) spends about the same amount on food as the average family.
E) spends a higher percentage of its income on food than family A.

Question 56

A straight line fitted to an upward-sloping scatter of points in a graph represents

A) the upper turning point.
B) economic growth.
C) the average relationship.
D) a long-run equilibrium.
E) an inverse function.

Question 57

The best economic models

A) are complex.
B) are chosen by secret ballot.
C) make a profit.
D) cannot be quantified.
E) forecast accurately.

Question 58

The intersection of the horizontal and vertical axes of a graph is called the

A) equilibrium.
B) origin.
C) elbow.
D) solution.
E) nib.

Question 59

Excluded from the tasks an economic system must perform is determining

A) how free resources are to be allocated.
B) the level and composition of society's output.
C) how each good and service is to be produced.
D) the rate of growth of per capita income.
E) how goods and services are to be distributed.

Question 60

When evaluating the usefulness of an economic model,one should check to see whether the model

A) is consistent with models in other social sciences.
B) is based on assumptions that are all close replicas of reality.
C) is intelligible to the average layperson.
D) predicts more accurately than any other model.
E) can be tested under carefully controlled conditions.

Question 61

For an economy at full employment to increase its per capita growth rate,it must

A) operate inside its production possibilities curve.
B) devote more resources to the production of capital goods.
C) shift the production possibilities curve inward.
D) ignore the central questions.
E) maintain existing levels of consumer production.

Question 62

A production possibilities curve illustrates

A) opportunity costs.
B) a market.
C) principles of taxation.
D) income distribution.
E) the circular flow.

Question 63

An improvement in technology or an increase in the amount of capital goods will

A) result in movement along a fixed production possibilities curve.
B) diminish the society's production potential.
C) increase the opportunity costs of all goods.
D) cause the production possibilities curve to become vertical.
E) shift the production possibilities curve outward.

Question 64

The United States could expand output of both civilian and military goods during the period from 1939 through the early part of World War II because

A) output per worker fell as more men were drafted by the military.
B) it captured large amounts of new resources from enemy territory.
C) military goods are produced using different resources than consumer goods.
D) during the 1930s it was operating well inside its production possibilities curve.
E) its production possibilities curve was bowed out during World War II.

Question 65

The following questions are based on the following production possibilities curve:

Suppose 4 million tractors wear out each year.If society chooses point A as this year's output combination,then this year's food output is 8 million tons,and at the end of the year

A) there will be 4 million more tractors than at the beginning of the year.
B) the production possibilities curve will shift outward.
C) there will be 4 million fewer tractors than at the beginning of the year.
D) there will be the same number of tractors as at the beginning of the year.
E) output cannot be determined due to insufficient information.

Question 66

The following questions are based on the following production possibilities curve:

Suppose 4 million tractors wear out each year.If society wishes to push next year's production possibilities curve outward,the best point to choose of those shown is

A) A.
B) B.
C) C.
D) D.
E) E.

Question 67

The fact that initial improvements in the health of cotton textile workers were far less costly to achieve than the final stages of compliance with OSHA regulations illustrates that typical production possibilities curves are

A) vertical.
B) horizontal.
D) bowed out.
C)bowed in.
E)upward sloping to the right.

Question 68

According to Richard Gill in the Economics U$A video,the opportunity costs for preserving the Alaskan wilderness are measured by the loss of

A) worker health benefits in textile manufacturing.
B) minerals rendered unavailable for development.
C) wilderness areas in the lower 48 states.
D) tax revenues to the federal government.
E) foreign oil because of the cutback in OPEC oil production.

Question 69

For this economy to produce 5 million units of consumer goods and 3 million units of defense goods

A) resources must be used inefficiently.
B) the production possibilities curve must be pushed outward.
C) unemployment must grow.
D) income inequality must increase.
E) society's resources must shrink.

Question 70

All output combinations that fall on an economy's production possibilities curve

A) can be chosen simultaneously.
B) represent the minimum amounts of each good that can be produced.
C) show the distribution of goods and services in the economy.
D) tell us little or nothing about a society's level and composition of output.
E) represent the full and efficient use of that economy's resources.

Question 71

A production possibilities curve is least helpful when it comes to analyzing which of the basic tasks facing an economic system?

A) determining what is produced
B) determining how goods are produced
C) determining how society's output is distributed
D) determining society's rate of growth
E) all the basic economic tasks facing an economic system

Question 72

If at full employment,defense goods production increases from 2 million units to 3 million units,the cost would be ________ units of consumer goods.

A) zero
B) 0.5 million
C) 1 million
D) 2 million
E) 5 million

Question 73

A movement from an output combination inside the production possibilities curve to a combination on the curve

A) requires an increase in resources or an improvement in technology.
B) leads to an increase in inequality in the distribution of income.
C) is possible only if the production possibilities curve shifts inward to the left.
D) enables society to increase the output of one good without reducing the output of another good.
E) leads to a decline in per capita output.