Deck 1: Economics and the World Around You

Question 1

One of the reasons communism failed was

A) government ran out of money.
B) workers received the same pay whether or not they worked hard.
C) there was no unemployment.
D) Leonid Brezhnev and Mao Zedong passed away.
E) technology lagged non-communistic countries.

Answer 1

workers received the same pay whether or not they worked hard.

Question 2

Scarcity

A) ensures people become satisfied with less than they want.
B) exists only during a recession.
C) exists only in some countries.
D) affects only poor people.
E) requires people to make choices.

Answer 2

requires people to make choices.

Question 3

Which of the following is a reason to study economics?

A) Economic analysis explains daily events.
B) It helps us understand why people, firms and government behave in a certain way.
C) We need to understand relevant economic applications and policy issues.
D) It provides useful logic for solving complex problems.
E) All of these

Answer 3

All of these

Question 4

Economics is

A) concerned with the problem of scarce resources combined with unlimited wants.
B) the study of how to make money in the stock market.
C) highly theoretical and has little practical application.
D) primarily concerned with day-to-day business decision making.
E) a decision making process involving individuals and firms rather than governments.

Question 5

Which of the following is not a limitation one faces when shopping for clothes?

A) The amount of time available to shop
B) One's budget
C) The various styles that are available
D) The store's selection
E) The freedom to make rational choices

Question 6

The main reason villagers in Xiaogang produced more rice than those in surrounding villages was

A) they had better farmland.
B) they were given better seeds.
C) they were able to keep the output they produced individually.
D) they made each family responsible for a certain, higher quota

Question 7

In 1981, in San Francisco Solano, Argentina, about 1,800 families took over a piece of wasteland. The resulting houses varied greatly, based on whether the residents received title. Those who received title also behaved differently, having fewer children, and the children experienced more education and better health. This is an example of (the results from)

A) Scarcity
B) Economic growth
C) Economic freedom
D) Private property rights
E) Quality of life

Question 8

Economics is the study of

A) the allocation of scarce resources and the ways in which human decision makers utilize those resources.
B) the methods that human decision makers use to transform a scarce good into a noneconomic good.
C) how to operate a business successfully.
D) a utopian society.
E) how to make money in the stock market.

Question 9

Sonia works at a restaurant where tips are pooled and divided equally. Anna works at a different restaurant where she keeps the tips her customers leave for her. Which of the following is true?

A) Both work equally hard because their hourly wage from the employer is low, and they can make up for this with tips
B) Sonia works harder, because she receives the same amount of tips as other workers.
C) Anna works harder, because she works at an expensive restaurant.
D) Anna works harder because her tips are her private property.
E) It's impossible to say without more information.

Question 10

GDP per capita is one way to measure an economy's growth. China and India began to progress when they allowed private ownership, in about ____. Since then there has been steady, strong growth in these economies.

A) 1960
B) 1970
C) 1980
D) 1990
E) 2000

Question 11

Overfishing, and in some cases extinction of species result from:

A) scarcity
B) greedy fishermen who cheat and take more than their fair share
C) no one has an incentive to take care of it
D) lack of laws to control the amount of fish taken
E) all of these

Question 12

Which of the following statements is true?

A) Goods are scarcer for the poor than for the rich.
B) Goods are scarce for neither the poor nor the rich.
C) Goods are scarce for both the poor and the rich.
D) Goods are scarce for the poor but not for the rich.
E) Goods are scarce for the rich but not for the poor.

Question 13

The heart of the economic problem is to

A) provide for full employment.
B) eliminate scarcity.
C) increase our standard of living.
D) allocate limited resources among unlimited uses.
E) increase leisure.

Question 14

Private property rights are important because

A) they create incentives for people to improve their standard of living.
B) the Constitution says so.
C) they allow students to choose their major field of study in college.
D) an economy cannot grow without them.
E) all of these

Question 15

According to the text, why are some countries rich and others very poor?

A) Some countries have no oil.
B) People have no property rights.
C) Access to education is very limited.
D) High tariffs prevent international trade.
E) All of these.

Question 16

Economic freedom is

A) the right to own property.
B) not having to pay taxes.
C) exists only in some countries.
D) affects only poor people.
E) the ability to engage in voluntary trade.

Question 17

Is it possible to eliminate scarcity?

A) Scarcity could be eliminated if all economies of the world would work together to solve world hunger.
B) Scarcity could be eliminated if we had full employment.
C) It is impossible to eliminate scarcity, given limited resources and unlimited wants.
D) Scarcity could be eliminated if the entire world would adopt communism.
E) Scarcity could be eliminated if the entire world would adopt a free market system.

Question 18

The primary reason to explain why some nations are rich and others poor is

A) A democratic government
B) A strong judicial system
C) Access to education
D) Private ownership
E) A stable currency

Question 19

It can be said that ____ laid the foundation for the Industrial Revolution.

A) the discovery of the Americas
B) private property rights
C) the invention of the cotton gin
D) the discovery of gold
E) the development of a strong judicial system

Question 20

Economic freedom generally leads to

A) a higher standard of living.
B) a better living conditions.
C) longer life expectancy.
D) better education.
E) all of these.

Question 21

The concept of scarcity as used by economists refers to

A) shortages.
B) a situation in which the available resources are not enough to satisfy the wants of the people.
C) a situation in which an item is available only in very small quantities.
D) a situation in which an item is very expensive.
E) a situation in which a resource is nonrenewable.

Question 22

If you must make a choice about consuming two apples, three oranges, or one candy bar, the opportunity cost of the candy bar is

A) two apples.
B) three oranges.
C) two apples and three oranges.
D) two apples or three oranges, whichever you most prefer.
E) the difference in the prices of the three options.

Question 23

Opportunity cost is best defined as the

A) sum of all alternatives given up when a choice is made.
B) money spent once a choice is made.
C) highest-valued alternative given up when a choice is made.
D) cost of a good less profits.
E) cost of capital resources used in the production of additional capital.

Question 24

Which economic concept is the closest parallel to the saying, "There's no such thing as a free lunch"?

A) Specialization
B) Unlimited wants
C) Underutilization of resources
D) Opportunity costs
E) Overutilization of resources

Question 25

Jane wins $100,000 in the lottery and immediately uses her winnings to open a donut shop. Her direct costs for the first year are $50,000. Alternatively, Jane could have placed her lottery winnings in a savings account earning 10 percent annual interest. Jane's total cost is

A) $60,000.
B) $50,000.
C) $160,000.
D) $45,000.
E) $55,000.

Question 26

Goods are scarce when

A) their price is too low.
B) their price is too high.
C) the amount people want is more than the amount available at a zero price.
D) they are necessities.
E) their price is controlled.

Question 27

Because of scarcity,

A) costs are incurred in making choices.
B) we attempt to utilize our resources as efficiently as possible.
C) we must make choices between production possibilities.
D) we are unable to produce all we would like to produce.
E) all of these.

Question 28

Ronnie waits one hour in line to buy a ticket to a rock concert. The opportunity cost of buying the $28 ticket

A) is Ronnie's best alternative use of the $28.
B) is Ronnie's best alternative use of the one hour it took to wait in line.
C) is the value of the $28 to the ticket agent.
D) is Ronnie's best alternative use of both the $28 and the one hour spent in line.
E) cannot be measured because there is no opportunity cost associated with consumption.

Question 29

What economic concept is illustrated by the saying "You can't have your cake and eat it too"?

A) Private property rights
B) Economic freedom
C) Scarcity
D) Opportunity cost
E) Gains from trade

Question 30

A good or service becomes scarcer over time if

A) the difference between quantities demanded and supplied at a zero price decreases.
B) the excess of the quantity demanded over the quantity supplied at a zero price increases.
C) the economy is capable of producing more goods and services.
D) people begin to reduce their requirements for the goods and services that are actually available.
E) the amount of a good available equals the amount desired.

Question 31

To an economist, scarcity means that

A) it is very time-consuming to find a good.
B) at a zero price, the available quantity of a good is insufficient to meet people's wants.
C) a good is unavailable.
D) at the current market price, the amount available is less than the amount that people want and are willing to pay for.
E) resources are unlimited but people's desires are limited.

Question 32

To say that something is scarce means that

A) it is no longer available in stores.
B) it must be conserved at any cost.
C) even the government cannot supply it.
D) sufficient amounts of it are available only at full employment and inflated prices.
E) not enough is available to satisfy people's wants at a zero price.

Question 33

Which statement concerning opportunity costs is false?

A) Opportunity costs can always be expressed in money terms.
B) Every choice involves opportunity costs.
C) Opportunity costs are the highest-valued alternatives that must be forgone when a choice is made.
D) The full cost of an activity includes the opportunity costs.
E) Economists refer to the forgone benefits of the next-best alternative as opportunity costs.

Question 34

To say that there is a scarcity of gold means that

A) gold prices will rise.
B) there is not enough gold to satisfy people's demand for it at a zero price.
C) there are very few substitutes for gold.
D) gold is very expensive.
E) the demand for gold is changing.

Question 35

The opportunity cost of studying economics tonight at the library does not include

A) the good time you could be having by going out with your friends.
B) the time you could be spending studying for your history class.
C) your lost sleep.
D) the time you could be spending listening to music or watching television.
E) the higher grade you might earn on the next economics test.

Question 36

Which of the following statements is false?

A) Economists look at the factors that lead an individual to decide that a particular idea is in his or her best interest.
B) Economists do not ask whether a particular decision is in the individual's best interest.
C) Choices must be made because of scarcity.
D) A particular choice is made because that choice provides the individual making the choice with the greatest satisfaction.
E) None of these statements is false-they are all true.

Question 37

The basic economic problem is

A) inflation.
B) unemployment.
C) poverty.
D) scarcity.
E) lack of money.

Question 38

Choices are not made because of limited

A) resources.
B) income.
C) wants.
D) time.
E) availability of goods.

Question 39

Which of the following sayings best represents the concept of opportunity costs?

A) "A glass can be half empty or half full."
B) "When in Rome, do as the Romans do."
C) "There is no such thing as a free lunch."
D) "No taxation without representation."
E) "What's up?"

Question 40

The total cost of attending college

A) includes only college-related expenses.
B) is the sum of the costs of tuition, books, and meals.
C) would not include other options that were sacrificed due to the decision to attend college.
D) would not include the lost opportunity to travel.
E) is the sum of college-related expenses and opportunity cost.

Question 41

A skilled worker is an example of

A) scarcity.
B) land resources.
C) labor resources.
D) capital resources.
E) both labor and capital resources.

Question 42

An economy's resources

A) are limited in quantity.
B) are always efficiently utilized.
C) consist of land, labor, capital, and money.
D) are unrelated to its standard of living.
E) are unlimited when we use the latest technology.

Question 43

An example of opportunity cost

A) is the Chinese food that you gave up when you chose to eat Italian food.
B) is the tuition that you pay to attend college.
C) for a professor of economics is the pleasure that he or she derives from teaching economics.
D) is sweets given up by a person who would never eat them even if he or she could.
E) is the price paid for a ticket when you go to the movies.

Question 44

Which of the following is an example of capital?

A) Education
B) Natural resources
C) Machinery
D) Training
E) Money

Question 45

What accounts for specialization?

A) People specialize when opportunity costs are at a maximum.
B) People specialize when their opportunity costs are lowest.
C) People do not specialize.
D) People specialize in the activity that pays the highest wage.
E) People specialize in the activity that they enjoy the most, no matter what the salary is.

Question 46

Which of the following is considered to be physical capital?

A) Stocks
B) Bonds
C) Machinery
D) Money
E) Finished products

Question 47

A factory is an example of

A) capital.
B) scarcity.
C) enterprise.
D) financial capital.
E) output.

Question 48

Which of the following is true of resources?

A) Capital resources include manual labor.
B) Natural resources are produced by nature and are available at a zero price.
C) Labor includes the skills and training people acquire to use in production.
D) Technological know-how is an example of a natural resource.
E) Human capital is the technical term for a robot.

Question 49

Nicky makes $25,000 a year as a sales clerk. He then decides to quit his job to enter an MBA program full-time (assume Nicky does not work in the summer or hold any part-time jobs). His tuition, books, living expenses, and fees total $15,000 a year. Given this information, the annual total cost of Nicky's MBA studies is

A) $10,000.
B) $25,000.
C) $15,000.
D) $40,000.
E) $35,000.

Question 50

Which of the following is not physical capital?

A) An office building
B) Machinery on an assembly line
C) An industrial robot
D) Cash paid for raw materials
E) A computer used by a business

Question 51

Oil found underground in Texas is an example of

A) a labor resource.
B) land or a natural resource.
C) an entrepreneur.
D) human capital.
E) a capital resource.

Question 52

Opportunity cost

A) applies only to consumption decisions.
B) applies only to production decisions.
C) is the same as monetary costs.
D) exists because of scarcity.
E) is irrelevant for wealthy economies.

Question 53

In economics, which of the following is not considered capital?

A) Offices and warehouses
B) Stocks and bonds
C) Machinery
D) Factories
E) Equipment

Question 54

Stocks and bonds are examples of

A) natural resources.
B) financial capital.
C) physical capital.
D) financial labor.
E) internal capital.

Question 55

Which of the following should not be considered an opportunity cost of attending college?

A) Money spent on living expenses that are the same whether or not you attend college
B) Lost salary
C) Business lunches
D) Interest that could have been earned on your money had you put the money into a savings account rather than spent it on tuition
E) Opportunities sacrificed in the decision to attend college

Question 56

People

A) tend to specialize in those activities in which their opportunity costs are minimized.
B) tend to specialize in those activities in which their opportunity costs are maximized.
C) never consider opportunity costs.
D) consider only direct costs.
E) do not behave in their own self-interest.

Question 57

In economics, physical capital includes

A) money.
B) natural resources.
C) machinery and factories.
D) bonds.
E) shares of stock.

Question 58

Labor resources (input) include

A) skilled workers but not unskilled workers.
B) unskilled workers but not skilled workers.
C) a robot.
D) education and training of workers.
E) coffee breaks.

Question 59

Every society must deal with the problem of scarcity because

A) people do not have enough money to buy everything they need.
B) government taxes consumers too much.
C) human beings become satiated as consumption increases.
D) human wants are nearly unlimited relative to the availability of resources.
E) productive resources, technology, and labor are unlimited.

Question 60

It is inappropriate to assume that accounting costs are equal to total costs of a particular item or activity because

A) accounting costs do not necessarily include the forgone benefits of the next-best alternative.
B) total costs are expressed only in monetary terms.
C) accounting costs include opportunity costs.
D) accounting costs overstate the tradeoffs involved.
E) total costs do not include direct, out-of-pocket expenses.

Question 61

Figure 1.1

A person has a comparative advantage in producing a good if that person

A) can produce the good at a lower absolute cost than anyone else.
B) can produce the good at a lower opportunity cost than anyone else.
C) can do a better job than anyone else.
D) spends less money in out-of-pocket expenses than anyone else.
E) can produce the good at a higher opportunity cost than anyone else.

Question 62

Figure 1.1

According to Figure 1.1, if trade occurs, what is the least Korea would be willing to accept for 1 unit of food?

A) 1 car
B) 2 cars
C) 1/2 car
D) 20 cars
E) 10 cars

Question 63

According to Table 1.3, the opportunity cost of producing 1 gallon of grape juice in Maine is

A) 5 gallons of apple juice.
B) 1/5 gallon of apple juice.
C) 5 gallons of grape juice.
D) 6 gallons of apple juice.
E) 1/8 gallon of apple juice.

Question 64

According to the data in Table 1.3, the opportunity cost of producing 1 gallon of grape juice in New Hampshire is ____ gallon(s) of apple juice.

A) 1.33
B) 5/6
C) 1.5
D) 6
E) 2/3

Question 65

According to the data in Table 1.1, if trade were to occur, what would be the most Ohio would be willing to pay for 1 chili?

A) 4 cookies
B) 8 cookies
C) 1/4 of a cookie
D) 1/8 of a cookie
E) 6 cookies

Question 66

According to the data in Table 1.3, New Hampshire has a comparative advantage in producing

A) neither good.
B) grape juice.
C) both apple juice and grape juice.
D) apple juice.
E) There is not enough information to say.

Question 67

Which of the following is false when speaking about a specialist?

A) A specialist may be someone with many talents who enjoys one activity more than others.
B) A specialist may be someone with many talents who is relatively better at one activity than others.
C) A specialist is a person who is capable of doing only one thing.
D) A specialist is someone whose opportunity cost of switching to an activity other than the one in which he or she is engaged is very high.
E) A specialist may be someone who is not very good at what he or she does, but enjoys it so much that the opportunity cost of switching to another activity is very high.

Question 68

According to the data in Table 1.2, if trade were to occur, what is the most country X would be willing to pay for 1 unit of sugar?

A) 1 unit of coffee
B) 1 1/2 units of coffee
C) 2/3 unit of coffee
D) 200 units of coffee
E) 1/2 unit of coffee

Question 69

According to Table 1.1, which of the following is true?

A) Ohio should specialize in the production of cookies and trade with Iowa.
B) Iowa should specialize in the production of cookies and trade with Ohio.
C) Ohio should specialize in the production of chili and trade with Iowa.
D) Neither state can benefit from trade.
E) None of these

Question 70

According to the data in Table 1.2, if trade were to occur, what is the least country Y would be willing to accept for 1 unit of sugar?

A) 1 unit of coffee
B) 1 1/2 units of coffee
C) 2/3 unit of coffee
D) 200 units of coffee
E) 1/2 unit of coffee

Question 71

Figure 1.1

According to Figure 1.1, if trade occurs, what is the most Germany would be willing to pay for 1 unit of food?

A) 1 car
B) 2 cars
C) 1/2 car
D) 20 cars
E) 10 cars

Question 72

According to the data in Table 1.1, the opportunity cost of a cookie in Iowa is

A) 8 chilies.
B) 96 chilies.
C) 1/8 chili.
D) less than in Ohio.
E) the same as in Ohio.

Question 73

Scenario 1.1
Alan and Brian work at a baseball and softball manufacturing plant. Alan can produce either 10 baseballs or 4 softballs in an hour. Brian can produce either 8 baseballs or 2 softballs in an hour.
According to Scenario 1.1, the opportunity cost for Brian to produce 1 softball is

A) 4 baseballs.
B) less than the opportunity cost for Alan to produce 1 softball.
C) 1/4 baseball.
D) 2 1/2 baseballs.
E) 2/5 baseball.

Question 74

In Table 1.2, assume that before specialization and trade, both countries were producing at production possibility C. If each country specializes according to comparative advantage, what will be the gains from trade?

A) 20 units of sugar and 10 units of coffee
B) 20 units of coffee and 10 units of sugar
C) 20 units of coffee
D) 10 units of sugar
E) 80 units of coffee and 90 units of sugar

Question 75

According to the data in Table 1.1, if trade were to occur, what would be the least amount Ohio would be willing to accept for 1 cookie?

A) 8 chilies
B) 1/4 of a chili
C) 1/8 of a chili
D) 4 chilies
E) 12 chilies

Question 76

According to the data in Table 1.1, the opportunity cost of chili in Ohio is

A) the same as in Iowa.
B) 1/4 cookie.
C) 4 cookies.
D) 1/8 cookie.
E) 8 cookies.

Question 77

Figure 1.1

Suppose that points A and B in Figure 1.1 represent pre-trade positions. If each country specializes according to comparative advantage, what are the potential gains to trade?

A) 6 cars
B) 6 cars and 6 units of food
C) 6 units of food
D) 4 units of food
E) 12 cars

Question 78

According to the data in Table 1.2, if trade were to occur, which of the following is true?

A) Country X should export coffee to country Y, but the two countries should not exchange sugar.
B) Country X should export coffee to country Y, and country Y should export sugar to country X.
C) Country X should export sugar to country Y, and country Y should export coffee to country X.
D) Country X should export sugar and coffee to country Y.
E) Country Y should export sugar and coffee to country X.

Question 79

Scenario 1.1
Alan and Brian work at a baseball and softball manufacturing plant. Alan can produce either 10 baseballs or 4 softballs in an hour. Brian can produce either 8 baseballs or 2 softballs in an hour.
According to Scenario 1.1, the opportunity cost for Alan to produce 1 baseball is

A) 1/4 softball.
B) 2/5 softball.
C) less than the opportunity cost of Brian to produce 1 baseball.
D) 2 1/2 softballs.
E) 4 softballs.

Question 80

According to the data in Table 1.3, Maine has an absolute advantage in producing

A) both grape juice and apple juice.
B) only grape juice.
C) only apple juice.
D) neither grape juice nor apple juice.
E) There is not enough information to say.