Deck 1: The Central Concepts of Economics

Question 1

The three questions of what, how, and for whom:

A)relate to the three factors of production.
B)exist because of scarcity.
C)are more of a problem in a market economy.
D)are more of a problem in a command economy.
E)are no longer relevant.

Answer 1

exist because of scarcity.

Question 2

What is the best definition of an economic good?

A)Goods that are very expensive.
B)Goods that are in scarce or limited supply.
C)Goods that a country produces and then trades to another county.
D)Goods that are vital to an individual's welfare.
E)None of the above.

Answer 2

Goods that are in scarce or limited supply.

Question 3

A market economy is:

A)one in which a government makes all the important production and consumption decisions.
B)one in which individuals and private firms make the major production and consumption decisions.
C)one in which only one person makes all the important production and consumption decisions.
D)none of the above.

Answer 3

one in which individuals and private firms make the major production and consumption decisions.

Question 4

"Scarcity" in economics refers basically to:

A)periods of famine.
B)monopolization of existing supplies of goods.
C)monopolization of resources to provide goods.
D)monopolization of outlets to sell goods.
E)none of the above.

Question 5

Which of the following is the most basic of the subjects with which the study of economics must try to deal?

A)Markets.
B)Money.
C)Profit seeking.
D)The price mechanism.
E)Scarcity.

Question 6

"Inflation is less of a problem, over the long term, than unemployment." is an example of:

A)a positive statement.
B)a normative statement.
C)a statement that could never be true.
D)a statement that suffers from a logical error.
E)none of the above.

Question 7

The subject of economics includes:

A)the study of activities involving money and exchange transactions among people.
B)the study of the allocation of scarce resources to the production and distribution of goods and services.
C)the study of wealth.
D)the study of people in ordinary business life, earning and enjoying life.
E)all of the above.

Question 8

Economic policies can be designed to fight which of the following economic problems?

A)Inflation.
B)Unemployment.
C)Trade imbalance.
D)All of the above.
E)None of the above.

Question 9

The U.S.is considered to be a mixed economy:

A)due to the combination of capital goods and consumption goods that it produces.
B)due to the increasing diversity of members of its labor force.
C)because of the government's involvement in the market system.
D)for all the above reasons.
E)none of the above.

Question 10

"The income tax code of the United States has been written to be mildly progressive." is an example of:

A)a positive statement.
B)a normative statement.
C)a statement that relates best to a command economy.
D)the inefficiency of the market system.
E)none of the above.

Question 11

Which of the following is not a reason to study economics?

A)To learn how people allocate scarce resources to produce goods.
B)To learn how to trade off quantities of goods for quality of life.
C)To learn a systematic model of economic principles for comprehending reality.
D)To learn to avoid the fallacy of composition in analyses of public policy.
E)All of the above are valid reasons for studying economics.

Question 12

The main difference between a free good and an economic good is that:

A)it is not produced.
B)no one desires any amount.
C)it is not tradable.
D)it is not scarce.
E)none of the above.

Question 13

What is the fundamental difference between macroeconomics and microeconomics?

A)Macroeconomics involves studying the economy as a whole, while microeconomics involves studying the behavior of individual industries, firms, and households.
B)Macroeconomics concentrates on those parts of the economy involving very large amounts of money, while microeconomics concentrates on those parts of the economy involving small sums of money.
C)Macroeconomics studies the behavior of large firms, while microeconomics studies the behavior of small firms.
D)There is no difference, basically macroeconomics and microeconomics are one and the same.
E)None of the above.

Question 14

"Distribution" in economics refers to:

A)retailing, wholesaling, and transportation..
B)what.
C)how.
D)for whom
E)none of the above.

Question 15

The single word that best describes the fundamental essence of economics is:

A)employment.
B)inflation.
C)prices.
D)trade.
E)scarcity.

Question 16

Which of the following would be considered a free good?

A)Fresh water.
B)Forests in the northwestern United States.
C)The advice of economists.
D)All the above.
E)None of the above.

Question 17

Economic analysis:

A)involves some simplifications of reality.
B)is only vaguely related to reality because if it did so coincide, it would not still be theory.
C)is impossible, because of the impossibility of a controlled experiment.
D)if it is good theory, involves no simplification of reality.
E)involves so much distortion of reality as to be worthless.

Question 18

If you, as a farmer, have a bumper crop this year you will make more money.If all farmers have a bumper crop this year, all farmers will make more money.What kind of fallacy does this statement exhibit?

A)post hoc fallacy.
B)failure to hold other things constant fallacy.
C)fallacy of composition.
D)fallacy of normalcy.
E)None of the above.

Question 19

Of the following, economics may best be defined as the study of:

A)how to stretch the family dollar.
B)how to make money in the stock market.
C)the interpretation of scarce data.
D)how scarce resources are used to produce various goods allocated among individuals in society.
E)why resources are as scarce as they are.

Question 20

Which of the following may have been considered a free good today?

A)Land.
B)Cattle.
C)Computers.
D)Air.
E)None of the above.

Question 21

Which of the following statements is an example of normative economics?

A)The rich are getting richer and the poor are getting poorer.
B)The Justice Department has ruled that Microsoft is a monopoly.
C)The federal government should allocate more of its budget toward education programs.
D)All of the statements above represent examples of normative economics.
E)None of the statements above represent examples of normative economics.

Question 22

Being on the production-possibility frontier between guns and butter means that:

A)it is impossible to produce any more guns.
B)it is impossible to produce any more butter.
C)more guns can be produced only by doing without some butter.
D)population is in equilibrium.
E)if society becomes more productive in producing butter, then we can have more butter but not more guns.

Question 23

When moving along a production possibilities frontier, the opportunity cost to society of obtaining more of one of the two goods:

A)is measured in dollar terms.
B)usually decreases as more of the good is produced.
C)is measured by the amount of the other good that must be given up.
D)is measured by the additional resources that must be used to produce the good.
E)is usually constant.

Question 24

A shift in a production-possibility frontier can result from:

A)unemployment.
B)inflation.
C)changes in production techniques.
D)changes in the combination of goods produced.
E)changes in consumers' tastes.

Question 25

The production-possibility frontier of a country can be said to shift outward as a result of the following.Which, if any, is the wrong explanation?

A)Expenditures on new plants and equipment are constantly being made.
B)The population increases.
C)Better methods of production are developed.
D)New oil finds are found.
E)All of the above are valid explanations.

Question 26

When Paul decides to not go to the concert, but goes to the library to study instead, he is:

A)realizing that his time is a scarce resource that must be allocated.
B)at least implicitly recognizing that the opportunity cost of going to the library is the concert he is giving up.
C)making an economic decision.
D)doing all of the above.
E)doing choices A)and B)only.

Question 27

Which of the following statements is an example of positive economics?

A)Workers in the new economy must be more computer literate than they were in the past.
B)If the food stamp program is eliminated, the poor will have difficulty feeding their families.
C)The elimination of tariffs on imported goods and services has increased unemployment in the United States.
D)All of the statements above represent examples of positive economics.
E)None of the statements above represent examples of positive economics.

Question 28

An economy might operate inside its production-possibility frontier for all but one of the following reasons.Which one is not valid?

A)Changes in the business cycle.
B)Unemployment.
C)Political upheaval.
D)Defense production.
E)Failure of the price mechanism.

Question 29

These data reflect three possible combinations of food and nothing that can be produced from a given set of resources. Refer to the above data.If both clothing and food always use all inputs in the same proportion, then X must be:

A)25.
B)more than 25.
C)less than 25.
D)50.
E)cannot not be determined from the data

Question 30

Which of the following would be considered a positive economic statement?

A)Lowering taxes will help the poor.
B)Lowering taxes will hurt the poor.
C)The rich are getting richer, and the poor are getting poorer.
D)All of the above.
E)None of the above.

Question 31

When the price of gasoline increases consumers may purchase more gasoline than before, if their incomes are rising as well.Concluding that there is a positive relationship between gasoline prices and the quantity demanded would be an example of:

A)the post hoc fallacy.
B)the failure to hold other things constant.
C)the fallacy of composition.
D)a mixed market economy.
E)none of the above.

Question 32

The description of economics as, "cool heads in the service of warm hearts" means that:

A)allocating scarce resources may require painful decisions.
B)costs and benefits need to be weighed objectively.
C)the proper balance must be struck between the discipline of the market and the generosity of the welfare state.
D)all of the above.
E)none of the above.

Question 33

Normative economics refers to:

A)economic policies that are in effect when inflation and unemployment are at their normal levels.
B)tax programs aimed at the middle class leads to more inflation.
C)economic programs that have been in place for five or more years.
D)economic statements with a value judgment of what ought to be, or what should be.
E)both statements A)and B).

Question 34

Which of the following statements relates to the concept of efficiency?

A)The absence of waste.
B)Using resources as effectively as possible.
C)Being able to produce more of one good only by producing less of something else.
D)B and C only.
E)All of the above.

Question 35

The twin themes that form the basis of the definition of economics are:

A)supply and demand.
B)inflation and unemployment.
C)scarcity and efficiency.
D)inputs and outputs.
E)price and quantity.

Question 36

These data reflect three possible combinations of food and clothing that can be produced from a given set of resources. Refer to the above data.If the PPF has its normal bowed-out shape, X will be

A)25.
B)more than 25.
C)less than 25.
D)5.
E)cannot be determined from the data given

Question 37

The production possibilities frontier between two normal goods and services is typically bowed out or concave to the origin because:

A)society must give up one good to get more of the other.
B)consumers do not want too much of either good.
C)government restrictions place limits on the production of certain goods.
D)consumers want as much of both goods as possible.
E)the resources used to produce goods and services are not equally suited to the production of both goods.

Question 38

If you stand up at a concert to get a better view, your view may not improve because everyone in front of you may stand up too.This situation is an example of:

A)the post hoc fallacy.
B)the failure to hold other things constant.
C)the fallacy of composition.
D)a zero-sum game.
E)what happens when you purchase cheap tickets.

Question 39

Opportunity cost:

A)is useful when discussing the allocation of resources.
B)refers to a next-best alternative that is not chosen when making decisions.
C)can be used to measure the cost of something without using monetary prices.
D)is all of the above.
E)statements A)and B)only.

Question 40

Which one of the following must be held constant in drawing up a production-possibility frontier?

A)The total resources.
B)The quantity of money.
C)Money income.
D)Prices.
E)The allocation of resources among alternate uses.

Question 41

Use the following to answer questions :
Figure 1-1
Which point on frontier AE drawn in Figure 1-1 represents a point that would support maximum economic growth in the next period subject to the constraint that at least some minimum quantity of consumption goods be produced?

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

Question 42

Use the following to answer questions :
Figure 1-1
Relative to frontier A'E' in Figure 1-1, which of the following points is least efficient?

A)B'.
B)C'.
C)B.
D)C.
E)F.

Question 43

Use the following to answer questions :
Figure 1-5
Figure 1-5 displays the production-possibilities of two countries.Given that both countries produce five units of x, which of the following best describes country B's production of y?

A)Less than country A's production of y.
B)The same as country A's production of y.
C)More than country A's production of y.
D)Cannot be determined from the graph.
E)None of the above.

Question 44

Use the following to answer questions :
Figure 1-1
Relative to frontier AE in Figure 1-1, which point shows unemployment (but not total unemployment)in the capital goods industry?

A)B.
B)D.
C)E.
D)H.
E)J.

Question 45

Use the following to answer questions :
Figure1-3
In Figure 1-3, what is the opportunity cost of producing 1 unit of x in terms of y?

A)2/3 units of y.
B)1 units of y.
C)3/2 units of y.
D)Cannot be determined from the given information.
E)None of the above.

Question 46

Use the following to answer questions :
Figure1-3
Which of the following represents a mixture of goods which country A depicted in Figure 1-3 cannot produce?

A)Point D.
B)Point B.
C)Point C.
D)Point E.
E)All of the above.

Question 47

Use the following to answer questions :
Figure 1-4
In Figure 1-4, what is Country A's cost of producing 1 unit of y in terms on x?

A)The same as country B's opportunity cost of producing 1 unit of y in terms of x.
B)Less than country B's opportunity cost of producing 1 unit of y in terms of x.
C)More than country B's opportunity cost of producing 1 unit of y in terms of x.
D)4 units of x.
E)None of the above.

Question 48

Use the following to answer questions :
Figure 1-4
In Figure 1-4, what is Country B's cost of producing 1 unit of y in terms of x?

A)2 units of x.
B)5/2 units of x.
C)1/2 units of x.
D)20 units of x.
E)None of the above.

Question 49

Use the following to answer questions :
Figure 1-4
In Figure 1-4, what does point J represent?

A)A mixture of goods both nations can produce.
B)A mixture of goods only country A can produce.
C)A mixture of goods only country B can produce.
D)A mixture of goods neither country can produce.
E)None of the above.

Question 50

Use the following to answer questions :
Figure 1-4
In Figure 1-4, what does point H represent?

A)A mixture of goods both nations can produce.
B)A mixture of goods only country A can produce.
C)A mixture of goods only country B can produce.
D)A mixture of goods neither country can produce.
E)None of the above.

Question 51

Use the following to answer questions :
Figure 1-4
In Figure 1-4, what does point I represent?

A)A mixture of goods both nations can produce.
B)A mixture of goods only country A can produce.
C)A mixture of goods only country B can produce.
D)A mixture of goods neither country can produce.
E)None of the above.

Question 52

Use the following to answer questions :
Figure 1-1
Given the lower production-possibility frontier AE drawn in Figure 1-1, movement from point G to which point would represent an increase in efficiency with a maximal effect on future economic growth?

A)B.
B)C.
C)F.
D)G.
E)I.

Question 53

Use the following to answer questions :
Figure 1-1
Which point on the production-possibility frontiers drawn in Figure 1-1 indicates no consumption goods being produced?

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

Question 54

Use the following to answer questions :
Figure 1-1
Of the following points, which point reflects the most efficient use of available resources in relation to frontier AE in Figure 1-1?

A)F.
B)G.
C)C.
D)H.
E)Cannot tell from the information provided.

Question 55

Use the following to answer questions :
Figure 1-4
In Figure 1-4, what is Country B's cost of producing 1 unit of x in terms of y?

A)10 units of y.
B)1/2 units of y.
C)5 units of y.
D)2 units of y.
E)None of the above.

Question 56

Use the following to answer questions :
Figure 1-1
Movement from frontier AE in Figure 1-1 to frontier A'E' would not be the result of

A)an increase in the stock of capital.
B)an increase in the labor force.
C)an increase in all prices at the same rate at the same time.
D)an increase in the supply of inexpensive energy.
E)none of the above.

Question 57

Use the following to answer questions :
Figure1-3
In Figure 1-3, what is the opportunity cost of producing 1 unit of y in terms of x?

A)2/3 units of x.
B)3/2 units of x.
C)1/3 units of x.
D)1 unit of x.
E)None of the above.

Question 58

Use the following to answer questions :
Figure 1-1
In Figure 1-1, what could account for a shift in the frontier from AE to A' E'?

A)A decrease in unemployment.
B)A decrease in inflation.
C)A war.
D)An increase in technology.
E)None of the above.

Question 59

Use the following to answer questions :
Figure 1-4
Country A has a PPF denoted by the lower line segment in Figure 1-4.Country B has a PPF denoted by the higher line segment.Which country enjoys greater consumption possibilities?

A)Country A.
B)Country B.
C)They have the same consumption possibilities.
D)Cannot be determined from the given information.
E)None of the above.

Question 60

Use the following to answer questions :
Figure1-3
As country A's economy grows, what will happen to the PPF in Figure 1-3?

A)The PPF will be stationary.
B)The PPF will shift inward.
C)The PPF will shift outward.
D)The PPF will shift outward then back in, until it is back at its original position.
E)None of the above.

Question 61

Although economics is not an exact science, statistics can be used to suggest rules of behavior that are true on average.

Question 62

Use the following to answer questions :
Figure 1-5
Consult Figure 1-5.What is country B's cost of producing 1 unit of y in terms of x?

A)1 unit of x.
B)10 units of x.
C)5 units of x.
D)1/2 units of x.
E)Cannot be determined from the given information.

Question 63

Economics may be simply defined as the study of money matters.

Question 64

The wide agreement among economists on the basic economic principles concerning prices and unemployment leads them to consensus in the policy field.

Question 65

Unlike the chemist, the economist can rarely perform controlled experiments.

Question 66

When economic theories are constructed, uncertainty is always ignored to make the analysis tractable.

Question 67

Compared with physical sciences, economics is more practical-hence not so concerned with theory.

Question 68

The major purpose of studying economics is to learn how to succeed in business.

Question 69

Subjectivity cannot be completely eliminated in the study of any science.

Question 70

Use the following to answer questions :
Figure 1-5
Consult Figure 1-5.What is Country A's cost of producing 1 unit of Y in terms of X?

A)1 unit of X.
B)10 units of X.
C)5 unit of X.
D)1/2 unit of X.
E)Cannot be determined from the information given.

Question 71

Which of the following are considered as major factors of production?

A)Labor.
B)Capital.
C)Land.
D)All of the above.
E)None of the above

Question 72

Economic policies that are appropriate in one circumstance can be entirely inappropriate in others.

Question 73

An increase in national savings will have what effect in the long term on a country's PPF?

A)The PPF will be stationary.
B)The PPF will shift out.
C)The PPF will shift in.
D)The PPF will shift in then back out to its original position.
E)None of the above.

Question 74

For a theory to be useful, it must be confirmed in each test case.

Question 75

The study of economics is best described as the study of how people and societies cope with scarcity.

Question 76

Economics includes the study of how to improve society.

Question 77

One can sense the elegance of economic analysis without mastering difficult mathematical techniques.

Question 78

In an economic sense, capital includes all of the following except:

A)Inventories of goods.
B)Buildings.
C)Machines.
D)Money.
E)All of the above.

Question 79

Without higher mathematics, you can't possibly understand economics.

Question 80

Commonsense knowledge about economics can handicap as it can help.