Chapter 1-3 Economics

3. The problems of aggregate inflation and unemployment are: A. major topics of macroeconomics. B. not relevant to the U.S. economy. C. major topics of microeconomics. D. peculiar to command economies.

A

8. People always face trade-offs because A. they always have more than one use for their time and money. B. they buy goods with money. C. trading takes place in a market economy D. they can make themselves better off through trade.

A

Refer to the above diagram. Flow (1) represents: A. wage, rent, interest, and profit income. B. land, labor, capital, and entrepreneurial ability. C. goods and services. D. consumer expenditures.

A

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The data suggest that: A. West Lothian should specialize in, and export, beer. B. both countries will be better off if they do not engage in specialization and trade involving these two products. C. West Lothian should specialize in, and export, pizza. D. East Lothian should specialize in, and export, beer.

A

The market system's answer to the fundamental question "What will be produced?" is essentially: A. "Goods and services that are profitable." B. "Low cost goods and services." C. "Goods and service that can be produced using large amounts of capital." D. "Goods and services that possess lasting value."

A

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially: A. "Those willing and able to pay for them." B. "Those who physically produced them." C. "Those who most need them." D. "Those who get utility from them."

A

The problems of aggregate inflation and unemployment are: A. major topics of macroeconomics. B. not relevant to the U.S. economy. C. major topics of microeconomics. D. peculiar to command economies.

A

A nation's true gain from international trade is: A. increased employment in export industries. B. an overall increase in output obtained through specialization and exchange. C. added technological knowledge. D. the tariff revenue that goes to the national treasury.

B

Broadly defined, competition involves: A. private property and freedom of expression. B. independently acting buyers and sellers and freedom to enter or leave markets. C. increasing opportunity costs and diminishing marginal utility. D. capital goods and division of labor.

B

Economic scarcity: A. is peculiar to the United States economy. B. applies to all economies. C. is peculiar to command systems. D. is peculiar to market systems

B

Economics ay best be defined as the: A. interaction between macro and micro considerations. B. social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity. C. empirical testing of value judgments through the use of logic. D. use of policy to refute facts and hypotheses.

B

Exchange rates are particularly important because: A. they present a challenge to financial speculators. B. they link the price levels of various nations to one another. C. they represent exceptions to the laws of demand and supply. D. equilibrium is never achieved in such markets.

B

In the production of goods and services, trade-offs exist because A. not all production is efficient. B. society has only a limited amount of productive resources. C. buyers and sellers often must negotiate prices. D. human wants and needs are limited at a particular point in time.

B

In a market economy the distribution of out put will be determined primarily by: A. consumer needs and preferences. B. the quantities and prices of the resources that households supply. C. government regulations that provide a minimum income for all. D. a social consensus as to what distribution of income is most equitable.

B

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The data contained in the production possibilities curves are based on the assumption of: A. imperfect shift ability of resources between beer and pizza production. B. constant costs. C. decreasing costs. D. increasing costs.

B

The terms of trade reflect the: A. rate at which gold exchanges internationally for any domestic currency. B. ratio at which nations will exchange two goods. C. fact that the gains from trade will be equally divided. D. cost conditions embodied in a single country's production possibilities curve.

B

The value of the best alternative sacrificed to obtain something you want is referred to as A. explicit cost. B. opportunity cost. C. marginal cost. D. sunk cost.

B

The production possibilities frontier illustrates the basic principle that: A. the production of more of any one good will in time require smaller and smaller sacrifices of other goods. B. an economy will automatically obtain full employment of its resources. C. if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced. D. an economy's capacity to produce increases in proportion to its population size.

C

The simple circular flow model shows that: A. households are on the buying side of both product and resource markets. B. businesses are on the selling side of both product and resource markets. C. households are on the selling side of the resource market and on the buying side of the product market. D. businesses are on the buying side of the product market and on the selling side of the resource market.

C

The spending by Americans while traveling in Europe best illustrates A. trade flow. B. labor flow. C. financial flow. D. technology flow

C

Which of the following concepts provides the basic rationale for international trade? A. Increasing opportunity costs. B. Consumer sovereignty. C. Comparative advantage. D. The law of supply.

C

Which of the following is a normative statement? A. The temperature is high today. B. The humidity is high today. C. It is too hot to play tennis today. D. It will cool off later this evening.

C

Which of the following is a positive statement? A. The humidity is too high today. B. It is too hot to jog today. C. The temperature is 92 degrees today. D. Summer evenings are nice when it cools off.

C

Refer to the above diagram. Other things equal, this economy will achieve the most rapid rate of growth if: A. the ratio of capital to consumer goods is minimized. B. it chooses point C. C. it chooses point B. D. it chooses point A.

D

Refer to the above diagram. This economy will experience unemployment if it produces at point: A. B. C. D.

D

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The opportunity cost of producing a: A. pizza is 2 beers in both countries. B. beer is 1/2 a pizza in both countries. C. pizza in East Lothian is 1 beer. D. beer in West Lothian is 1/2 a pizza.

D

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The trading possibilities curves suggest that the terms of trade are: A. 1.5 beers for 1 pizza. B. 1 beer for 2 pizzas. C. 2 beers for 1 pizza. D. 1 beer for 1.5 pizzas.

D

Which of the following is a fundamental characteristic of the market system? A. property rights. B. central planning by government. C. unselfish behavior. D. government-set wages and prices.

A

4. Scarcity refers to A. the ability of society to employ all of its resources. B. the ability of society to consume all that it produces. C. the inability of society to satisfy all human wants because of limited resources. D. the inability of society to eliminate poverty.

C

6. All of the following are examples of physical capital EXCEPT A. buildings. B. machinery. C. company stocks and bonds. D. a hydroelectric power plant.

C

6. Refer to the above diagram. Flow (3) represents: A. wage, rent, interest, and profit income. B. land, labor, capital, and entrepreneurial ability. C. goods and services. D. consumer expenditures.

C

According to the concept of comparative advantage, a good should be produced in that nation where: A. its domestic opportunity cost is greatest. B. money is used as a medium of exchange. C. its domestic opportunity cost is least. D. the terms of trade are maximized.

C

Assume an economy is operating at some point on its production possibilities curve, which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods: A. will remain unchanged. B. may be either increased or decreased. C. must be decreased. D. must also be increased.

C

For economists, the word "utility" means: A. versatility and flexibility. B. rationality. C. pleasure and satisfaction. D. purposefulness.

C

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The trading possibilities curves imply that: A. both countries have a trade surplus that will result in economic growth. B. the domestic production possibilities curves entail unemployment and/or the domestic misallocation of resources. C. world resources will be allocated more efficiently if the two nations specialize and trade based on comparative advantage. D. both nations will be worse off as a result of international specialization and trade.

C

Since 1970, United States exports and imports have: A. grown absolutely, but remained a constant proportion of GDP. B. grown absolutely, but declined as a proportion of GDP. C. grown both absolutely and as a percentage of GDP. D. declined both absolutely and as a percentage of GDP.

C

The physical import of DVD players to the United States from Japan best illustrates a: A. resource flow. B. financial flow. C. trade flow. D. technology flow.

C

The presence of market failure implies that: A. money is not an effective tool for exchange in a market system. B. individuals and firms should strive to be self-sufficient rather than specialize. C. there is an active role for government, even in a market system. D. command systems are superior to market systems in the allocation of resources.

C