ECON 2301 Ch 1 & 2

Which of the following is not considered by economists to be an economic resource? a) Money. b) Factory workers. c) Computers at a retail store. d) A forest.

a) Money

Which of the following is not a main function of the entrepreneur? a) To make routine pricing decisions. b) To innovate. c) To assume the risk of economic losses. d) To make strategic business decisions.

a) To make routine pricing decisions.

Opportunity costs exist because: a) the decision to engage in one activity means forgoing some other activity. b) wants are scarce relative to resources. c) households and businesses make rational decisions. d) most decisions do not involve sacrifices or trade-offs.

a) the decision to engage in one activity means forgoing some other activity.

The production possibilities curve shows: a) the various combinations of two goods that can be produced when society employs all of its scarce resources. b) the minimum outputs of two goods that will sustain a society. c) the various combinations of two goods that can be produced when some resources are unemployed. d) the ideal, but unattainable, combinations of two goods that would maximize consumer satisfactions.

a) the various combinations of two goods that can be produced when society employs all of its scarce resources.

The optimal point on a production possibilities curve is achieved where: a) the smallest physical amounts of inputs are used to produce each good. b) each good is produced at a level where marginal benefits equal marginal costs. c) large amounts of capital goods are produced relative to consumer goods. d) large amounts of consumer goods are produced relative to capital goods.

b) each good is produced at a level where marginal benefits equal marginal costs.

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of: a) resource scarcity and the necessity of choice. b) purposeful behavior. c) marginal costs that exceed marginal benefits. d) the trade-off problem that exists between competing goals.

b) purposeful behavior.

The construction of a production possibilities curve assumes: a) the quantities of all resources are unlimited. b) technology is fixed. c) some resources are unemployed. d) there is no inflation in the economy.

b) technology is fixed.

Economic theories: a) are useless because they are not based on laboratory experimentation. b) that are true for individual economic units are never true for the economy as a whole. c) are generalizations based on a careful observation of facts. d) are abstractions and therefore of no application to real situations.

c) are generalizations based on a careful observation of facts.

If two variables are inversely related, then as the value of one variable: a) increases, the value of the other may either increase or decrease. b) decreases, the value of the other decreases. c) increases, the value of the other decreases. d) increases, the value of the other increases.

c) increases, the value of the other decreases.

The process of producing and accumulating capital goods is called: a) money capital. b) depreciation. c) investment. d) consumption.

c) investment.

A production possibilities curve shows: a) that resources are unlimited. b) that people prefer one of the goods more than the other. c) the maximum amounts of two goods that can be produced, assuming the full use of available resources. d) combinations of capital and labor necessary to produce specific levels of output.

c) the maximum amounts of two goods that can be produced, assuming the full use of available resources.

Which of the following is a land resource? a) A farmer. b) An oil drilling rig. c) A machine for detecting earthquakes. d) Natural gas.

d) Natural gas.

The basic difference between consumer goods and capital goods is that: a) consumer goods are produced in the private sector and capital goods are produced in the public sector. b) an economy that commits a relatively large proportion of its resources to capital goods must accept a lower growth rate. c) the production of capital goods is not subject to the law of increasing opportunity costs. d) consumer goods satisfy wants directly while capital goods satisfy wants indirectly.

d) consumer goods satisfy wants directly while capital goods satisfy wants indirectly.

The marginal benefit curve is: a) upsloping because of increasing marginal opportunity costs. b) upsloping because successive units of a specific product yield less and less extra benefit. c) downsloping because of increasing marginal opportunity costs. d) downsloping because successive units of a specific product yield less and less extra benefit.

d) downsloping because successive units of a specific product yield less and less extra benefit.