Econ Section 1

18) In broad terms the difference between microeconomics and macroeconomics is that A) microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy. B) macroeconomics studies the effects of government regulation and taxes on the price of individual goods and services whereas microeconomics does not. C) microeconomics studies the effects of government taxes on the national unemployment rate. D) they use different sets of tools and ideas.

A

2) Which of the following is an example of a positive statement? A) Households are the primary source of saving. B) Government should not redistribute income. C) Business firms ought to contribute more to charities. D) The foreign sector should be more tightly controlled.

A

30) When firms in an economy start producing more computers and fewer televisions, they are answering the ________ part of one of the two big economic questions. A) "what" B) "for whom" C) "where" D) "when"

A

36) In the U.S. economy, which of the following statements is TRUE? (see textbook page3: "Fig. 1.1: What Three Countries Produce) A) More services are produced than goods. B) Production is divided evenly between goods and services. C) More goods are produced than services. D) The economy is too complex to determine the proportion of production that is devoted to producing services.

A

10) People must make choices because A) there are many goods available. B) of scarcity. C) most people enjoy shopping. D) None of the above answers is correct.

B

14) In every economic system, choices must be made because resources are ________ and our wants are ________. A) limited; limited B) limited; unlimited C) unlimited; unlimited D) unlimited; limited

B

15) All economic questions are about A) how to make money B) how to cope with scarcity. C) what to produce. D) how to satisfy all our wants.

B

20) Macroeconomics is concerned with A) the effects on Ford Motor of a strike by the United Auto Workers. B) economy-wide variables. C) government decision making concerning farm price supports. D) individual consumers.

B

23) The term human capital refers to A) entrepreneurship and risk-taking. B) people's knowledgeand skill. C) labor resources used to make capital equipment. D) buildings and machinery.

B

24) Human resources that perform the functions of organizing, managing, and assembling the other resources are called A) productive capital. B) entrepreneurship. C) venture capital. D) physical capital.

B

31) Suppose Company A's profits increase by $10 million and nobody is made worse off. The CEO of Company A keeps all $10 million for herself. This situation A) is definitely fair. B) is definitely efficient. C) is definitely not in the self-interest of Company A. D) is definitely not in the social interest.

B

42) In terms of dollars, the marginal benefit of working five days a week instead of four days a week is A) the wages received for 4 days of work. B) the wages received for the fifth day of work. C) the wages received for 5 days of work. D) None of the above answers is correct.

B

48) You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do not go to work where you could have earned $750. In terms of dollars, the opportunity cost of the vacation is A) $750. B) $2,750. C) $1,250. D) $2,000.

B

49) From 8 to 11 p.m., Sam can either attend a basketball game, a hockey match or the symphony. Suppose that Sam decides to attend the hockey match and thinks to herself that if she did not go to the match she would go to the symphony. Then the opportunity cost of attending the hockey match is A) three hours of time. B) going to the symphony. C) going to the basketball game. D) going to the symphony and the basketball game.

B

5) Which of the following is a positive statement? A) My favorite dinner is pizza and soda. B) An increase in the price of pizza will lead fewer students to buy pizza. C) The government should spend more on education. D) The government must provide health insurance so that the poor canobtain decent medical treatment.

B

8) Which of the following is a positive statement? A) The United States should fight inflation even if it raises unemployment. B) A 5 percent increase in income leads to a 3 percent increase in the consumption of orange juice. C) Because they decrease productivity, labor unions should be eliminated. D) What to do with Social Security is the most important economic issue today.

B

12) Which of the following is a microeconomic topic? A) the reasons for a decline in average prices B) the effect of the government budget deficit on inflation C) the reasons why Kathy buys less orange juice D) the reasons why total employment decreases

C

19) Scarcity exists because A) poor people need more food and other goods. B) society and people are greedy and wasteful. C) our wants exceed the resources available to satisfy them. D) of the inefficient choices we make.

C

21) Scarcity requires that people must A) compete. B) cooperate. C) make choices. D) trade.

C

29) When a firm decides to produce more electric cars and conventional gas powered cars, it is most directly answering the ________ part of one of the two big economic questions. A) "for whom" B) "scarcity" C) "what" D) "how"

C

32) The "gifts of nature" are included as part of which factor of production? A) capital B) labor C) land D) entrepreneurship

C

35) According to Adam Smith(see textbook page 8: "At Issue: The Protest Against Market Capitalism") A) politicians are well-equipped to regulate corporations and intervene in markets to improve market outcomes. B) in a market transaction buyers can either get what they want for less than they would be willing to pay or sellers can earn a profit, but both buyers and sellers can't gain simultaneously. C) government intervention in markets is not desirable because an invisible hand leads decisions made in pursuit of self-interest to unintentionally promote the social interest. D) when big corporations pursue their self-interest of maximum profit, they will inevitably conflict with social interest.

C

39) When the government chooses to spend the tax dollars that it collects on homeland security, its choice A) involves no tradeoff because the defense is necessary. B) primarily affects who gets the goods and services produced. C)involves a tradeoff of other goods and services such as education for more homeland security. D) illustrates that scarcity does not always exist.

C

46) During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is A) $3,300. B) $6,000. C) $10,300. D) $4,300.

C

47) The marginal benefit is the A) additional gain from one more unit of an activity minus the additional cost from one more unit of the activity. B) additional cost from one more unit of an activity. C) additional gain from one more unit of an activity. D) loss of the highest-valued alternative.

C

50) Which of the following is NOTan example of an opportunity cost? A) By choosing to attend college, Jean was not able to continue working as an electrician; as a result, she gave up more than$85,000 in earnings while she was in college. B) Because David used all of his vacation time to paint his house, he was unable to visit the Caribbean last year. C) Because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment. D) By spending Thursdaynight studying for an economics exam, a student was unable to complete a homework assignment for calculus class.

C

9) Positive economic statements A) prescribe what should be. B) cannot be tested against the facts. C) can be tested against the facts. D) are related only to microeconomics.

C

Studying the effects choices have on the individual markets within the economy is part of A) macroeconomics. B) scarcity. C) microeconomics. D) incentives.

C

17) When an economist talks of scarcity, the economist is referring to the A) ability of society to continually make technological breakthroughs and increase production. B) ability of society to consume all that it produces. C) ability of society to employ all of its resources. D) inability of society to satisfy all human wants because of limited resources.

D

22) Fundamental economic problems basically arise from A) turmoil inthe stock market. B) the unequal distribution of income. C) the fact that society has more than it needs. D) our wants exceeding our scarce resources.

D

25) An art museum decides to offer tours by having visitors listen to cassette tapes rather than have tour guides. The museum is answering the ________ part of one of the two big economic questions. A) "why" B) "scarcity" C) "what" D) "how"

D

27) The fact that people with higher incomes get to consume more goods and services addresses the ________ part of one of thetwo big economic questions. A) "where" B) "how" C) "when" D) "for whom"

D

28) Which factor of production earns profit? A) money B) land C) human capital D) entrepreneurship

D

33) If Taco Bell decides to produce more tacos and fewer burritos, Taco Bell is answering the ________ part of one of the two big economic questions. A) "why" B) "when" C) "scarcity" D) "what"

D

34) Human capital is A) all capital owned by individuals or corporations, but not by governments. B) machinery that meets or exceeds federal safety standards for use by humans. C) all capital owned by individuals, but not by corporations or governments. D) the skill and knowledge of workers.

D

37) A student athlete is deciding whether to work out for an extra hour. Her marginal benefit from another hour of exercise A) is less than the marginal cost of the additional hour. B) is the benefit she gets from all the hours she's worked out all week. C) depends on the cost of the workout. D) is the benefit she receives from exercising the additional hour.

D

38) The loss of the highest-valued alternative defines the concept of A) entrepreneurship. B) marginal benefit. C) scarcity. D) opportunity cost.

D

4) Which of the following is a normative statement?A) An increase in tax rates means people work fewer hours. B) Studying more hours leads to an increase in your GPA. C) Taking extra vitamin C prevents catching a cold. D) States should require all motorcycle riders to wear helmets to reduce the number of riders killed.

D

41) On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym,have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is A) zero because you do not have to pay money to use the library. B) not clear because not enough information is given. C) working out at the gym, having breakfast with friends, and sleeping late. D) working out at the gym.

D

43) In economics we learn that A) tradeoffs allow us to have more of everything we value. B) opportunity costs are all of the possible alternatives given up when we make a choice. C) tradeoffs allow us to avoid the problem of opportunity cost. D) None of the above answers is correct.

D

44) When the government hires people to serve in the army, these people are no longer available to do other work. This choiceillustrates the concept of A) marginal benefit. B) an incentive. C) asocial interest/private interest conflict. D) opportunity cost.

D

45) Bill Bonecrusher graduates from college with a choice of playing professional football at $2 million a year or coaching for $50,000 a year. He decides to play football, but eight years later, though he could continue to play football at $2 million a year, he quits football to make movies for $3 million a year. His opportunity cost of playing football at graduation was ________ and eight years later the opportunity cost of making movieswas ________. A) $50,000; $50,000 B) $2 million; $3 million C) $2 million; $2 million D) $50,000; $2 million

D

6) Which of the following is a normative statement?A) The price of candy bars is $1.25 each. B) Popcorn and candy are sold in movie theaters. C) Candy bars are more expensive than newspapers. D) You should eat less candy.

D

11) Which of the following is a macroeconomic issue? A) the effect of increasing the money supply on inflation B) the purchasing decisions that an individual consumer makes C) the hiring decisions that a business makes D)the effect of an increase in the tax on cigarettes on cigarette sales

A

13) Studying the determination of prices in individual markets is primarily a concern of A) microeconomics. B) negative economics. C) macroeconomics. D) positive economics.

A

26) Which of the following best defines capital as a factor of production? A) instruments, machines, and buildings used in production B) financial assets used by businesses C) the knowledge and skills that people obtain from education and use in production of goods and services D) the gifts of nature that businesses use to produce goods and services

A

3) Which of the following is a normative statement?A) Low rents are good because they make apartments more affordable. B) Owners of apartment buildings are free to charge whatever rent they want C) Low rents will restrict the supply of housing. D) Housing costs are rising.

A

7) Normative economic statements A) deal with economic hypotheses that are not well-established laws. B) describe what is rather than what ought to be. C) describe the process of economic policy-making. D) describe what ought to be.

D

40) Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares A) the extra revenue from selling a few additional printers to the extra costs of producing the printers. B) the total revenue from sales of printers to the total cost of producing all the printers. C) HP's printers to printers from competing companies, such as Lexmark. D) the extra revenue from selling a few additional printers to the average cost of producingthe additional printers.

A

16) All economic questions arise because we A) have an abundance of resources. B) want more than we need. C) have limited wants that need to be satisfied. D) want more than we can get.

D