ECON 102 - Sample Test 1 (Chapter One)

"The rich should pay higher income tax rates than the poor" is an example of a A) theoretical statement. B) normative statement. C) descriptive statement. D) positive statement.

B

In economics, the term "capital" refers to A) mineral resources. B) buildings and equipment. C) consumer goods. D) the money in one's pocket.

B

A good economic model A) describes every aspect of the economic world, with no exception. B) includes all those features of the world that can be described numerically. C) includes only those features of the world that are needed for the purpose at hand. D) should not include more than two variables

C

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 $3,0 00 and books and supplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is A) $4,300. B) $3,300. C) $10,300. D) $6,000.

C

Factors of production are grouped into four categories A) land, capital, money, entrepreneurship. B) labor, capital, money, entrepreneurship. C) land, labor, capital, entrepreneurship. D) land, labor, capital, money.

C

One economist says that raising taxes on gas would be in the social interest. What does this economist mean? A) Higher taxes on gas would benefit everyone. B) Raising taxes on gas would benefit most of the people. C) Higher taxes on gas would benefit society as a whole. D) Both answers A and C are correct.

C

The fact that a rock star earns $5 million a year while a teacher earns $25,0 00 annually is most directly an example of an economy answering the ________ part of one of the two big economic questions. A) "how" B) "when" C) "for whom" D) "why"

C

Which of the following is NOT a factor of production? A) a university professor B) an apartment building C) 100 shares of Microsoft stock D) mineral resources

C

A lawn service is deciding whether to add an additional employee to its summer crew. The marginal cost of hiring this worker depends on the A) the additional revenue created by having an additional worker minus the cost of hiring the worker. B) total amount paid to all previously hired workers. C) the total amount paid to all the workers, both the new one and the previously hired workers. D) total amount paid to only the new worker.

D

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

D

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

D

Factors of production include A) land, labor, capital and entrepreneurship. B) labor and capital (not land, which is fixed). C) the economic system. D) only capital, land, and labor.

A

Suppose that for the past two months, you have studied economics one hour a day. You now decide to study economics two hours a day. For the past two months A) your marginal benefit from studying economics an hour must have been greater than its marginal cost. B) the opportunity cost of studying economics must have risen. C) your marginal cost of studying economics for an hour must have exceeded its marginal benefit. D) the marginal cost of studying economics must have fallen.

A

The term "opportunity cost" points out that A) any decision regarding the use of a resource involves a costly choice. B) there may be such a thing as a free lunch. C) not all individuals will make the most of life's opportunities because some will fail to achieve their goals. D) executives do not always recognize opportunities for profit as quickly as they should.

A

Opportunity cost means the A) monetary costs of an activity. B) highest-valued alternative forgone. C) accounting cost minus the marginal benefit. D) accounting cost minus the marginal cost.

B

The opportunity cost of attending college includes the cost of A) the tuition but not the job at which you would otherwise have worked. B) the highest valued alternative to attending college plus the cost of tuition. C) the highest valued alternative to attending college. D) tuition, books, and the lost wages for the hours spent studying.

B

The statement "Managers with a college education earn $18 an hour while ski instructors who did not complete college earn $10" is A) a political statement. B) a positive statement. C) an ethical statement. D) a normative statement.

B

Which of the following are TRUE regarding "positive" statements? I. They describe what "ought to be." II. They describe what is believed about how the world appears. III. They can be tested as to their accuracy. A) I and II B) II and III C) I and III D) I, II and III

B

Which of the following is NOT an investment in human capital? A) A computer science student takes a course on programming a laptop computer. B) A student purchases a laptop computer. C) A business student takes a seminar in using a laptop computer. D) A computer science student learns how to repair a laptop computer

B

Which of the following is NOT part of the first big economic question? A) How are goods and services produced? B) Why do incentives affect only marginal costs? C) What goods and services are produced? D) For whom are goods and services produced?

B

Jed had an exam score of 50 percentage points. There is an extra credit assignment that Jed can complete that will raise his exam score by 20 percentage points. Jed has determined that the extra credit assignment will take 10 hours of his time. Jed will complete the assignment if he values the A) 10 hours of his time more than the 20 percentage points. B) 70 percentage points more than the 10 hours of his time. C) 20 percentage points and the 10 hours of his time equally. D) 20 percentage points more than the 10 hours of his time.

D

Macroeconomics differs from microeconomics in that A) microeconomics looks at the economy as a whole. B) macroeconomics studies the decisions of individuals. C) macroeconomics studies the behavior of government while microeconomics looks at private corporations. D) macroeconomics focuses on the national economy and the global economy

D

Suppose that the government of New York state promises to decrease taxes to a firm if it decides to stay in New York instead of moving to another state. This policy on the part of the state constitutes ________, to make the ________ of the firm remaining in New York. A) an incentive; marginal cost exceed the marginal benefit B) a command; marginal benefit exceed the marginal cost C) a command; marginal cost exceed the marginal benefit D) an incentive; marginal benefit exceed the marginal cost

D

When China builds a dam using few machines and a great deal of labor, it is answering the ________ part of one of the two big economic questions. A) "what" B) "where" C) "for whom" D) "how"

D

Which of the following is an example of a microeconomic decision? A) a multinational company deciding where to relocate its world headquarter B) an individual deciding how to allocate the time he or she has for work and leisure C) a small shoe factory deciding how much leather to purchase for the next quarter's production need D) All of the above answers are correct

D