ECON 102: Chapter 1

10) 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

12) 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

13) Differences in income are most directly related to which of the following economic question? A) Who consumes the goods and services that are produced? B) How are goods and services produced? C) What goods and services are produced? D) In what quantities are various goods and services produced?

A

15) Which of the following is NOT a factor of production? A) 175 shares of Microsoft stock B) wilderness areas that have yet to be developed C) vans used by a bakery company for deliveries D) a person developing a production schedule for a new product

A

27) A cost due to an increase in activity is called A) a negative marginal benefit. B) a marginal cost. C) an incentive loss. D) the total cost

B

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

B

38) 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

39) 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) going to the basketball game. B) going to the symphony. C) three hours of time. D) going to the symphony and the basketball game

B

42) 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

44) "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

45) An economic model is A) a generalization that summarizes all the normative assumptions we make about a particular issue. B) a description of some aspect of the economic world that includes only those features of the world that are needed for the purpose at hand. C) a statement that describes how the world should be. D) a collection of facts that describe the real world.

B

48) 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

50) 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

34) 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

4) 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

19) When a textile company keeps track of its inventory using a computer and its competitor uses a pad of paper and a pencil, they are both answering the ________ part of one of the two big economic questions. A) "for whom" B) "what" C) "how" D) "where"

C

14) 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

17) When an economy produces more houses and fewer typewriters, it is answering the ________ part of one of the two big economic questions. A) "for whom" B) "where" C) "how" D) "what"

D

21) In the U.S. economy, which of the following statements is TRUE? (See Figure 1.1 on page 3 of the Parkin textbook.) A) More services are produced than goods. B) More goods are produced than services. C) Production is divided evenly between goods and services. D) The economy is too complex to determine the proportion of production that is devoted to producing services.

A

30) 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

33) From 8 P.M. to 10 P.M., Susan can attend a movie, study, or talk with friends. Suppose that Susan decides to go to the movie but thinks that, if she hadn't, she would otherwise have talked with friends. The opportunity cost of attending the movie is A) talking with friends. B) talking with friends and studying. C) studying. D) two hours of time.

A

36) 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

37) 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 lib rary. Your opportunity cost is A) working out at the gym. B) zero because you do not have to pay money to use the library. C) not clear because not enough information is given. D) working out at the gym, having breakfast with friends, and sleeping late

A

47) 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

49) Which of the following is a normative statement? A) The main reason why the United States has a trade deficit with China is because China's trade practices are unfair. B) The United States has a comparative advantage compared to the European Union in the production of wheat. C) Both these statements are normative. D) Neither of these statements is normative.

A

8) 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

1) Which of the following is a macroeconomic issue? A) what determines the amount a firm will produce B) how federal government budget deficits affect interest rates C) the cause of a decline in the price of peanut butter D) how a rise in the price of sugar affects the market for sodas

B

16) 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 comput er. D) A computer science student learns how to repair a laptop computer.

B

18) 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

22) 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

25) Entrepreneurs do all of the following EXCEPT A) organize labor, land, and capital. B) own all the other resources used in the production process. C) bear risk from business decisions. D) come up with new ideas about what and how to produce.

B

20) 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

23) A natural resource, such as fishing territories, is considered an example of A) only capital. B) both land and labor. C) land only. D) land, labor, capital and entrepreneurship.

C

24) 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

26) 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

29) 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

31) Which of the following statements are CORRECT? I. The "highest-valued alternative given up to get something" is the opportunity cost. II. Wealthy economies don't experience opportunity costs. III. Scarcity creates opportunity costs. A) I only B) I and II C) I and III D) I, II, and III

C

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

C

46) 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

11) Which of the following are considered factors of production used to produce goods and services? I. Land II. Labor III. Capital IV. Entrepreneurship A) I and II only B) I and III only C) I, II and III only D) I, II, III and IV

D

2) 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

28) 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

3) Macroeconomic topics include A) studying the determination of wages and production costs in the software industry. B) the impact of government regulation of markets. C) studying what factors influence the price and quantity of automobiles. D) total, nationwide employment.

D

32) 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

40) 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

41) A store remains open from 8 a.m. to 4 p.m. each weekday. The store owner is deciding whether to stay open an extra hour each evening. The owner's marginal benefit A) is the benefit the owner receives from staying open from 8 a.m. to 5 pm. B) depends on the revenues the owner makes during the day. C) is the benefit the owner receives from staying open from 8 a.m. to 6 pm. D) must be greater than or equal to the owner's marginal cost if the owner decides to stay open.

D

5) An incentive A) could be a penalty but could not be a reward. B) is the opposite of a tradeoff. C) could be a reward but could not be a penalty. D) could be either a reward or a penalty.

D

6) 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

7) An inducement to take a particular action is called A) the marginal cost. B) opportunity cost. C) the marginal benefit. D) an incentive.

D

9) Samantha goes to college to become an engineer. This is an example of an A) increase in labor. B) investment in physical capital. C) increase in entrepreneurship. D) investment in human capital.

D