Definition of the Economic Problem

Economics is the A) study of the consumption, production, and distribution of goods and services. B) study of the distribution of unlimited resources to satisfy limited wants. C) exclusive study of financial markets and instruments. D) study of political organization.

A

Unfortunately, you only have a few hours after work to do whatever you want this weekend. You would enjoy hanging out with friends at a concert they want to see, but you are not a fan of the band. You enjoy doing well in school and usually enjoy your studies, and so would rather study than go to the concert. There is a movie coming out this weekend that you would prefer to see instead of studying. The benefit of going to the concert is ____ and the opportunity cost is ____ . A) enjoying the activity; missing the movie B) getting better grades; missing the movie C) enjoying the activity; getting better grades

A

Unfortunately, you only have a few hours after work to do whatever you want this weekend. You would enjoy hanging out with friends at a concert they want to see, but you are not a fan of the band. You enjoy doing well in school and usually enjoy your studies, and so would rather study than go to the concert. There is a movie coming out this weekend that you would prefer to see instead of studying. The benefit of studying is ____ and the opportunity cost is ____ . A) getting better grades; missing the movie B) enjoying the activity; missing the movie C) getting better grades; missing the concert

A

Which is NOT an example of a resource? A) money B) machinery C) labor D) land

A

Which statement describes the equity-efficiency trade‑off? A) The least efficient economic outcome is the fairest outcome. B) Actions intended to make economic outcomes fairer may cause efficiency to decrease. C) There is always a more equitable outcome that is also more efficient. D) Government intervention can increase efficiency in a market.

B

Why is there no such thing as a completely "free" market? A) The division of labor makes trade necessary. B) Every market is subject to restrictions imposed by those who have the authority to do so and who may do so. C) Free markets do exist, since politicians talk about them all the time. D) Scarcity dictates that one must give up something to get something else.

B

Choose the economic term that is best described by the statement "Everything you do requires giving up something (time, money, etc.)." A) margins B) recession C) tradeoffs D) financial capital

C

The local river has so much pollution that three-eyed fish are forming. Regulations are therefore enacted to limit the amount of chemicals dumped into the river. This scenario illustrates which economic principle? A) specialization B) equilibrium C) government intervention D) market efficiency

C

The seaport town of New Monopoly has become extremely popular with shipping companies due to its superior location. The port has become so congested that ships must wait hours every day just to dock. The mayor of New Monopoly realizes that the congestion at the port costs the shipping companies and his town money. This is an example of A) marginal analysis. B) a recession. C) market failure. D) a private good.

C

Which is the best definition of efficiency? A) when somebody can be made better off without making someone worse off B) when the only way somebody can be made better off is by making another better off C) when nobody can be made better off without making someone worse off D) when everyone can be made better off by using resources more wisely

C

For which of the following decisions is marginal analysis LEAST beneficial? A) deciding between watching another episode of your favorite TV series and going to sleep B) deciding how fast to go on the freeway C) deciding whether to do more sit-ups at the gym D) deciding which college to attend

D

You and other college students are deciding whether to major in music or engineering. You learn that there is a shortage of engineers, making it easy for engineering graduates to find employment, while there is a glut of musicians for whom finding a job is difficult. As a result, you and many other college students decide to major in engineering. Which economic principle does this illustrate? A) Specialization leads to economic efficiency. B) Individuals do not normally take into account the decisions of other individuals. C) Changes in incentives are unlikely to change the decisions people make. D) Markets tend to move towards equilibrium as individuals respond to incentives.

D