1. According to the textbook, economics is a:
a. social science.
b. study of business decisions, not social decisions.
c. part of operations and management science.
d. part of humanities.
2. A/an _______ does not pose the problem of scarcity; one use of the good is not an alternative to another use.
a. free good
b. scarce good
c. economic good
d. monetary good
3. Water is considered a scarce good rather than a free good because:
a. it has alternative uses.
b. it does not have alternative uses.
c. scarce goods are less expensive than free goods.
d. free goods are more expensive than scarce goods.
4. The Case in Point on the oil extraction suggests that one reason oil may become more costly is that:
a. we will have to give up more and more valuable alternatives to extract oil.
b. speculation is likely to drive up oil prices.
c. oil producers are likely to become more greedy in the future.
d. actually, the Case suggests that oil extraction is likely to become less costly and the future.
5. The opportunity cost of something is:
a. greater during periods of rising prices.
b. equal to the money cost.
c. less during periods of falling prices.
d. what is given up to acquire it.
6. The BEST example of making a choice at the margin is:
a. buying a new car.
b. quitting your job.
c. a coffee drinker drinking another cup of coffee.
d. attending college.
7. The study of a single firm and how it determines prices would fall under:
a. macroeconomics.
b. microeconomics.
c. the study of inflation.
d. normative economics.
8. Each of the following statements about the use of models in the study of economics is true EXCEPT:
a. models fit the observed facts exactly.
b. models are sometimes revised in light of new research findings.
c. models are easier to manipulate than the reality they represent.
d. models contain the essential features of the economic behavior being studied.
9. Suppose you observe that the sun sets every evening after the six o’clock business report. If you conclude that the six o’clock business report makes the sun set, you are guilty of the fallacy of:
a. division.
b. composition.
c. false cause.
d. science.
10. An example of a normative statement is:
a. The rate of unemployment is 4 percent.
b. A high rate of economic growth creates more jobs for the country.
c. The federal government spends half of its budget on national defense.
d. Everyone in the country needs to be covered by national health insurance.
11. Resources from nature that can be used to to produce other goods and services are called:
a. money.
b. natural resources.
c. labor.
d. capital.
12. Increasing the level of education in the United States will:
a. shift the production possibilities curve to the left.
b. improve the level of technology.
c. lead to increased natural resource use.
d. lead to workers possessing greater human capital.
13. Technology is:
a. knowledge that can be applied to the production of goods and services.
b. generally unlimited in modern economies.
c. a graphical illustration of the alternative combinations of goods and services an economy can produce.
d. the resources the economy has available to produce goods and services.
14. A person who seeks to earn profits by finding ways to organize factors of production is called a/an:
a. foreman
b. finance capitalist.
c. entrepreneur.
d. manager.
15. In this exhibit (Guns and Butter), the combination of guns and butter at point H:
a. can be obtained, but would cost too much.
b. cannot be attained given the level of technology and the factors of production available.
c. has no meaning since it does not relate to the preferences of consumers.
d. Is attainable but would increase unemployment.
16. If the production possibilities curve were a straight line sloping down from left to right, this would suggest that:
a. more of both goods could be produced moving along the curve.
b. the two products must have the same price.
c. no factor of production has any particular comparative advantage over other resources.
d. the utility of the two goods must be equal to consumers.
17. When moving along a production possibilities curve, the opportunity cost to society of getting more of the good on the horizontal axis:
a. is constant.
b. is measured in dollar terms.
c. is measured by the amount of the other good that must be given up.
d. usually decreases.
18. Efficient production implies that it is:
a. possible to produce more of all goods and services.
b. it is possible to produce more of one good without producing less of another.
c. not possible to produce more of one good without producing less of another good.
d. producing at a combination of goods which lies between the production possibilities curve and the origin.
19. In market capitalism:
a. factors of production are privately owned and decisions are made privately.
b. factors of production are owned by the government but decisions are made privately.
c. there is no role for government.
d. the consumer has few choices to make.
20. Government’s role of taxing some citizens and transferring income to others is considered:
a. enforcing a legal system.
b. providing certain goods and services.
c. redistributing income.
d. maintaining the money supply.