Question 1

Which of the following is a positive statement?

Accepted Answer

A)  An unemployment rate of 9 percent is a national disgrace. 
B)  Unemployment is a more important problem than inflation. 
C)  When the national unemployment rate is 9 percent, the unemployment rate for inner-city youth is often close to 40 percent. 
D)  Unemployment and inflation are equally important problems. 
A)  An unemployment rate of 9 percent is a national disgrace. 
B)  Unemployment is a more important problem than inflation. 
C)  When the national unemployment rate is 9 percent, the unemployment rate for inner-city youth is often close to 40 percent. 
D)  Unemployment and inflation are equally important problems.

Question 2

-In the above, a positive relationship between price and quantity is shown in

Accepted Answer

A)  Figure A. 
B)  Figure B. 
C)  both Figure A and Figure B. 
D)  neither Figure A nor Figure B. 
A)  Figure A. 
B)  Figure B. 
C)  both Figure A and Figure B. 
D)  neither Figure A nor Figure B.

Question 3

-In the above figure, tax revenue is at a maximum when the tax rate is

Accepted Answer

A)  0 percent. 
B)  30 percent. 
C)  50 percent. 
D)  100 percent. 
A)  0 percent. 
B)  30 percent. 
C)  50 percent. 
D)  100 percent.

Question 4

-The above figure graphs the price of a bushel of wheat and housing starts. The graph shows the variables are

Accepted Answer

A)  strongly positively related. 
B)  strongly negatively related. 
C)  not related. 
D)  related via an indirect relationship. 
A)  strongly positively related. 
B)  strongly negatively related. 
C)  not related. 
D)  related via an indirect relationship.

Question 5

-If the slope of a line that graphs the relationship between variable x and variable y is positive, then we know that

Accepted Answer

A)  when the value of variable x increases, then the value of variable y decreases. 
B)  when the value of variable x decreases, then the value of variable y decreases. 
C)  the two variables are unrelated. 
D)  the two variables have an inverse relationship. 
A)  when the value of variable x increases, then the value of variable y decreases. 
B)  when the value of variable x decreases, then the value of variable y decreases. 
C)  the two variables are unrelated. 
D)  the two variables have an inverse relationship.

Question 6

Fundamental economic problems basically arise from

Accepted Answer

A)  the fact that society has more than it needs. 
B)  turmoil in the stock market. 
C)  the unequal distribution of income. 
D)  our wants exceeding our scarce resources. 
A)  the fact that society has more than it needs. 
B)  turmoil in the stock market. 
C)  the unequal distribution of income. 
D)  our wants exceeding our scarce resources.

Question 7

Which of the following is NOT part of the first big economic question?

Accepted Answer

A)  What goods and services are produced? 
B)  How are goods and services produced? 
C)  For whom are goods and services produced? 
D)  Why do incentives affect only marginal costs? 
A)  What goods and services are produced? 
B)  How are goods and services produced? 
C)  For whom are goods and services produced? 
D)  Why do incentives affect only marginal costs?

Question 8

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

Accepted Answer

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

Question 9

Macroeconomics is concerned with

Accepted Answer

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

Question 10

Why do economists say that even very rich people face scarcity?

Accepted Answer

A person faces scarcity whenever his or

Question 11

Opportunity cost is defined as the

Accepted Answer

A)  total value of all the alternatives given up. 
B)  highest-valued alternative given up. 
C)  cost of not doing all of the things you would like to do. 
D)  lowest-valued alternative given up. 
A)  total value of all the alternatives given up. 
B)  highest-valued alternative given up. 
C)  cost of not doing all of the things you would like to do. 
D)  lowest-valued alternative given up.

Question 12

-In the above figure, the slope across the arc between a and b is

Accepted Answer

A)  3. 
B)  1. 
C)  3/5. 
D)  1/3. 
A)  3. 
B)  1. 
C)  3/5. 
D)  1/3.

Question 13

Marginal cost is the cost

Accepted Answer

A)  that your activity imposes on someone else. 
B)  that arises from an increase in an activity. 
C)  of an activity that exceeds its benefit. 
D)  that arises from the secondary effects of an activity. 
A)  that your activity imposes on someone else. 
B)  that arises from an increase in an activity. 
C)  of an activity that exceeds its benefit. 
D)  that arises from the secondary effects of an activity.

Question 14

-The above table gives data on two variables. If these data were graphed, their relationship would

Accepted Answer

A)  be a straight line. 
B)  be a curved line. 
C)  show a negative relationship. 
D)  nonexistent. 
A)  be a straight line. 
B)  be a curved line. 
C)  show a negative relationship. 
D)  nonexistent.

Question 15

Most income in the United States is earned by business owners as profit.

Accepted Answer

A) True 
 B)False

Question 16

Factors of production include

Accepted Answer

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

Question 17

The value of the x-coordinate of a point in a graph is the length of a line from the point to the

Accepted Answer

A)  origin. 
B)  scalar. 
C)  x-axis. 
D)  y-axis. 
A)  origin. 
B)  scalar. 
C)  x-axis. 
D)  y-axis.

Question 18

Which of the following creates an incentive to increase the amount of an activity?

Accepted Answer

A)  an increase in the marginal cost of the activity and a decrease in the marginal benefit of the activity 
B)  a decrease in the marginal cost of the activity and an increase in the marginal benefit of the activity 
C)  constant marginal cost and constant marginal benefit of the activity 
D)  None of the above create an incentive to increase the amount of an activity. 
A)  an increase in the marginal cost of the activity and a decrease in the marginal benefit of the activity 
B)  a decrease in the marginal cost of the activity and an increase in the marginal benefit of the activity 
C)  constant marginal cost and constant marginal benefit of the activity 
D)  None of the above create an incentive to increase the amount of an activity.

Question 19

In which of the following cases is the slope of a line positive and less than infinity?

Accepted Answer

A)  As the variable measured on the x-axis decreases, the variable measured on the y-axis decreases. 
B)  As the variable measured on the x-axis increases, the variable measured on the y-axis decreases. 
C)  As the variable measured on the y-axis increases, the variable measured on the x-axis does not change. 
D)  As the variable measured on the y-axis increases, the variable measured on the x-axis decreases. 
A)  As the variable measured on the x-axis decreases, the variable measured on the y-axis decreases. 
B)  As the variable measured on the x-axis increases, the variable measured on the y-axis decreases. 
C)  As the variable measured on the y-axis increases, the variable measured on the x-axis does not change. 
D)  As the variable measured on the y-axis increases, the variable measured on the x-axis decreases.

Question 20

"Ceteris paribus" refers to the idea that if more than two variables are graphed, only one variable must be held constant.

Accepted Answer

A) True 
 B)False

Exam 1: What Is Economics

Which of the following is a positive statement?

-In the above, a positive relationship between price and quantity is shown in

-In the above figure, tax revenue is at a maximum when the tax rate is

-The above figure graphs the price of a bushel of wheat and housing starts. The graph shows the variables are

-If the slope of a line that graphs the relationship between variable x and variable y is positive, then we know that

Fundamental economic problems basically arise from

Which of the following is NOT part of the first big economic question?

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

Macroeconomics is concerned with

Why do economists say that even very rich people face scarcity?

Opportunity cost is defined as the

-In the above figure, the slope across the arc between a and b is

Marginal cost is the cost

-The above table gives data on two variables. If these data were graphed, their relationship would

Most income in the United States is earned by business owners as profit.

Factors of production include

The value of the x-coordinate of a point in a graph is the length of a line from the point to the

Which of the following creates an incentive to increase the amount of an activity?

In which of the following cases is the slope of a line positive and less than infinity?

"Ceteris paribus" refers to the idea that if more than two variables are graphed, only one variable must be held constant.

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

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