Question 1

If the output of product X is such that marginal benefit equals marginal cost:

Accepted Answer

A)  the correct amount of resources is being allocated to X's production. 
B)  the value of producing X exceeds the value of producing alternative products with the available resources. 
C)  there can be a net gain to society by allocating either more or less resources to producing X. 
D)  resources are overallocated to the production of X. 
A)  the correct amount of resources is being allocated to X's production. 
B)  the value of producing X exceeds the value of producing alternative products with the available resources. 
C)  there can be a net gain to society by allocating either more or less resources to producing X. 
D)  resources are overallocated to the production of X.

Question 2

(Last Word)A caller to a radio talk show states that protesters against globalization are a collection of "anarchist punks,naïve college students,and trade union radicals." This is an example of:

Accepted Answer

A)  the fallacy of composition. 
B)  the economic perspective. 
C)  loaded terminology. 
D)  marginal analysis. 
A)  the fallacy of composition. 
B)  the economic perspective. 
C)  loaded terminology. 
D)  marginal analysis.

Question 3

Money is not an economic resource because:

Accepted Answer

A)  money,as such,does not produce anything. 
B)  idle money balances do not earn interest income. 
C)  it is not scarce. 
D)  money is not a free gift of nature. 
A)  money,as such,does not produce anything. 
B)  idle money balances do not earn interest income. 
C)  it is not scarce. 
D)  money is not a free gift of nature.

Question 4

Which of the following would not be classified as an economic resource by economists?

Accepted Answer

A)  A professional soccer player. 
B)  Water in a town's reservoir. 
C)  Money in a business checking account. 
D)  The manager of the local hamburger restaurant. 
A)  A professional soccer player. 
B)  Water in a town's reservoir. 
C)  Money in a business checking account. 
D)  The manager of the local hamburger restaurant.

Question 5

Which of the following is a land resource?

Accepted Answer

A)  A farmer. 
B)  An oil drilling rig. 
C)  A machine for detecting earthquakes. 
D)  Natural gas. 
A)  A farmer. 
B)  An oil drilling rig. 
C)  A machine for detecting earthquakes. 
D)  Natural gas.

Question 6

A nation's production possibilities curve might shift to the left (inward)as a result of:

Accepted Answer

A)  technological advance. 
B)  increases in the size of the labor force. 
C)  the depletion of its soil fertility due to overplanting and overgrazing. 
D)  investing in more capital goods. 
A)  technological advance. 
B)  increases in the size of the labor force. 
C)  the depletion of its soil fertility due to overplanting and overgrazing. 
D)  investing in more capital goods.

Question 7

If we say that two variables are directly related,this means that:

Accepted Answer

A)  the relationship between the two is purely random. 
B)  an increase in one variable is associated with a decrease in the other variable. 
C)  an increase in one variable is associated with an increase in the other variable. 
D)  the two graph as a downsloping line. 
A)  the relationship between the two is purely random. 
B)  an increase in one variable is associated with a decrease in the other variable. 
C)  an increase in one variable is associated with an increase in the other variable. 
D)  the two graph as a downsloping line.

Question 8

Which of the following is not a main function of the entrepreneur?

Accepted Answer

A)  To make routine pricing decisions. 
B)  To innovate. 
C)  To assume the risk of economic losses. 
D)  To make strategic business decisions. 
A)  To make routine pricing decisions. 
B)  To innovate. 
C)  To assume the risk of economic losses. 
D)  To make strategic business decisions.

Question 9

Choices entail marginal costs because resources are scarce.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following terms implies the greatest degree of confidence in an economic generalization?

Accepted Answer

A)  Hypothesis. 
B)  Comparison. 
C)  Principle. 
D)  Anomaly. 
A)  Hypothesis. 
B)  Comparison. 
C)  Principle. 
D)  Anomaly.

Question 11

A positive statement is concerned primarily with:

Accepted Answer

A)  some goal that is desirable to society. 
B)  what should be. 
C)  what is. 
D)  the formulation of economic policy. 
A)  some goal that is desirable to society. 
B)  what should be. 
C)  what is. 
D)  the formulation of economic policy.

Question 12

Kara was out jogging and,despite being tired,decided to run one more mile.Based on her actions,economists would conclude that Kara:

Accepted Answer

A)  must be an avid runner. 
B)  decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile. 
C)  decided that the marginal cost of running one more mile would outweigh the benefit of the additional mile. 
D)  was not very tired,so the marginal cost of the extra mile was very low. 
A)  must be an avid runner. 
B)  decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile. 
C)  decided that the marginal cost of running one more mile would outweigh the benefit of the additional mile. 
D)  was not very tired,so the marginal cost of the extra mile was very low.

Question 13

The process of producing and accumulating capital goods is called:

Accepted Answer

A)  money capital. 
B)  depreciation. 
C)  investment. 
D)  consumption. 
A)  money capital. 
B)  depreciation. 
C)  investment. 
D)  consumption.

Question 14

A normative statement is one that:

Accepted Answer

A)  is based on the law of averages. 
B)  applies only to microeconomics. 
C)  applies only to macroeconomics. 
D)  is based on value judgments. 
A)  is based on the law of averages. 
B)  applies only to microeconomics. 
C)  applies only to macroeconomics. 
D)  is based on value judgments.

Question 15

If price (P)and quantity (Q)are directly related,this means that:

Accepted Answer

A)  a change in Q will alter P,but a change in P will not alter Q. 
B)  if P increases,Q will decrease. 
C)  if P increases,Q will also increase. 
D)  an increase in P will cause Q to change,but the direction in which Q changes cannot be predicted. 
A)  a change in Q will alter P,but a change in P will not alter Q. 
B)  if P increases,Q will decrease. 
C)  if P increases,Q will also increase. 
D)  an increase in P will cause Q to change,but the direction in which Q changes cannot be predicted.

Question 16

Which of the following statements is correct?

Accepted Answer

A)  The value of the independent variable is determined by the value of the dependent variable. 
B)  The value of the dependent variable is determined by the value of the independent variable. 
C)  The dependent variable designates the "cause" and the independent variable the "effect." 
D)  Dependent variables graph as upsloping lines;independent variables graph as downsloping lines. 
A)  The value of the independent variable is determined by the value of the dependent variable. 
B)  The value of the dependent variable is determined by the value of the independent variable. 
C)  The dependent variable designates the "cause" and the independent variable the "effect." 
D)  Dependent variables graph as upsloping lines;independent variables graph as downsloping lines.

Question 17

An increase in money income:

Accepted Answer

A)  shifts the consumer's budget line to the right. 
B)  shifts the consumer's budget line to the left. 
C)  increases the slope of the budget line. 
D)  has no effect on the budget line. 
A)  shifts the consumer's budget line to the right. 
B)  shifts the consumer's budget line to the left. 
C)  increases the slope of the budget line. 
D)  has no effect on the budget line.

Question 18

The output of MP3 players should be:

Accepted Answer

A)  reduced if marginal benefits exceed marginal costs. 
B)  reduced if marginal costs exceed marginal benefits. 
C)  increased if marginal costs exceed marginal benefits. 
D)  reduced to zero if their unit costs exceed the unit costs of alternative products. 
A)  reduced if marginal benefits exceed marginal costs. 
B)  reduced if marginal costs exceed marginal benefits. 
C)  increased if marginal costs exceed marginal benefits. 
D)  reduced to zero if their unit costs exceed the unit costs of alternative products.

Question 19

Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income.Letting C represent consumption and Y represent income,the equation that summarizes this relationship is:

Accepted Answer

A)  C = 80 + 100Y. 
B)  C = 100 + .8Y. 
C)  C = 100 + 80Y. 
D)  C = 80 + .1Y. 
A)  C = 80 + 100Y. 
B)  C = 100 + .8Y. 
C)  C = 100 + 80Y. 
D)  C = 80 + .1Y.

Question 20

Assume that a change in government policy results in greater production of both consumer goods and investment goods.We can conclude that:

Accepted Answer

A)  the economy was not employing all of its resources before the policy change. 
B)  the economy's production possibilities curve has been shifted to the left as a result of the policy decision. 
C)  this economy's production possibilities curve is convex (bowed inward)to the origin. 
D)  the law of increasing opportunity costs does not apply in this society. 
A)  the economy was not employing all of its resources before the policy change. 
B)  the economy's production possibilities curve has been shifted to the left as a result of the policy decision. 
C)  this economy's production possibilities curve is convex (bowed inward)to the origin. 
D)  the law of increasing opportunity costs does not apply in this society.

Exam 1: Limits, Alternatives, and Choices

If the output of product X is such that marginal benefit equals marginal cost:

(Last Word)A caller to a radio talk show states that protesters against globalization are a collection of "anarchist punks,naïve college students,and trade union radicals." This is an example of:

Money is not an economic resource because:

Which of the following would not be classified as an economic resource by economists?

Which of the following is a land resource?

A nation's production possibilities curve might shift to the left (inward)as a result of:

If we say that two variables are directly related,this means that:

Which of the following is not a main function of the entrepreneur?

Choices entail marginal costs because resources are scarce.

Which of the following terms implies the greatest degree of confidence in an economic generalization?

A positive statement is concerned primarily with:

Kara was out jogging and,despite being tired,decided to run one more mile.Based on her actions,economists would conclude that Kara:

The process of producing and accumulating capital goods is called:

A normative statement is one that:

If price (P)and quantity (Q)are directly related,this means that:

Which of the following statements is correct?

An increase in money income:

The output of MP3 players should be:

Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income.Letting C represent consumption and Y represent income,the equation that summarizes this relationship is:

Assume that a change in government policy results in greater production of both consumer goods and investment goods.We can conclude that:

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

Technology RD and Efficiency

The Demand for Resources

Wage Determination

Rent Interest and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

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