Question 1

The value of the next-best choice not chosen is called opportunity cost.

Accepted Answer

A) True 
 B)False

Question 2

A scarce resource is one that:

Accepted Answer

A)  has two or more alternative uses. 
B)  exhibits the basic properties of a free good. 
C)  is confronted only under socialist conditions. 
D)  has an unlimited supply.

Question 3

The economic way of thinking includes:

Accepted Answer

A)  attention paid to the opportunity costs involved in any choice. 
B)  the assumption that individuals choose to average out some objective. 
C)  concern with the biological make up of decision makers. 
D)  emphasis on how choices affect total values rather than marginal values.

Question 4

Which of the following would be a part of macroeconomics  A study of:

Accepted Answer

A)  the change in automobile sales due to a change in the price of automobiles. 
B)  a tax reduction impact on the profits of a business. 
C)  inflation. 
D)  the unemployment of workers displaced by technological change in the typesetting industry.

Question 5

Economics, generally speaking, is primarily concerned with:

Accepted Answer

A)  the operation of the bond and stock markets. 
B)  the issues of income inequality or income equality. 
C)  how people choose among the alternatives available to them. 
D)  ceteris paribus, the scientific method, and the margin.

Question 6

Opportunity cost is:

Accepted Answer

A)  the costs of all sacrifices not chosen when a choice is made. 
B)  the highest valued other choice that could have been made. 
C)  the result of having made a bad choice. 
D)  the result of not making choices at the margin.

Question 7

In the 1970s, the Organization of Petroleum Exporting Countries (OPEC) tripled the price of petroleum, causing automobile manufacturers to look for ways to produce more fuel-efficient cars by substituting aluminum and plastic for steel. This was primarily a response to the economic question of:

Accepted Answer

A)  When will each good be produced? 
B)  For whom shall the goods be produced? 
C)  What goods and services should a society produce? 
D)  How should goods and services be produced?

Question 8

The statement that the minimum wage needs to be increased is a:

Accepted Answer

A)  positive statement. 
B)  normative statement. 
C)  condition contained in the fallacy of false cause. 
D)  scientific conclusion based on marginal analysis.

Question 9

Opportunity cost is the expected value of the alternative not chosen.

Accepted Answer

A) True 
 B)False

Question 10

The basic concern of economics is to:

Accepted Answer

A)  keep business firms from losing money. 
B)  prove that capitalism is better than socialism. 
C)  study the choices people make. 
D)  use unlimited resources to produce goods and services to satisfy limited wants.

Question 11

Most economists' disagreements are a result of:

Accepted Answer

A)  factual considerations. 
B)  positive economics. 
C)  the scientific method. 
D)  normative considerations.

Question 12

Economists are:

Accepted Answer

A)  concerned with developing theories but not interested in solving problems. 
B)  interested in solving problems but not concerned with developing theories. 
C)  reluctant to predict changes in variables such as prices, employment, and spending. 
D)  not always in agreement on the best way to implement policy decisions.

Question 13

A tradeoff between two economic goals means that:

Accepted Answer

A)  if achievement of one increases, then achievement of the other must increase. 
B)  if achievement of one decreases, then achievement of the other must decrease. 
C)  if you achieve more of one, you will achieve less of the other. 
D)  the goals are fully compatible.

Question 14

A term that means "all other things unchanged" is:

Accepted Answer

A)  dependent variable. 
B)  independent variable. 
C)  quid pro quo. 
D)  ceteris paribus.

Question 15

A hypothesis is an assertion that can be:

Accepted Answer

A)  proven to be false. 
B)  proven to be true. 
C)  proven to be true or false. 
D)  tested only in the normative sense.

Question 16

Economic models are:

Accepted Answer

A)  created and used in order to duplicate virtually every aspect of the real world. 
B)  useless if they are simple. 
C)  made generally of wood, plastic, and/or metal. 
D)  built using assumptions.

Question 17

The problem of determining how goods and services should be produced exists because:

Accepted Answer

A)  we do not have enough skilled workers relative to the number of unskilled workers. 
B)  we do not have enough unskilled workers relative to the number of skilled workers. 
C)  corporations want to avoid changing their methods of production. 
D)  most goods can be produced with different combinations of resources.

Question 18

The statement that "there is no such thing as a free lunch" means:

Accepted Answer

A)  there are no tradeoffs between economic goals. 
B)  any production requires the use of scarce resources, and thus the sacrifice of another alternative. 
C)  choices need not be made in rational behavior. 
D)  scarcity only exists in poor societies.

Question 19

Suppose that voters in your community pass a one-cent sales tax increase to fund education, knowing full well they will have to forgo other goods they typically consume. This primarily addresses the economic question of:

Accepted Answer

A)  How will each good be produced? 
B)  For whom shall the goods be produced? 
C)  Why will the resources be used to produce goods? 
D)  What goods and services should a society produce?

Question 20

Unemployment and inflation are:

Accepted Answer

A)  not relevant in the U.S. economy today. 
B)  major topics in macroeconomics. 
C)  unique only to capitalistic economies. 
D)  very important in the study of microeconomics.

Exam 1: Economics: the Study of Choice