Question 1

An economic model is a purposeful simplification of reality, whose function includes

Accepted Answer

A)  understanding the full complexity of the real world.
B)  predicting the behavior of each and every individual or organization.
C)  analyzing the behavior of a typical or average consumer or firm.
D)  forecasting random economic events with a high level of accuracy.E) All of the above
F) C) and D)

Question 2

Which of the following is not a factor of production?

Accepted Answer

A)  money
B)  labor
C)  capital
D)  entrepreneurE) A) and C)
F) C) and D)

Question 3

The resource category called "land" includes forests, animals, and water resources.

Accepted Answer

A) True 
 B)False

Question 4

A point or combination that is on the production possibilities curve is

Accepted Answer

A)  attainable, and resources are fully employed.
B)  attainable, but some resources are unemployed.
C)  unattainable, but some resources are unemployed.
D)  attainable only if we get additional resources.E) A) and B)
F) All of the above

Question 5

Matt observes that "there is a high correlation between educational attainment and the level of income." Jean concurs and adds that "high school graduates should all proceed to college."

Accepted Answer

A)  Both Matt's and Jean's statements are positive.
B)  Both Matt's and Jean's statements are normative.
C)  Matt's statement is normative, while Jean's statement is positive.
D)  Matt's statement is positive, while Jean's statement is normative.E) None of the above
F) A) and B)

Question 6

In constructing models, economists

Accepted Answer

A)  make simplifying assumptions.
B)  include all available information.
C)  must use mathematical equations.
D)  attempt to duplicate the real world.E) A) and B)
F) B) and D)

Question 7

Rational individuals may make different choices because their preferences and circumstances differ.

Accepted Answer

A) True 
 B)False

Question 8

If two variables are directly related, the relationship will have a graph that

Accepted Answer

A)  is a straight line.
B)  may either be upward-sloping or downward-sloping.
C)  is an upward-sloping line.
D)  is horizontal.E) B) and C)
F) A) and D)

Question 9

The economic perspective entails

Accepted Answer

A)  irrational behavior by individuals and institutions.
B)  a comparison of marginal benefits and marginal costs in decision making.
C)  short-term but not long-term thinking.
D)  rejection of the scientific method.E) C) and D)
F) A) and D)

Question 10

According to economists, economic self-interest

Accepted Answer

A)  is a reality that underlies economic behavior.
B)  has the same meaning as selfishness.
C)  means that people never make wrong decisions.
D)  is usually self-defeating.E) B) and D)
F) C) and D)

Question 11

Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas.The price of an apple is $1.50 and the price of a banana is $0.75.For this consumer, the opportunity cost of buying one more apple is

Accepted Answer

A)  0.5 of a banana.
B)  0.8 of a banana.
C)  1 banana.
D)  2 bananas.E) B) and C)
F) A) and D)

Question 12

If the marginal benefit of a good is less than its marginal cost, then the nation should

Accepted Answer

A)  produce more of that good.
B)  Maintain the current level of production of that good.
C)  reduce the marginal benefit of that good.
D)  reduce the production of that good.E) A) and B)
F) A) and C)

Question 13

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 gasE) C) and D)
F) None of the above

Question 14

If a linear relation is described by the equation C = 35 - 5D, then the vertical intercept of the graph (where C is on the vertical axis)  is

Accepted Answer

A)  35.
B)  -5.
C)  30.
D)  not known.E) All of the above
F) B) and D)

Question 15

Which of the following is one of the simplifying assumptions made in constructing a production possibilities curve?

Accepted Answer

A)  The state of technology is constantly changing.
B)  A wide variety of products are produced.
C)  Resources are fully employed and are used in least-cost methods of production.
D)  Quantities of available resources in the economy vary as we move from one point on the curve to another.E) A) and D)
F) B) and C)

Question 16

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.E) A) and C)
F) A) and B)

Question 17

Assume that a consumer purchases only two products and there is a decrease in the consumer's income.The prices of the two products stay constant.The decrease in income will result in

Accepted Answer

A)  a shift of the budget line inward to the left.
B)  a shift of the budget line outward to the right.
C)  a decrease in the slope of the budget line.
D)  an increase in the slope of the budget line.E) A) and B)
F) None of the above

Question 18

For economists, the word "utility" means

Accepted Answer

A)  versatility and flexibility.
B)  rationality.
C)  pleasure or satisfaction.
D)  purposefulness.E) A) and D)
F) A) and B)

Question 19

As a consequence of the problem of scarcity,

Accepted Answer

A)  there is never enough of anything.
B)  individuals have to make choices from among alternatives.
C)  only some people can "have it all."
D)  things which are plentiful have relatively high prices.E) C) and D)
F) B) and D)

Question 20

The production possibilities curve tells us

Accepted Answer

A)  the specific combination of two products that is most desired by society.
B)  that costs do not change as society varies its output.
C)  that costs are irrelevant in a society that has fixed resources.
D)  the combinations of two goods that can be produced with society's available resources.E) B) and D)
F) None of the above

Exam 1: Limits, Alternatives, and Choices

Matt observes that "there is a high correlation between educational attainment and the level of income." Jean concurs and adds that "high school graduates should all proceed to college."

Correct AnswerverifiedShow Answer

The production possibilities curve tells us

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The economic perspective entails

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Assume that a consumer purchases only two products and there is a decrease in the consumer's income.The prices of the two products stay constant.The decrease in income will result in

Correct AnswerverifiedShow Answer

For economists, the word "utility" means

Correct AnswerverifiedShow Answer

In constructing models, economists

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If the marginal benefit of a good is less than its marginal cost, then the nation should

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Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas.The price of an apple is $1.50 and the price of a banana is $0.75.For this consumer, the opportunity cost of buying one more apple is

Correct AnswerverifiedShow Answer

As a consequence of the problem of scarcity,

Correct AnswerverifiedShow Answer

An economic model is a purposeful simplification of reality, whose function includes

Correct AnswerverifiedShow Answer

Which of the following is one of the simplifying assumptions made in constructing a production possibilities curve?

Correct AnswerverifiedShow Answer

If a linear relation is described by the equation C = 35 - 5D, then the vertical intercept of the graph (where C is on the vertical axis) is

Correct AnswerverifiedShow Answer

Rational individuals may make different choices because their preferences and circumstances differ.

Correct AnswerverifiedShow Answer

Which of the following is not a factor of production?

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Which of the following is a land resource?

Correct AnswerverifiedShow Answer

The resource category called "land" includes forests, animals, and water resources.

Correct AnswerverifiedShow Answer

According to economists, economic self-interest

Correct AnswerverifiedShow Answer

If two variables are directly related, the relationship will have a graph that

Correct AnswerverifiedShow Answer

A point or combination that is on the production possibilities curve is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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