Question 1

The lower the consumer's income, the higher his or her budget line.

Accepted Answer

A) True 
 B)False

Question 2

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day.This fact

Accepted Answer

A)  is an example of irrational behavior.
B)  implies that electronic media sources are displacing print sources for many consumers.
C)  contradicts the economic perspective.
D)  implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.E) C) and D)
F) A) and C)

Question 3

Macroeconomics can best be described as the

Accepted Answer

A)  analysis of how a consumer tries to spend income.
B)  study of the large aggregates of the economy or the economy as a whole.
C)  analysis of how firms attempt to maximize their profits.
D)  study of how supply and demand determine prices in individual markets.E) C) and D)
F) B) and D)

Question 4

Which of the following would not be considered a capital resource by economists?

Accepted Answer

A)  a van used by a mother to transport the family around
B)  an office computer used by an accountant
C)  a crane used by a building contractor
D)  a camera used by a professional photographerE) A) and C)
F) C) and D)

Question 5

(Consider This)  The assertion by economists that "there is no free lunch"

Accepted Answer

A)  is contradicted by the presence of free goods offered by firms.
B)  applies to goods that have prices, not to goods given away free by firms.
C)  remains true even for goods given away free by firms.
D)  applies to agricultural goods but not to manufactured goods.E) A) and B)
F) A) and C)

Question 6

(Last Word)  Which of the following has to do with the problem of distinguishing cause and effect in economic reasoning?

Accepted Answer

A)  the law of large numbers
B)  the law of averages
C)  the post hoc, ergo propter hoc fallacy
D)  the fallacy of compositionE) A) and C)
F) A) and D)

Question 7

Macroeconomics approaches the study of economics from the viewpoint of

Accepted Answer

A)  the entire economy.
B)  governmental units.
C)  the operation of specific product and resource markets.
D)  individual firms.E) C) and D)
F) B) and C)

Question 8

"Macroeconomics is the part of economics concerned with individual units, such as a person, a household, a firm, or an industry." This statement is

Accepted Answer

A)  positive but incorrect.
B)  positive and correct.
C)  normative but incorrect.
D)  normative and correct.E) None of the above
F) All of the above

Question 9

Which of the following will not produce an outward shift of the production possibilities curve?

Accepted Answer

A)  upgrading the quality of a nation's human resources
B)  reducing unemployment
C)  increasing the quantity of a society's labor force
D)  improving a society's technological knowledgeE) A) and D)
F) C) and D)

Question 10

A country can achieve some combination of goods outside its production possibilities curve by

Accepted Answer

A)  idling some of its resources.
B)  specializing and engaging in international trade.
C)  buying the debt (bonds and stocks)  of foreign nations.
D)  producing more capital goods and fewer consumer goods.E) A) and D)
F) None of the above

Question 11

Assume an economy is incurring unemployment.The effect of resolving this problem will be to

Accepted Answer

A)  move the level of actual output closer to the economy's production possibilities curve.
B)  create a less equal distribution of income.
C)  shift its production possibilities curve to the left.
D)  shift its production possibilities curve to the right.E) B) and D)
F) None of the above

Question 12

Which pitfall to sound economic reasoning is illustrated when a person comments that "capitalists focus only on profits and don't care about their workers"?

Accepted Answer

A)  abstraction
B)  biases
C)  the fallacy of composition
D)  confusing correlation and causationE) B) and D)
F) B) and C)

Question 13

Economic resources are also called

Accepted Answer

A)  free gifts of nature.
B)  consumption goods.
C)  units of money capital.
D)  factors of production.E) A) and B)
F) None of the above

Question 14

When an economy is operating under conditions of full employment, the production of more of commodity A will mean the production of less of commodity B because

Accepted Answer

A)  of the law of increasing opportunity costs.
B)  economic wants are insatiable.
C)  resources are limited.
D)  resources are specialized and only imperfectly substitutable.E) A) and B)
F) A) and D)

Question 15

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

Question 16

If two variables are inversely related, then as the value of one variable

Accepted Answer

A)  increases, the value of the other may either increase or decrease.
B)  decreases, the value of the other decreases.
C)  increases, the value of the other decreases.
D)  increases, the value of the other increases.E) A) and B)
F) A) and D)

Question 17

Which of the following will shift the production possibilities curve to the right?

Accepted Answer

A)  an increase in the unemployment rate from 6 to 8 percent
B)  a decline in the efficiency with which the present labor force is allocated
C)  a decrease in the unemployment rate from 8 to 6 percent
D)  a technological advance that allows farmers to produce more output from given inputsE) None of the above
F) B) and C)

Question 18

"Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is

Accepted Answer

A)  positive but incorrect.
B)  positive and correct.
C)  normative but incorrect.
D)  normative and correct.E) A) and C)
F) None of the above

Question 19

The amount of pizzas that consumers want to buy per week is reflected in the equation P = 15 - .02Qd, where Qd is the amount of pizzas purchased per week and P is the price of pizzas.On the basis of this information, we can say that

Accepted Answer

A)  if pizzas were free, people would consume 800 per week.
B)  more pizzas will be purchased at a high price than at a low price.
C)  if the price of pizzas is $6, then 150 will be purchased.
D)  50 fewer pizzas will be purchased per week for every $1 increase in price.E) A) and C)
F) B) and C)

Question 20

A person should consume more of something when its marginal

Accepted Answer

A)  benefit exceeds its marginal cost.
B)  cost exceeds its marginal benefit.
C)  cost equals its marginal benefit.
D)  benefit is still better.E) A) and D)
F) None of the above

Exam 1: Limits, Alternatives, and Choices

Economic resources are also called

Correct AnswerverifiedShow Answer

The amount of pizzas that consumers want to buy per week is reflected in the equation P = 15 - .02Qd, where Qd is the amount of pizzas purchased per week and P is the price of pizzas.On the basis of this information, we can say that

Correct AnswerverifiedShow Answer

A person should consume more of something when its marginal

Correct AnswerverifiedShow Answer

Which of the following will shift the production possibilities curve to the right?

Correct AnswerverifiedShow Answer

Which of the following would not be considered a capital resource by economists?

Correct AnswerverifiedShow Answer

Assume an economy is incurring unemployment.The effect of resolving this problem will be to

Correct AnswerverifiedShow Answer

Which pitfall to sound economic reasoning is illustrated when a person comments that "capitalists focus only on profits and don't care about their workers"?

Correct AnswerverifiedShow Answer

"Macroeconomics is the part of economics concerned with individual units, such as a person, a household, a firm, or an industry." This statement is

Correct AnswerverifiedShow Answer

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day.This fact

Correct AnswerverifiedShow Answer

Macroeconomics can best be described as the

Correct AnswerverifiedShow Answer

Which of the following will not produce an outward shift of the production possibilities curve?

Correct AnswerverifiedShow Answer

Macroeconomics approaches the study of economics from the viewpoint of

Correct AnswerverifiedShow Answer

(Consider This) The assertion by economists that "there is no free lunch"

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A country can achieve some combination of goods outside its production possibilities curve by

Correct AnswerverifiedShow Answer

The lower the consumer's income, the higher his or her budget line.

Correct AnswerverifiedShow Answer

(Last Word) Which of the following has to do with the problem of distinguishing cause and effect in economic reasoning?

Correct AnswerverifiedShow Answer

"Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is

Correct AnswerverifiedShow Answer

When an economy is operating under conditions of full employment, the production of more of commodity A will mean the production of less of commodity B because

Correct AnswerverifiedShow Answer

If two variables are inversely related, then as the value of one variable

Correct AnswerverifiedShow Answer

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