Homework answers / question archive / Chapter 1 Practice Test Limits, Alternatives, and Choices   1

Chapter 1 Practice Test Limits, Alternatives, and Choices   1

Economics

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Chapter 1 Practice Test

Limits, Alternatives, and Choices

 

1. Economics is primarily the study of:

a. how scarcity can be eliminated

b. how firms manipulate prices

c. how government influence resource allocation decisions

d. the problem of scarce resources relative to human wants

 

 

2. Macroeconomics mainly focuses upon:

a. the economy as a whole

b. international trade and foreign exchange markets

c. specific product and resource markets

d. individual consumers and producers

 

 

3. The production possibilities curve:

a. shows all combinations of goods that society most desires

b. indicates that any combination of goods lying outside the curve is attainable

c. separates all combinations of two goods that can be produced from those that cannot

d. is bowed in toward the origin

 

 

4. Moving from left to right, the typical production possibilities curve has:

a. an increasingly steep negative slope

b. a decreasingly steep negative slope

c. an increasingly steep positive slope

d. a constant and negative slope

 

 

5. According to economists, human wants will never be fulfilled completely because:

a. people are greedy

b. productive resources are scarce

c. people are not capable of fully rational thought

d. people’s wants are manipulated by advertising

 

 

 

 

6. True or false:  Economic theory suggests that purposeful behavior and economic growth will eventually solve the problem of scarcity.

a. True

b. False

 

 

7. In studying economic principles, economists make use of:

a. both the economic perspective and the scientific method

b. the economic perspective but not the scientific method

c. the scientific method but not the economic perspective

d. neither the scientific method nor the economic perspective

 

 

8. Suppose you have a $20 iTunes gift card with which you can buy (download) songs or videos.  Songs cost $1.00 each and videos cost $2.00 each.  The opportunity cost of one video:

a. increases as more videos are purchased

b. is $1.00

c. is constant and equal to ½ song

d. is constant and equal to 2 songs

 

 

9. Purposeful behavior and marginal analysis:

a. explain why there is “no free lunch”

b. are part of the economic perspective

c. are relevant in short-term but not long-term analysis

d. explain the “fallacy of composition”

 

 

10. True or false:  Two rational individuals will always make the same choices when faced with the same circumstances.

a. True

b. False

 

 

 

 

 

 

 

 

11. The scarcity problem:

a. can be eliminated if all countries adopt laissez-faire capitalism

b. will persist so long as productive resources are limited

c. persists only in the developing countries

d. will be eliminated if full employment is achieved

 

 

12. The role of theorizing is to:

a. substitute for “policy economics”

b. arrange and interpret facts

c. lend practical support to the “economic perspective”

d. refute marginal analysis

 

 

13. You should decide to study an extra hour tonight

a. if the marginal cost of studying an extra hour exceeds its marginal benefit

b. if the marginal benefit of studying an extra hour exceeds its marginal cost

c. if you got a lower than expected grade on your last exam

d. because studying harder will improve your test scores

 

 

14. When constructing a typical production possibilities curve, economists assume:

a. economic resources are underutilized

b. resources are equally productive in many alternative uses

c. all available resources are fully employed

d. production technology is allowed to vary

 

 

15. Microeconomics:

a. is particularly subject to the “fallacy of composition”

b. is concerned with the economy as a whole

c. studies how supply and demand determine prices in individual markets

d. describes the aggregate flows of output and income

 

 

 

 

 

 

 

 

16. Answer the next question on the basis of the data given in the following production possibilities table:

 

 

 

 

Refer to the above table.  These data indicate that increasing production of capital goods requires:

a. increasing sacrifices of consumer goods

b. decreasing sacrifices of consumer goods

c. constant sacrifices of consumer goods

d. no sacrifices of consumer goods

 

 

17. Refer to the following diagram:

 

 

 

The slope of curve ZZ at point C is:

a. positive

b. negative

c. zero

d. undefined

 

 

18. Consider the choice Marsha faces of how to allocate her weekly allowance between books and CDs. An increase in Marsha’s income will:

a. shift her budget line to the right

b. shift her budget line to the right

c. rotate her budget line, allowing her to buy more books but not more CDs

d. rotate her budget line, allowing her to buy more CDs but not more books

 

 

19. The negative slope of the production possibilities curve illustrates that:

a. some resources are always unemployed

b. an economy can produce more of one thing only by producing less of something else

c. opportunity costs are constant

d. business can sell more when prices are low

 

 

20. Which of the following would lead to an inward shift of a nation’s production possibilities curve?

a. Immigration of skilled workers into the nation

b. An increase in the average skill level of the population

c. a decrease in the size of the working-age population

d. Increased production of capital goods

 

 

21. The two major features of the economic perspective are:

a. purposeful behavior and marginal analysis

b. normative and positive analysis

c. benefit and cost

d. consumers and producers

 

 

22. A nation’s production possibilities curve is “bowed out” from the origin because:

a. resources are not perfectly adaptable to production of alternative goods

b. capital goods and consumer goods utilize the same production technology

c. resources are scarce relative to human wants

d. opportunity costs are decreasing

 

 

23. A microeconomist would most likely study:

a. how consumers respond to a change in gasoline prices

b. the effects of an income tax reduction on the size of the national budget deficit

c. the effects of aggregate consumer debt on overall consumption spending

d. the relationship between the size of the money supply and the rate of inflation

 

 

 

 

 

 

24. Refer to the following:

 

 

 

Which of the points on the production possibilities curve in the diagram is currently unattainable given the economy’s resources?

a. Point A

b. Point B

c. Point C

d. Point D

 

 

25. The fundamental problem of economics implies that:

a. governments must be relied upon to supply essential goods and services

b. inflation and unemployment are unavoidable

c. growing populations will deplete natural resources

d. individuals and communities must make choices among competing alternatives

 

 

26. “Rational self-interest is the same as selfishness.”

a. True

b. False

 

 

27. When an economist concludes that there is not enough of some activity, the economist is suggesting that:

a. the marginal benefit of the activity exceeds its marginal cost

b. the cost of the activity has increased

c. the benefit of the activity has decreased

d. the marginal cost of the activity exceeds its marginal benefit

 

28. In the equation y = a + bx, where y is the dependent variable and x is the independent variable, the slope of line is given by:

a. a

b. b

c. y/x

d. a/b

 

 

29. Suppose you can purchase milk for $3 a gallon or eggs for $1.50 per dozen. Your opportunity cost of a gallon of milk is:

a. one dozen eggs

b. two dozen eggs

c. one half dozen eggs

d. $1.50

 

30. Margaret decides to stay home and study for her exam rather than going out with her friends to a movie.  Her dilemma is an example of:

a. the economic perspective

b. marginal analysis

c. allocative efficiency

d. opportunity cost