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Multiple-Choice Quiz
1. By the end of 2009, what share of Americans expected their income to increase in the next
year?
A) More than 75%.
B) More than 50%, but less than 75%.
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C) More than 25%, but less than 50%.
D) Less than 25%.
During the Great Recession, only 1 out of 3 Americans expected their income to increase in
the next year.
2. Which of the following would not be studied in macroeconomics?
A) National unemployment rate.
B) Inflation.
C) Economic growth.
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D) Market for new cars.
The market for new cars would be studied in microeconomics, which deals with individual parts
of the economy.
3. Which of the following statements regarding scarcity is true?
A) Scarcity occurs because our available resources are incapable of producing
enough goods and services to satisfy everyone's wants.
B) Even if our average per-capita income were to increase to $1,000,000 per
year, scarcity still would not be eliminated.
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C) Both A and B.
D) None of the above.
Scarcity means that there aren’t enough resources to produce everything that people want,
and scarcity is a problem in any economy.
4. If a nation were to save more, consume less, and produce more capital goods, then:
A) Current consumption would rise, but future production would fall.
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B) Current consumption would fall, but future production would rise.
C) There would be no change in either current consumption or future production.
D) Both current consumption and future production would fall.
By saving more now and consuming less, a nation will be able to produce more in the future.
5. You can visit the exhibits at the Smithsonian Institution for no charge. Which of the
following statements is true?
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A) There is still an opportunity cost because scarce time could have been used
differently.
B) There is no opportunity cost because the goods are free.
C) Those who visit the exhibits have no opportunity cost since it is an extremely
rewarding experience.
D) The Smithsonian Institution is not a for-profit organization; as a result,
economic theory is totally irrelevant to this question.
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Full file at http://testbanksinstant.eu/ Test-Bank-for-Essentials-ofEconomics-8E---Schiller-Opportunity cost represents the most desired goods and services that are forgone in order to
obtain something else.
6. What is economics?
A) The study of money.
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B) The study of how to allocate scarce resources among alternative uses.
C) The study of stocks and bonds.
D) None of the above properly defines economics.
Economics is the study of how best to allocate scarce or limited resources among competing
uses.
7. Which of the following is a basic economic question?
A) What to produce.
B) How to produce.
C) For whom to produce.
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D) All of the above are basic economic questions.
The three basic economic questions are WHAT to produce, HOW to produce, and FOR WHOM
to produce.
8. The value of the best alternative you’ve given up in order to do something else is called:
A) scarcity.
B) production possibilities.
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C) opportunity cost.
D) None of the above is true.
Opportunity cost represents the most desired goods and services that are forgone in order to
obtain something else.
9. When was the share of total output devoted to national defense the highest in U.S. history?
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A) World War II.
B) Korean War.
C) Vietnam War.
D) Reagan buildup.
The share of total output devoted to national defense was about 40 percent during World War
II.
10. Which of the three basic economic questions deals with how the national “pie” will be
distributed?
A) What to produce.
B) How to produce.
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C) For whom to produce.
D) None of the above is true.
The FOR WHOM to produce question is also known as the “distribution question.”
11. The production possibilities curve:
A) shows the combinations of goods that could be produced with available
resources and technology.
B) illustrates economic trade-offs.
C) deals with scarcity and the need to make choices.
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D) All of the above are true about the production possibilities curve.
The production possibilities curve does all three of these things.
12. Which term means “other things being equal”?
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A) Ceteris paribus.
B) Laissez faire.
C) Caveat emptor.
D) None of the above.
Ceteris paribus is the assumption that nothing else changes.
13. Government failure may have occurred when:
A) government intervention doesn’t improve economic outcomes.
B) the economy moves away from the optimal mix of output.
C) policy shifts the economy to the left of (inside) the production-possibilities
curve.
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D) All of the above are true.
Government policies intended to improve the economy may actually hurt it, which is referred
to as government failure.
14. What is an example of a market failure?
A) Too much pollution created by private firms.
B) A higher level of poverty than is desired by society.
C) Disincentives to work created by government transfers.
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D) Both A and B are correct.
Market failures occur when the market does not produce the best possible mix of output.
15. The economics of the health care debate boil down to:
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A) Expanding health care versus paying for the costs of health care.
B) Choosing the group that will experience the greatest reduction in health care.
C) Deciding how to spend the extra savings from lower health care costs.
D) Spurring technological growth in the health care sector.
Proponents of recent health care initiatives applaud the increased access to health care, while
opponents disagree with the increased costs this will introduce.
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