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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or
answers the question.
1) According to the text, the reason to study economics is
1) _______
A) to learn a way of thinking.
B) to be an informed voter.
C) to understand society and global affairs.
D) All of the above
2) Fundamental concepts in economics is(are)
A) efficient markets.
B) marginalism.
C) opportunity cost.
D) All of the above
2) _______
3) One of its most basic economic problems is that society
A) has more products available than it needs.
B) must decide how to lower a product price.
C) must decide how to allocate available resources.
D) has more resources available than it needs.
3) _______
4) Which of the following statements is FALSE?
A) If poverty were eliminated there would be no reason to study
economics.
B) Economic analysis can be used to explain how both individuals
and societies make decisions.
C) Economics is a behavioral science.
D) In large measure, economics is the study of how people make
choices.
4) _______
5) The process of analyzing the additional or incremental costs or benefits
arising from a choice or decision is called ________.
A) equity
B) growth
C) marginalism
D) efficiency
5) _______
6) In calculating marginal costs, we ________ costs.
A) include sunk and average
B) exclude sunk
C) include only sunk
D) exclude all
6) _______
7) You purchased a ticket to a concert for $30 a month ago. Last week
someone invited you to a party on the same night as the concert. You
would much rather go to the party than the concert. You have tried
unsuccessfully to sell the concert ticket. Which of the following
statements regarding this situation is correct?
A) The $30 you paid for the concert ticket is relevant to the decision,
as this represents the opportunity cost of attending the party.
B) The $30 concert ticket should be irrelevant in your decision
making, because it represents the marginal cost of attending the
party.
C) You should base your decision on whether or not the party will
provide you with more than $30 in satisfaction.
D) The $30 you paid for the concert ticket should be irrelevant in
your decision making, because it is a sunk cost.
7) _______
8) You spent a total of $5 buying songs for your MP3 player. After you buy
one more song, your total cost rises to $6. The marginal cost of the last
song that you bought is ________.
A) $0.50
B) $1.00
C) $5.00
D) $6.00
8) _______
9) The concept of opportunity cost
A) is relevant only to economics.
B) applies to consumers but not to firms.
C) refers only to actual payments and incomes.
D) can be applied to the analysis of any decision-making process.
9) _______
10) Opportunity cost is
A) the additional cost of buying an additional unit of a product.
B) the additional cost of producing an additional unit of output.
C) that which we forgo, or give up, when we make a choice or a
decision.
D) a cost that cannot be avoided, regardless of what is done in the
future.
10) ______
11) You have $100 in savings. You could earn four percent interest if you
put the $100 in a bank savings account for a year. What is your
opportunity cost if you put the $100 under the pillow of your bed
instead?
A) $0.00.
B) $4.00.
C) $100.00.
D) $104.00.
11) ______
12) The ________ is NOT an opportunity cost of attending college.
A) income you could have earned if you didnʹt attend college
B) tuition you pay
C) cost of the food that you consume while you are attending college
D) alternative uses of the time you spend studying
12) ______
13) If you own a building and you decide to use that building to open a
restaurant,
A) the only cost relevant to this decision is the price you paid for the
building.
B) there is no opportunity cost of using this building for a restaurant
because you own it.
C) there are no sunk costs involved in this decision.
D) there is an opportunity cost of using this building for a restaurant
because it could have been used in other ways.
13) ______
14) You own The Wizard of Oz on DVD. The opportunity cost of watching
this DVD for the second time
A) is zero.
B) is the value of the alternative use of the time you spend watching
the DVD.
C) cannot be calculated.
D) is one-half the cost of the DVD, as this is the second time you
have watched it.
14) ______
15) That which we forgo, or give up, when we make a choice or decision is
called the ________ cost of that decision.
15) ______
A) sunk
C) opportunity
B) marginal
D) fixed
16) Regardless of what I do in the future, I cannot avoid ________ costs
because I have already incurred them.
A) allocative
B) marginal
C) total
D) sunk
16) ______
17) A market in which profit opportunities are eliminated almost
instantaneously is a(n) ________ market.
A) capitalist
B) laissez-faire
C) socialist
D) efficient
17) ______
18) When information is less costly and more easily available to all
participants of a market, this should
A) make markets less efficient.
B) make markets more efficient.
C) increase the opportunity cost of acquiring more information.
D) increase profit opportunities.
18) ______
19) In an efficient market
A) equilibrium happens more frequently than disequilibrium.
B) opportunity costs are zero.
C) profit opportunities are eliminated almost instantaneously.
D) profits are always very high and persistent.
19) ______
20) The economics discipline began to take shape during
A) ancient Roman times.
B) biblical times.
C) the late eighteenth and early nineteenth centuries.
D) the latter half of the twentieth century.
20) ______
21) The rise of the modern factory system in England during the late
eighteenth and early nineteenth centuries is known as the
A) Wealth of Nations.
B) First Economic Revolution.
C) Industrial Revolution.
D) Great Migration.
21) ______
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
22) Economics and physics are physical sciences.
22) ______
23) The value of the best alternative foregone is the opportunity cost of
making a decision.
23) ______
24) Scarcity is the reason that opportunity costs arise.
24) ______
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or
answers the question.
25) The branch of economics that examines the functioning of individual
25) ______
industries and the behavior of individual decision-making units is
A) normative economics.
B) macroeconomics.
C) microeconomics.
D) positive economics.
26) Studying how the management of US Steel, a large steel-producing
company, decides how many tons of steel to produce and the price to
charge for its steel would be considered
A) descriptive economics.
B) macroeconomics.
C) microeconomics.
D) empirical economics.
26) ______
27) Studying how Bob's firm decides to produce one more unit of output is
an example of
A) industrial organization.
B) macroeconomics.
C) microeconomics.
D) descriptive economics.
27) ______
28) ________ focuses on the prices of individual goods and services and
________ focuses on the rate of inflation.
A) Microeconomics; macroeconomics
B) Microeconomics; microeconomics
C) Macroeconomics; microeconomics
D) Macroeconomics; macroeconomics
28) ______
29) One topic that microeconomics focuses on is
A) national income.
B) total corporate profits.
C) the minimum wage.
D) total wages and salaries.
29) ______
30) Positive economics is an approach to economics that
A) analyzes outcomes of economic behavior, evaluates them as good
or bad, and may prescribe preferred courses of action.
B) seeks to understand behavior and the operation of systems while
making judgments about their usefulness to society.
C) prescribes roles for government in an economy.
D) describes the economy and how it works.
30) ______
31) Normative economics is an approach to economics that
A) seeks to understand behavior and the operation of systems
without making judgments.
B) would never prescribe a role for government in the economy.
C) describes the economy and how it works.
D) analyzes outcomes of economic behavior, evaluates them as good
or bad, and may prescribe preferred courses of action.
31) ______
32) "High taxes reduce the incentive of workers to work" is best described
as a ________ statement.
A) descriptive economics
B) Marxist ideology
C) normative
D) positive
32) ______
33) If the price of a product falls, then the quantity demanded of that
product will rise. This is best described as a ________ statement.
A) descriptive economics
B) positive
C) normative
D) Marxist ideology
33) ______
34) Scientists should not create life in a laboratory is an example of a
________ statement.
A) descriptive
B) Marxist ideology
C) normative
D) positive.
34) ______
35) Which of the following is a normative question?
A) To reduce the regressive nature of the gasoline excise tax, should
a portion of the gasoline excise tax paid by low-income individuals
be refunded to them?
B) How will oil exploration be affected if the government imposes
price controls on gasoline?
C) Why do gasoline prices increase before holiday weekends?
D) What will happen to gasoline consumption if excise taxes on
gasoline are increased?
35) ______
36) Which of the following is a positive question?
A) Wouldnʹt it be better to try to increase peopleʹs wages through
job-training programs than by requiring employers to pay
minimum wages?
B) Wouldnʹt it be more equitable if the minimum wage increased
automatically with the cost of living?
C) Will the level of teenage unemployment increase if the minimum
wage is increased?
D) Should the minimum wage be set at one-half the average
manufacturing wage to guarantee individuals a decent standard of
living?
36) ______
37) "A poor nation like Haiti should tolerate its wealthy citizens" is best
described as a ________ statement.
A) normative
B) descriptive economics
C) positive
D) nonjudgmental
37) ______
38) ________ economics describes what exists and ________ economics
prescribes courses of action.
A) Positive; normative
B) Descriptive; positive
C) Normative; descriptive
D) Normative; positive
38) ______
39) Descriptive economics
A) requires model building.
B) mainly involves the compilation of data that describe phenomena
and facts.
C) involves mathematical statements of presumed relationships
among variables.
D) looks at the outcomes of economic behavior and asks if they are
good or bad.
39) ______
40) The Commerce Department announced that economic growth rose by
one-half of a percentage point. This is best described as
A) descriptive economics.
B) a microeconomic
statement.
C) an economic model.
D) a normative statement.
40) ______
41) An example of descriptive economics is when an economist
A) collects data on the wage rates and employment levels in the steel
industry.
B) tries to determine if there are any regular patterns in the
41) ______
employment steel industry and then makes generalizations from these patterns.
levels in the
C) tries to understand the relationship between the price of imported
steel and the level of employment in the U.S. steel industry.
D) tries to develop a model to explain the changes in employment
and wages in the steel industry.
Refer to the information provided in Scenario 1 below to answer the questions that follow.
SCENARIO 1: An economist wants to understand the relationship between minimum wages and
the level of teenage unemployment. The economist collects data on the values of the minimum
wage and the levels of teenage unemployment over time. The economist concludes that a 1%
increase in the minimum wage causes a 0.2% increase in teenage unemployment. From this
information he concludes that the minimum wage is harmful to teenagers and should be reduced
or eliminated to increase employment among teenagers.
42) Refer to Scenario 1. The statement that a 1% increase in the minimum
wage causes a 0.2% increase in teenage unemployment is an example of
________ economics.
A) non‐empirical
B) normative
C) policy
D) positive
42) ______
43) Refer to Scenario 1. The statement,ʺthe minimum wage is harmful to
teenagers and should be reduced or eliminated to increase employment
among teenagers,ʺis most likely an example of ________ economics.
A) positive
B) normative
C) microeconomic
D) descriptive
43) ______
44) Refer to Scenario 1. The process of collecting data on minimum wage
and teenage unemployment levels is an example of
A) economic history.
B) law and economics.
C) descriptive economics.
D) econometrics.
44) ______
45) Refer to Scenario 1. The statement that an increase in the minimum
wage causes an increase in teenage unemployment is an example of
A) normative economics.
B) descriptive reasoning.
C) economic theory.
D) deductive reasoning.
45) ______
46) Refer to Scenario 1. A graph of the value of the minimum wage on one
axis and the level of teenage unemployment on the other axis is an
example of
A) a variable theory.
B) inductive reasoning.
C) an economic model.
D) an economic theory.
46) ______
47) A measure that can change from time to time or from observation to
observation is a
A) theory.
B) parameter.
C) model.
D) variable.
47) ______
48) To isolate the impact of one single factor, economists invoke the
assumption of
A) ceteris paribus.
B) post hoc, ergo propter hoc.
C) Ockhamʹs razor.
D) inductive reasoning.
48) ______
49) The principle that irrelevant detail should not be included in a model is
known as
A) Sayʹs Identity.
B) Ockhamʹs razor.
C) Hobsonʹs choice.
D) ceteris paribus.
49) ______
50) Economists use the phraseʺceteris paribusʺ to express the assumption,
A) ʺscarcity is a fact of life.ʺ
B) ʺthere is no such thing as a free lunch.ʺ
C) ʺall else equal.ʺ
D) ʺeverything affects everything else.ʺ
50) ______
51) Labor economics deals with the.
A) economic function of legal rules and institutions.
B) structure and performance of industries and firms within an
economy.
C) way alternative economic systems function.
D) factors that determine wage rates, employment, and
unemployment.
51) ______
52) Jim states that the melting of the polar icecap will cause prices in the
stock market to increase. He is committing the
A) fallacy of composition.
B) fallacy of inductive reasoning.
C) ceteris paribus fallacy.
D) post hoc, ergo propter hoc fallacy.
52) ______
53) Since Becky plays basketball well, therefore the other members of her
team must also play basketball well. This statement is an example of the
fallacy of
A) composition.
B) post hoc, ergo propter hoc.
C) ceteris paribus.
D) inductive reasoning.
53) ______
54) The economy expanded during all of the years that James was a student,
but as soon as he graduated, the economy contracted. Therefore, the
labor market waited until James started looking for a job to contract.
This statement is an example of the fallacy of
A) inductive reasoning.
B) post hoc, ergo propter hoc.
C) composition.
D) ceteris paribus.
54) ______
55) You know that traffic gets very congested about 7:45 a.m. To avoid this
congestion, you start leaving for school 15 minutes earlier every day.
But many students make the same decision, and now traffic becomes
very congested at 7:30 a.m. This is an example of the fallacy of
A) ceteris paribus.
B) division.
C) post hoc, ergo propter hoc.
D) composition.
55) ______
56) It always rains about an hour after you finish washing your car.
Concluding that washing your car caused rain to fall is an example of
the fallacy of
A) ceteris paribus.
B) inductive reasoning.
C) post hoc, ergo propter hoc.
D) composition.
56) ______
57) At a very exciting ballgame, you stand up to see better. Everyone else
stands up, as well. This is an example of the fallacy of
A) ceteris paribus.
B) Ockhamʹs razor.
C) post hoc, ergo propter hoc.
D) composition.
57) ______
58) A student observes that every time he eats an apple before taking an
exam he gets an F. He, therefore, concludes that to pass an exam, he
only needs to avoid eating an apple before he takes the exam. He has
committed the fallacy of
A) post hoc, ergo propter hoc.
B) division.
C) inductive reasoning.
D) composition.
58) ______
59) If you observe that Event A happens before Event B, and you conclude
that Event A caused Event B, you may be guilty of an error called the
fallacy of
A) inductive reasoning.
B) ceteris paribus.
C) post hoc, ergo propter hoc.
D) composition.
59) ______
60) The fallacy of composition is the belief that
A) what is true for the whole is necessarily true of the parts.
B) if Event A happens before Event B, then Event A causes Event B
to occur.
C) what is true for a part is necessarily true for the whole.
D) it is impossible to draw generalizations about cause and effect.
60) ______
61) Two variables are ________ if one variable changes when the other
variable changes.
A) independent of each other
B) causally related
C) unrelated
D) correlated
61) ______
62) Empirical economists
A) collect and use data to test economic theories.
B) impose ceteris paribus conditions to conduct controlled
experiments.
C) reason inductively to develop economic models.
D) reason deductively to develop economic theories.
62) ______
63) The collection and use of data to test economic theories is ________
economics.
A) empirical
B) normative
C) policy
D) descriptive
63) ______
64) City officials may impose rent controls when they believe landlords are
exploiting tenants. The officials use the ________ criteria to justify their
actions.
A) equity
B) stability
C) efficiency
D) growth
64) ______
65) A government policy that tries to minimize variations in aggregate
output can best be described as trying to achieve economic
A) efficiency.
B) growth.
65) ______
C) stability.
D) equity.
66) Governments redistribute income from the rich to the poor with a tax
system that requires taxes to rise with income. Which of the following
criteria best explains the reason for this tax system?
A) Efficiency
B) Growth
C) Equity
D) Stability
66) ______
67) Voluntary exchange is efficient when the two trading parties are
________ the exchange than they were ________ the exchange.
A) better off after; before
B) worse off after; before
C) no better off after; before
D) better off before; after
67) ______
68) In an efficient economy
A) output is steady or growing and there is low inflation.
B) what consumers want is produced at the least possible cost.
C) the distribution of wealth is fair.
D) output is distributed equally among all consumers.
68) ______
69) Allocative efficiency means
A) an economy distributes income and wealth fairly.
B) opportunity costs are high.
C) an economy produces what people want at the least possible cost.
D) the ratio of economic output to inputs is as low as possible.
69) ______
70) The four criteria that are frequently used in judging the outcome of
economic policy are
A) efficiency, equity, stability, and economic growth.
B) efficiency, equality, stability, and economic growth.
C) efficiency, equity, profitability, and stability.
D) efficiency, equality, profitability, and stability.
70) ______
71) You have noticed that there is an increase in the number of homeless
people in your city. At the same time you observe that there are also a
number of vacant apartments. You believe that the government could
reduce the number of homeless people if landlords were required to
rent their apartments for less than they are currently charging. This
policy recommendation would be motivated by concerns over
A) increased production.
B) economic growth.
C) equity.
D) stability.
71) ______
72) There is a possibility that a national sales tax will be implemented.
Many economists argue that items such as food and clothing should be
exempt from such a tax because low-income people spend a greater
percentage of their income on these goods than high-income
individuals. This argument is motivated by concerns over
A) equity.
B) economic growth.
C) economic stability.
D) efficiency.
72) ______
73) A(n) ________ economy produces increasing total output.
A) growing
B) equitable
C) efficient
D) stable
73) ______
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
74) Normative economics looks at outcomes of economic behavior and
evaluates them as good or bad.
74) ______
75) Positive economics looks at outcomes of economic behavior and
evaluates them as good or bad.
75) ______
76) Standards of living increase if output grows faster than population.
76) ______
77) ʺCeteris Paribusʺ literally translated means,ʺbuyer beware.ʺ
77) ______
78) Positive economics seeks to understand behavior, but not make
judgments.
78) ______
79) Descriptive economics involves a mathematical statement of a
presumed relationship between two or more variables.
79) ______
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or
answers the question.
Refer to the information provided in Figure 1.1 below to answer the questions that follow.
Figure 1.1
80) Refer to Figure 1.1. There is ________ relationship between the daily
temperature and the number of gallons of ice cream purchased.
A) either a negative or a positive
B) a positive
C) an inverse
D) a negative
80) ______
Refer to the information provided in Figure 1.2 below to answer the questions that follow.
Figure 1.2
81) Refer to Figure 1.2. The slope of the line between Points A and B is
A) 3.3.
B) 2.3.
C) .3.
D) indeterminate from this information.
81) ______
82) If a straight line has slope, a(n) ________ in X ________ Y.
A) increase; increases
B) decrease; doesn't change
C) increase; lowers
D) decrease; lowers
82) ______
Refer to the information provided in Figure 1.3 below to answer the questions that follow.
Figure 1.3
83) Refer to Figure 1.3. The slope of the line is
A) increasing at an increasing rate.
B) positive.
C) negative.
D) decreasing at an increasing rate.
83) ______
84) Refer to Figure 1.3. The slope of the line between the origin and Point B
is
A) -2.
B) 0.5.
C) 5.
D) 2.
84) ______
85) Refer to Figure 1.3. If a 45 degree line were also graphed, the line shown
would ________ it.
A) lie above
B) cross
85) ______
C) lie below
D) indeterminant from this information.
86) Refer to Figure 1.3. At Point A, what is the value of Y?
A) 12.
B) 7.
C) 8.
D) indeterminate from this information.
86) ______
87) Refer to Figure 1.3. At Point A the slope of the line is 2, so at Point D the
slope would be
A) less than 2.
B) equal to 2.
C) greater than 2.
D) indeterminate from this information.
87) ______
Refer to the information provided in Figure 1.4 below to answer the questions that follow.
Figure 1.4
88) Refer to Figure 1.4. Which of the curves or lines has a slope that is first
positive and then negative?
A) A
B) B
C) C
D) D
88) ______
89) Refer to Figure 1.4. Which of the curves or lines has a slope that is
negative and then positive?
A) A
B) B
C) C
D) D
89) ______
90) Refer to Figure 1.4. Which of the following curves or lines has a zero
slope throughout?
A) A
B) B
C) C
D) D
90) ______
91) Refer to Figure 1.4. Which of the curves or lines has an infinite slope
throughout
?
91)
A) A
___
___
B) B
C) C
D) D
92) Refer to Figure 1.4. At Point E in panel A, the slope is
A) infinite.
B) negative.
C) zero.
D) indeterminate from this information.
92) ______
93) The slope of a curve
A) is always positive.
B) is not constant.
C) is constant.
D) must first increase then decrease.
93) ______
94) The slope of a horizontal line is
A) infinite.
C) continually changing.
94) ______
B) zero.
D) negative.
95) If the slope of a straight line is 5 and if X (the variable on the horizontal
axis) increases by 10, then Y (the variable on the vertical axis) will
A) increase by 0.5.
B) increase by 50.
C) decrease by .5.
D) decrease by 50.
95) ______
96) If the slope of a straight line is 10 and if Y (the variable on the vertical
axis) decreases by 20, then X (the variable on the horizontal axis)
A) decreases by 2.
B) decreases by 200.
C) increases by 2.
D) increases by 200.
96) ______
97) The slope of a vertical line is
A) zero.
C) negative.
97) ______
B) infinite.
D) continually changing.
Refer to the information provided in Figure 1.5 below to answer the questions that follow.
Figure 1.5
98) Refer to Figure 1.5. Which of the curves has a slope that is positive and
decreasing?
A) A
B) B
C) C
D) D
98) ______
99) Refer to Figure 1.5. Which of the curves has a slope that is positive and
increasing?
A) A
B) B
C) C
D) D
99) ______
100) Refer to Figure 1.5. Which of the curves has a slope that is negative and
decreasing?
A) A
B) B
C) C
D) D
100) _____
101) Refer to Figure 1.5. Which of the curves has a slope that is negative and
increasing?
A) A
B) B
C) C
D) D
101) _____
102) Refer to Figure 1.5. As income increases, consumption increases, but for
each additional increase in income, consumption increases by a smaller
and smaller amount. If consumption is graphed on the vertical axis and
income is graphed on the horizontal axis, the relationship between
consumption and income would look like which of the following
panels?
A) A
B) B
C) C
D) D
102) _____
103) Refer to Figure 1.5. In many industries, as firms produce additional
units, average costs of production decline but continue to fall by a
smaller and smaller amount. If output is graphed on the horizontal axis
and average costs are graphed on the vertical axis, the relationship
between average costs and output would be like which of the following
panels?
A) A
B) B
C) C
D) D
103) _____
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
104) Each Y value equals the corresponding X value on a 45 ° line.
105) A graph illustrating how one variable changes over time is a Cartesian
coordinate system.
104) _____
105) _____
1)
2)
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D
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FALSE
TRUE
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D
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D
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99)
100)
101)
102)
103)
D
A
B
D
C
D
A
C
C
D
A
A
A
C
C
A
B
C
A
C
A
A
TRUE
FALSE
TRUE
FALSE
TRUE
FALSE
B
C
C
B
D
A
C
B
B
A
C
D
C
B
B
B
A
B
B
A
C
D
B
C
104) TRUE
105) FALSE