Question 1

In graphing a relationship between two variables, economists always follow the mathematical convention.Thus, if price is the independent variable then it is measured on the horizontal axis.

Accepted Answer

A) True 
 B)False

Question 2

Purposeful behavior suggests that

Accepted Answer

A)  everyone will make identical choices.
B)  resource availability exceeds economic wants.
C)  individuals may make different choices because of different desired outcomes.
D)  an individual's economic goals cannot involve trade-offs.E) C) and D)
F) All of the above

Question 3

Products and services are scarce because resources are scarce.

Accepted Answer

A) True 
 B)False

Question 4

"The role of government in the economy should be kept to a minimum" is an example of a positive economic statement.

Accepted Answer

A) True 
 B)False

Question 5

In a graph showing the relationship between variables X and Y, ceteris paribus means that

Accepted Answer

A)  X is inversely related to Y.
B)  X is positively related to Y.
C)  X and Y are independent.
D)  other variables not shown are held constant.E) A) and B)
F) C) and D)

Question 6

Which of the following statements regarding people's wants is true?

Accepted Answer

A)  Over time, people's wants tend to be stable and constant.
B)  As people consume more products, their wants will be reduced.
C)  Intangible services, just like tangible goods, may satisfy people's wants.
D)  People's wants do not include their basic needs.E) B) and D)
F) B) and C)

Question 7

Economic growth is a result of

Accepted Answer

A)  a reduction in the unemployment rate.
B)  an increase in the opportunity costs of production.
C)  a decrease in the demand for resources.
D)  an increase in the supply of resources.E) A) and B)
F) B) and C)

Question 8

Which of the following is a labor resource?

Accepted Answer

A)  a computer programmer
B)  a computer
C)  silicon (sand)  used to make computer chips
D)  software used by a firmE) A) and B)
F) A) and C)

Question 9

If someone produced too little of a good, this would suggest that

Accepted Answer

A)  rational choice cannot be applied to many economic decisions.
B)  the good was produced past the point where its marginal cost exceeded its marginal benefit.
C)  government should intervene to produce more of the good.
D)  the good was produced to the point where its marginal benefit exceeded its marginal cost.E) A) and C)
F) A) and B)

Question 10

From an economic perspective, when consumers leave a fast-food restaurant because the lines to be served are too long, they have concluded that the

Accepted Answer

A)  marginal cost of waiting is less than the marginal benefit of eating in that restaurant.
B)  marginal cost of waiting is greater than the marginal benefit of eating in that restaurant.
C)  management is exhibiting irrational behavior by not considering the marginal cost and the marginal benefit of standing in line by the consumer.
D)  management is making an assumption that other things are equal.E) A) and C)
F) A) and D)

Question 11

The law of increasing opportunity costs states that

Accepted Answer

A)  costs of production increase for one good, but costs decrease for the other good.
B)  increases in wages and other resource costs is what the increasing opportunity costs refer to.
C)  increases in the production of one good require larger and larger sacrifices of the other good.
D)  increases in the production of one good make the production of that good easier.E) All of the above
F) None of the above

Question 12

The budget line shows

Accepted Answer

A)  the amount of product X that a consumer is willing to give up to obtain one more unit of product Y.
B)  all possible combinations of two goods that can be purchased, given money income and the prices of the goods.
C)  the minimum amount of two goods that a consumer can purchase with a specific money income.
D)  all possible combinations of two goods that yield the same level of utility to the consumer.E) A) and D)
F) A) and C)

Question 13

(Consider This)  A direct cost of going to college is

Accepted Answer

A)  tuition, while an indirect cost (opportunity cost)  is books and other supplies.
B)  forgone income while in college, while an indirect cost (opportunity cost)  is tuition.
C)  tuition, while an indirect cost (opportunity cost)  is forgone income while in college.
D)  books and supplies, while an indirect cost (opportunity cost)  is food and housing.E) A) and B)
F) A) and C)

Question 14

Which of the following is a positive economic statement?

Accepted Answer

A)  Government must maintain the current level of defense spending to keep the nation safe.
B)  The minimum wage should be increased to give people a decent wage.
C)  Americans should buy American products in order to boost the national economy.
D)  Stock prices rose to a new record last month for the fourth month in a row.E) A) and D)
F) B) and C)

Question 15

Kara was out jogging and, despite being tired, decided to run one more mile.Based on her actions, economists would conclude that Kara

Accepted Answer

A)  must be an avid runner.
B)  decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile.
C)  decided that the marginal cost of running one more mile would outweigh the benefit of the additional mile.
D)  was not very tired, so the marginal cost of the extra mile was very low.E) B) and C)
F) B) and D)

Question 16

Imagine an ideal scenario where world peace prevails and all nations are led by peace-minded leaders.In such a world, the

Accepted Answer

A)  MB for defense goods would shift left.
B)  MB for defense goods would shift right.
C)  MC for defense goods would shift left.
D)  MC for defense goods would shift right.E) A) and B)
F) A) and C)

Question 17

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase.This is a reflection of

Accepted Answer

A)  resource scarcity and the necessity of choice.
B)  purposeful behavior.
C)  marginal costs that exceed marginal benefits.
D)  the trade-off problem that exists between competing goals.E) B) and C)
F) B) and D)

Question 18

Increasing the share of your income that you save is good for you.Therefore, it would be good for the whole economy if everyone saved more.This exemplifies the

Accepted Answer

A)  post hoc fallacy.
B)  fallacy of composition.
C)  use of loaded terminology.
D)  confusion between correlation and causation.E) C) and D)
F) B) and D)

Question 19

If an economy is operating on its production possibilities curve for consumer goods and capital goods, this means that

Accepted Answer

A)  it is impossible to produce more consumer goods.
B)  resources cannot be reallocated between the two goods.
C)  it is impossible to produce more capital goods.
D)  more consumer goods can only be produced at the cost of fewer capital goods.E) B) and C)
F) A) and B)

Question 20

Opportunity costs exist because

Accepted Answer

A)  the decision to engage in one activity means forgoing some other activity.
B)  wants are scarce relative to resources.
C)  households and businesses make rational decisions.
D)  most decisions do not involve sacrifices or trade-offs.E) A) and B)
F) A) and C)

Exam 1: Limits, Alternatives, and Choices

In a graph showing the relationship between variables X and Y, ceteris paribus means that

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Purposeful behavior suggests that

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Opportunity costs exist because

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(Consider This) A direct cost of going to college is

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Which of the following is a positive economic statement?

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The budget line shows

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Which of the following statements regarding people's wants is true?

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In graphing a relationship between two variables, economists always follow the mathematical convention.Thus, if price is the independent variable then it is measured on the horizontal axis.

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If an economy is operating on its production possibilities curve for consumer goods and capital goods, this means that

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Which of the following is a labor resource?

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If someone produced too little of a good, this would suggest that

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The law of increasing opportunity costs states that

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Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase.This is a reflection of

Correct AnswerverifiedShow Answer

"The role of government in the economy should be kept to a minimum" is an example of a positive economic statement.

Correct AnswerverifiedShow Answer

Economic growth is a result of

Correct AnswerverifiedShow Answer

Increasing the share of your income that you save is good for you.Therefore, it would be good for the whole economy if everyone saved more.This exemplifies the

Correct AnswerverifiedShow Answer

From an economic perspective, when consumers leave a fast-food restaurant because the lines to be served are too long, they have concluded that the

Correct AnswerverifiedShow Answer

Imagine an ideal scenario where world peace prevails and all nations are led by peace-minded leaders.In such a world, the

Correct AnswerverifiedShow Answer

Products and services are scarce because resources are scarce.

Correct AnswerverifiedShow Answer

Kara was out jogging and, despite being tired, decided to run one more mile.Based on her actions, economists would conclude that Kara

Correct AnswerverifiedShow Answer

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