Question 1

The following economy produces two products.  Refer to the above table.The marginal opportunity cost of the fourth unit of tanks is:

Accepted Answer

A)   200.
B)   300.
C)   350.
D)  650E) All of the above
F) C) and D)

Question 2

Refer to the above graph.The shift of the budget line from AB to CD is consistent with:

Accepted Answer

A)   a decrease in money income.
B)   an increase in money income.
C)   an increase in the price of Good 1 and no change in the price of Good 2.
D)   a decrease in the price of Good 2 and no change in the price of Good 1.E) A) and B)
F) All of the above

Question 3

The basic economic problem is essentially one of deciding how to make the best use of:

Accepted Answer

A)   limited resources to satisfy limited economic wants.
B)   limited resources to satisfy unlimited economic wants.
C)   unlimited resources to satisfy unlimited economic wants.
D)   unlimited resources to satisfy limited economic wants.E) All of the above
F) B) and D)

Question 4

If an economy is producing at a point inside a production possibilities curve:

Accepted Answer

A)   the economy is efficient.
B)   there is economic growth.
C)   resources are unemployed.
D)   resources are fully employed.E) C) and D)
F) All of the above

Question 5

Economics is the study of the efficient use of scarce resources to achieve maximum satisfaction of economic wants.

Accepted Answer

A) True 
 B)False

Question 6

The purpose of the ceteris paribus assumption used in economic analysis is to:

Accepted Answer

A)   make sure that all relevant factors are considered.
B)   avoid making normative statements.
C)   avoid making positive statements.
D)   restrict the analysis to the effect of a single economic factor.E) A) and B)
F) B) and D)

Question 7

When producers maximize their profits from the production of a good or service,they are:

Accepted Answer

A)   testing a hypothesis.
B)   exhibiting purposeful behavior.
C)   assuming that all other things are equal.
D)   making a trade-off between economic efficiency and economic freedom.E) B) and D)
F) B) and C)

Question 8

Economic models do not reflect the full complexity of reality and instead are based on:

Accepted Answer

A)   trade-offs.
B)   purposeful simplifications.
C)   value judgments.
D)   the fallacy of composition.E) A) and B)
F) B) and D)

Question 9

Assume that a consumer purchases two products and the consumer's money income increases.All other things equal,the most likely effect is:

Accepted Answer

A)   an outward shift in the production possibilities curve because the consumer can now satisfy more wants.
B)   an inward shift in the budget line because the consumer can now purchase less of both products.
C)   an outward shift in the budget line because the consumer can now purchase more of both products.
D)   no change in the consumer's buying pattern.E) A) and B)
F) A) and C)

Question 10

The concave,or bowed-out,shape of the production possibilities curve illustrates the law of increasing opportunity costs.

Accepted Answer

A) True 
 B)False

Question 11

Which would be considered a macroeconomic study? A study of the effect of:

Accepted Answer

A)   a decrease in the price of automobiles on automobile sales.
B)   changing government spending to increase employment.
C)   a new tax on the profits of a business.
D)   lower interest rates on a firm's investment.E) None of the above
F) B) and C)

Question 12

From the "economic perspective," people make purposeful decisions based on hypotheses.

Accepted Answer

A) True 
 B)False

Question 13

The utility of a specific product:

Accepted Answer

A)   is determined by consumer income.
B)   is determined by the price of the product.
C)   varies from person to person using the product.
D)   is constant from person to person using the product.E) A) and D)
F) B) and C)

Question 14

The marginal cost curve for a product slopes upward as more units are produced because of the law of increasing costs.

Accepted Answer

A) True 
 B)False

Question 15

The statement that "the unemployment rate will increase as the economy moves into a recession" is an example of:

Accepted Answer

A)   a normative statement.
B)   a microeconomic statement.
C)   marginal analysis.
D)   a generalization.E) All of the above
F) A) and B)

Question 16

Money is not considered to be an economic resource because:

Accepted Answer

A)   as such it is not productive.
B)   money is not a free gift of nature.
C)   the terms of trade can be determined in nonmonetary terms.
D)   idle money balances do not earn interest income.E) A) and D)
F) C) and D)

Question 17

Scaling back the U.S."war on terror" would:

Accepted Answer

A)   shift U.S.production from "defense goods" to "civilian goods."
B)   shift U.S.production from "civilian goods" to "defense goods."
C)   shift the production possibilities curve inward.
D)   suggest that the United States is allocating less than the optimal amount of resources to the war on terror.E) A) and B)
F) A) and C)

Question 18

The individual who brings together economic resources and assumes the risk in a capitalist economy is called the:

Accepted Answer

A)   manager.
B)   entrepreneur.
C)   stockbroker.
D)   banker.E) A) and B)
F) B) and C)

Question 19

Among competing issues,the most important concern of economics is with the:

Accepted Answer

A)   degree of competition in stock and bond markets in the economy.
B)   efficient use of limited productive resources to satisfy economic wants.
C)   issue of equality in the distribution of income and wealth among households.
D)   budget deficits in the domestic economy and trade deficits in the international economy.E) B) and D)
F) None of the above

Question 20

A point inside the production possibilities curve is:

Accepted Answer

A)   attainable and the economy is efficient.
B)   attainable,but the economy is inefficient.
C)   unattainable and the economy is inefficient.
D)   unattainable,but the economy is efficient.E) All of the above
F) B) and C)

Exam 1: Limits, Alternatives, and Choices

The marginal cost curve for a product slopes upward as more units are produced because of the law of increasing costs.

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Economics is the study of the efficient use of scarce resources to achieve maximum satisfaction of economic wants.

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The basic economic problem is essentially one of deciding how to make the best use of:

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When producers maximize their profits from the production of a good or service,they are:

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A point inside the production possibilities curve is:

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Scaling back the U.S."war on terror" would:

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Among competing issues,the most important concern of economics is with the:

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Refer to the above graph.The shift of the budget line from AB to CD is consistent with:

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If an economy is producing at a point inside a production possibilities curve:

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The utility of a specific product:

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Money is not considered to be an economic resource because:

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The concave,or bowed-out,shape of the production possibilities curve illustrates the law of increasing opportunity costs.

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From the "economic perspective," people make purposeful decisions based on hypotheses.

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The statement that "the unemployment rate will increase as the economy moves into a recession" is an example of:

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The following economy produces two products. Refer to the above table.The marginal opportunity cost of the fourth unit of tanks is:

Correct AnswerverifiedShow Answer

Assume that a consumer purchases two products and the consumer's money income increases.All other things equal,the most likely effect is:

Correct AnswerverifiedShow Answer

Which would be considered a macroeconomic study? A study of the effect of:

Correct AnswerverifiedShow Answer

Economic models do not reflect the full complexity of reality and instead are based on:

Correct AnswerverifiedShow Answer

The individual who brings together economic resources and assumes the risk in a capitalist economy is called the:

Correct AnswerverifiedShow Answer

The purpose of the ceteris paribus assumption used in economic analysis is to:

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