Question 1

In accepting a job, you incur an opportunity cost.

Select one:
a. true
b. false

Question 2
A rightward shift of the production possibilities curve represents economic
growth.
Select one:
a. true
b. false

Question 3
The shape of the production possibilities curve reveals the degree of income
equality in an economy.
Select one:
a. true
b. false

Question 4
Economic growth can be pictured in a production possibilities curve diagram by
Select one:
a. shifting the production possibilities curve out.
b. moving from right to left along the curve.
c. moving from left to right along the curve.
d. shifting the production possibilities curve in.

Question 5

Figure 1.3
If an economy is producing at point A in Figure 1.3,
Select one:
a. it is producing 3300 units of housewares and 3300 units of consumer electronics.
b. it is producing 3300 units of housewares and 1800 units of consumer electronics.
c. it is producing 1800 units of housewares and 1800 units of consumer electronics.
d. it is producing 1800 units of housewares and 3300 units of consumer electronics.
Question 6
All points on the production possibilities curve are efficient.
Select one:
a. true
b. false

Question 7
In economics, all the things that people would consume if they had unlimited
income are
Select one:
a. needs.
b. aggregates.
c. outputs.
d. wants.

Question 8

Figure 1.2
In Figure 1.2, the combination of civilian goods and military goods shown by
point B
Select one:
a. reflects an inefficient use of resources.
b. can be attained only if some of society's resources are unemployed.
c. reflects an efficient use of resources.
d. is not attainable at the point in time for which the graph is drawn.

Question 9
Suppose the current unemployment rate is 15 percent. If it rises to 20 percent,
Select one:
a. the production possibilities curve will shift inward.
b. the economy will move closer to the production possibilities curve.
c. the economy will operate further inside the production possibilities curve.
d. the economy will move up along the production possibilities curve.
Question 10
The assumption of rational self-interest implies that people will choose to
enrich themselves even if doing so violates the rights or property of others.
Select one:
a. true
b. false

Question 11

Figure 1.3
What change would occur if the economy moves from point C to point B in Figure
1.3?
Select one:
a. Resources previously devoted to producing consumer electronics would be used
to produce housewares.
b. Previously unemployed resources would be used to produce housewares.
c. Previously unemployed resources would be used to produce consumer electronics.
d. Resources previously devoted to producing housewares would be used to produce
consumer electronics.

Question 12
If you can earn $10 an hour as a retail clerk, $12 an hour as an office assistant,
$16 an hour as a house painter, and $20 an hour repairing bicycles, what is your
opportunity cost of working to repair bicycles?
Select one:
a. $12 an hour
b. $10 an hour
c. $20 an hour
d. $16 an hour

Question 13
Gifts of nature used in the production process are considered
Select one:
a. entrepreneurship.
b. labor.
c. land.
d. capital.

Question 14
The market system is also called the price system because
Select one:
a. people pay money in markets.
b. everything has a price tag.
c. rising prices are the signal to producers to make more of a particular good.
d. inflation is a disturbing problem.

Question 15
Which one of the following is FALSE?
Select one:
a. The U.S. labor force will continue to grow through immigration.
b. Inflation stops economic growth.
c. Increased availability of reliable communication channels at lower and lower
costs have led to companies relocating their manufacturing operations offshore.
d. The size of the U.S. labor force continues to grow despite many jobs being
moved off-shore.

Question 16
Which one of the following is TRUE?
Select one:
a. The factors of production are land, labor, capital, and entrepreneurship.
b. Land is a factor of production only in agricultural endeavors.
c. Capital is a factor of production only in high-tech industries.
d. Labor is a factor of production only in providing services.

Question 17
The factors of production are
Select one:
a. never as useful as people expect them to be.
b. valuable only because they are owned by corporations seeking to make a profit
from them.
c. scarce resources.
d. abundant without limit on the planet.

Question 18
In choosing whether to produce something, a firm wants to know
Select one:
a. how the cost of producing the good compares to its selling price.
b. how many other firms are producing the same good.
c. how long the typical consumer will shop before making this purchase.
d. how frequently consumers who purchase the good will actually use it.
Question 19
Resources are also known as
Select one:
a. stocks, bonds, and other financial instruments.
b. minerals.
c. factors of production.
d. factories.

Question 20
Markets tend to
Select one:
a. benefit sellers at the expense of buyers.
b. exist primarily in towns or cities.
c. facilitate exchange.
d. benefit buyers at the expense of sellers.

Question 21
What would lead a customer to purchase a product?
Select one:
a. She believes the firm will earn a fair profit by selling the product to her.
b. She believes the price is an accurate reflection of the good's relative
scarcity.
c. Her expected value from consuming it exceeds the cost of purchasing it.
d. Her expected value from consuming it exceeds the cost of producing it.

Question 22
In choosing a method of production, firms will seek to use the least-cost
combination of inputs.
Select one:
a. true
b. false

Question 23
A recent study found that eating dark chocolate can provide cardiovascular health
benefits. What effect does this have on the market for dark chocolate?
Select one:
a. The price of dark chocolate can be expected to decline.
b. Dark chocolate is now relatively less scarce.
c. Dark chocolate is now relatively more scarce.
d. The price that the typical consumer is willing to pay for dark chocolate will
decline.

Question 24
Production refers to
Select one:
a. any activity that causes a material conversion of an object.
b. any activity that results in the conversion of resources into goods and
services that can be consumed.
c. any activity carried on by a firm, whether a corporation, partnership, or
sole proprietorship.
d. physically producing material goods only.
Question 25
Which one of the following is TRUE?
Select one:
a. The growth of the U.S. population over the next several decades will come
from immigration.
b. Population growth makes a country poorer, because there are more mouths to
feed.
c. Real per capita GDP can increase only if there is inflation.
d. Real per capita GDP can increase only if there is no inflation.

Question 26
What is the purpose of a market system?
Select one:
a. to facilitate efficient exchange
b. to encourage consumers to buy goods on credit
c. to ensure an equal distribution of income
d. to ensure that everyone is treated fairly

Question 27
What will happen when the price of a good is held below its equilibrium price?
Select one:
a. A surplus results.
b. Supply of the good decreases.
c. Demand for the good increases.
d. A shortage results.

Question 28
Scarcity can be eliminated by increasing the price of a good.
Select one:
a. true
b. false

Question 29
The market demand curve for a particular good
Select one:
a. will not be affected by any of the determinants of individual demand.
b. is the horizontal sum of each individual demand curve for the good.
c. will show a direct relationship between price and quantity demanded.
d. may be less than an individual demand curve for the good.

Question 30
Suppose a college increases the wages paid to student employees. Which of the
following options is the best description of the most likely effect of the wage
increases on the market for school sweatshirts in the bookstore?
Select one:
a. The demand curve shifts to the left.
b. There is a leftward movement along the demand curve.
c. The demand curve shifts to the right.
d. There is a rightward movement along the demand curve.

Question 31
Which of the following will shift the supply curve to the right?
Select one:
a. There is an increase in the number of consumers in the market.
b. There is an increase in the number of firms producing the good.
c. Input prices rise.
d. Sales taxes increase.

Question 32
Table 3.1

Quantity Demanded of Quantity Supplied of

Price per Constant-
Constant-Quality Units Constant-Quality Units
Quality Unit
per Year per Year
$1.00 1,000 200
2.00 800 400
3.00 600 600
4.00 400 800
5.00 200 1,000

What condition characterizes a surplus?

Select one:
a. Quantity supplied exceeds quantity demanded.
b. Quantity demanded exceeds quantity supplied.
c. Consumers are unhappy with the price.
d. Producers are unhappy with the price.

Question 33
An increase in the price of one good will decrease the demand for a substitute
good.
Select one:
a. true
b. false

Question 34
Consumers substitute between goods in response to changes in relative prices.
Select one:
a. true
b. false
Question 35
An increase in the price of coffee, holding other things constant, will
Select one:
a. decrease the demand for coffee.
b. increase the demand for coffee.
c. decrease the quantity of coffee demanded.
d. decrease the supply of coffee.

Question 36
What is the equilibrium price of a good?
Select one:
a. The price that all producers are happy with.
b. The price that all consumers are happy with.
c. The price that the average consumer can afford.
d. The price that clears the market.

Question 37
The market demand for cotton clothing shifts to the right when
Select one:
a. more consumers enter the market for cotton clothing.
b. the price of cotton decreases.
c. the supply of cotton decreases.
d. cotton clothing becomes less popular.

Question 38
Which of the following will cause an increase in the supply of new homes?
Select one:
a. lower interest rates for home buyers
b. an influx of new home buyers in the area
c. lower wages for construction workers
d. higher land prices

Question 39
A baker raised his bread prices by 10 percent and found that the quantity of
bread sold decreased by 10 percent. What happened to the total amount of sales
revenue he took in from bread sales?
Select one:
a. It decreased.
b. It remained unchanged.
c. It increased.
d. We cannot determine the effect on total revenue unless we also know the slope
of the demand curve for bread.

Question 40
When total utility is maximized,
Select one:
a. marginal utility is equal to total utility.
b. marginal utility is zero.
c. marginal utility is minimized.
d. marginal utility is negative.

Question 41
When marginal utility is negative, total utility is
Select one:
a. zero.
b. increasing at a decreasing rate.
c. at its maximum.
d. decreasing.

Question 42
Utility is a term economists use to refer to
Select one:
a. rationality.
b. satisfaction.
c. affordability.
d. expectation.

Question 43
The law of diminishing marginal utility
Select one:
a. does not apply to luxury goods.
b. asserts that you become worse off as you consume more.
c. explains why you buy more of one good as its price declines.
d. does not apply to essentials, such as food and shelter.

Question 44
Which one of the following would make the demand for satellite subscription TV
relatively less elastic?
Select one:
a. The cost of administering the satellite service is lowered.
b. Cable TV service becomes less widely available.
c. Other networks of wireless entertainment become more widely available.
d. The cost of transmitting satellite signals is lowered.

Question 45
Price elasticity of demand is the responsiveness
Select one:
a. of the quantity demanded to changes in supply.
b. of the quantity demanded to changes in income.
c. of the quantity demanded to changes in price.
d. of the quantity demanded to changes in quantity.

Question 46
Everyone who views the latest adventure movie in theaters will derive the same
utility from seeing it.
Select one:
a. true
b. false

Question 47
Table 4.4
Quantity Demanded of Quantity Supplied of
Price per Constant-
Constant-Quality Units Constant-Quality Units
Quality Unit
per Year per Year
$1.00 1,000 200
2.00 800 400
3.00 600 600
4.00 400 800
5.00 200 1,000
According to Table 4.4, what is the total utility when six CDs are purchased?
Select one:
a. 65
b. 260
c. 120
d. 220

Question 48
A price increase will cause a relatively large drop in quantity demanded when
Select one:
a. demand is perfectly inelastic.
b. the price elasticity of demand is 0.
c. there is very little time allowed for consumers to react.
d. the consumer has easy access to a number of substitute goods.

Question 49
Table 4.5

Glasses of Marginal
Total Utility
Water Utility
0 0
1 100
2 175
3 225
4 250
5 260
6 255
Using Table 4.5, diminishing marginal utility begins after the ________ glass of
water is consumed.
Select one:
a. fourth
b. second
c. first
d. third

Question 50
The more you are willing to pay for an item, the more marginal utility you derive
from it.
Select one:
a. true
b. false