Chapter 1—Introducing the Economic Way of Thinking

MULTIPLE CHOICE

1. When economists say scarcity, they mean:

a. there are only a limited number of consumers who would be interested in purchasing
goods.
b. the human desire for goods exceeds the available supply of time, goods and resources.
c. most people in poorer countries do not have enough goods.
d. goods are so expensive that only the rich can afford it.

3. Scarcity is a problem:
a. measured by the amount of goods available.
b. of the poor, but not the rich.
c. because human wants are unlimited while resources are limited.
d. only in industrialized economies.

5. Scarcity is a(n):
a. problem only in industrialized economies.
b. condition measured by the quantity of goods available.
c. subjective concept that human wants can never be satisfied.
d. problem only in poor economies.

7. Scarcity:
a. exists because resources are unlimited while human wants are limited.
b. means we are unable to have as much as we would like to have.
c. will likely be eliminated as technology continues to expand.
d. is not an issue addressed in economics.

9. The finite nature of the economy's resource base:

a. will be solved if only we would learn to conserve.
b. is only a problem in developing countries.
c. will be solved as technology advances.
d. will always be with us.

11. Scarcity:
a. is a problem only in the poorer countries of the world.
b. can be solved by rapid advances in technology.
c. is a problem that exists in every economy.
d. is not a problem for the very rich.

13. The perpetual state of insufficiency of resources to satisfy people's unlimited wants is:
a. apparent only in poor countries.
b. completely unrealistic.
c. present in modern economies, but not in the past.
d. the definition of scarcity.

15. Economists believe that scarcity forces everyone to:

a. satisfy all their wants.
b. abandon consumer sovereignty.
c. lie about their wants.
d. create unlimited resources.

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 e. make choices.

17. Natural resources are:

a. not considered scarce because no one pays for them.
b. only desired for use in producing other goods.
c. included in the category of resources called land.
d. available in unlimited quantities.

19. An entrepreneur is a(n):

a. individual who has much education.
b. organizer who seeks profitable opportunities and is willing to accept risks.
c. business organization that uses inputs to produce output.
d. depot or warehouse for commercial products.

21. The sun is an example of:

a. a natural resource.
b. capital.
c. labor.
d. none of these.

23. Computer programs or software are an example of:

a. land.
b. labor.
c. capital.
d. none of these.

25. The creative ability of persons to combine and direct resources to produce new products is known as:
a. economizing.
b. entrepreneurship.
c. value judgment.
d. product sensitivity.

27. A textbook is an example of:

a. capital.
b. a natural resource.
c. labor.
d. all of these.

29. Which of the following is the best example of a nonrenewable resource?

a. Forests.
b. Oil.
c. Clean air.
d. Fish in the ocean.

31. The three basic categories of resources are land, labor, and:
a. money.
b. time.
c. energy.
d. capital.

33. A factor of production is the same as:

a. the amount of a good produced.
b. the price of a good.

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 c. a profit of a firm.
d. an opportunity cost.
e. a resource.

35. The silly clothes worn by a circus clown are an example of:
a. a natural resource.
b. capital goods.
c. labor.
d. entrepreneurship.

37. Entrepreneurs can delegate every one of the following tasks to labor except:
a. hiring and training new employees.
b. assuming business risk and uncertainty.
c. supervision of the production process.
d. researching ideas for new products.
e. marketing the goods and services produced.

39. An entrepreneur is:

a. an employee in a factory.
b. the manager of a factory.
c. the person who conceives and starts a business.
d. the person who contracts to work for a specific price.
e. the person who does not assume any risk in business.

41. Economics is the study of how people:

a. vote for political leaders who decide what is to be produced.
b. make choices to produce and consume goods and services.
c. establish social institutions that maximize well-being.
d. develop value systems that affect their consumption choices.

43. The central question in economics is how to:

a. deal with the problem of scarcity.
b. change government economic policy.
c. change people's wants to match their needs.
d. manage money and become wealthy.

45. The most fundamental concepts underlying the discipline of economics are:
a. scarcity and choice.
b. supply and demand.
c. money, stocks, and bonds.
d. inflation and unemployment.

47. Microeconomics approaches the study of economics from the viewpoint of:
a. inflation, unemployment, and economic growth.
b. the federal government.
c. individual economic units, such as consumers, firms, and units of government.
d. the economy as a whole.

49. Determining the price of compact discs is a concern of:

a. macroeconomics.
b. microeconomics.
c. both macroeconomics and microeconomics.
d. neither macroeconomics nor microeconomics.

© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different
from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
51. Microeconomics approaches the study of economics from the viewpoint of:
a. individual or specific markets.
b. the national economy.
c. government units.
d. economywide markets.

53. Which of the following would be of particular interest to a microeconomist?

a. The price of fruit the typical household consumes.
b. The nation's inflation rate.
c. The nation's rate of unemployment.
d. The budget of the national government.
e. The growth of the economy.

55. The sub-discipline of economics that focuses especially on individual markets is:
a. normative economics.
b. positive economics.
c. microeconomics.
d. macroeconomics.
e. econometrics.

57. Which of the following is a microeconomics topic?

a. A price of a new home.
b. The inflation rate.
c. The economy's growth rate.
d. The unemployment rate.
e. Forecasts of a recession next year.

59. The branch of economics that focuses on decision making for the economy as a whole is called:
a. normative economics.
b. macroeconomics.
c. microeconomics.
d. consumer economics.

61. Policies to lower the price level of goods in the nation are a concern of:
a. macroeconomics.
b. microeconomics.
c. both microeconomics and macroeconomics.
d. political science.

63. A review of the performance of the economy during the Bush administration is the concern of:
a. macroeconomics.
b. microeconomics.
c. both macroeconomics and microeconomics.
d. neither macroeconomics nor microeconomics.

65. The branch of economics that focuses on economywide variables like inflation and unemployment is
called:
a. macroeconomics.
b. microeconomics.
c. free-market economics.
d. aggregate economics.

© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different
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 67. A sub-discipline of economics that looks at the economy as a whole is:
a. macroeconomics.
b. microeconomics.
c. positive economics.
d. normative economics.
e. impossible to model.

69. Which of the following is a macroeconomic subject?

a. Shipping rates.
b. Price of corporate stock.
c. Market price of Japanese cars.
d. Unemployment rate in the nation.

71. Which of the following questions would not be studied by a microeconomist but would be studied by a
macroeconomist?
a. Why do national economies grow?
b. What percentage of consumer income is spent on entertainment?
c. Why do workers prefer the 4-day workweek?
d. How is the electric industry harmed by the passage of new clean air legislation?

73. Economists use models to:

a. abstract from the complexities of the world.
b. understand economic behavior.
c. explain and help predict human behavior.
d. do all of these.

75. A model is defined as a:

a. description of all variables affecting a situation.
b. positive analysis of all variables affecting an event.
c. simplified description of reality to understand and predict an economic event.
d. prediction based on historical evidence.

77. An economic model is defined as:

a. a value judgment.
b. a presentation of all possible relevant real-world variables.
c. a simplified representation of the way in which facts are related.
d. data adjusted for irrational actions.

79. An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, Ceteris
paribus. The phrase "Ceteris paribus" means that:
a. other relevant factors like consumer incomes must be held constant.
b. the gasoline prices must first be adjusted for inflation.
c. the theory is widely accepted but cannot be accurately tested.
d. consumers' need for gasoline remains the same regardless of the price.

93. When economists want to hold a number of factors constant, they are demonstrating which of the
following expressions?
a. Positive economics model.
b. Consumer sovereignty.
c. Ceteris paribus.
d. Normative economics.

101. Which of the following represents positive economics?

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 a. Policy A is fair.
b. Outcome B is the best objective to achieve.
c. If policy A is followed, then outcome B results.
d. All of these.

108. "An increase in the federal minimum wage causes an increase in unemployment among teenagers" is
a:
a. statement of positive economics.
b. statement of normative economics.
c. testable value judgment.
d. fallacy of composition.

118. Which of the following is a normative statement?

a. A decrease in price leads to an increase in quantity consumed.
b. Incomes grow more rapidly in high-tax states than low-tax states.
c. People would be better off if government expenditures were higher.
d. People will buy less butter at $1.50 per pound than they will at $1 per pound.

119. In a congressional debate about agricultural price supports, senators, members of congress, and other
experts made the following four statements. Which of these is a normative statement?
a. "Price supports are important because America should preserve the small family farm."
b. "Without price supports, the price of wheat and corn will fall by over twenty percent."
c. "The decline in commodity prices caused by the removal of price supports will result in
fewer, larger farms."
d. "The decline in commodity prices caused by the removal of price supports will reduce the
number of tractors sold in the United States."

120. A normative economic statement:

a. is a model used to collect data.
b. is a statement of fact.
c. is a statement of what ought to be, not what is.
d. indicates what will occur if certain assumptions are true.

121. A normative economic statement is:

a. a statement of fact.
b. a statement of opinion which advocates a particular position.
c. not acceptable in the economics profession.
d. the only acceptable manner to present economic information.
e. a statement based upon government-supplied information.

122. Normative economics is:

a. usually incorrect.
b. a statement of fact.
c. the analysis of what is.
d. the study of what ought to be.
e. free of value judgments.

© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different
from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.