Question 1

What is the economic meaning of the expression that "there is no such thing as a free lunch"?

Accepted Answer

A)   It refers to "free-riders," who do not pay for the cost of a product but who receive the benefit from it.
B)   It means that economic freedom is limited by the amount of income available to the consumer.
C)   It means there is an opportunity cost when resources are used to provide "free" products.
D)   It indicates that products only have value because people are willing to pay for them.E) B) and D)
F) B) and C)

Question 2

A reduction in the level of unemployment would have which effect with respect to the nation's production possibilities curve?

Accepted Answer

A)   It would shift the curve to the right.
B)   It would shift the curve to the left.
C)   It would not shift the curve;it would be represented by moving from a point inside the curve toward the curve.
D)   It would not shift the curve;it would be represented by moving from a point on the curve to a point outside the curve.E) A) and B)
F) A) and C)

Question 3

Which is considered to be an economic resource by economists?

Accepted Answer

A)   Rent
B)   Money
C)   Labor
D)   WagesE) C) and D)
F) B) and C)

Question 4

The law of increasing opportunity cost explains why the shape of the production possibilities curve is:

Accepted Answer

A)   a straight line parallel to the horizontal axis.
B)   a straight line from one axis to the other.
C)   bowed out (concave) from the origin of the graph.
D)   bowed inward (convex) to the origin of the graph.E) None of the above
F) A) and B)

Question 5

Which is an illustration of a microeconomic question?

Accepted Answer

A)   What is the current national rate of unemployment?
B)   Is the economy experiencing a declining rate of inflation?
C)   Will a new type of television set increase the number of buyers?
D)   Is the production of goods and services in the economy greater this year than last year?E) A) and D)
F) None of the above

Question 6

If a consumer has an income of $200,the price of X is $5,and the price of Y is $10,the maximum quantity of X the consumer is able to purchase is:

Accepted Answer

A)   5.
B)   10.
C)   20.
D)   40E) C) and D)
F) All of the above

Question 7

An economic model is:

Accepted Answer

A)   a value judgment.
B)   a fact.
C)   built using theory.
D)   built on policies.E) A) and B)
F) C) and D)

Question 8

Refer to the above graph.The shift of the budget line from CD to AB 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) None of the above
F) All of the above

Question 9

Which is not considered to be an economic resource?

Accepted Answer

A)   Land (or other natural resources) 
B)   Money
C)   Labor
D)   Tools and machineryE) A) and C)
F) B) and D)

Question 10

The macroeconomist would most likely study:

Accepted Answer

A)   the effects of changing beer prices on the market for pretzels.
B)   the effects of an increased income tax on a typical household's purchase of goods.
C)   the effects of a reduction in income tax rates on the nation's total output.
D)   how consumers in Gary,Indiana,respond to lower gasoline prices.E) A) and C)
F) A) and D)

Question 11

The following economy produces two products.  Refer to the above table.According to the production possibilities schedule,a combination of four tanks and 650 autos is:

Accepted Answer

A)   attainable and involves an efficient use of society's resources.
B)   attainable,but would not be in the best interests of a strong national defense.
C)   not attainable because it is not listed in the schedule.
D)   not attainable because society does not have sufficient resources to produce this combination.E) C) and D)
F) B) and C)

Question 12

Which statement is an economic rationale for the law of increasing opportunity cost?

Accepted Answer

A)   The economy is employing all of its available resources.
B)   Many economic resources are better at producing one product than another.
C)   In any economy,the state of technology is changing and resources are variable.
D)   The economy is achieving productive efficiency by producing goods and services at the least cost.E) All of the above
F) C) and D)

Question 13

Which question is an example of a microeconomic question?

Accepted Answer

A)   What should the federal government do to reduce the trade deficit with Japan?
B)   Will the merger of two airlines likely result in higher airline ticket prices?
C)   What factors are contributing to the rise of unemployment in the economy?
D)   Will the inflation rate remain relatively stable this year?E) A) and D)
F) A) and B)

Question 14

Macroeconomics is concerned with the whole economy or its major sectors.

Accepted Answer

A) True 
 B)False

Question 15

The study of how a single business firm sets its prices would fall under the study of:

Accepted Answer

A)   macroeconomics.
B)   microeconomics.
C)   income distribution.
D)   economic growth.E) All of the above
F) C) and D)

Question 16

When society overallocates resources to a product it means that the:

Accepted Answer

A)   investment in the product is declining.
B)   opportunity cost of the product is decreasing.
C)   marginal benefit is greater than the marginal cost.
D)   marginal benefit is less than the marginal cost.E) A) and B)
F) All of the above

Question 17

One major feature of the economic perspective is:

Accepted Answer

A)   that scarcity is more important than choice.
B)   that costs are more important than benefits.
C)   the assumption of purposeful behavior by individuals.
D)   the idea that the economy has unproductive resources.E) B) and D)
F) A) and B)

Question 18

If a product's price falls and the consumer buys 4 units,as they did before the price change,then the:

Accepted Answer

A)   budget line will be unaffected.
B)   budget line must shift inward to the origin.
C)   budget line may shift either outward from or inward to the origin.
D)   consumer will no longer be in equilibrium.E) All of the above
F) C) and D)

Question 19

If the marginal benefits are greater than the marginal cost of an activity,then society is overallocating resources to this activity.

Accepted Answer

A) True 
 B)False

Question 20

The production possibilities table below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy.  Refer to the table above.What is the opportunity cost of producing the third unit of capital goods?

Accepted Answer

A)   4 units of consumer goods
B)   5 units of consumer goods
C)   6 units of consumer goods
D)   7 units of consumer goodsGoing from C to D is a one-unit increase in capital goods and it costs 6 units of consumer goods (from 13 down to 7) .E) B) and C)
F) All of the above

Exam 1: Limits, Alternatives, and Choices

The macroeconomist would most likely study:

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The following economy produces two products. Refer to the above table.According to the production possibilities schedule,a combination of four tanks and 650 autos is:

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The law of increasing opportunity cost explains why the shape of the production possibilities curve is:

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

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An economic model is:

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If a consumer has an income of $200,the price of X is $5,and the price of Y is $10,the maximum quantity of X the consumer is able to purchase is:

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The production possibilities table below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy. Refer to the table above.What is the opportunity cost of producing the third unit of capital goods?

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If a product's price falls and the consumer buys 4 units,as they did before the price change,then the:

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One major feature of the economic perspective is:

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Macroeconomics is concerned with the whole economy or its major sectors.

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What is the economic meaning of the expression that "there is no such thing as a free lunch"?

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The study of how a single business firm sets its prices would fall under the study of:

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When society overallocates resources to a product it means that the:

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Which is considered to be an economic resource by economists?

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Which is an illustration of a microeconomic question?

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Which is not considered to be an economic resource?

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Which statement is an economic rationale for the law of increasing opportunity cost?

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A reduction in the level of unemployment would have which effect with respect to the nation's production possibilities curve?

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Which question is an example of a microeconomic question?

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If the marginal benefits are greater than the marginal cost of an activity,then society is overallocating resources to this activity.

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