Chapter 1 Introduction: What Is Economics? 1.1 What Is Economics?
Which of the following is n o t a factor of production? A) money
B) human capital
C) physical capital
An arrangement that allows buyers and sellers to exchange things is called: A) a contract.
D) a market.
Economics is best defined as the study of:
A) financial decision‑making.
B) how consumers make purchasing decisions.
C) choices made by people faced with scarcity.
D) inflation, unemployment, and economic growth.
Which of the following is an example of a normative question? A) How will an increase in the price of gasoline affect taxi drivers? B) Should the government provide free prescription drugs to senior citizens? C) What fraction of an income‑tax cut will be spent on consumer goods? D) How will an increase in the minimum wage affect teenaged workers? Answer: B
An economic model is
A) a small but completely working economy.
B) a simplified representation of an economic environment. C) any graph.
D) all of the above.
When economists assume that people are rational and respond to incentives, they mean: E) people act with kindness.
F) people are altruistic.
G) people act in their own self‑interest.
H) none of the above
Ceteris paribus is the Latin expression meaning:
A) let buyer beware.
B) think at the margin.
C) for every action there is an equal and opposite reaction. D) other variables are held fixed.
The slope of a straight line is
A) the variable on the vertical axis divided by the variable on the horizontal axis. B) the variable on the horizontal axis divided by the variable on the vertical axis. C) the run over the rise.
D) rise over the run.
If a variable is 100 and then decreases to 60,
then using the initial value approach its percentage decline was A) ‑40 percent.
B) 160 percent.
C) 40 percent.
D) 50 percent.
10)Which of the following is n o t a factor in making economic decisions?
A) Who produces the products?
B) What products to produce?
C) How to produce the products?
D) Who gets the produced products?
Chapter 2 The Key Principles of Economics
11) Suppose that your tuition to attend college is $10,000 per year and you spend $4,000 per year on room and board. If you were working full time, you could earn $20,000 per y ear. What is your opportunity cost of attending college for one year?
12)The opportunity cost of something is:
A) the cost of the labor used to produce it.
B) what you sacrifice to get it.
C) the price charged for it.
D) the search cost required to find it.
13)The opportunity cost of going to college:
A) is zero if your parents pay your tuition.
B) is equal to the cost of tuition, room and board, and other expenses. C) includes wages you lose by going to school instead of working. D) is the same for all students at a particular school who pay full tuition. Answer: C
14)Suppose that you own a house. What is the opportunity cost of living in the house? A) There is no opportunity cost because you own the house. B) There is no opportunity cost unless you could set up a business in the house. C) The opportunity cost is the cost of your monthly mortgage payment plus bills. D) The opportunity cost is the rent you could have received from a tenant if you didnʹt live there. Answer: D
15)If an economy is fully utilizing its resources, it can produce more of one product only if it: A) doubles manufacturing of the product.
B) produces less of another product.
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