Deck 1: Foundations of Economics

Question 1

The term scarcity in economics refers to a situation when:

A) some people have more than they need.
B) the supply of something doesn't satisfy everyone's desires for it.
C) all wants and needs are satisfied.
D) everyone desires less than the amount of something available.

Answer 1

B

Question 2

The condition that exists when the supply of something doesn't satisfy everyone's desire for it is known as:

A) scarcity.
B) economics.
C) efficiency.
D) ceteris paribus.

Answer 2

A

Question 3

Theo has only 10 minutes to eat breakfast each morning. What is the term for the condition that Theo faces?

A) ceteris paribus
B) normative economics
C) scarcity
D) incentives

Answer 3

C

Question 4

Economics is best described as the study of:

A) decision making under conditions of scarcity.
B) the stock market.
C) holding all else equal.
D) judgments about the way things should be.

Question 5

The study of all decision making under uncertainty is called:

A) ceteris paribus.
B) economics.
C) normative.
D) positive.

Question 6

Economics as a discipline is fundamentally about:

A) scarcity and choice.
B) stocks and bonds.
C) finance and interest.
D) money and banking.

Question 7

Opportunity cost is defined as the value of:

A) all other alternatives.
B) the least favorite alternative.
C) the dollar amount paid for something.
D) the next best alternative.

Question 8

Use the table How Pam Likes to Spend Her Time. Pam's preferences are ranked 1 to 4 from her favorite activity (1) to her least favorite activity (4). What is her opportunity cost of going to dinner with friends?
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What is the opportunity cost of going to dinner with friends?

A) the value that she puts on going to the gym
B) the value of all of the other options combined
C) the value that she puts on washing her car
D) the value that she puts on going to swim meets

Question 9

Use the table How Pam Likes to Spend Her Time. Pam's preferences are ranked 1 to 4 from her favorite activity (1) to her least favorite activity (4). What is her opportunity cost of going to the gym?
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A) the value that she puts on going to the gym
B) the value of all of the other options combined
C) the value that she puts on washing her car
D) the value that she puts on going to swim meets

Question 10

Use the table Galena's Value of Farm Production. The value of different crops that Galena can grow on her farm are given in this table. What is Galena's opportunity cost of growing onions?
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A) $800
B) $1,000
C) $1,300
D) $400

Question 11

Use the table Galena's Value of Farm Production. The values of different crops that Galena can grow on her farm are given in this table. What is Galena's opportunity cost of growing carrots?
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A) $800
B) $100
C) $1,300
D) $2,300

Question 12

Use the table Galena's Value of Farm Production. The value of different crops that Galena can grow on her farm are given in this table. What is Galena's opportunity cost of growing radishes?
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A) $800
B) $1,000
C) $1,300
D) $2,300

Question 13

A policy maker is faced with a dilemma: she can use tax dollars to build either a bridge or a new high school. Which of the following is the opportunity cost of the high school?

A) the cost of construction for the high school
B) the cost of construction for the bridge
C) the value that people place on building a bridge
D) the value that people place on building a high school

Question 14

A collection of buyers and sellers of the same good and service is called:

A) an economy.
B) ceteris paribus.
C) a model.
D) a market.

Question 15

Which of the following is true of markets?

A) All sellers in a market must be located in the same geographic area.
B) Buyers are best served when sellers try to produce all goods.
C) They include only legal goods.
D) They are a collection of buyers and sellers of the same good or service.

Question 16

What is an economy?

A) a banking system
B) a system of coordinating the production and distribution of goods and services
C) the movement of goods and services between countries
D) the coordination of a buyer of a good and a seller of a good

Question 17

What word is used in economics to describe land, workers, and equipment?

A) production
B) costs
C) resources
D) capital

Question 18

Producing more of one good does NOT draw resources away from the production of other goods if an economy:

A) is operating on its production possibilities frontier.
B) has idle resources.
C) operates using a barter system.
D) is producing more than what is sustainable.

Question 19

Use the table Possible Output Combinations Using All Available Resources I. If this economy is currently producing one ukelele and eight wooden bowls, what must happen if it wants to produce one more ukulele?
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A) Wooden bowl production must decrease by one bowl.
B) Wooden bowl production must increase by one bowl.
C) Wooden bowl production must decrease by eight bowls.
D) Wooden bowl production must decrease by two bowls.

Question 20

Use the table Possible Output Combinations Using All Available Resources I. What is true about the opportunity cost of ukuleles as you move from left to right across this table?
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A) The opportunity cost of a ukulele is always the same.
B) The opportunity cost of a ukulele increases.
C) The opportunity cost of a ukulele decreases.
D) The opportunity cost of a ukulele at first increases and then decreases.

Question 21

Use the table Possible Output Combinations Using All Available Resources I. What is true about the resources that are freed up as you move to left to right across this table?
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A) The amount of resources that are freed up when you produce two fewer wooden bowls is always enough to produce another ukulele.
B) Producing smaller quantities of wooden bowls frees up resources to produce higher quantities of ukuleles.
C) Producing smaller quantities of wooden bowls frees up resources to produce smaller quantities of ukuleles.
D) The amount of resources that are freed up when you produce wooden bowls at first frees up increasing resources to produce wooden bowls and then decreasing resources to produce wooden bowls.

Question 22

Use the table Possible Output Combinations Using All Available Resources I. What combination of production of ukuleles and wooden bowls indicates that there are idle resources?
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A) zero ukuleles and 10 wooden bowls
B) two ukuleles and five wooden bowls
C) three ukuleles and four wooden bowls
D) five ukuleles and zero wooden bowls

Question 23

Use the table Possible Output Combinations Using All Available Resources I. What is true about the combination of one ukulele and four bowls?
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A) The combination is efficient.
B) The combination is inefficient.
C) The combination is unattainable.
D) The combination is attainable if there is growth.

Question 24

Use the table Possible Output Combinations Using All Available Resources II. If this economy is currently producing two lattes and 18 banana muffins, how many banana muffins must be given up to make two more lattes?
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A) four banana muffins
B) two banana muffins
C) zero banana muffins
D) one banana muffin

Question 25

Use the table Possible Output Combinations Using All Available Resources II. What is true about the opportunity cost of banana muffins as you move from left to right across this table?
What is true about the opportunity cost of lattes as you move from left to right across this table?

A) The opportunity cost of a latte is always the same.
B) The opportunity cost of a latte decreases.
C) The opportunity cost of a latte increases.
D) The opportunity cost of a latte at first decreases and then increases.

Question 26

Use the table Possible Output Combinations Using All Available Resources II. At what combination of production is the opportunity cost of producing lattes the lowest?
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A) combination N
B) combination O
C) combination P
D) combination Q

Question 27

A model is best defined as a:

A) simplification of a real-life situation.
B) way of representing every possible detail of a situation.
C) graphical depiction of many things changing at the same time.
D) way of complicating the analysis of simple economic relationships.

Question 28

What does the phrase ceteris paribus mean?

A) The teacher has said it.
B) out of many, one
C) Let the buyer beware.
D) other things being equal

Question 29

Which Latin phrase meaning "other things remaining unchanged" is used as an assumption to help simplify economic models?

A) Caveat emptor.
B) ceteris paribus
C) ad valorem
D) Quod erat demonstradum.

Question 30

When an economist invokes the ceteris paribus statement, what is she doing?

A) indicating that a mathematical statement is completed
B) assuming that an event is about to happen
C) assuming that all other factors affecting an event are not changing
D) indicating that the outcome of an event is uncertain

Question 31

What is true if an economy produces a combination of goods that is inside its production possibilities frontier (PPF)?

A) This combination is not using resources efficiently.
B) More of one good cannot be produced without giving up some of the other good.
C) The economy is growing.
D) It is impossible to produce at a point inside the PPF.

Question 32

What model is used by economists to illustrate efficient combinations of the production of two goods within an economy?

A) the production possibilities frontier (PPF)
B) maps
C) the market model
D) cost curves

Question 33

What combinations of production are efficient in a production possibilities frontier (PPF)?

A) all points that lie on the axes
B) all points that are inside the PPF
C) all points that are outside the PPF
D) all points that are on the PPF

Question 34

Use the figure The Production Possibilities Frontier I. Which points on the production possibilities frontier (PPF) are efficient?
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Figure: The Production Possibilities Frontier I

A) A, B, C, D, E, and H
B) B, C, D, and E only
C) I and F only
D) All of the points in this graph are efficient.

Question 35

Use the figure The Production Possibilities Frontier I. An economy that wants to produce an efficient combination of goods would NOT choose the combination of goods represented by point:
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Figure: The Production Possibilities Frontier I

A) A
B) H
C) F
D) D

Question 36

Use the figure The Production Possibilities Frontier I. What point represents a combination of output that is produced if some resources are idle?
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Figure: The Production Possibilities Frontier I

A) I
B) A
C) G
D) H

Question 37

Use the figure The Production Possibilities Frontier I. If this economy is currently producing a combination of output represented by point A, what is the opportunity cost of producing three more lamps?
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Figure: The Production Possibilities Frontier I

A) five televisions
B) three televisions
C) zero televisions
D) one television

Question 38

Use the figure The Production Possibilities Frontier I. If this economy is currently producing a combination of output represented by point D, what is the opportunity cost of producing one more television?
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Figure: The Production Possibilities Frontier I

A) three lamps
B) one lamp
C) one-third of a lamp
D) nine lamps

Question 39

Use the figure The Production Possibilities Frontier I. If this economy is currently producing a combination of output represented by point F, what is the opportunity cost of producing three more lamps?
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Figure: The Production Possibilities Frontier I

A) six televisions
B) three televisions
C) zero televisions
D) two televisions

Question 40

Use the figure The Production Possibilities Frontier I. Which point is unattainable?
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Figure: The Production Possibilities Frontier I

A) A
B) F
C) D
D) G

Question 41

Use the figure The Production Possibilities Frontier II. Which points on the PPF are efficient?
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Figure: The Production Possibilities Frontier II
​

A) R and T only
B) R, T, and V
C) R, T, S, U, and V
D) V only

Question 42

Use the figure The Production Possibilities Frontier II. An economy that wants to produce an efficient combination of goods would NOT choose the combination of goods represented by point:
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Figure: The Production Possibilities Frontier II
​

A) R.
B) T.
C) V.
D) S.

Question 43

Use the figure The Production Possibilities Frontier II. What point represents a combination of output that is produced if some resources are idle?
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Figure: The Production Possibilities Frontier II
​

A) R
B) S
C) V
D) U

Question 44

Use the figure The Production Possibilities Frontier II. Which point is unattainable?
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Figure: The Production Possibilities Frontier II
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A) T
B) S
C) V
D) U

Question 45

Use the figure The Production Possibilities Frontier III. Which points on the production possibilities frontier are efficient?
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Figure: The Production Possibilities Frontier III

A) H, I, and L
B) J, I, and L
C) H and I only
D) G, H, I, and K

Question 46

Use the figure The Production Possibilities Frontier III. An economy that wants to produce an efficient combination of goods would NOT choose the combination of goods represented by point:
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Figure: The Production Possibilities Frontier III

A) G
B) J
C) I
D) K

Question 47

Use the figure The Production Possibilities Frontier III. What point represents a combination of output that is produced if some resources are idle?
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Figure: The Production Possibilities Frontier III

A) G
B) J
C) I
D) K

Question 48

Use the figure The Production Possibilities Frontier III. If this economy is currently producing a combination of output represented by point H, what is the opportunity cost of producing five more gloves?
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Figure: The Production Possibilities Frontier III

A) six sunglasses
B) five sunglasses
C) ten sunglasses
D) zero sunglasses

Question 49

Use the figure The Production Possibilities Frontier III. If this economy is currently producing a combination of output represented by point J, what is the opportunity cost of producing five more gloves?
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Figure: The Production Possibilities Frontier III

A) three sunglasses
B) one sunglasses
C) six sunglasses
D) zero sunglasses

Question 50

Use the figure The Production Possibilities Frontier III. At which point is the opportunity cost of producing sunglasses the highest?
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Figure: The Production Possibilities Frontier III

A) H
B) I
C) J
D) K

Question 51

Use the figure The Production Possibilities Frontier III. At which point is the opportunity cost of producing sunglasses the lowest?
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Figure: The Production Possibilities Frontier III

A) H
B) I
C) L
D) K

Question 52

Use the figure The Production Possibilities Frontier III. At which point is the opportunity cost of producing gloves the highest?
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Figure: The Production Possibilities Frontier III

A) H
B) I
C) J
D) K

Question 53

Use the figure The Production Possibilities Frontier III. At which point is the opportunity cost of producing gloves the lowest?
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Figure: The Production Possibilities Frontier III

A) H
B) I
C) L
D) K

Question 54

Use the figure The Production Possibilities Frontier III. Which point is unattainable given the current availability of resources?
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Figure: The Production Possibilities Frontier III

A) J
B) I
C) L
D) K

Question 55

If opportunity costs are constant, what is the shape of the production possibilities frontier (PPF)?

A) a bowed-in line connecting the axes
B) a bowed-out line connecting the axes
C) a straight line connecting the axes
D) a vertical line on the horizontal axis

Question 56

Specialization of resources results in a production possibilities frontier that is a:

A) bowed-in line connecting the axes.
B) bowed-out line connecting the axes.
C) straight line connecting the axes.
D) vertical line on the horizontal axis.

Question 57

Use the figure Production Possibilities Frontier I. What kind of opportunity costs does the shape of the PPF indicate?
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Figure: The Production Possibilities Frontier I

A) increasing opportunity costs
B) decreasing opportunity costs
C) constant opportunity costs
D) no opportunity costs

Question 58

Use the figure Production Possibilities Frontier II. What kind of opportunity costs does the shape of the PPF indicate?
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Figure: The Production Possibilities Frontier II
​

A) increasing opportunity costs
B) decreasing opportunity costs
C) constant opportunity costs
D) no opportunity costs

Question 59

Use the table Possible Output Combinations Using All Available Resources I. What is the shape of the production possibilities frontier (PPF) for these combinations of output?
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A) convex
B) concave
C) linear
D) vertical

Question 60

Use the table Possible Output Combinations Using All Available Resources II. What is the shape of the production possibilities frontier (PPF) for these combinations of output?
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A) convex
B) concave
C) linear
D) vertical

Question 61

As more salads are produced, increasing amounts of hamburgers must be given up to produce them. What is the shape of the production possibilities frontier (PPF) for salads and hamburgers?

A) convex
B) concave
C) linear
D) vertical

Question 62

Whatever quantity of croissants Stephen bakes, the quantity of kolaches that he gives up baking is identical. What is the shape of Stephen's production possibilities frontier (PPF)?

A) bowed in
B) bowed out
C) linear
D) horizontal

Question 63

Economic growth has occurred if:

A) the maximum amount of production in an economy has increased.
B) idle resources have been put to use.
C) the amount of resources and technology available has decreased.
D) opportunity costs have have decreased.

Question 64

Economic growth is represented on a production possibilities frontier (PPF) as a:

A) shift in of the PPF.
B) shift out of the PPF.
C) change in the shape of the PPF.
D) decrease in the slope of the PPF.

Question 65

If the production possibilities frontier (PPF) has shifted in, what is true?

A) More of all resources are available.
B) Some resources have become idle.
C) Less is available of at least one resource.
D) The technology that is used to produce goods no longer uses one of the resources.

Question 66

Scientists in Elizaland discover a new source of energy. What happens to the production possibilities frontier (PPF) in Elizaland?

A) It changes shape.
B) Its slope decreases.
C) It shifts out.
D) It shifts in.

Question 67

A massive plague results in a decrease in workers who are available in Elizaland. What happens to the production possibilities frontier (PPF) in Elizaland?

A) It changes shape.
B) Its slope decreases.
C) It shifts out.
D) It shifts in.

Question 68

Use the figure The Production Possibilities Frontier III. Economic growth occurs if there is a change in output from point:
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Figure: The Production Possibilities Frontier III

A) J to point I.
B) J to point H.
C) I to point K.
D) I to point L.

Question 69

Use the figure The Production Possibilities Frontier III. An increase in the resources available to this economy occurs if there is a change in output from point:
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Figure: The Production Possibilities Frontier III

A) I to point K.
B) I to point L.
C) J to point I.
D) J to point H.

Question 70

Which of the following is NOT one of the three fundamental economic questions?

A) How much money can be earned?
B) What should be produced?
C) How should it be produced?
D) For whom should it be produced?

Question 71

The three fundamental questions are NOT concerned with:

A) who gets what is produced.
B) what goods should be produced.
C) how well the goods are made.
D) how resources are used to produce goods.

Question 72

A reward or punishment that guides decision making is called:

A) a profit.
B) a penalty.
C) an opportunity cost.
D) an incentive.

Question 73

The concept of the "invisible hand" in economics as described by Adam Smith states that:

A) all our actions are coordinated by the desires of a benevolent dictator.
B) the selfish pursuit of profit leads to consumers getting more of what they want.
C) magicians are the only agents who have purely economic motives.
D) our efforts to help out neighbors are not economic activity.

Question 74

When a producer is trying to answer the economic question about how to produce a good, what is she trying to make sure happens?

A) that she operates on her production possibilities frontier
B) that her production possibilities frontier is linear
C) that her production possibilities frontier is concave
D) that she shifts her production possibilities frontier inward

Question 75

When producers answer the economic question "How should a good be produced?," they are ensuring that:

A) goods go to people who value them the most.
B) the most goods are being made with the resources available.
C) the goods that are produced are those that people value.
D) the goods that are produced are the most popular.

Question 76

Goh is deciding on whether he should hire another worker or buy another piece of machinery. Which of the three fundamental economic questions is he trying to answer?

A) What to produce?
B) Is the economy efficient?
C) How to produce goods?
D) For whom to produce?

Question 77

Oliver's lumberyard is deciding on whether he should produce more sheets of plywood or more hardwood flooring. Which of the three fundamental economic questions is he trying to answer?

A) What to produce?
B) Is the economy efficient?
C) How to produce goods?
D) For whom to produce?

Question 78

Which of the following is an example of positive economics?

A) The unemployment rate is 3.9 percent.
B) The unemployment rate is too high, and Congress must take measures to lower it.
C) The minimum wage of $7.50 per hour is too low and must be increased.
D) The city of Portland should take measures to reduce the homelessness of military veterans.

Question 79

Which of the following is an example of positive economics?

A) The city of Madison should take measures to reduce the unemployment rate.
B) The inflation rate is too high, and the central bank must take measures to lower it.
C) The minimum wage must be abolished.
D) A higher gasoline tax will reduce gasoline consumption and improve air quality in our cities.

Question 80

Which of the following is an example of positive economics?

A) Our nation spends too much on the military.
B) The inflation rate is too high, and the central bank must take measures to lower it.
C) Median home prices have been stable for nearly six months.
D) Our environmental laws are too weak.