Deck 1: Introduction to Economics

Question 1

The basic reason we study economics is because material wants and needs are:

A) limited and so are resources.
B) limited but resources are not.
C) unlimited and so are resources.
D) unlimited but resources are not.

Answer 1

unlimited but resources are not.

Question 2

The basic problem that gives rise to the study of economics is the need to:

A) control the effects of actions by foreign governments.
B) be sure all the goods and services produced in an economy get sold.
C) use scarce resources to satisfy people's unlimited material wants and needs.
D) control people's tastes and wishes so that the available resources can produce all the goods and services they want.

Answer 2

use scarce resources to satisfy people's unlimited material wants and needs.

Question 3

The basic concern of economics is:

A) to provide stable economic conditions to ensure political stability.
B) to match limited resources to people's limited material wants and needs.
C) the scarcity problem created because people's desires for material things exceed the ability to produce them.
D) to encourage society to acquire enough goods and services so that everybody has a job.

Answer 3

the scarcity problem created because people's desires for material things exceed the ability to produce them.

Question 4

Economics is concerned with:

A) earning as much money as possible.
B) limiting individuals' wants so that our scarce resources will not be used up.
C) using scarce resources to satisfy virtually limitless material wants and needs.
D) using as many workers as possible to produce any given level of output.

Question 5

The "economic problem"exists because:

A) for the first time in history, people are earning more money than they can spend.
B) resources are limited while wants and needs for goods and services are virtually limitless.
C) people are unwilling to put forth the effort required to attain the goods and services they want.
D) there are more goods and services being produced than people want, causing some businesses to go bankrupt.

Question 6

There would be no need to study economics if:

A) there were no government controls on people's actions.
B) people were free to do whatever they wanted with their lives.
C) there were enough resources to produce all the goods and services people would like to obtain.
D) all of the above.

Question 7

Which of the following statements is FALSE?

A) Economics is the study of decision making in a world of scarcity.
B) Scarcity is faced by all individuals, businesses, and societies.
C) Scarcity arises because people's wants and needs are virtually unlimited, while the resources available to satisfy those wants and needs are not.
D) Scarcity could be overcome if people were willing to work harder to produce all the goods and services that would satisfy their material wants and needs.

Question 8

Scarcity is a problem faced by:

A) households, but not businesses and governments.
B) households and businesses, but not governments because they can pass laws to get the goods and services they need.
C) households and governments, but not businesses because they are the ones that produce the goods and services that people want.
D) households, businesses and governments.

Question 9

In economics, scarcity refers to the fact that there are not enough:

A) goods and services to completely satisfy everyone's wants and needs.
B) hours in the day to consume all the goods and services available in the economy.
C) goods and services produced to allow everyone wanting to work to hold down a full-time job.
D) dollars for spending on goods that have already been produced and directly satisfy our wants, such as food and clothing.

Question 10

We study economics to:

A) understand how an economy operates.
B) develop more sophisticated thought processes.
C) develop skills which can be used in our careers.
D) all of the above.

Question 11

Because resources are scarce, individuals must:

A) learn to do without.
B) make value judgments.
C) try to be more efficient.
D) all of the above.

Question 12

Because of scarcity:

A) individuals and societies are not able to choose which material wants and needs to satisfy.
B) individuals and societies must choose which material wants and needs to satisfy.
C) all choices about satisfying wants and using resources must be made by the government.
D) choices can be made about which wants to satisfy, but not about which resources to use.

Question 13

Economics is concerned with tradeoffs caused by scarcity. "Tradeoffs"refers to:

A) the alternatives given up when making choices.
B) recycling old goods into new goods to reduce the scarcity problem.
C) the buying and selling that occurs when unwanted goods are exchanged for goods that are desired.
D) the decisions about whether households or businesses should bear the entire burden of the scarcity problem.

Question 14

The relative importance a person assigns to various actions or alternatives:

A) reflects the person's value judgments.
B) is the same for all people who earn the same income.
C) depends only on the dollar prices of the actions or alternatives.
D) all of the above.

Question 15

The choices that are made because of scarcity:

A) are always correct if solved mathematically.
B) differ when they involve people's wants, but are similar when they involve people's needs.
C) depend on the decision maker's value judgments about the relative importance of different alternatives.
D) are important in poor countries, but not in economically advanced countries where people earn high incomes.

Question 16

The opportunity cost of a purchase or a decision is:

A) the lowest possible cost to make that purchase or decision.
B) the highest cost that must be paid to make that purchase or decision.
C) the actual amount paid to make that purchase or decision.
D) what had to be given up to make that purchase or decision.

Question 17

The cost of a purchase or decision measured by what is given up to make the purchase or carry out the decision is its:

A) sunk cost.
B) hidden cost.
C) overhead cost.
D) opportunity cost.

Question 18

The opportunity cost of going to school rather than working is the:

A) cost of food and clothing.
B) cost of tuition and housing.
C) cost of getting to and from school.
D) wages which could have been earned.

Question 19

An opportunity cost:

A) exists only for decisions involving expenditures of money.
B) exists because there is only one way money and time can be spent.
C) is equal to the value of what is given up to make a purchase or take an action.
D) accompanies every decision made by individuals and businesses, but not by government because that reflects the wishes of society.

Question 20

The opportunity cost to a student of preparing for an examination is:

A) impossible to measure.
B) the alternative use of the time required to prepare for the exam.
C) high for a student with a high GPA and low for a student with a low GPA.
D) zero since the tuition has already been paid for the course and there is not an extra fee to take the exam.

Question 21

If there were no scarcity:

A) there would be no opportunity costs.
B) there would be no need to make tradeoffs.
C) both of the above.
D) none of the above.

Question 22

Application 1.1, "To Work or Not to Work,"focuses on the:

A) cost to parents when adult working children move back home after graduating from college.
B) effects on high school students' grades, and social and other activities from working long hours while in school.
C) amounts cities spend to keep businesses from relocating elsewhere in order to keep employment rates high.
D) amounts people spend on child care, transportation, and "professional wardrobes," in order to keep high-paying jobs.

Question 23

Efficiency means:

A) producing output of a desired quality at the lowest possible cost.
B) producing the largest possible output of a desired quality with a given set of resources.
C) using the minimum cost inputs to produce a given amount of output of a desired quality.
D) all of the above.

Question 24

Increasing efficiency will:

A) increase the problem of scarcity.
B) reduce the problem of scarcity.
C) eliminate the problem of scarcity.
D) have no effect on the problem of scarcity because there is a fixed supply of resources.

Question 25

If all goods and services were produced efficiently:

A) there would be no more opportunity costs.
B) there would no longer be a problem with scarcity.
C) the largest attainable output would be produced from available resources.
D) all of the above.

Question 26

A student earning an A in a course would be considered efficient if she got that grade by:

A) letting her grade drop in another course.
B) quitting her job to spend more time studying.
C) mastering the required material in the least amount of time.
D) studying the subject matter for at least 15 hours per week.

Question 27

If there were no scarcity:

A) equity and efficiency would no longer be important concerns.
B) both equity and efficiency would continue to be important concerns.
C) equity would continue to be an important concern, but efficiency would not.
D) efficiency would continue to be an important concern, but equity would not.

Question 28

Questions about equity are difficult to answer because people:

A) have different value judgments about what is fair.
B) disagree over how fairness can be achieved.
C) disagree over whether fairness should be an economic goal.
D) all of the above.

Question 29

Whether a distribution of goods and services is fair or just is a question of:

A) equity.
B) efficiency.
C) how to produce at minimum cost.
D) maximizing the employment of scarce resources.

Question 30

Which of the following statements is true?

A) Equity requires that every person receive the same amount of goods and services.
B) Equity requires that every person receive a sufficient amount of goods and services to satisfy their needs.
C) Equity requires that every person receive an amount of goods and services proportional to what they contribute to society.
D) The definition of equity depends on a person's value judgments, and any of the above could fulfill an individual's concept of equity.

Question 31

Equity as defined in a market system requires that every person receive:

A) the same amount of goods and services as every other person.
B) a sufficient amount of goods and services to satisfy their needs.
C) an amount of goods and services based on their contribution to production.
D) none of the above.

Question 32

Efficiency and equity:

A) can never be achieved at the same time because increasing equity necessarily reduces efficiency.
B) can always be achieved at the same time because increasing efficiency automatically increases equity.
C) are separate goals that can be pursued independently.
D) none of the above.

Question 33

The factor of production that organizes economic activity and bears the risk of success or failure in a business venture is:

A) labor.
B) capital.
C) entrepreneurship.
D) all of the above.

Question 34

An engineer employed by a city is an example of:

A) land.
B) labor.
C) capital.
D) entrepreneurship.

Question 35

A tractor used to harvest corn crops on a farm is:

A) land
B) labor
C) capital.
D) entrepreneurship.

Question 36

A woman who owns and operates her own real estate company is an example of:

A) land.
B) labor.
C) capital.
D) entrepreneurship.

Question 37

An auto repair shop, a corn field, and a person managing a coffee shop that they own are, respectively, examples of:

A) land, capital, and labor.
B) capital, land, and labor.
C) land, capital, and entrepreneurship.
D) capital, land, and entrepreneurship.

Question 38

When classifying factors of production, capital refers to:

A) stocks, bonds, and money
B) machinery and equipment to produce goods and services
C) the financial payments by an entrepreneur to start a business.
D) all of the above

Question 39

The four factors of production are:

A) interest, profit, rent, and wages.
B) capital, entrepreneurship, labor, and land.
C) buildings, equipment, natural resources, and supplies.
D) management, money, natural resources, and workers.

Question 40

A salaried corporate attorney, a vein of coal, the owner of a bakery, and a snowplow are, respectively:

A) labor, capital, entrepreneurship, and land.
B) labor, land, entrepreneurship, and capital.
C) entrepreneurship, capital, labor, and land.
D) entrepreneurship, land, labor, and capital.

Question 41

The two functions of an entrepreneur are:

A) supply and organize resources.
B) organize and pay resources.
C) supply resources and bear the risk of a business' failure.
D) organize resources and bear the risk of a business' failure.

Question 42

Which of the following statements is true?

A) Organizing other resources is one function of an entrepreneur.
B) Only real estate is included in the factor of production category termed land.
C) The factor of production category termed capital includes stocks, bonds, and money.
D) All of the statements are true.

Question 43

Which of the following statements is true?

A) Land refers only to farm land, oil, and coal reserves.
B) Money is important for economic activity, but it is not a factor of production.
C) Stocks and bonds are included in the factor of production category termed capital.
D) Labor refers to unskilled workers; all other human effort is classified as entrepreneurship.

Question 44

The incomes received by entrepreneurs, by labor, and by the owners of land and of capital resources are, respectively:

A) rents, wages, interest and profits.
B) profits, wages, rents, and interest.
C) wages, rents, profits and interest.
D) interest, rents, wages, and profits.

Question 45

The incomes received by the four factors of production are:

A) rents, wages, interest, and profits.
B) rents, salaries, dividends, and net income.
C) rents, profit sharing, dividends, and net income.
D) capital gains, wages, dividends, and net income.

Question 46

An employee in a local shopping mall earns $9.00 per hour, the owner of heavy construction equipment receives $15,000 per month for the use of that equipment by contractors that build bridges and highways, and the owner of 5 acres of land receives $800 per month from a business that stores school buses on that land. These incomes are, respectively:

A) interest, profit, and rent.
B) profit, rent, and interest.
C) wages, interest, and rent.
D) wages, interest, and profit.

Question 47

A student earns $8 per hour from a part-time job, her mother receives $500 per month from a man who harvests crops from 80 acres of farmland that she owns, and her brother gets $100 every quarter from stock he owns in a corporation. These incomes are, respectively:

A) wages, rent, and profit.
B) profit, interest, and rent.
C) wages, interest, and profit.
D) wages, profit, and interest.

Question 48

Wages are earned by:

A) owners of land.
B) suppliers of labor.
C) owners of capital.
D) entrepreneurs.

Question 49

Interest is earned by:

A) owners of land.
B) suppliers of labor.
C) owners of capital.
D) entrepreneurs.

Question 50

Rents are earned by:

A) owners of land.
B) suppliers of labor.
C) owners of capital.
D) entrepreneurs.

Question 51

Distinctions between the different factor incomes are important because they affect:

A) taxes paid by factor owners.
B) class perceptions within society.
C) legislative and public policy initiatives.
D) all of the above.

Question 52

To an economist, scarce resources means that:

A) the number of resources at our disposal is numerically small.
B) resources are scarce compared to the goods and services people want and need.
C) resources are hard to locate, and resource suppliers are unwilling to sell their resources.
D) all of the above.

Question 53

All resources are:

A) scarce both in relative terms and in absolute terms.
B) abundant both in relative terms and in absolute terms.
C) scarce relative to the wants and needs they must satisfy, but many resources are abundant in absolute terms.
D) scarce in absolute terms, but many resources are abundant compared to the wants and needs they must satisfy.

Question 54

Resources are scarce:

A) when compared to the wants and needs people wish to satisfy.
B) in less developed countries, but not in advanced economies, such as that of the United States.
C) in the sense that there is almost no oil, coal, clean air, or water left, and the labor force is shrinking.
D) because people do not demand enough goods and services to ensure that resources will be made available in large enough quantities.

Question 55

According to Application 1.2, "Does Money Buy Happiness?":

A) there have been no studies on how having more money affects happiness.
B) there have been studies on money buying happiness, but they have not arrived at the same conclusion.
C) there is clear evidence that having more money will always increase a person's happiness more than anything else.
D) almost all studies show that having more money makes people less happy because the more money they have the more goods they want.

Question 56

A formal explanation of the relationship between economic variables is an;

A) assumption.
B) economic theory.
C) economic policy.
D) opinion that usually cannot be supported.

Question 57

Economic theories are:

A) always expressed in terms of mathematical equations.
B) actions, such as tax cuts, to change economic conditions.
C) formal explanations of the relationships between economic variables.
D) all of the above.

Question 58

Which of the following is an example of an economic theory?

A) The actual behavior of the economy over a one-year period.
B) A tax cut to increase spending by businesses and households.
C) Statistics showing the change in the unemployment rate since 2008.
D) An explanation as to why raising the price of a product would cause people to buy less of that product.

Question 59

Economic theory is:

A) a set of conditions which are held to be true.
B) an action taken to change economic conditions.
C) a formal explanation of the relationship between economic variables.
D) the statistical techniques used to determine the relationship between economic variables.

Question 60

An economic theory may be disputed because it:

A) focuses on just two variables.
B) sometimes uses unrealistic assumptions.
C) cannot give a precise cause-and-effect relationship, like that found in the physical sciences.
D) all of the above.

Question 61

Disputes about economic theories:

A) prove that the economy is too complex to be studied.
B) would never occur if the theories were logically presented.
C) can arise from disagreements about the choice of variables or assumptions in the theories.
D) are a matter of concern because they show that some people don't understand economics.

Question 62

Econometrics:

A) helps us better understand the economy.
B) is useful in defending the accuracy of economic theories.
C) is the use of statistical techniques to describe the relationship between economic variables.
D) all of the above.

Question 63

Econometrics is:

A) the set of conditions held to be true in a model.
B) measures taken to change economic conditions.
C) a formal explanation of the relationship between economic variables.
D) the use of the statistical techniques to determine the relationship between economic variables.

Question 64

An economist has developed a model to explain the relationship between people losing their jobs and the frequency with which individuals experience severe emotional distress. The study is limited to urban areas with large populations, and uses information supplied by people meeting with local counselors for treatment. The study supports a theory that job loss can play a key role in explaining who will experience severe emotional distress.

-In this theory, people's job status and the frequency with which emotional distress occurs are:

A) variables.
B) assumptions.
C) conclusions.
D) none of the above.

Question 65

An economist has developed a model to explain the relationship between people losing their jobs and the frequency with which individuals experience severe emotional distress. The study is limited to urban areas with large populations, and uses information supplied by people meeting with local counselors for treatment. The study supports a theory that job loss can play a key role in explaining who will experience severe emotional distress.

-Holding the condition that this theory is true only in urban areas with large populations is an example of the use of:

A) data in a model.
B) variables in a model.
C) conclusions in a model.
D) assumptions in a model.

Question 66

An economist has developed a model to explain the relationship between people losing their jobs and the frequency with which individuals experience severe emotional distress. The study is limited to urban areas with large populations, and uses information supplied by people meeting with local counselors for treatment. The study supports a theory that job loss can play a key role in explaining who will experience severe emotional distress.

-The information supplied by the people meeting with local counselors provides the:

A) data for the model.
B) variables for the model.
C) conclusions for the model.
D) assumptions for the model.

Question 67

An economist has developed a model to explain the relationship between people losing their jobs and the frequency with which individuals experience severe emotional distress. The study is limited to urban areas with large populations, and uses information supplied by people meeting with local counselors for treatment. The study supports a theory that job loss can play a key role in explaining who will experience severe emotional distress.

-To say that job loss plays a key role in determining who experiences severe emotional distress:

A) is a conclusion of the model.
B) cannot be challenged since that is what the model shows.
C) can, on the basis of this model, be said to be true for people regardless of where they live.
D) all of the above.

Question 68

Assumptions:

A) must accurately reflect every detail of the real world.
B) have no effect on the explanations a theory provides.
C) are always given along the horizontal axis of a graph.
D) are conditions held to be true when developing a theory.

Question 69

Application 1.3, "OK, What Are They?" is about unidentified flying objects, or UFOs. Which of the following is true?

A) There are no similarities in the rules for judging economic theories and theories about UFOs.
B) Just like there are competing theories about economic conditions, there are also competing theories about UFOs.
C) Economic theories are always based on realistic measurable assumptions, while there are no assumptions supporting theories about UFOs.
D) All of the above.

Question 70

Economic policy is a:

A) condition held to be true in a model.
B) guide to change an economic situation.
C) formal explanation of the relationship between economic variables.
D) statistical technique to determine the relationship between economic variables.

Question 71

Economic policies:

A) are guides to change economic conditions.
B) have consequences that vary from policy to policy.
C) are based on the value judgments of the persons forming the policies.
D) all of the above.

Question 72

Which of the following is an economic policy?

A) Assuming that you will earn more if you have more education.
B) Explaining what happens to the supply of a product as its price rises.
C) Understanding that the scarcity problem is at the foundation of economics.
D) Giving families a tax break on college tuition in order to encourage more degrees.

Question 73

It is important for policy makers to understand economic theory because:

A) there are different ways for achieving a policy goal.
B) their decisions can alter the distribution of income in society.
C) their decisions can produce undesirable unintended consequences.
D) all of the above.

Question 74

Up for Debate, "Should St. Louis County, Missouri, Impose Mandatory Trash Pickup and Recycling?" clearly shows that arguments for and against this mandatory policy

A) were based on value judgments such as environmental concerns and the role of the government.
B) were based on solid economic theories.
C) disregarded both value judgments and economic theories.
D) were useless since the only right thing to do was enact the mandatory program.

Question 75

Which of the following can be used to express economic theories?

A) Words.
B) Graphs.
C) Mathematical equations.
D) All of the above.

Question 76

A line that slopes upward on a graph indicates that the variables measured on the graph are:

A) unrelated.
B) directly related.
C) inversely related.
D) always increasing but never decreasing.

Question 77

A line that slopes downward on a graph indicates that the variables measured on the graph are:

A) unrelated.
B) directly related.
C) inversely related.
D) always decreasing but never increasing.

Question 78

If A increases as B increases, a line on a graph showing the relationship between A and B would be:

A) upward sloping.
B) downward sloping.
C) perfectly horizontal.
D) perfectly vertical.

Question 79

If A decreases as B decreases, a line on a graph showing the relationship between A and B would be:

A) upward sloping.
B) downward sloping.
C) perfectly horizontal.
D) perfectly vertical.

Question 80

If A increases as B decreases, a line on a graph showing the relationship between A and B would be:

A) upward sloping.
B) downward sloping.
C) perfectly horizontal.
D) perfectly vertical.