Deck 1: The Central Idea

Question 1

Where do buyers and sellers meet?

A) In a government
B) Only in a face-to-face forum
C) In a family
D) In a market
E) In a firm

Answer 1

In a market

Question 2

The problem of scarcity is

A) a problem only for poor countries.
B) a problem only for economies under complete government control.
C) faced by all economies.
D) eliminated as the economy grows.
E) not faced by free market economies.

Answer 2

faced by all economies.

Question 3

The reason, from an economic perspective, people are forced to choose is because of

A) social custom.
B) genetics.
C) scarcity.
D) government.
E) religion.

Answer 3

scarcity.

Question 4

If a resource is always available when needed, then it

A) will be more expensive than other resources.
B) is not scarce.
C) has a high opportunity cost.
D) is not tangible.
E) is scarce.

Question 5

An economic transaction occurs only in a market

Question 6

A resource is not scarce if

A) there is more of this resource than people want.
B) it can be found in any store.
C) people have enough money to pay for it.
D) it has a low opportunity cost.
E) its supply exceeds its demand.

Question 7

The basic economic problem is

A) lack of money.
B) unemployment.
C) poverty.
D) scarcity.
E) inflation.

Question 8

Economics is the study of how individuals become wealthy.

Question 9

A market is

A) a place where firms meet to set prices.
B) an arrangement by which economic exchanges take place.
C) an organization controlled by a government.
D) a place where goods are produced.
E) anywhere people come close to each other.

Question 10

Choices are made in order to avoid scarcity.

Question 11

Scarcity applies to everyone regardless of income.

Question 12

Economics is a study of

A) choices and interactions among people when resources are scarce.
B) how to overcome scarcity.
C) how to make choices and interact in order to avoid scarcity.
D) how to avoid scarcity by making choices.
E) how to make money in stock markets.

Question 13

A budget constraint

A) does not occur if there is scarcity.
B) enables choices to be avoided.
C) is a way to overcome scarcity.
D) forces people to make choices.
E) prohibits consumers from spending.

Question 14

The concept of scarcity, as used by economists, refers to

A) a situation in which an item is very expensive.
B) a situation in which an item is available only in very small quantities.
C) a situation in which a resource is nonrenewable.
D) shortages.
E) a situation in which the available resources are not enough to satisfy the wants of the people.

Question 15

An important implication of scarcity is that

A) it inhibits economic interaction.
B) people are not able to use all the available resources.
C) people must make a choice.
D) people will always be poor.
E) it is a problem that is easily abolished.

Question 16

Who faces the problem of scarcity?

A) Only the rich
B) Only the poor
C) Only people living next to wealthy people
D) Everyone
E) Only people living next to poor people

Question 17

People make decisions when choices involve

A) no benefits.
B) only benefits.
C) nominal costs.
D) opportunity costs.
E) unlimited resources.

Question 18

Economics is the study of how people cope with

A) unlimited resources.
B) too much money.
C) scarcity.
D) limited human wants.
E) political disputes.

Question 19

Which of the following statements about economic interaction is not true?

A) It is a fact of economic life.
B) It requires a market.
C) It can occur within a family.
D) It makes our lives better.
E) It occurs only among different countries.

Question 20

Economics deals with how

A) individuals make decisions to use scarce resources in order to satisfy their unlimited wants.
B) to run a business.
C) individuals become rich.
D) society can eliminate scarcity.
E) society creates more resources in order to raise its standard of living.

Question 21

Of the following individuals, who bears the highest opportunity cost of going to college?

A) A pro-football player earning $1 million a year
B) A high school graduate without a job
C) A high school dropout earning the minimum wage in a fast-food restaurant
D) A person being laid off by a company
E) A retiree

Question 22

Gains from voluntary trade arise because

A) it reallocates goods between individuals.
B) it occurs in a household.
C) it reallocates goods between individuals in a way they both prefer.
D) it occurs in a market.
E) of the power involved.

Question 23

When the economy is in recession, jobs are generally harder to find and more people go to college. We can conclude that the opportunity cost of

A) going to college decreases when the economy is in recession.
B) going to college increases when the economy is in recession.
C) working increases when the economy is in recession.
D) working is zero when the economy is in recession.
E) going to college is always higher than the opportunity cost of working.

Question 24

According to the textbook, the main reason for Mark Zuckerberg to leave college and to start a new company, Facebook, is that

A) he had failed many courses in college.
B) the opportunity cost is higher for him to stay in college than to run Facebook.
C) the opportunity cost is lower for him to stay in college than to run Facebook.
D) the opportunity cost is zero for him to stay in college.
E) the opportunity cost is zero for him to run Facebook.

Question 25

The opportunity cost for a student to attend college is zero if the student receives a scholarship.

Question 26

Choices are made based on

A) scarcity.
B) opportunity costs.
C) producers.
D) consumers.
E) supply.

Question 27

Which of the following statements is false?

A) There is an opportunity cost associated with any choice made.
B) If there is a budget constraint, there will be scarcity.
C) A financial budget constraint must exist for an opportunity cost to exist.
D) Opportunity costs occur because of scarce resources.
E) Because of scarcity, choices have to be made.

Question 28

Gains from trade occur when there are differences in opportunity cost.

Question 29

Kyle has two options to spend her school break in the summer: get a summer job that pays $2,000 or travel in Europe. The opportunity cost of the summer job is that Kyle

A) can earn more than $2,000.
B) can also travel in Europe.
C) has to give up traveling in Europe.
D) can save the money for traveling in Europe.
E) has to work and travel at the same time.

Question 30

An example of opportunity cost

A) is sweets given up by a person who would never eat them even if he or she could.
B) for a professor of economics is the pleasure that he or she derives from teaching economics.
C) is the Chinese food that you gave up when you chose to eat Italian food.
D) is the tuition you pay to attend college.
E) is the price paid for a ticket when you go to the movies.

Question 31

Trade takes place when one party gains at the expense of another party.

Question 32

Exhibit 1-1
Refer to Exhibit 1-1. Suppose that Jack has three hours to study for an exam in economics and another exam in math on the same day. The amount of time he spends studying economics and its relation to his grade in the two classes are shown in the table. The opportunity cost of increasing the time spent on studying economics from one hour to two hours is

A) 85 points on the math grade.
B) 55 points on the math grade.
C) 30 points on the math grade.
D) 20 points on the math grade.
E) zero.

Question 33

A college student faces no opportunity cost if her parents pay her college tuition and her living expenses.

Question 34

The opportunity cost of a choice is the

A) cost associated with making a choice.
B) value of the next best activity not chosen.
C) fair market price of whatever is chosen.
D) amount paid to purchase what is chosen.
E) consequence associated with failure.

Question 35

The opportunity cost of attending college

A) is zero because the return is always positive.
B) includes the skills earned from attending college.
C) is the living expenses, which are the same whether the students attend college or not.
D) includes the lost wages that would have been earned if the student had not attended college.
E) includes the scholarships for attending college.

Question 36

John's budget is such that he can afford either a computer or a Caribbean vacation, both of which cost the same. Which of the following statements about his opportunity cost is correct?

A) The opportunity cost of a Caribbean vacation is the money John pays for the vacation.
B) The opportunity cost of the vacation is the same as the opportunity cost of the computer because John can afford only one or the other.
C) There is nothing to say about the opportunity cost because we don't know how much the computer or the Caribbean vacation costs.
D) The opportunity cost of going on a vacation is the loss from not being able to buy the computer.
E) The opportunity cost of the computer is the total cost of the computer and the Caribbean vacation.

Question 37

A rich individual who can afford anything and everything does not need to be concerned with opportunity costs.

Question 38

A voluntary exchange of existing consumer goods is beneficial because it

A) makes those engaging in the exchange better off.
B) changes the total quantity of goods produced.
C) reallocates existing goods.
D) reduces scarcity.
E) requires choice.

Question 39

John has only one hour to study for an exam in history or to complete a written report in economics. The opportunity cost of spending the hour writing the economics report is

A) a lower grade in the history exam.
B) a higher grade in the history exam.
C) a lower grade in both the history exam and the economics report.
D) a higher grade in both the history exam and the economics report.
E) none because history and economics are unrelated.

Question 40

Exhibit 1-2
According to Exhibit 1-2, if Sam did all the cooking as well as waited on tables, how many customers would he be able to serve per day?

A) 4
B) Between 2 and 20 customers
C) 0
D) 20
E) 5

Question 41

As a result of economic interaction,

A) the number of available choices is reduced.
B) scarcity is increased.
C) opportunity costs increase.
D) people are able to specialize.
E) scarcity is eliminated.

Question 42

A division of labor occurs when some workers do all tasks while others do nothing.

Question 43

The goods individual producers specialize in are determined by absolute advantage.

Question 44

When people specialize in the activity in which they have a comparative advantage,

A) there cannot be a division of labor, though production will increase.
B) there will likely be a division of labor as well as an increase in output.
C) there will be a gain from trade, but production will not be increased.
D) there will likely be a division of labor, and output will stay the same.
E) there will likely be a division of labor, and output will decline.

Question 45

It is impossible for two people to increase their total production if one has a comparative advantage in the production of one particular good.

Question 46

Exhibit 1-3
Refer to Exhibit 1-3. Suppose John and Jack can produce the above combinations of candy bars and ice cream bars in one hour. John and Jack can maximize their total production if

A) both produce candy bars.
B) both produce ice cream bars.
C) John produces both candy bars and ice cream bars, while Jack produces nothing.
D) Jack produces both candy bars and ice cream bars, while John produces nothing.
E) each of them produces what he has a comparative advantage in producing.

Question 47

Trade always results in a gain for one or both participants.

Question 48

A country trades with other countries because

A) it can gain in production and consumption.
B) it wants to improve foreign relations.
C) its government can earn taxes on imported goods.
D) it has an excess production capacity.
E) its residents always prefer imported goods to domestic goods.

Question 49

Which of the following statements is true?

A) There are no gains from trade between people in different countries because, with international trade, it's the countries that trade, and not its people, that realize the gains.
B) Trade between people in different countries cannot occur.
C) Trade between people in different countries can occur, but it will not result in an increase in consumer satisfaction.
D) Trade between people in different countries can occur, but it will not lead them to better utilize their comparative advantage.
E) Trade between people in different countries can occur, and the gains that occur are the same as the gains from trade within a country.

Question 50

Exhibit 1-2
According to Exhibit 1-2, if Anne spent all her time cooking, how many meals would she be able to prepare per day?

A) 20
B) 2
C) 4
D) 40
E) 5

Question 51

In general, what is economics the study of?

Question 52

International trade exists only when a country can gain a trade advantage over another country.

Question 53

Production can be increased whenever people

A) engage in activities with a high opportunity cost.
B) specialize in whichever field they have a comparative advantage in.
C) specialize in whatever interests them.
D) choose to interact.
E) make decisions.

Question 54

What is the relationship among economic interaction, specialization, comparative advantage, and gains from trade?

Question 55

Trade enables people to specialize in activities in which they have a comparative advantage.

Question 56

____ must exist in order for gains from trade to be realized.

A) Governments
B) Markets
C) Households
D) Interaction
E) Firms

Question 57

Exhibit 1-2
According to Exhibit 1-2, if Anne and Sam each worked separately, how many meals per day would be served by each of them?

A) 40
B) 4
C) 2
D) 20
E) 5

Question 58

The division of labor enables

A) the augmentation of scarcity.
B) the elimination of scarcity.
C) opportunity costs.
D) economic interaction.
E) specialization.

Question 59

If an individual is able to produce a good with relatively less time, effort, or resources than somebody else, then that individual has

A) avoided opportunity costs.
B) an interaction advantage.
C) cornered the market.
D) removed scarcity.
E) a comparative advantage.

Question 60

Explain how trade between two different countries is similar to trade occurring within a country.

Question 61

If an economy produces only movies and computers, then the opportunity cost of producing more movies is

A) the value of forgone computer production.
B) the value of more computer production.
C) the value of movie production minus the value of computer production
D) the total value of movie and computer production.
E) zero because computers and movies are unrelated.

Question 62

If an economy produces only movies and computers, then producing more and more computers will most likely require

A) giving up a decreasing amount of the production of movies.
B) giving up an increasing amount of the production of movies.
C) gaining an increasing amount of the production of movies.
D) gaining a decreasing amount of the production of movies.
E) no change in movie production.

Question 63

Which of the following is not considered to be scarce for an economy as a whole?

A) Money
B) Workers
C) Land
D) Machinery
E) Factories

Question 64

The production possibilities curve shows how an economy increases its output with more resources.

Question 65

The typical production possibilities schedule shows that the opportunity cost for producing more of one good requires giving up an increasing amount of production of another good.

Question 66

Why is it reasonable to assume that when trade is voluntary, those involved in the trade will gain?

Question 67

Choices are necessary only for individuals but not for the economy as a whole.

Question 68

Josie has two classes: English and math. She finds out that the grades for both classes has improved without spending more time studying. Using the production possibilities curve, Josie's situation can be represented by

A) moving from a point on the production possibilities curve to a point inside the curve.
B) a movement along the curve from the axis for English to the axis for math.
C) a movement along the curve from the axis for math to the axis for English.
D) an inward shift of the curve.
E) an outward shift of the curve.

Question 69

Choices are made whenever

A) money is limited.
B) there are too many alternatives.
C) resources are limited relative to human wants.
D) the society has abundant resources.
E) different people in an economy want different things.

Question 70

What is meant by a division of labor, and why is this a reason for economic interaction?

Question 71

Exhibit 1-4
Refer to Exhibit 1-4. The opportunity cost of producing the first television set is

A) 15 units of computers.
B) 5 units of computers.
C) 43 units of computers.
D) 42 units of computers.
E) 1 unit of computers.

Question 72

Exhibit 1-4
Refer to Exhibit 1-4. The opportunity cost of producing the sixth television set is

A) 15 units of computers.
B) 5 units of computers.
C) 43 units of computers.
D) 42 units of computers.
E) 1 unit of computers.

Question 73

A production possibilities curve shows

A) what happens to the amount of available resources if it is not possible to produce a good.
B) what can be produced with unlimited resources.
C) what happens as available resources in an economy are moved from producing one type of good to another type, or vice versa.
D) the choice between producing some goods versus other goods with unlimited resources.
E) the different kinds of products that a firm can produce.

Question 74

If available resources are being used efficiently,

A) a society can increase the production of one good or service only by decreasing the production of some other good or service.
B) society need no longer worry about tradeoffs.
C) a society can increase the production of one good or service only by increasing the production of some other good or service.
D) resources are no longer limited.
E) scarcity is no longer a problem.

Question 75

After purchasing a quart of milk from a convenience store, John complains that the store ripped him off because it charged too much for the milk. Comment.

Question 76

Exhibit 1-5
Refer to Exhibit 1-5. The production possibilities curve representing the given schedule would be a

A) negatively sloped curve that bows outward.
B) negatively sloped straight line.
C) positively sloped curve that bows outward.
D) positively sloped curve that bows inward.
E) positively sloped straight line.

Question 77

What is meant by comparative advantage?

Question 78

The table below depicts the choices George and Sarah face when deciding whether to cook, wait on tables, or both.

Question 79

Which of the following does a production possibilities schedule best illustrate?

A) The concept of achieving an impossible goal
B) The concept of unlimited possibilities
C) The concept of an opportunity cost
D) The elimination of scarcity
E) The concept of a good

Question 80

Suppose that an economy produces only two goods: computers and movies. If the economy at all times utilizes all its resources, and it decides to use more of its available resources to produce computers,

A) the production of movies will drop.
B) the production of both movies and computers will drop.
C) the production of movies will rise.
D) the production of movies will not change but the production of computers will increase.
E) then will be no change in the production of either computers or movies.