Deck 1: Exploring Economics

Question 1

Economics is a:

A) natural science.
B) physical science.
C) life science.
D) social science.

Answer 1

D

Question 2

In which market is government most likely to intervene to prevent a market failure?

A) the restaurant market
B) the market for college education
C) the market for designer clothing
D) the jewelry market

Answer 2

B

Question 3

Economists tend to look:

A) at costs but not at benefits.
B) at benefits but not at costs.
C) for rational responses to incentives.
D) only at macroeconomic topics.

Answer 3

C

Question 4

Which situation deals more with equity than efficiency?

A) The Red Sox signs a star player for $35 million a year, which is over 10 times the average salary of the rest of the team.
B) Due to the lack of customers, Jamie's Pizza reduced the number of pepperoni slides on each pizza.
C) Mike's Auto Shop invests in a new hydraulic lift that makes it easier to change oil and rotate tires.
D) Howard's Realty offers his sales staff a bonus incentive if the annual sales goal is reached.

Question 5

Because of scarcity:

A) resources are limitless.
B) wants are limited.
C) choices are unlimited.
D) we face tradeoffs in nearly every choice we make.

Question 6

Scarcity refers to the fact that:

A) some goods are scarce.
B) something is scarce.
C) a person must make choices given the resource limitations he or she faces.
D) there is no long-term benefit to studying economics.

Question 7

The study of economics:

A) primarily considers the stock market.
B) is about people making decisions regarding their use of scarce resources.
C) does not apply to decisions made by businesses.
D) states that efficiency and equity do not conflict.

Question 8

Why is it important for students to study economics?

A) Most students will work as professional economists.
B) It helps us reduce our personal income taxes.
C) It helps us make better and wiser decisions, given our limited resources.
D) There is no long-term benefit to studying economics.

Question 9

Scarcity is BEST defined as when:

A) the quantity demanded exceeds the quantity supplied.
B) the quantity supplied exceeds the quantity demanded.
C) unlimited resources exceed limited wants.
D) unlimited wants exceed limited resources.

Question 10

Economics is BEST defined as the study of how:

A) to classify resources used to produce final goods and services.
B) resources are apportioned to satisfy human wants.
C) people make rational decisions.
D) technology can be used to change scarce resources into free resources.

Question 11

The MOST common way in which economists model a problem is by:

A) making sure as many details and facts are included.
B) simplifying the model down to its basic relevant elements.
C) avoiding assumptions as much as possible in order to avoid misrepresenting reality.
D) using case studies to analyze individual real-life examples of problems.

Question 12

Which policy is MOST likely to contribute to improved standards of living over time?

A) addressing teacher shortages by closing schools and busing students to other schools
B) allowing individuals the freedom to circumvent laws due to personal objections to them
C) reducing the years that drug patents are valid to speed up production of generic versions
D) adding after-school art and music programs to promote creativity

Question 13

When an economy uses the most efficient means of farming to grow as much corn as possible, this economy has achieved:

A) production efficiency and allocative efficiency.
B) neither production efficiency nor allocative efficiency.
C) production efficiency but not necessarily allocative efficiency.
D) allocative efficiency but not necessarily production efficiency.

Question 14

Which headline would be LEAST likely to be studied in macroeconomics?

A) Economic Growth Rises Slow and Steady
B) Unemployment Falls to a 7-Year Low
C) GM Expands Car Sales in China
D) The Fed Raises Interest Rates

Question 15

Tim woke up this morning with a stomachache and decided to skip class in order to get more rest. What is the opportunity cost of Tim's decision to sleep in?

A) the improvement in how he feels by getting more rest
B) the level of pain he endured from the stomachache
C) the value of attending the class he decided to miss
D) the actual enjoyment of lying in bed instead of sitting in class

Question 16

Economics is a social science that involves the study of how individuals, firms, and societies:

A) maximize happiness.
B) maximize incomes.
C) choose among alternatives to satisfy their unlimited wants.
D) develop their tastes and preferences.

Question 17

Reasons to study economics include all of these EXCEPT that you:

A) will always live in a world of scarcity and choices.
B) will understand more about how governments and businesses interact.
C) may become a better prepared voter.
D) will learn exactly how to invest your cash short term for the highest return on investment.

Question 18

Students who never miss class and study hard generally earn higher grades than those who do not. This is an example of:

A) incentives.
B) specialization.
C) market failure.
D) marginal cost.

Question 19

To say that economics is a way of thinking about how people make rational decisions means that people:

A) don't consider the cost of their decisions.
B) consider only monetary terms in their decisions.
C) respond to incentives.
D) are irrational.

Question 20

Which question would be considered a normative question?

A) How many people participated in obstacle course racing last year?
B) How much does an entry into an obstacle course race cost?
C) When and where are the major obstacle races held?
D) Should obstacle races be regulated to ensure the safety of its participants?

Question 21

Which topic is MOST likely to be studied in a microeconomics course?

A) energy policy
B) unemployment
C) inflation
D) recessions

Question 22

Macroeconomics does NOT deal with:

A) recessions.
B) inflation.
C) job creation rates.
D) markets for semiconductor chips.

Question 23

Which statement about economics is CORRECT?

A) Economists do not believe that criminals behave rationally.
B) Economics has little to say about social issues.
C) Economists consider how rational people respond to incentives.
D) Economists assume that people don't respond to incentives.

Question 24

Paying a salesperson more for increased sales is an example of:

A) an incentive.
B) an opportunity cost.
C) efficiency.
D) equity.

Question 25

When economists assume people make rational decisions, it means that:

A) people never make mistakes.
B) a rational person can never appear to make irrational decisions.
C) people are always selfish.
D) a rational person will respond to the benefits and costs associated with incentives.

Question 26

A recent decision regarding the Federal Reserve's impending interest rate increase is an example of a _____ topic. On the other hand, a debate on the impact of the arrival of Uber on local taxi businesses is an example of a _____ topic.

A) microeconomic; macroeconomic
B) macroeconomic; macroeconomic
C) microeconomic; microeconomic
D) macroeconomic; microeconomic

Question 27

Microeconomics is concerned with issues such as:

A) inflation.
B) unemployment.
C) which job to take.
D) interest rates.

Question 28

Supply and demand analysis is used:

A) only in microeconomics.
B) only in macroeconomics.
C) in both microeconomics and macroeconomics.
D) in neither microeconomics nor macroeconomics.

Question 29

The field of economics that focuses on decision making by individuals, businesses, industries, and governments is called:

A) macroeconomics.
B) decision science.
C) minieconomics.
D) microeconomics.

Question 30

The main difference between macroeconomics and microeconomics is that:

A) microeconomics largely deals with the fallacy of composition, and macroeconomics does not deal with the fallacy of composition.
B) macroeconomics focuses on the aggregate economy, and microeconomics focuses on small components of the economy.
C) macroeconomics looks at how individuals make choices, and microeconomics looks at the aggregate of those choices.
D) macroeconomics is concerned with economic policy, and microeconomics is concerned with international policies.

Question 31

Which topic is a macroeconomic topic?

A) the study of the business cycle
B) price of a pair of Nike shoes
C) total sales for GE in 2009
D) labor market for computer analysts

Question 32

Macroeconomics is concerned with issues such as:

A) which orange juice to buy.
B) unemployment.
C) which job to take.
D) what price to charge for goods.

Question 33

The field of economics that is concerned about the broader issues in the economy, such as inflation, unemployment, and national output of goods and services is called:

A) macroeconomics.
B) microeconomics.
C) national economics.
D) labor force economics.

Question 34

Macroeconomics focuses on:

A) decisions made by individuals.
B) decisions made by firms.
C) the decision to purchase a new home for a family.
D) decisions affecting the entire economy.

Question 35

Which statement is TRUE of microeconomics?

A) The unemployment rate fell by 2%.
B) All businesses in the United States experienced a decrease in revenues of 5% due to the recession.
C) About 15% of teachers were laid off last week.
D) GDP increased by 6% last quarter.

Question 36

Which topic is a microeconomic topic?

A) U.S. inflation rate in 2009
B) the price of an iPad sold by Apple
C) U.S. unemployment rate in March 2010
D) U.S. rate of growth in GDP for the first quarter in 2010

Question 37

Which concept would be addressed by microeconomics?

A) the national unemployment rate
B) the reasons for a decline in a country's total output
C) the price of college tuition that an individual student pays
D) the inflation rate in Brazil

Question 38

Which scenario does NOT fall under the category of microeconomics?

A) Cooks at McDonalds supply labor in return for wages.
B) The cost of living has risen due to rising housing and food prices.
C) Jonathan decided to go to the movies instead of going to work.
D) Pepsi experienced an increase in revenue last quarter.

Question 39

Which topic is MOST likely to be studied in a macroeconomics course?

A) taxation methods
B) recessions
C) public utility regulation
D) game theory

Question 40

Economists understand that people respond to:

A) laws.
B) incentives.
C) threats more than rewards.
D) positives but not negatives.

Question 41

Which statement is NOT true of economic model building?

A) There may be exceptions to economic models.
B) Adding more complexity to models does not always provide greater insights.
C) Economic models always reach verifiable results.
D) Economic models provide generalizations about economic behavior.

Question 42

The economics of uranium mining would be studied in:

A) microeconomics.
B) macroeconomics.
C) deductive logic.
D) inductive logic.

Question 43

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a:

A) metaphor.
B) model.
C) conclusion.
D) practice.

Question 44

Allocative efficiency occurs when:

A) production is allocated equally among all citizens.
B) people who want a product the most get it.
C) goods are produced at the lowest possible cost.
D) resources are equally allocated between the private and public sectors of the economy.

Question 45

_____ occur(s) when goods are produced at the lowest possible cost, and _____ occur(s) when individuals who desire a product the most receive those goods and services.

A) Production efficiency; allocative efficiency
B) Production possibilities; allocative possibilities
C) Allocative possibilities; production possibilities
D) Allocative efficiency; production efficiency

Question 46

Which statement is a characteristic of economic models?

A) They try to boil down an economic situation to its most basic elements.
B) They are always complex because the economy is complex.
C) They attempt to reproduce reality exactly.
D) They try to avoid invoking the ceteris paribus assumption.

Question 47

When goods are produced at the lowest possible cost, an economy is said to have achieved:

A) production efficiency.
B) allocative efficiency.
C) cheap production.
D) inferior quality goods.

Question 48

_____ is how well resources are used and allocated.

A) Equity
B) Efficiency
C) Choice
D) Scarcity

Question 49

The purpose of an economic model is to:

A) be a complex, exact replica of reality.
B) demonstrate which values and beliefs are best for the economy.
C) explain the behavior of the issue being examined.
D) manage the economy like an automatic pilot.

Question 50

Economists like to use graphs and equations primarily because:

A) these tools efficiently express economic concepts.
B) economics should be difficult.
C) mathematical aptitude is necessary to understand economics.
D) the use of mathematics reduces rigor.

Question 51

Which effect does NOT deal with macroeconomics?

A) effect of the budget deficit on the economy
B) effect of monetary policy on inflation
C) effect of Walmart's pricing policies on consumers
D) effect of government policies on the country's unemployment rate

Question 52

_____ is the fairness of various issues and policies.

A) Equity
B) Efficiency
C) Choice
D) Scarcity

Question 53

Economic models must:

A) be completely realistic to be useful.
B) include all relationships that exist in the relevant issue to be modeled.
C) completely represent the real world.
D) rely on the ceteris paribus assumption.

Question 54

Stylized economic models must include:

A) assumptions.
B) inflation.
C) money.
D) complexity.

Question 55

Which statement is NOT a macroeconomic issue?

A) The Federal Reserve will raise interest rates this week.
B) The unemployment rate will exceed 6% this month.
C) The country's price level has increased over the last quarter.
D) The production of automobiles decreased last year.

Question 56

International finance is generally studied in:

A) microeconomics.
B) macroeconomics.
C) deductive logic.
D) inductive logic.

Question 57

Which statement does NOT deal with microeconomics?

A) Profits for some manufacturing firms fell in 2009.
B) In 2009, the unemployment rate in the United States rose to nearly 10%.
C) Salaries of top executives fell in 2009.
D) Competitive markets promote efficiency.

Question 58

Which statement does NOT describe model building in economics?

A) Models are developed to cover specific behaviors only.
B) Models are created and then tested.
C) Models are used to help understand the general economy.
D) Assumptions are used to analyze an economic issue.

Question 59

Which is the BEST example of a microeconomic issue?

A) The Federal Reserve will raise interest rates this week.
B) The unemployment rate will exceed 6% this month.
C) The country's price level has increased over the last quarter.
D) The production of automobiles decreased last year.

Question 60

Which statement regarding macroeconomics and microeconomics is TRUE?

A) Microeconomics examines consumer behavior, while macroeconomics studies business behavior.
B) Macroeconomics employs many of the same analytical tools as microeconomics.
C) Because it focuses on national economies, macroeconomics does not study international trade and finance.
D) Neither macroeconomics nor microeconomics is concerned with prices.

Question 61

Production efficiency:

A) reflects how often economists make assumptions about important variables.
B) reflects how well resources are allocated.
C) reflects the fact that all labor is equally productive.
D) is an assumption used by economists that holds important variables constant.

Question 62

When the individuals who get a good or service are the ones who desire that product the most, the economy is experiencing:

A) allocative efficiency.
B) production efficiency.
C) equity.
D) deflation.

Question 63

Production efficiency occurs when goods are:

A) produced with the lowest possible resource cost.
B) allocated equally.
C) delivered to those who have the greatest willingness and ability to acquire them.
D) allocated to those with the greatest need.

Question 64

Scarcity:

A) is synonymous with poverty.
B) is eliminated with greater technology.
C) is faced by all individuals and societies.
D) can be eliminated with adequate resources.

Question 65

Economists generally have _____ to say about equity than efficiency.

A) less
B) a little bit more
C) about the same
D) much more

Question 66

Production inefficiency implies that:

A) goods are produced at too high a cost.
B) people who want the specific goods cannot get them at any price.
C) too many Twinkies and too few Ding Dongs were produced.
D) workers are lazy.

Question 67

Resources are:

A) unlimited, but wants are limited.
B) limited, but efficiency is unlimited.
C) limited, but wants are unlimited.
D) unlimited, but efficiency is limited.

Question 68

Consider the following statements. Which, if any, are positive statements? I. Main Street needs more coffee shops.
II) A new parking garage on campus will reduce parking congestion.
III) Last winter, the state should have spent more money on snow removal.

A) I
B) I and II
C) II only
D) I, II, and III

Question 69

An economy exhibits production efficiency if:

A) it produces more than enough clothes to clothe everyone.
B) economic growth increases every year.
C) it produces goods at the lowest possible cost.
D) it eliminates poverty.

Question 70

The problem of the medically uninsured involves:

A) opportunity cost.
B) equity.
C) production efficiency.
D) allocative efficiency.

Question 71

When government policies are being designed:

A) there is usually a tradeoff between equity and efficiency.
B) equity and efficiency goals are usually independent of each other.
C) equity can usually be achieved without an efficiency loss.
D) increasing efficiency usually results in more equity.

Question 72

Efficiency within economics focuses on:

A) how well resources are used and allocated.
B) the fairness of various policies.
C) how quickly a task can be completed.
D) calculations of opportunity cost.

Question 73

In the study of economics, the goals of efficiency and equity are often:

A) compatible.
B) in conflict with one another.
C) objectively definable.
D) given equal emphasis.

Question 74

Allocative inefficiency implies that:

A) goods are produced at too high at cost.
B) the people who want a specific good the most cannot get it, while others can.
C) too many Twinkies and too few Ding Dongs were produced.
D) workers are lazy.

Question 75

Which statement is an example of a normative question?

A) How do interest rates influence employment?
B) How should a society achieve full employment?
C) How do unemployment rates differ among nations?
D) What are the long-term effects of unemployment?

Question 76

When goods are produced at the lowest possible cost, the economy is experiencing:

A) allocative efficiency.
B) production efficiency.
C) equity.
D) deflation.

Question 77

Which statement is NOT true?

A) There are often tradeoffs between efficiency and equity.
B) Both equity and efficiency are subjective concepts.
C) There are often disagreements over what is an equitable distribution of income.
D) Another term for equity is fairness.

Question 78

The main focus of efficiency is for:

A) firms to charge high prices for their goods.
B) firms to earn the largest profits.
C) consumers to get the goods and services they want at the lowest possible resource cost.
D) consumers to pay high prices.

Question 79

If a society produces a pie at the lowest possible cost and then distributes the pie evenly among its population, then:

A) production and allocative efficiency are achieved.
B) only production efficiency is achieved.
C) neither production efficiency nor allocative efficiency is achieved.
D) only allocative efficiency is achieved.

Question 80

A society that is able to produce goods and services at the lowest possible cost is experiencing:

A) allocative efficiency.
B) production efficiency.
C) opportunity costs.
D) scarcity.