Deck 1: What Is Economics

Question 1

Keeping in mind economists' definition of factors of production, which of the following is NOT a factor of production?

A) Money
B) An engineer
C) Coal
D) Low- skilled labour

Answer 1

Money

Question 2

Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares

A) the total revenue from sales of printers to the total cost of producing all the printers.
B) the extra revenue from selling a few additional printers to the extra costs of producing the printers.
C) HP's printers to printers from competing companies, such as Lexmark.
D) the extra revenue from selling a few additional printers to the average cost of producing the additional printers.

Answer 2

the extra revenue from selling a few additional printers to the extra costs of producing the printers.

Question 3

Which of the following is NOT part of the first big economic question?

A) For whom are goods and services produced?
B) What goods and services are produced?
C) Why do incentives affect only marginal costs?
D) How are goods and services produced?

Answer 3

Why do incentives affect only marginal costs?

Question 4

In the above diagram, which figure shows a linear relationship?

A) Figure A
B) Figure B
C) Both Figure A and Figure B
D) Neither Figure A nor Figure B

Question 5

Which of the following is the BEST definition of economics?

A) The study of how individuals, businesses, governments and entire societies make choices as they cope with scarcity and the incentives that influence and reconcile those choices
B) The study of how consumers satisfy their limited wants with a given income
C) The study of how consumers and producers interact in the market
D) The study of how producers decide what inputs to hire and what outputs to produce

Question 6

Which of the following statements are correct?
I. The "highest- valued alternative given up to get something" is the opportunity cost.
II. Wealthy economies don't experience opportunity costs.
III. Scarcity creates opportunity costs.

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

Question 7

In the table above, y is measured along the y- axis and x along the x- axis. The slope of the relationship between x = 0 and x = 2 is

A) 3.
B) - 6.
C) 2.
D) 6.

Question 8

The slope of a straight line is

A) decreasing.
B) constant.
C) variable.
D) increasing.

Question 9

A positive statement is

A) about what is.
B) about what ought to be.
C) the result of a model's normative assumptions.
D) valid only in the context of a model with simple assumptions.

Question 10

In the above figure, when the interest rate is 8 per cent and household income is $40,000, household consumption is

A) $60,000.
B) $20,000.
C) $0.
D) $35,000.

Question 11

Which of the following creates an incentive to increase the amount of an activity?

A) Constant marginal cost and constant marginal benefit of the activity
B) A decrease in the marginal cost of the activity and an increase in the marginal benefit of the activity
C) An increase in the marginal cost of the activity and a decrease in the marginal benefit of the activity
D) None of the above creates an incentive to increase the amount of an activity.

Question 12

In the above figure, the slope across the arc between b and c is

A) 2/3.
B) 2.
C) 1.
D) 1/2.

Question 13

The opportunity cost of any action is

A) the dollars the action cost.
B) the benefit from the action minus the cost of the action.
C) the highest- valued alternative given up.
D) all the possible alternatives given up.

Question 14

The slope of the line in the above figure is

A) independent.
B) positive.
C) direct.
D) negative.

Question 15

A lawn service is deciding whether to add an additional employee to its summer crew. The marginal cost of hiring this worker depends on the

A) the total amount paid to all the workers, both the new one and the previously hired workers.
B) total amount paid to only the new worker.
C) total amount paid to all previously hired workers.
D) the additional revenue created by having an additional worker minus the cost of hiring the worker.

Question 16

Economics is BEST defined as the study of how people, businesses, governments and societies

A) use their infinite resources.
B) make choices to cope with scarcity.
C) attain wealth.
D) choose abundance over scarcity.

Question 17

The study of the changes in the economy's total output of goods and services over long periods of time is defined as

A) microeconomics.
B) macroeconomics.
C) normative economics.
D) positive economics.

Question 18

The horizontal axis in a graph

A) is named the y- axis.
B) is named the x- axis.
C) measures time in a scatter diagram.
D) measures the quality of a variable.

Question 19

Economists point out that scarcity confronts

A) the rich but not the poor.
B) the poor but not the rich.
C) neither the poor nor the rich.
D) both the poor and the rich.

Question 20

The opportunity cost of attending college includes the cost of

A) the highest- valued alternative to attending college.
B) tuition, books and the lost wages for the hours spent studying.
C) the tuition but not the job at which you would otherwise have worked.
D) the highest- valued alternative to attending college plus the cost of tuition.

Question 21

An inducement to take a particular action is called

A) an incentive.
B) the marginal cost.
C) opportunity cost.
D) the marginal benefit.

Question 22

In the above figure, the slope across the arc between a and b is

A) 1/4.
B) 1.
C) - 1/4.
D) - 4.

Question 23

The above figure plots income and consumption in a nation. In 2007

A) consumption was equal to $28,000 and income was equal to $25,000.
B) consumption was equal to $25,000 and income was equal to $25,000.
C) consumption was equal to $27,000 and income was equal to $31,000.
D) consumption was equal to $25,000 and income was equal to $28,000.

Question 24

In the above table, when x increases from 4 units to 6 units, y changes by _______ units.

A) 6
B) 2
C) - 2
D) - 6

Question 25

Which of the following is correct? The factors of production are

A) land, labour, capital and money.
B) the fundamental source of energy.
C) land, labour, capital and entrepreneurship.
D) land, labour, capital and profits.

Question 26

Which of the following is a macroeconomic issue?

A) The cause of a decline in the price of peanut butter
B) How federal government budget deficits affect interest rates
C) How a rise in the price of sugar affects the market for colas
D) What determines the amount a firm will produce

Question 27

Which of the following is NOT a normative statement?

A) The distribution of income is fair.
B) The government ought to provide health care for everyone.
C) Corporations should be more socially responsible.
D) People buy more of a good or service when its price falls.

Question 28

In the above figure, the slope at point b is

A) greater than 5/2.
B) between 1 and 5/2.
C) 5/2.
D) 1.

Question 29

The vertical axis in a graph

A) has no origin.
B) is named the x- axis.
C) is named the y- axis.
D) is not used in a scatter diagram.

Question 30

When Alice makes the statement, "The cost of living has increased 10 per cent over the past 10 years," she is

A) making a normative statement.
B) making a positive statement.
C) facing the standard of living tradeoff.
D) testing an economic model.

Question 31

An art museum decides to offer tours by having visitors listen to cassette tapes rather than have tour guides. The museum is answering the _______ part of one of the two big economic questions.

A) "scarcity"
B) "what"
C) "how"
D) "why"

Question 32

In the table above, y is measured along the y- axis and x along the x- axis. What is the value of the slope between the x = 8 and x = 6?

A) 70
B) - 35
C) - 19.28
D) - 0.057

Question 33

Australian producers decide to produce more compact cars and fewer tractors as the price of fuel rises. Producers are answering the _______ part of one of the two big economic questions.

A) "when"
B) "how"
C) "how many"
D) "what"

Question 34

In the above figure, using the slope across an arc, the slope of the curve between points a and b is

A) - 2.
B) - 1/2.
C) 2.
D) 1/2.

Question 35

Which of the following is NOT an investment in human capital?

A) A computer science student takes a course on programming a laptop computer.
B) A business student takes a seminar in using a laptop computer.
C) A computer science student learns how to repair a laptop computer.
D) A student purchases a laptop computer.

Question 36

Which factor of production earns rent?

A) Capital
B) Money
C) Entrepreneurship
D) Land

Question 37

In the above figure, using the slope across an arc, the slope of the curve between points b and c is

A) - 1/3.
B) 1/3.
C) 3.
D) - 3.

Question 38

In the above figure, the curve has a slope that is .

A) negative and becoming larger in magnitude
B) negative and becoming smaller in magnitude
C) positive and becoming larger in magnitude
D) positive and becoming smaller in magnitude

Question 39

In terms of dollars, the marginal benefit of working five days a week instead of four days a week is

A) the wages received for the fifth day of work.
B) the wages received for four days of work.
C) the wages received for five days of work.
D) None of the above answers is correct.

Question 40

Which of the following is an example of a microeconomic decision?

A) A multinational company deciding where to relocate its world headquarters
B) An individual deciding how to allocate the time he or she has for work and leisure
C) A small shoe factory deciding how much leather to purchase for the next quarter's production need
D) All of the above answers are correct.

Question 41

In the above figure,

A) consumption expenditures are a linear function of labour income.
B) consumption expenditures are positively related to labour income.
C) the slope of the function depicted is 0.9.
D) All of the above answers are correct.

Question 42

With y measured on the vertical axis and x measured on the horizontal axis, the slope of a straight line is defined as

A) (change in y)/(change in x).
B) y/x.
C) (change in x)/(change in y).
D) x/y.

Question 43

Suppose we are considering the relationship between two variables y and x. y is measured on the y- axis and x is measured on the x- axis, and the relationship between them is a straight line. Suppose that the slope of the line is equal to 1. This slope means that

A) a change in x is associated with a bigger change in y.
B) a change in x is associated with no change in y.
C) a change in x is associated with a smaller change in y.
D) a change in x is associated with an equal change in y.

Question 44

Which of the following is NOT a factor of production?

A) The wages paid to workers.
B) The water used to cool a nuclear power plant.
C) The effort of farmers raising cattle.
D) The management skill of a small business owner.

Question 45

All economic questions arise because we

A) have limited wants that need to be satisfied.
B) want more than we can get.
C) have an abundance of resources.
D) want more than we need.

Question 46

In the above figure, the slope across the arc between c and d is

A) 2.
B) 4/3.
C) 1/2.
D) 1.

Question 47

When a country decides to produce fewer fighter jets and more public housing projects, it is answering the _______ part of one of the two big economic questions.

A) "defence"
B) "for whom"
C) "what"
D) "how"

Question 48

Bill Hogan graduates from college with a choice of playing professional football at $2 million a year or coaching for $50,000 a year. He decides to play football, but eight years later, even though he could continue to play football at $2 million a year, he quits football to make movies for $3 million a year. His opportunity cost of playing football at graduation was _______ and eight years later the opportunity cost of making movies was _______.

A) $50,000; $50,000
B) $2 million; $3 million
C) $50,000; $2 million
D) $2 million; $2 million

Question 49

If the quantity of wood purchased decreases when the price of wood rises, a graph representing these variables would have

A) a negative slope.
B) time on the vertical axis.
C) the slope on the vertical axis.
D) a positive slope.

Question 50

Which of the following is a positive statement?

A) An unemployment rate of 9 per cent is a national disgrace.
B) When the national unemployment rate is 9 per cent, the unemployment rate for inner- city youth is often close to 40 per cent.
C) Unemployment and inflation are equally important problems.
D) Unemployment is a more important problem than inflation.

Question 51

The study of economics

A) arises from the fact that our wants exceed available resources.
B) deals mainly with microeconomics.
C) recognises that scarcity does not affect rich nations.
D) focuses mainly on individual consumers.

Question 52

Which of the following are considered factors of production used to produce goods and services?
I. Land
II. Labour
III. Capital
IV. Entrepreneurship

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

Question 53

Select the BEST statement about economic models.

A) An economic model should not generate predictions about actual events in the real world, since it discusses only abstract events.
B) An economic model will be discarded if its predictions are often in conflict with the facts.
C) An economic model must always be correct in its predictions or it must be discarded.
D) All economic models are false.

Question 54

In the above figure, when income is zero, household expenditures equal

A) $0.
B) $8,000.
C) $4,000.
D) $1,000.

Question 55

When a farmer decides to raise pigs instead of cattle, the farmer is answering the _______ part of one of the two big economic questions.

A) "for whom"
B) "what"
C) "how"
D) "why"

Question 56

Which of the following is a normative statement?

A) Low rents are good because they make apartments more affordable.
B) Housing costs are rising.
C) Owners of apartment buildings are free to charge whatever rent they want.
D) Low rents will restrict the supply of housing.

Question 57

The problem of "scarcity" applies

A) only in underdeveloped countries because there are few productive resources in these countries.
B) only in industrially developed countries because resources are scarce in these countries.
C) to all economic systems, regardless of their level of development.
D) only in economic systems that are just beginning to develop because specialised resources are scarce.

Question 58

Assume that the quantity consumed of pizza is dependent on three factors: the price of a pizza, the income of pizza purchasers, and consumers' taste for pizza. When graphing the relationship between the price of a pizza and the quantity of pizza consumed,

A) consumers' taste for pizza and the income of pizza purchasers are the only variables that are allowed to change.
B) the price of a pizza and the income of pizza consumers are the only variables that are allowed to change.
C) the price of pizza and quantity consumed of pizza are the only variables that are allowed to change.
D) None of the above answers is correct.

Question 59

A graph measures y on the vertical axis and x on the horizontal. The curve on the graph is a horizontal line. From this fact we know that

A) the value of x never changes.
B) the ratio of x to y is constant.
C) the slope of the line is not defined because y never changes.
D) the value of y does not depend on the value of x.

Question 60

In the above figure, the slope across the arc between a and b is

A) 1.
B) 2/5.
C) 3/2.
D) 5/2.

Question 61

Samantha goes to college to become an engineer. This is an example of an

A) increase in labour.
B) investment in human capital.
C) increase in entrepreneurship.
D) investment in physical capital.

Question 62

When the government chooses to use resources to build a dam, these resources are no longer available to build a highway. This choice illustrates the concept of

A) a fallacy of composition.
B) opportunity cost.
C) good governance.
D) a market mechanism.

Question 63

Which of the following correctly describes the above figure?
I. There is no relationship between the price of an avocado and a student's grade in economics.
II. The value of the variable measured on the y- axis is constant as the variable measured on the
X- axis increases.
III. As a student's grade in economics increases, the price of an avocado increases.

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

Question 64

In part, microeconomics is concerned with

A) factors that explain changes in the unemployment rate over time.
B) the Reserve Bank's policy decisions.
C) how a business firm decides upon the amount it produces and the price it sets.
D) changes in the economy's total output of goods and services over long periods of time.

Question 65

The economic resource that organises the use of other economic resources is called

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

Question 66

Scarcity can be eliminated through

A) wise use of our resources.
B) exploration that helps us find new resources.
C) the use of market mechanisms.
D) None of the above because scarcity cannot be eliminated.

Question 67

A good economic model

A) should not include more than two variables.
B) includes all those features of the world that can be described numerically.
C) describes every aspect of the economic world, with no exceptions.
D) includes only those features of the world that are needed for the purpose at hand.

Question 68

In the figure above, the relationship between the x variable and the y variable

A) starts by being negative and then becomes positive.
B) starts by being positive and then becomes negative.
C) is negative.
D) is positive.

Question 69

Human resources that perform the functions of organising, managing and assembling the other resources are called

A) productive capital.
B) venture capital.
C) physical capital.
D) entrepreneurship.

Question 70

You notice that when the inflation rate increases, the interest rate tends to increase. This observation indicates that

A) there might be false causality between inflation and the interest rate.
B) higher inflation rates must cause a higher interest rate.
C) the variables have an inverse relationship.
D) a scatter diagram of the inflation rate and the interest rate will show a positive relationship.

Question 71

The term "opportunity cost" points out that

A) not all individuals will make the most of life's opportunities because some will fail to achieve their goals.
B) there may be such a thing as a free lunch.
C) executives do not always recognise opportunities for profit as quickly as they should.
D) any decision regarding the use of a resource involves a costly choice.

Question 72

Your employer has asked you to start working overtime and has offered to pay $18 per hour for every hour you work beyond forty hours a week. The wage rate for each of the first forty hours will continue to be the usual $15 per hour. In terms of dollars, what is the marginal benefit of working each hour of overtime?

A) Zero
B) $15.00
C) $3.00
D) $18.00

Question 73

Which of the following correctly describes the above figure?

A) There is a positive relationship between x and y.
B) There is no relationship between x and y.
C) There is a negative relationship between x and y.
D) None of the above answers is correct.

Question 74

When China builds a dam using few machines and a great deal of labour, it is answering the _______
Part of one of the two big economic questions.

A) "for whom"
B) "what"
C) "where"
D) "how"

Question 75

In the above figure, the slope across the arc between b and d is

A) 1/3.
B) 1/2.
C) 5/3.
D) 6/5.

Question 76

In every economic system, choices must be made because resources are_______ and our wants are
_______.

A) unlimited; limited
B) limited; limited
C) limited; unlimited
D) unlimited; unlimited

Question 77

Suppose that you are spending two hours a day studying economics, and your grade is 85 per cent. You want a higher grade and decide to study for an extra hour a day. As a result, your grade rises to 90 per cent. Your marginal benefit is the

A) three hours per day you spend studying.
B) extra hour per day you spend studying.
C) five point increase in your grade.
D) five point increase in your grade minus the opportunity cost to you of spending the hour studying.

Question 78

Jill, an economics student, has already spent five hours cleaning her room. In deciding whether or not to continue cleaning for another hour, she applies the economic principle of

A) choosing at the margin.
B) scarcity.
C) productivity.
D) ceteris paribus.

Question 79

If a large change in the variable measured on the x- axis is associated with a small change in the variable measured on the y- axis, the line is _______ and the slope is _______.

A) downward- sloping; small
B) upward- sloping; small
C) downward- sloping; large
D) either downward or upward- sloping; small

Question 80

The largest part of what Australia produces today are _______ such as _______.

A) goods; education and entertainment
B) services; trade and health care
C) services; textbooks and computers
D) goods; food and electronic equipment