Deck 1: The Basics of Economics

Question 1

Economics is:

A) an analysis of markets by individuals and businesses.
B) a function of fiscal and monetary policies by governments.
C) the decision-making process undertaken by governments in using their limited resources.
D) the study of how individuals, businesses, and governments make decisions about using limited resources.

Answer 1

D

Question 2

The study of economics:

A) revolves around a central theme that human wants are limited in developing nations.
B) considers scarcity to be a situation only for developing nations.
C) looks at how individuals, businesses, and governments make decisions about how to use their limited resources.
D) is limited to examining how governments interact with each other at the federal, state, and local levels.

Answer 2

C

Question 3

Scarcity occurs when:

A) people are selfish.
B) human wants and needs exceed the resources that are available to meet those wants and needs.
C) there is insufficient demand.
D) economies are undeveloped.

Answer 3

B

Question 4

The number of tickets available for a Super Bowl is limited to the number of seats in the stadium. This is an example of:

A) equity.
B) human wants.
C) unlimited needs.
D) scarcity.

Question 5

A central theme of economic thought is that human wants are virtually _____ and resources are _____.

A) scarce; unlimited
B) insufficient; massive
C) endless; plentiful
D) unlimited; scarce

Question 6

When human wants and needs exceed the resources that are available to meet those wants and needs, _____ occurs.

A) equity
B) scarcity
C) efficiency
D) allocation

Question 7

Scarcity:

A) does not exist in the real world.
B) is experienced only by individuals.
C) is unique to business.
D) limits society's productive capacity.

Question 8

Economics assumes that most humans make _____ decisions from which they expect to benefit.

A) motivated
B) efficient
C) intelligent
D) rational

Question 9

Rational self-interest predicts that:

A) people will alter their behavior in response to changing incentives and circumstances.
B) incentives are unimportant in decision making.
C) incentives do not alter behavior.
D) the decision-making process is efficient.

Question 10

A basic assumption made by economists regarding human behavior is:

A) ceteris paribus.
B) rationality.
C) scarcity.
D) equity.

Question 11

Where does trade occur?

A) primarily in foreign markets
B) only among corporations
C) in markets
D) on Main Street

Question 12

Economics is considered a social science primarily due to its:

A) elements of psychology.
B) consideration of how people behave in the broader society.
C) lack of assumptions about human behavior.
D) elements of sociology.

Question 13

Economics starts with the premise that most humans are _____ and make decisions from which they expect to:

A) rational; benefit.
B) rational; make money.
C) irrational; benefit.
D) irrational; lose money.

Question 14

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

A) a country's unemployment rate
B) a country's inflation rate
C) a country's trade deficit
D) a decision by Boeing to open another plant

Question 15

_____ consists of all actual and potential buyers and sellers of a particular resource or product.

A) An economy
B) A society
C) A country
D) A market

Question 16

A market:

A) does not include services.
B) is absent from government intervention.
C) transaction relies solely on an exchange for money.
D) consists of all potential and actual buyers and sellers of resources and products.

Question 17

Amazon and eBay are examples of _____ markets.

A) traditional
B) retail
C) online
D) international

Question 18

In economics, resources include:

A) money and labor.
B) money and land.
C) money and physical capital.
D) labor and physical capital.

Question 19

In economics, physical capital includes:

A) stocks traded in a stock market.
B) bonds.
C) the equipment and machinery that are used to produce goods and services.
D) goods and services.

Question 20

Which branch of economics focuses on economic issues that are faced primarily by individuals and businesses in a particular segment of the economy?

A) managerial economics
B) microeconomics
C) nanoeconomics
D) macroeconomics

Question 21

Which branch of economics focuses on economic issues that impact the overall economy, such as unemployment, inflation, recessions, and economic growth?

A) managerial economics
B) microeconomics
C) behavior economics
D) macroeconomics

Question 22

Maria is analyzing the inflation rates in Brazil and Peru. Which branch of economics is Maria studying?

A) managerial economics
B) microeconomics
C) nanoeconomics
D) macroeconomics

Question 23

Matthew is analyzing the production processes of the Boeing Company. Which branch of economics is Matthew studying?

A) managerial economics
B) microeconomics
C) nanoeconomics
D) macroeconomics

Question 24

An example of a microeconomic issue is:

A) the current inflation rate.
B) the threat of recession.
C) a local electric company's decision to raise its prices.
D) a discussion of a tax bill's impact on the economy.

Question 25

An example of a macroeconomic issue is:

A) Ford Motor Company's decision to discontinue a model.
B) the threat of recession.
C) an electric company's decision to raise its prices.
D) a local planning commission's denial of an easement encroachment request from a homeowner.

Question 26

When individuals, firms, and policymakers make decisions, these decisions often have both costs and benefits. This is an example of:

A) scarcity.
B) trade-offs.
C) equity.
D) efficiency.

Question 27

What must be given up in order to acquire or do something else is known as:

A) money.
B) stocks and bonds.
C) goals.
D) opportunity cost.

Question 28

What opportunity cost does Sarah incur when she goes to a theater to see a movie?

A) the cost of her ticket
B) the price of movie-theater popcorn
C) the babysitting job she gave up in order to attend the movie
D) the cost of her ticket and the babysitting job she gave up in order to attend the movie

Question 29

An example of opportunity cost is the:

A) marginal revenue that a firm receives when producing one more product.
B) time that a student spends studying for an economics test that results in less study time for a math test.
C) price of a new car.
D) decrease in disposable income as taxes increase.

Question 30

Marginal analysis is:

A) a method that is used to determine income tax brackets.
B) a method that is seldom used by economists.
C) the process of comparing the additional benefits of an activity with the additional costs.
D) another way of explaining disposal income.

Question 31

_____ is the extra revenue earned by a business from selling one additional item.

A) Marginal revenue
B) Marginal cost
C) Total revenue
D) Total cost

Question 32

_____ is the extra cost of selling one additional item.

A) Marginal revenue
B) Marginal cost
C) Total revenue
D) Total cost

Question 33

Prices not adjusted for inflation are:

A) real.
B) marginal.
C) total.
D) nominal.

Question 34

Suzanne just obtained a car loan at a 5% interest rate. This is a _____ interest rate.

A) real
B) marginal
C) total
D) nominal

Question 35

A bank would like to make a 2% real return on its car loans. The expected inflation rate is 4%. What rate should the bank charge?

A) 2%
B) 4%
C) 6%
D) 8%

Question 36

Grace is considering the purchase of a dress with a price tag of $45.00. This is a _____ price.

A) real
B) marginal
C) artificial
D) nominal

Question 37

Prices adjusted for inflation are:

A) real.
B) marginal.
C) total.
D) nominal.

Question 38

Maria was thrilled to receive a 3% raise. Inflation is 4%. Maria is experiencing:

A) money illusion.
B) opportunity cost.
C) income inflation.
D) tunnel vision.

Question 39

The time necessary to make all adjustments to new economic circumstances is known as:

A) the long run.
B) the short run.
C) circumstantial.
D) periodical.

Question 40

The time insufficient to make all adjustments to new economic circumstances is known as:

A) the long run.
B) the short run.
C) circumstantial.
D) periodical.

Question 41

The price of a gallon of gas increases unexpectedly by $4 per gallon. Because Tracey's gas warning light is on, in the _____ run, she has to pay the higher gas price. However, in the ____ run, she will be able to make car-pooling arrangements with a friend.

A) long; short
B) long; long.
C) short; long
D) short; short

Question 42

A firm is submitting a bid to build a bridge that will take five years to build. In their bid, the firm's estimators have included forecasted price increases on supplies over the five-year period. This firm is taking a _____ view of the project.

A) long-run.
B) short-run.
C) circumstantial.
D) periodical.

Question 43

The market that consists of buyers and sellers of assets like stocks, bonds, and foreign currencies is known as the:

A) labor market.
B) financial market.
C) resource market.
D) commodity market.

Question 44

The market that connects employees and employers is known as the:

A) labor market.
B) financial market.
C) product market.
D) commodity market.

Question 45

The efficiency of the labor market is directly connected to:

A) production output.
B) inflation.
C) scarcity.
D) scarce resources.

Question 46

Soybeans are traded in the _____ market.

A) labor
B) financial
C) resource
D) commodity

Question 47

The question of whether student loans should or should not be forgiven is an example of:

A) marginal benefit.
B) positive analysis.
C) normative analysis.
D) marginal cost.

Question 48

_____ analysis is subjective and value-based.

A) Cost-benefit
B) Positive
C) Normative
D) Marginal cost

Question 49

_____ analysis considers questions involving cause and effect.

A) Cost-benefit
B) Positive
C) Normative
D) Marginal cost

Question 50

A firm deciding the best way to support its sustainability initiatives is an example of:

A) marginal benefit.
B) positive analysis.
C) normative analysis.
D) marginal cost.

Question 51

Efficiency is:

A) utilizing all resources equally.
B) utilizing available resources to maximize output.
C) allocating resources.
D) distributing resources.

Question 52

Producing as much as possible with available resources results is known as:

A) scarcity.
B) equity.
C) efficiency.
D) effectiveness.

Question 53

Fairness of output and income distribution is known as:

A) equity.
B) efficiency.
C) effectiveness.
D) scarcity.

Question 54

Inherited wealth is an example of:

A) inequity.
B) inefficiency.
C) ineffectiveness.
D) scarcity.

Question 55

A manufacturing firm that is producing at less than maximum output due to a government restriction on hours of operation is operating:

A) with less competition.
B) at a loss.
C) with fewer resources.
D) inefficiently.

Question 56

The factors of production are known as:

A) natural resources, labor, physical capital, and entrepreneurship.
B) natural resources, labor, physical capital, and output.
C) labor, output, physical capital, and unions.
D) output, labor, transportation, and entrepreneurship.

Question 57

The inputs used in the production of goods and services are factors of:

A) efficiency.
B) equity.
C) scarcity.
D) production.

Question 58

Labor is defined:

A) solely as physical work for which payment is received.
B) as human effort used in the production of goods and services.
C) as physical capital used in human effort.
D) as the entrepreneurship ability used to produce goods.

Question 59

The payment for labor is:

A) wages and salaries.
B) rent.
C) dividends.
D) interest.

Question 60

Inputs that are found in nature and that can be used in the production process are known as:

A) physical capital.
B) human capital.
C) natural resources.
D) money.

Question 61

Oil drilled from the ground in Saudi Arabia is considered which factor of production?

A) land
B) human capital
C) a natural resource
D) physical capital

Question 62

The equipment and machinery that are used to produce goods and services are known as:

A) physical capital.
B) human capital.
C) natural resources.
D) financial capital.

Question 63

A farmer uses soil, seeds, a highly skilled foreman, tractors, and a barn to produce his harvest. Which factor of production is the soil?

A) natural resources
B) human capital
C) entrepreneurship
D) physical capital

Question 64

A farmer uses soil, seeds, a highly skilled foreman, tractors, and a barn to produce his harvest. Which factor of production is the foreman?

A) labor
B) human capital
C) natural resources
D) physical capital

Question 65

A farmer uses soil, seeds, a highly skilled foreman, tractors, and a barn to produce his harvest. Which factor of production are the tractors?

A) labor
B) human capital
C) natural resources
D) physical capital

Question 66

A farmer uses soil, seeds, a highly skilled foreman, tractors, and a barn to produce his harvest. Which factor of production is the barn?

A) entrepreneurship
B) human capital
C) natural resources
D) physical capital

Question 67

A farmer uses soil, seeds, a highly skilled foreman, tractors, and a barn to produce his harvest. Which factor of production is the farmer?

A) entrepreneurship
B) human capital
C) natural resources
D) physical capital

Question 68

The eBay website uses technology and the Internet for its virtual marketplace, employs personnel to maintain the technology, provides office space for employees, and has a founder who quit a lucrative career in another industry. Which factor of production is the founder?

A) entrepreneurship
B) human capital
C) natural resources
D) physical capital

Question 69

The eBay website uses technology and the Internet for its virtual marketplace, employs personnel to maintain the technology, provides office space for employees, and has a founder who quit a lucrative career in another industry. Which factor of production are computers used to access the Internet?

A) entrepreneurship
B) human capital
C) natural resources
D) physical capital

Question 70

Exxon Mobil is an oil and gas company that operates in the energy sector. Which factor of production do oil and gas employ?

A) entrepreneur
B) human capital
C) natural resources
D) physical capital

Question 71

The eBay website uses technology and the Internet for its virtual marketplace, employs personnel to maintain the technology, provides office space for employees, and has a founder who quit a lucrative career in another industry. Which factor of production are employees?

A) entrepreneurship
B) human capital
C) natural resources
D) physical capital

Question 72

The eBay website uses technology and the Internet for its virtual marketplace, employs personnel to maintain the technology, provides office space for employees, and has a founder who quit a lucrative career in another industry. Which factor of production is the office space?

A) entrepreneurship
B) human capital
C) natural resources
D) physical capital

Question 73

Skills that are acquired through education, experience, and training and that allow labor to be more productive are known as:

A) physical capital.
B) human capital.
C) natural resources.
D) financial capital.

Question 74

Individuals who combine various resources into a business in pursuit of profit are known as:

A) members of a union.
B) farmers.
C) employees.
D) entrepreneurs.

Question 75

Which factor of production has limited availability and thus constrains what society is capable of producing?

A) natural resources
B) labor
C) capital
D) natural resources, labor, and capital

Question 76

The ceteris paribus assumption:

A) means that other economic and business conditions are held constant.
B) is not a critical component of economic thinking.
C) was used by ancient Greeks in trade.
D) is Latin for "go forth and conquer."

Question 77

The practice of holding other factors constant in order to understand the effect of a specific variable is known as the:

A) scientific method.
B) ceteris paribus assumption.
C) invisible hand.
D) law of averages.

Question 78

In economics, when a business invests in capital, it is:

A) raising money.
B) purchasing equipment and machinery.
C) selling stocks and bonds.
D) raising prices.

Question 79

In economics, when a business increases investment, it is:

A) raising money.
B) purchasing equipment and machinery.
C) selling stocks and bonds.
D) purchasing stocks and bonds.

Question 80

When a business increases investment, what is the effect on the economy?

A) There is no effect on the economy.
B) Prices on goods and services increase.
C) The amount of physical capital increases.
D) The firm's financial capital increases.