Deck 1: The Nature of Economics

Question 1

Resources are also known as

A)minerals.
B)factories.
C)factors of production.
D)money.

Answer 1

factors of production.

Question 2

Scarcity means

A)not being able to satisfy all of everyone's needs.
B)not being able to satisfy all of everyone's wants.
C)having too little of a product to serve all customers who wish to buy it.
D)the same thing as shortage.

Answer 2

not being able to satisfy all of everyone's wants.

Question 3

Imagine (assume)you have just met someone who truly means it when they say they "have everything they could want." As a result,

A)scarcity would not be a problem.
B)scarcity would still be a problem unless every person in the world felt that way.
C)that person would not be rational.
D)that person's behaviour would not be self-interested.

Answer 3

scarcity would still be a problem unless every person in the world felt that way.

Question 4

In economic analysis,resources are ________ while people's wants are ________.

A)unlimited,unlimited.
B)limited,limited.
C)limited,greater than can all be satisfied.
D)unlimited,limited.

Question 5

Production refers to

A)physically producing material goods only.
B)any activity carried on by a firm,whether a corporation,partnership,or sole proprietorship.
C)any activity that results in the conversion of resources into goods and services that can be consumed.
D)any activity that causes the material conversion of an object.

Question 6

Scarcity implies that people must

A)be selfish.
B)make choices.
C)be unhappy.
D)not be selfish.

Question 7

Scarcity implies that

A)people should limit their wants.
B)firms must become more efficient when producing goods.
C)people must make choices.
D)non-renewable resources should never be used.

Question 8

Economists sometimes say that wants are "unlimited" because

A)even if everyone could have all of the goods and services they wanted,they would not have enough time to enjoy them all.
B)studies have shown that they are unlimited.
C)no one ever has all they want of anything.
D)there are always going to be some people richer than others.

Question 9

"Wants" are

A)another term for needs.
B)all the things people would consume if they had unlimited incomes.
C)the things people consume with their current incomes.
D)all the things people really need in order to live comfortably.

Question 10

A person goes to college to become an engineer.This action is an example of an

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

Question 11

Services can be thought of as

A)free goods.
B)intangible goods.
C)unvalued goods.
D)unwanted goods.

Question 12

The most basic concept in economics is

A)wealth.
B)income.
C)scarcity.
D)spending.

Question 13

Economists speak of using resources to satisfy wants,not needs.They do so because

A)needs are most usefully viewed as wants an individual would give up large amounts of other desirable things to satisfy.
B)only biologists and psychologists are qualified to talk about human needs.
C)there are not enough resources to satisfy all wants of everyone in the world but there are enough to satisfy their needs.
D)people never make choices between their different needs.

Question 14

In economic language,"wants"

A)is another term for needs.
B)refer to services while needs refer to goods.
C)is the term used by economists instead of needs because needs are not objectively definable.
D)are used by economists and refer to the same thing as needs when used by psychologists.

Question 15

Scarcity exists because human wants ________.

Question 16

Which of the following statements about scarcity is TRUE?

A)Scarcity is no longer a problem for industrialized countries.
B)Scarcity is a problem only in countries that do not use markets to organize economic activity.
C)Scarcity exists in all societies.
D)Scarcity is a problem only in countries that use markets to organize economic activity.

Question 17

In economic language,when a resource is used to produce output it is referred to as a ________.

Question 18

In producing goods and services,trade-offs exist between different items because

A)human wants and needs are limited at a particular point in time.
B)buyers and sellers often must negotiate prices.
C)not all production is efficient.
D)society has only a limited amount of productive resources.

Question 19

In economics,the things that people would consume if they had unlimited income,or if goods and services were available to them for free,are known as

A)needs.
B)wants.
C)preferences.
D)outputs.

Question 20

Economists do NOT refer to individual resources (such as oil)as scarce because ________.

Question 21

Economics can usefully be defined as

A)the process by which goods are sold in free markets.
B)the study of how government can most effectively raise funds through taxation.
C)the study of how people allocate limited resources to try and satisfy their many wants.
D)the study of individual self-interests.

Question 22

Physical capital includes

A)training programs for workers.
B)improvements to natural resources.
C)money.
D)natural resources.

Question 23

Microeconomics concentrates on ________.

Question 24

In economic terminology,the accumulated experience,training and education of workers that increases their productivity is referred to as

A)labour.
B)human capital.
C)physical capital.
D)entrepreneurship.

Question 25

In economics,things that are used to produce goods and services are known as

A)resources.
B)money.
C)stocks.
D)aggregates.

Question 26

Which statement most accurately defines economics?

A)Economics is the study of how to eliminate scarcity.
B)Economics is the study of values a society should live by.
C)Economics is the study of how people make choices to satisfy their wants.
D)Economics is the study of how people make money.

Question 27

One area of study within microeconomics would be

A)the effects of inflation.
B)the effects of government spending.
C)the effects on a producer of an increase in the price of labour.
D)aggregate demand for goods and services.

Question 28

Which of the following is a factor of production?

A)Money
B)Human capital
C)Stocks
D)Bonds

Question 29

The primary goal of economics is to understand

A)how people make money.
B)how households purchase goods and services.
C)the choices people make.
D)how people earn a comfortable living.

Question 30

Microeconomics is the study of

A)the behaviour of the economy as a whole.
B)how rising prices affect the level of employment in the economy.
C)the effect that money has in the economic system.
D)decisions made by individuals and firms.

Question 31

The income that is earned when land is used to produce goods and services is ________.

Question 32

Human capital includes

A)money held by people rather than banks.
B)the skills of workers gained from experience,education,and training.
C)computer-directed robots.
D)labour.

Question 33

Economics is best described as the study of

A)how to be successful in the stock market.
B)how people allocate resources to try and satisfy their wants.
C)how people should spend their incomes.
D)why people choose certain goods and services rather than others.

Question 34

Human resources that organize,manage,and assemble the other factors of production are called ________.

Question 35

Microeconomics is the part of economic analysis that studies ________.

Question 36

The income that is earned by entrepreneurs is ________.

Question 37

The income that is earned when capital is used to produce goods and services is ________.

Question 38

When an economist refers to land as a factor of production,land includes

A)all natural resources.
B)only land that has been cleared for farming.
C)only land that has buildings on it.
D)only land that has valuable timber on it.

Question 39

Economics is a social science that involves the study of how individuals

A)develop their tastes and preferences.
B)maximize their wealth.
C)achieve happiness.
D)respond to scarcity.

Question 40

Economics is a part of the

A)social sciences.
B)natural sciences.
C)biological sciences.
D)organizational sciences.

Question 41

When studying individuals' economic behaviour,economists make the assumption that

A)only educated people act as if they were rational.
B)individuals typically act as if they were rational.
C)individuals fully understand the rationale for all of their actions.
D)self-interest is of limited relevance in predicting an individual's actions.

Question 42

Macroeconomists study the behaviour of

A)individual business firms.
B)industries.
C)consumers.
D)the overall economy.

Question 43

Macroeconomics is concerned with

A)the effects on a corporation of a strike by the union workers.
B)government decision making concerning farm price supports.
C)economic aggregates.
D)individual consumers.

Question 44

Macroeconomics studies economics from the standpoint of

A)a specific individual.
B)a typical household.
C)a typical firm.
D)the economy as a whole.

Question 45

People behave rationally when they ________.

Question 46

Macroeconomists study

A)changes in unemployment levels.
B)changes in the price of gasoline used by a trucking business.
C)the effects of a tax on beer.
D)the effects of energy price increases on steel makers.

Question 47

Macroeconomists study which of the following?

A)the impact of a change in consumer income on the sales of corn
B)the most efficient means for General Motors to produce an automobile
C)the impact of a snowstorm on the sales of snow shovels
D)the effect of a change in income taxes on the nation's rate of unemployment

Question 48

Economists typically assume people act as if they are motivated by

A)selfishness.
B)pride.
C)self-interest.
D)social justice.

Question 49

If people make their choices rationally,then

A)the behaviour of a typical individual will be predictable.
B)they will never have regrets over the decision they made.
C)everyone facing the same alternatives will make the same choice.
D)they do not behave in a self-interested manner.

Question 50

Economists assume people behave rationally.Rationality means that people

A)always understand the consequences of their decisions.
B)always weigh their decisions carefully.
C)have the necessary information to always make correct decisions.
D)do not intentionally make choices that cause themselves to be worse off.

Question 51

In economics,the idea that individuals respond predictably to opportunities to advance their self-interest is known as the ________ assumption.

Question 52

In his book "An Inquiry into the Nature and Causes of the Wealth of Nations," economist Adam Smith argued that individuals

A)always consider the impact of their actions on the welfare of others.
B)act as if motivated by self-interest.
C)never consider the impact of their actions on the welfare of others.
D)are usually not concerned with economic questions.

Question 53

Macroeconomics is best defined by which of the following statements?

A)Macroeconomics is the study of individual economic units.
B)Macroeconomics is the study of how the prices of individual goods are determined.
C)Macroeconomics is the study of how firms strive to maximize their profits.
D)Macroeconomics is the study of the economy as a whole.

Question 54

One topic of study for a microeconomist would be

A)the effects of an increase in the price of gasoline on sales of gasoline
B)the effects of an increase in government spending on unemployment levels
C)the causes of aggregate unemployment
D)the causes of inflation

Question 55

A decision made by a rational individual

A)never would make the person worse off than they would be following a different choice.
B)would always make the person wealthier than any other decision.
C)is identical to the decision that would be made by any other person facing the same choices.
D)is made with the intention of making the person better off.

Question 56

In building economic models,economists assume people behave

A)instinctively.
B)rationally.
C)irrationally.
D)greedily.

Question 57

A macroeconomist would be most likely to study

A)the effects of changing apple prices on the market for oranges.
B)the effect of increased union wages on the cost of producing automobiles.
C)the effects of an increase in wage rates on a woman's decision to enter the labour force.
D)the effects of a reduction in income tax rates on the nation's output.

Question 58

Macroeconomics often relies on microeconomic analysis because

A)microeconomics is older than macroeconomics.
B)microeconomic theory can be tested and macroeconomic theory cannot.
C)the effects of macroeconomic subjects such as inflation and unemployment are independent of individual consumers and firms.
D)all aggregates are made up of individuals and firms.

Question 59

Economists typically assume people act as if they are motivated by ________.

Question 60

Another term for "aggregate" is

A)government.
B)partial.
C)public.
D)total.

Question 61

Incentives are

A)inducement to take a particular action.
B)ineffective as a device to get people to behave in a certain fashion.
C)inappropriate ways to obtain a certain kind of behaviour.
D)useless if people behave rationally.

Question 62

The potential rewards available to an individual because a particular activity is undertaken are known as

A)gifts.
B)incentives.
C)premiums.
D)intrinsic values.

Question 63

When a particular choice is being considered,its opportunity cost is

A)the combined value of all the alternatives not selected.
B)the same thing as the money price of a good.
C)the value of the best alternative that was given up.
D)based on the intrinsic value of the good itself.

Question 64

Which of the following sets of terms are closely connected in economic analysis?

A)Goods,economic goods,and needs
B)Labour,needs,and opportunity costs
C)Choices,opportunity costs,and trade-offs
D)Production,possibilities,and wants

Question 65

Marginal benefit refers to

A)the additional benefit resulting from a particular choice
B)the extra benefit resulting from a particular choice minus the extra cost of that choice
C)a very small benefit.
D)a very large benefit.

Question 66

The opportunity cost of going to college typically includes

A)paying for room,board,and other living expenses.
B)paying tuition.
C)purchasing textbooks.
D)giving up employment possibilities while in college.

Question 67

Canadians have been spending more time on line each year.One change we can be sure has resulted is

A)they have increased their incomes.
B)they have increased their satisfaction levels
C)they have purchased more pizza
D)they have had to give up time spent on other activities.

Question 68

The opportunity cost of missing an economics class and going skiing for the day in fresh powder snow is

A)the amount by which your course grade falls as a result of missing the class.
B)the satisfaction you lose because your course grade will be lower as a result of missing the class.
C)the wages you could have earned that day at your part-time job had you not gone skiing.
D)the value of whatever would have been the best use of your day other than going skiing.

Question 69

Marginal benefit refers to

A)a small change in benefit.
B)extra benefits received when a choice is made.
C)a large change in benefit.
D)potential rewards.

Question 70

on line matchmaking services specializing in people who share very specific characteristics typically charge higher prices than do general on line dating services.One likely reason might be that

A)they generally have more attractive web sites.
B)their operating costs are higher.
C)their owners are more interested in making a profit.
D)the opportunity costs of finding matches for very specific characteristics are higher.

Question 71

In economic language,the term cost always means

A)the value of the best foregone opportunity when a choice is made.
B)the money spent purchasing land,labour,and capital inputs into production.
C)the prices of factors of production.
D)the money spent purchasing consumer goods.

Question 72

The opportunity cost of attending college can best be described as

A)the value of the best alternative use of the student's time.
B)the money that must be paid in order to attend college.
C)the value of the lowest-ranked alternative use of the student's time.
D)the value that the student attaches to not working.

Question 73

Opportunity costs are

A)subjective because each person determines the value of forgone alternatives.
B)objective because they can always be put in monetary terms.
C)subjective because it is impossible to put a monetary value on forgone alternatives.
D)objective because specific things are given up when making a choice.

Question 74

Steve and Karen decide to attend the same concert when each is given a free ticket to it.We know that

A)both bear the same opportunity cost because they are making the same choice.
B)both bear the same opportunity cost because the tickets have the same face value.
C)both bear an opportunity cost but the its value depends on what each person is giving up to attend the concert.
D)neither bears an opportunity cost since the tickets were given to them for free.

Question 75

Marginal cost is defined as

A)the cost you incur no matter which choice you make.
B)a small change in cost.
C)the addition to total cost incurred as a result of a decision.
D)the total cost incurred as a result of a decision.

Question 76

The concept of marginal cost refers to ________.

Question 77

Suppose you have four choices go to a movie,read a book,watch television,or go to a concert.You choose to go to a movie.The opportunity cost of the movie is ________.

Question 78

Sam Slapshot graduates from college with a choice of playing professional hockey at $2 million a year or (his best alternative)coaching for $50,000 a year.He decides to play hockey,but eight years later he quits as a player to make movies for $3 million a year.His opportunity cost at graduation was ________ and eight years later was ________.

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

Question 79

Fred and Ann both decide to see the same movie when they are given free tickets to it.We know that

A)both bear the same opportunity cost since they are doing the same thing.
B)the cost of going to the movie is greater for the one who had more choices to do other things.
C)both bear an opportunity cost since they could have done other things instead of see the movie.
D)neither bear an opportunity cost because the tickets were free.

Question 80

Sunk costs are

A)costs incurred in the past and that won't change as a result of current decisions.
B)the same as the marginal costs of a decision.
C)the same as the marginal benefits resulting from a decision.
D)costs incurred in the past that will change as a result of a current decision.