MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) In economics, choices must be made because we live in a world of
A) unemployment. B) unlimited resources.
C) greed.D) scarcity.
2) Which of the following statements is trueabout scarcity?
A) Scarcity arises when there is a wide disparity in income distribution.
B) Scarcity is not a problem for the wealthy.
C) Scarcity is only a problem when a country has too large a population.
D) Scarcity refers to the situation in which unlimited wants exceed limited resources.
3) By definition, economics is the study of
A) the choices people make to attain their goals, given their scarce resources.
B) how to make money in the stock market.
C) how to make money in a market economy.
D) supply and demand.
4) An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue.
A) modelB) trade-offC) variableD) market
5) Economists assume that individuals
A) behave in unpredictable ways.
B) are rational and respond to incentives.
C) prefer to live in a society that values fairness above all else.
D) will never take actions to help others.
6) Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.
A) selfishlyB) emotionallyC) rationallyD) equitably
7) Consider the following statements:
a.Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area.
b.Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment.
c.Firms produce more of a particular DVD when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?
A) a only.B) b only.C) c only.D) a and b.E) a, b, and c.
8) Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and therefore choose to invest in foreign markets. By using all available information as they act to achieve their goals, these investors are exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
9) Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that
A) there is no correlation between having health insurance and being overweight.
B) people with health insurance will be less likely to be overweight than people without health insurance.
C) people with health insurance will be equally likely to be overweight as people without health insurance.
D) people with health insurance will be more likely to be overweight than people without health insurance.
10) In economics, the term ________ means “additional” or “extra.”
A) equity B) allocativeC) marginalD) optimal
11) Making optimal decisions “at the margin” requires
A) weighing the costs and benefits of a decision before deciding if it should be pursued.
B) making borderline decisions.
C) making decisions according to one’s whims and fancies.
D) making consistently irrational decisions.
12) DeShawn’s Detailing is a service that details cars at the customers’ homes or places of work. DeShawn’s cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car’s engine, a service that adds an additional $20 to the total cost of the package. What is DeShawn’s marginal benefit if he sells a basic detailing package?
C) He makes a marginal loss of $15, not a marginal benefit.
D) The marginal benefit cannot be determined.
13) DeShawn’s Detailing is a service that details cars at the customers’ homes or places of work. DeShawn’s cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car’s engine, a service that adds an additional $20 to the total cost of the package. What is the marginal cost of adding the engine detailing to the basic detailing package?
A) $20B) $30
C) $60D) $60 plus the value of his time
14) Allison’s Auto Art is a company that applies pinstripes to vehicles. Allison’s cost for a basic 1-color pinstriping job is $35, and she charges $95 for this service. For a total price of $175, Allison will apply a fancier 3-color pinstripe application to an automobile, a service that adds an additional $40 to the total cost of the package. Should Allison continue to offer the 3-color pinstripe application?
A) yes, she still makes a profit by selling the 3-color application.
B) no, her marginal benefit is less than her marginal cost
C) yes, but only if she lowers the price of the 1-color application
D) More information is needed for Allison to make this decision.
Total Revenue (dollars)
Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour.
15) Refer to Table 1–1. Using marginal analysis, how many hours should Lydia extend her nail salon’s hours of operations?
A) 2 hoursB) 3 hoursC) 4 hoursD) 5 hoursE) 6 hours
16) Refer to Table 1–1. What is Lydia’s marginal cost if she decides to stay open for two hours instead of one hour?
A) $10B) $20C) $25D) $40
17) Soo Jin shares a one-bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics major, you rightly conclude that
A) the cost of having one’s own space outweighs the benefits.
B) Soo Jin figures that the benefit of having her own place (as opposed to sharing) is at least $950.
C) Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250.
D) Soo Jin did not have a choice; her roommate was a slob.
18) Economic models do all of the following except
A) portray reality in all its minute details.
B) make economic ideas explicit and concrete for use by decision makers.
C) answer economic questions.
D) simplify some aspect of economic life.
19) Which of the following statements about positive economic analysis is false?
A) There is much more disagreement among economists over normative economic analysis than over positive economic analysis.
B) Unlike normative economic analysis, positive economic analysis can be tested.
C) There is much more disagreement among economists over positive economic analysis than over normative economic analysis.
D) Positive analysis uses an economic model to estimate the costs and benefits of different course of actions.
20) Which of the following is a normative economic statement?
A) The state of Texas is considering increasing funds for light-rail development to promote the use of public transportation.
B) Rising global demand for coal has led to increases in the price of coal.
C) Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.
D) With rising mortgage rates and rising unemployment rates, the number of unsold homes has increased.
21) Which of the following questions or statements regarding medical school is normative?
A) How do changes in expected future incomes affect the decisions of medical students about which specialty to choose?
B) Have tuition increases had a large effect or a small effect on the number of applications to medical school?
C) What role does tuition play in a student’s decision about whether to attend medical school?
D) Medical students who enter specialized fields make a larger contribution to society than do student who enter primary care.
22) Which of the following is part of an economic model?
A) opinionsB) hypotheses
C) preferences of economic agentsD) norms
23) Which of the following is a microeconomics question?
A) What determines the average price level and inflation?
B) What will the level of economic growth be in the entire economy?
C) How much will be saved and how much will be produced in the entire economy?
D) What factors determine the price of carrots?
24) Which of the following is a macroeconomics question?
A) What factors determine the price of carrots?
B) What determines the production of DVDs?
C) What determines the inflation rate?
D) What determines the wage of auto workers?
25) When Mr. Peabody decides on the companies to which he will donate his time and money, a ________ issue is being addressed.
A) microeconomicB) macroeconomic
C) normative economicD) positive economic
26) Which of the following statements is true about profit?
A) The terms “accounting profit” and “economic profit” can be used interchangeably.
B) Profit is calculated by multiplying price and quantity sold.
C) Profit refers to the revenue received from the sale of a quantity of goods.
D) Profit is the difference between revenue and cost.
27) In economics, the accumulated skills and training that workers have is known as
A) innovation.B) physical capital.
C) human capital.D) entrepreneurship.
28) The machines workers have to work with are considered
A) entrepreneurship.B) financial capital.
C) physical capital.D) human capital.
29) Based on projections from the U.S. Census Bureau and the Congressional Budget Office
A) there will be a significant increase in the demand for health care by the year 2020.
B) the change in the supply of health care will more than make up for the change in demand for health care by the year 2020.
C) there will be no significant change in the demand for health care by the year 2020.
D) there will be a significant decrease in the demand for health care by the year 2020.
30) Households ________ factors of production and ________ goods and services.
A) supply; supplyB) supply; demand
C) demand; supplyD) demand; demand
31) Which of the following statements is false?
A) A curved line has slope values that change at every point.
B) A straight line has a slope of zero.
C) A direct relationship has a positive slope value.
D) An inverse relationship has a negative slope value.
32) Suppose when the price of laptops fall, college students buy more laptops. This implies that
A) there is a negative relationship between laptop prices and quantities purchased by college students.
B) there is a positive relationship between laptop prices and quantities purchased by college students.
C) there is a one-to-one relationship between laptop prices and quantities purchased by college students.
D) there is a direct relationship between laptop prices and quantities purchased by college students.
33) If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the percentage change in price?
A) 13 percentB) 30 percentC) 75 percentD) 77 percent
34) Refer to Figure 1–1. Using the information in the figure above, calculate the percentage change in sales of alcoholic beverages between 2008 and 2011.
A) 23.1%B) 23.8%C) 30%D) 42.9%
35) Refer to Figure 1–2. Calculate the area of the triangle A.
A) $1.3 millionB) $2.6 millionC) $3.4 millionD) $5.2 million
36) Refer to Figure 1–4. Which of the following statements is false?
A) The slope of the tangent at F is negative.
B) The slope of the tangent at E is positive.
C) The slope of the tangent at E and the slope of the tangent at F are equal.
D) Neither the slope of the tangent at E nor the slope of the tangent at F are equal to zero.
37) If a straight line passes through the point x = 24 and y = 8 and also through the point x = 8 and y = 16, the slope of this line is
A) negative one half.B) seven tenths.
C) one and one half.D) negative 8 divided by 4.