Question 1

The law of increasing opportunity costs exists because:

Accepted Answer

A)   resources are not equally efficient in producing various goods.
B)   the value of the dollar has diminished historically because of persistent inflation.
C)   wage rates invariably rise as the economy approaches full employment.
D)   consumers tend to value any good more highly when they have little of it.E) All of the above
F) A) and B)

Question 2

Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

Accepted Answer

A)   Ben's statement is normative,but Holly's is positive.
B)   Holly's statement is normative,but Ben's is positive.
C)   Both statements are normative.
D)   Both statements are positive.E) All of the above
F) None of the above

Question 3

In drawing the production possibilities curve we assume that:

Accepted Answer

A)   technology is fixed.
B)   unemployment exists.
C)   economic resources are unlimited.
D)   wants are limited.E) C) and D)
F) A) and D)

Question 4

-Refer to the above diagram.Which line(s) show(s) a negative vertical intercept?

Accepted Answer

A)   C only
B)   both C and E
C)   B,C,and E
D)   both B and CE) All of the above
F) B) and D)

Question 5

Tammie makes $150 a day as a bank clerk.She takes off two days of work without pay to fly to another city to attend the concert of her favourite music group.The cost of transportation for the trip is $250.The cost of the concert ticket is $50.The opportunity cost of Tammie's trip to the concert is:

Accepted Answer

A)   $300
B)   $450
C)   $500
D)   $600E) A) and B)
F) B) and D)

Question 6

-The slope of a line parallel to the horizontal axis is:

Accepted Answer

A)   zero.
B)   one.
C)   infinite.
D)   one-half.E) C) and D)
F) A) and D)

Question 7

From the perspective of economists,which term provides the highest degree of confidence for explaining economic behaviour?

Accepted Answer

A)   an economic principle or a law
B)   a fact
C)   a hypothesis
D)   an assumptionE) B) and C)
F) A) and B)

Question 8

(The following economy produces two products. ) 
Production Possibilities Table
 
-The production possibilities curve represents:

Accepted Answer

A)   the maximum amount of labour and capital available for production.
B)   combinations of goods and services among which consumers are indifferent.
C)   maximum combinations of products available with fixed resources and technology.
D)   the maximum rate of growth of capital and labour in an economy.E) C) and D)
F) None of the above

Question 9

Through specialization and international trade a nation:

Accepted Answer

A)   can achieve some combination of goods lying outside its production possibilities curve.
B)   can move from a high consumption-low investment to a high investment-low consumption point on its production possibilities curve.
C)   will achieve some combination of goods lying within its production possibilities curve.
D)   will cause its production possibilities curve to shift leftward.E) A) and D)
F) None of the above

Question 10

Macroeconomics approaches the study of economics from the viewpoint of:

Accepted Answer

A)   the entire economy.
B)   governmental units.
C)   the operation of specific product and resource markets.
D)   individual firms.E) B) and C)
F) None of the above

Question 11

-The vertical intercept of line (2) on the above graph is:

Accepted Answer

A)   8
B)   12
C)   16
D)   24E) A) and B)
F) A) and C)

Question 12

The production possibilities curve illustrates the basic principle that:

Accepted Answer

A)   the production of more of any one good will in time require smaller and smaller sacrifices of other goods.
B)   an economy will automatically seek that level of output at which all of its resources are employed.
C)   if all the resources of an economy are in use,more of one good can be produced only if less of another good is produced.
D)   an economy's capacity to produce increases in proportion to its population size.E) A) and B)
F) B) and C)

Question 13

Assume that a tradeoff exists in the short run between inflation and unemployment.This relationship means that:

Accepted Answer

A)   a low rate of unemployment causes a low rate of inflation.
B)   the unemployment rate always equals the inflation rate.
C)   less unemployment can be achieved with more inflation.
D)   less unemployment can be achieved with less inflation.E) B) and C)
F) A) and D)

Question 14

Consumers might leave a fast-food restaurant without being served because:

Accepted Answer

A)   they are misinformed about the marginal cost and marginal benefits of the food being served.
B)   they conclude that the marginal cost (monetary plus time costs) exceeds the marginal benefit.
C)   the environment is not conducive to a rational choice.
D)   the lines waiting for service are not of equal length.E) None of the above
F) All of the above

Question 15

The "economic perspective" entails:

Accepted Answer

A)   rational behaviour by individuals and institutions.
B)   a comparison of marginal benefits and marginal costs in decision making.
C)   the altering of behaviour when marginal benefits and marginal costs change.
D)   all of the above.E) None of the above
F) A) and D)

Question 16

Which situation would most likely cause a nation's production possibilities curve to shift inward?

Accepted Answer

A)   the construction of more capital goods
B)   a decrease in discrimination based on race
C)   an increase in the number of skilled immigrant workers
D)   the destruction from bombing and warfare in a losing military conflictE) B) and D)
F) C) and D)

Question 17

Economics is concerned with using scarce productive resources efficiently in attempting to satisfy society's material wants.This statement is:

Accepted Answer

A)   positive,but incorrect.
B)   positive and correct.
C)   normative,but incorrect.
D)   normative and correct.E) A) and B)
F) A) and C)

Question 18

-Refer to the above table.What is the opportunity cost of producing the fourth unit of capital goods?

Accepted Answer

A)   6 units of consumer goods
B)   7 units of consumer goods
C)   15 units of consumer goods
D)   22 units of consumer goodsE) A) and D)
F) None of the above

Question 19

The assertion that "There is no free lunch" means:

Accepted Answer

A)   there are always tradeoffs between economic goals.
B)   all production involves the use of scarce resources and thus the sacrifice of alternative goods.
C)   marginal analysis is not used in economic reasoning.
D)   choices do not need be made if behaviour is rational.E) A) and D)
F) A) and B)

Question 20

Marginal analysis means that decision-makers compare the extra benefits with the extra costs of a specific choice.

Accepted Answer

A) True 
 B)False

Exam 1: Limits, Alternatives, and Choices

(The following economy produces two products. ) Production Possibilities Table -The production possibilities curve represents:

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Consumers might leave a fast-food restaurant without being served because:

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-The vertical intercept of line (2) on the above graph is:

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-Refer to the above diagram.Which line(s) show(s) a negative vertical intercept?

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Which situation would most likely cause a nation's production possibilities curve to shift inward?

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The assertion that "There is no free lunch" means:

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The production possibilities curve illustrates the basic principle that:

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Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

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From the perspective of economists,which term provides the highest degree of confidence for explaining economic behaviour?

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The "economic perspective" entails:

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-Refer to the above table.What is the opportunity cost of producing the fourth unit of capital goods?

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In drawing the production possibilities curve we assume that:

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Assume that a tradeoff exists in the short run between inflation and unemployment.This relationship means that:

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-The slope of a line parallel to the horizontal axis is:

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The law of increasing opportunity costs exists because:

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Tammie makes $150 a day as a bank clerk.She takes off two days of work without pay to fly to another city to attend the concert of her favourite music group.The cost of transportation for the trip is $250.The cost of the concert ticket is $50.The opportunity cost of Tammie's trip to the concert is:

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Macroeconomics approaches the study of economics from the viewpoint of:

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Economics is concerned with using scarce productive resources efficiently in attempting to satisfy society's material wants.This statement is:

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Through specialization and international trade a nation:

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Marginal analysis means that decision-makers compare the extra benefits with the extra costs of a specific choice.

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