1. What do economists mean when they state that a good is scarce?
a. There is a shortage or insufficient supply of the good at the existing price.
b. It is impossible to expand the availability of the good beyond the current amount.
c. People will want to buy more of the good regardless of the price of the good.
d. The amount of the good that people would like exceeds the supply freely available from
nature.
ANS: D PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: What is Economics About?
KEY: Bloom's: Comprehension MSC: Suggested Quiz
2. Economic choice and competitive behavior are the result of
a. basic human greed.
b. poverty.
c. private ownership of resources.
d. scarcity.
ANS: D PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: What is Economics About?
KEY: Bloom's: Comprehension MSC: Suggested Quiz
3. Joe and Ed go to a diner that sells hamburgers for $5 and hot dogs for $3. They agree to split the lunch
bill evenly. Ed chooses a hot dog. The marginal cost to Joe then of ordering a hamburger instead of a
hot dog is
a. $1.
b. $2.
c. $2.50.
d. $3.
ANS: A PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
STA: DISC: Marginal costs & benefits TOP: The Economic Way of Thinking
KEY: Bloom's: Application MSC: Suggested Quiz
4. The expression, "There's no such thing as a free lunch," implies that
a. everyone has to pay for his own lunch.
b. the person consuming a good must always pay for it.
c. opportunity costs are incurred when resources are used to produce goods and services.
d. no one has time for a good lunch anymore.
ANS: C PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
STA: DISC: Scarcity, tradeoffs, and opportunity cost
TOP: The Economic Way of Thinking KEY: Bloom's: Comprehension
MSC: Suggested Quiz
5. Which one of the following states a central element of the economic way of thinking?
a. Scarce goods are priceless.
b. Incentives matter--human choice is influenced in predictable ways by changes in personal
costs and benefits.
c. The realism of the assumptions is the best test of an economic theory.
d. When deciding how to allocate time, the concept of opportunity cost is meaningless.
, ANS: B PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
STA: DISC: The role of incentives TOP: The Economic Way of Thinking
KEY: Bloom's: Comprehension MSC: Suggested Quiz
6. Which of the following is most clearly consistent with the basic postulate of economics regarding the
reaction of people to a change in incentives.
a. Farmers produce fewer bushels of wheat in response to an increase in the price of wheat.
b. People will buy more milk at a price of $2 per gallon than at $1 per gallon.
c. People will buy less gas if the price of gas increases by $.20 per gallon.
d. People will consume more beef if the price increases from $1 to $2 per pound.
ANS: C PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
STA: DISC: The role of incentives TOP: The Economic Way of Thinking
KEY: Bloom's: Application MSC: Suggested Quiz
7. Which one of the following is a positive economic statement?
a. An increase in the minimum wage will reduce employment.
b. The minimum wage should be increased.
c. Social justice will be served by increasing the minimum wage.
d. Thoughtful people oppose an increase in the minimum wage.
ANS: A PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
STA: DISC: Scarcity, tradeoffs, and opportunity cost
TOP: Positive and Normative Economics KEY: Bloom's: Comprehension
MSC: Suggested Quiz
8. The basic difference between macroeconomics and microeconomics is that
a. macroeconomics is concerned with the forest (aggregate markets), while microeconomics
is concerned with the individual trees (subcomponents).
b. macroeconomics is concerned with policy decisions, while microeconomics applies only
to theory.
c. microeconomics is concerned with the forest (aggregate markets), while macroeconomics
is concerned with the trees (subcomponents).
d. opportunity cost is applicable to macroeconomics, and the fallacy of composition relates
to microeconomics.
ANS: A PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
STA: DISC: Scarcity, tradeoffs, and opportunity cost
TOP: Pitfalls to Avoid in Economic Thinking KEY: Bloom's: Comprehension
MSC: Suggested Quiz
9. Economic analysis assumes that
a. individuals act only out of selfish motives.
b. although individuals are at times selfish and at times unselfish, only their selfish actions
may be predicted.
c. people are basically humanitarian, and their actions are, therefore, impossible to predict.
d. changes in the personal benefits and costs associated with a choice will exert a predictable
influence on human behavior.
ANS: D PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
STA: DISC: Utility and consumer choice TOP: What is Economics About?
KEY: Bloom's: Comprehension MSC: Suggested Quiz
, 10. While waiting in line to buy two tacos at 75 cents each, and a medium drink for 80 cents, Jordan
notices that the restaurant has a value meal containing three tacos and a medium drink all for $2.50.
For Jordan, the marginal cost of purchasing the third taco would be
a. zero.
b. 20 cents.
c. 75 cents.
d. 80 cents.
ANS: B PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
STA: DISC: Marginal costs & benefits TOP: The Economic Way of Thinking
KEY: Bloom's: Application MSC: Suggested Quiz
11. Adam Smith believed that if people were free to pursue their own interests,
a. public interest would be served quite well.
b. less would be produced than if altruism were the guiding principle.
c. they would generally apply their talents to unproductive activities that would generate
little value to society.
d. they would have little incentive to undertake productive activities.
ANS: A PTS: 1 DIF: Easy NAT: BUSPROG: Analytic
STA: DISC: Scarcity, tradeoffs, and opportunity cost
TOP: Outstanding Economist: The Importance of Adam Smith, the Father of Economic Science
KEY: Bloom's: Knowledge
12. Modern economics as a field of study is usually thought to have begun with
a. Adam Smith and the writing of The Wealth of Nations.
b. David Ricardo and the writing of The Principles of Political Economy and Taxation.
c. Aristotle and the writing of Politics and Ethics.
d. Moses and the Ten Commandments.
ANS: A PTS: 1 DIF: Easy NAT: BUSPROG: Analytic
STA: DISC: Scarcity, tradeoffs, and opportunity cost
TOP: Outstanding Economist: The Importance of Adam Smith, the Father of Economic Science
KEY: Bloom's: Knowledge
13. According to Adam Smith, individual self-interest
a. is a powerful force for economic progress when it is directed by competitive markets.
b. is a powerful force for economic progress when individuals are wisely directed by a strong
central government.
c. is a major factor in retarding the economic progress of humankind.
d. could be either a positive or negative force for economic progress, depending on the moral
influences of political leaders.
ANS: A PTS: 1 DIF: Easy NAT: BUSPROG: Analytic
STA: DISC: Scarcity, tradeoffs, and opportunity cost
TOP: Outstanding Economist: The Importance of Adam Smith, the Father of Economic Science
KEY: Bloom's: Knowledge
14. The basic ingredients in any economic decision are
a. scarcity and choice.
b. surpluses and shortages.
c. market prices and the use of efficient production methods.
d. needs and wants.
ANS: A PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
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