Chapter 1 What is Economics?
Test bank
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) An incentive 1)
A) is the opposite of a tradeoff.
B) could be a reward but could not be a penalty.
C) could be either a reward or a penalty.
D) could be a penalty but could not be a reward.
2) The most fundamental economic problem is 2)
A) security.
B) the fact the United States buys more goods from foreigners than we sell to foreigners.
C) health.
D) scarcity.
3) Economics is best defined as the study of how people, businesses, governments, and societies 3)
A) make choices to cope with scarcity. B) attain wealth.
C) choose abundance over scarcity. D) use their infinite resources.
4) Economists point out that scarcity confronts 4)
A) the rich but not the poor. B) the poor but not the rich.
C) both the poor and the rich. D) neither the poor nor the rich.
5) Scarcity requires that people must 5)
A) trade. B) compete. C) cooperate. D) make choices.
6) As an economic concept, scarcity applies to 6)
A) neither time nor money. B) both money and time.
C) time but not money. D) money but not time.
7) Which is the most accurate definition of the study of economics? Economics is the study of 7)
A) the distribution of surplus goods to those in need.
B) affluence in a morally bankrupt world.
C) ways to reduce wants to eliminate the problem of scarcity.
D) the choices we make because of scarcity.
8) Which of the following is a macroeconomic topic? 8)
A) why plumbers earn more than janitors
B) the reasons for the rise in average prices
C) whether the army should buy more tanks or more rockets
D) the reasons for a rise in the price of orange juice
9) Which of the following is a microeconomic topic? 9)
A) the reasons for a decline in average prices
B) the reasons why Kathy buys less orange juice
C) the cause of why total employment may decrease
D) the effect of the government budget deficit on inflation
1
,10) Microeconomics focuses on all of the following EXCEPT 10)
A) the effect of increasing the money supply on inflation.
B) the purchasing decisions that an individual consumer makes.
C) the effect of an increase in the tax on cigarettes on cigarette sales.
D) the hiring decisions that a business makes.
11) In broad terms the difference between microeconomics and macroeconomics is that 11)
A) microeconomics studies the effects of government taxes on the national unemployment
rate.
B) macroeconomics studies the effects of government regulation and taxes on the price of
individual goods and services whereas microeconomics does not.
C) they use different sets of tools and ideas.
D) microeconomics studies decisions of individual people and firms and macroeconomics
studies the entire national economy.
12) Studying the determination of prices in individual markets is primarily a concern of 12)
A) negative economics. B) microeconomics.
C) positive economics. D) macroeconomics.
13) The analysis of the behavior of individual decision-making units is the definition of 13)
A) microeconomics. B) macroeconomics.
C) positive economics. D) normative economics.
14) Which of the following topics would be studied in a microeconomics course? 14)
A) how a tax rate increase will impact total production
B) comparing inflation rates across countries
C) how a trade agreement between the United States and Mexico affects both nations'
unemployment rates
D) how rent ceilings impact the supply of apartments
15) Which of the following is a macroeconomic issue? 15)
A) how federal government budget deficits affect interest rates
B) the cause of a decline in the price of peanut butter
C) what determines the amount a firm will produce
D) how a rise in the price of sugar affects the market for sodas
16) Which of the following is an issue in macroeconomics? 16)
A) the purchasing decisions that an individual consumer makes
B) the effect of an increase in the tax on cigarettes on cigarette sales
C) the hiring decisions that a business makes
D) the effect of increasing the money supply on inflation
17) Macroeconomic topics include 17)
A) the impact of government regulation of markets.
B) total, nationwide employment.
C) studying what factors influence the price and quantity of automobiles.
D) studying the determination of wages and production costs in the software industry.
18) Macroeconomics is the branch of economics that studies 18)
A) prices of individual goods. B) important, as opposed to trivial, issues.
C) the way individual markets work. D) the economy as a whole.
2
,19) When an economy produces more houses and fewer typewriters, it is answering the ________ 19)
question.
A) "where" B) "for whom" C) "how" D) "what"
20) When firms in an economy start producing more computers and fewer televisions, they are 20)
answering the ________ question.
A) "where" B) "when" C) "what" D) "for whom"
21) U.S. producers decide to produce more compact cars and fewer SUVs as the price of gasoline 21)
rises. Producers are answering the ________ question.
A) "what" B) "when" C) "how" D) "how many"
22) The question "Should movies or compact discs be produced?" is an example of the 22)
A) "how" question. B) "who" question.
C) "where" question. D) "what" question.
23) Which of the following statements is correct? 23)
A) The percentage of people producing goods in the United States has steadily increased over
the last 60 years.
B) The United States produces an equal amount of goods and services.
C) The United States produces more goods than services.
D) The United States produces more services than goods.
24) Which of the following is correct concerning production in the United States? 24)
A) The percentage of people employed in manufacturing has increased over the last 60 years.
B) The percentage of people employed in farming has decreased over the last 60 years.
C) The percentage of people employed in services has decreased over the last 60 years.
D) The percentage of people employed in construction has increased over the last 60 years.
25) When China builds a dam using few machines and a great deal of labor, it is answering the 25)
________ question.
A) "how" B) "what" C) "where" D) "for whom"
26) When a textile company keeps track of its inventory using a computer and its competitor uses a 26)
spreadsheet and pencil, they are both answering the ________ question.
A) "where" B) "what" C) "for whom" D) "how"
27) Human capital is 27)
A) machinery that meets or exceeds federal safety standards for use by humans.
B) all capital owned by individuals or corporations, but not by governments.
C) the skill and knowledge of workers.
D) all capital owned by individuals, but not by corporations or governments.
28) Entrepreneurs do all of the following EXCEPT 28)
A) bear risk from business decisions.
B) own all the other resources.
C) come up with new ideas about what, how, when and where to produce.
D) organize labor, land, and capital.
29) To answer the "for whom" question, we study 29)
A) business cycles. B) technological change.
C) the global economy. D) income differences.
3
, 30) The fact that people with higher incomes get to consume more goods and services addresses 30)
the ________ question.
A) "how" B) "where" C) "for whom" D) "when"
31) Which of the following is NOT a factor of production? 31)
A) the water used to cool a nuclear power plant.
B) the wages paid to workers.
C) the effort of farmers raising cattle.
D) the management skill of a small business owner.
32) Which of the following is NOT a factor of production? 32)
A) a share of stock issued by a firm.
B) a new computer used by a small business owner.
C) a tractor used by a wheat farmer.
D) the time worked by elementary school teachers.
33) An autoworker is considered ________ and earns ________. 33)
A) labor; wages B) labor; rent
C) capital; rent D) entrepreneurship; wages
34) Overtime worked by a JCPenney associate is considered ________ and earns ________. 34)
A) entrepreneurship; profit B) labor; profit
C) human capital; interest D) labor; wages
35) When a university decides to add to the football stadium instead of adding to the baseball 35)
stadium, it faces the
A) "what" tradeoff. B) "how" tradeoff.
C) macroeconomic question. D) "for whom" tradeoff.
36) When a farmer decides to increase the amount of acreage devoted to wheat and grow fewer 36)
acres of soybeans, the farmer is facing the
A) "how" tradeoff. B) microeconomic question.
C) "what" tradeoff. D) "for whom" tradeoff.
37) When a photographer decides to use a digital camera to take shots versus using film, the 37)
photographer is facing the
A) "what" tradeoff. B) microeconomic question.
C) "for whom" tradeoff. D) "how" tradeoff.
38) The "how" tradeoff occurs when 38)
A) a firm decides to produce refrigerators instead of dishwashers.
B) we answer the macroeconomic question.
C) the government increases income taxes paid by the rich.
D) a farm uses machinery to pick oranges instead of employing migrant workers.
39) When the government decides to provide tax relief for small businesses while placing higher 39)
taxes on large corporations, it is facing the
A) "for whom" tradeoff. B) "what" tradeoff.
C) "how" tradeoff. D) macroeconomic question.
4
Test bank
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) An incentive 1)
A) is the opposite of a tradeoff.
B) could be a reward but could not be a penalty.
C) could be either a reward or a penalty.
D) could be a penalty but could not be a reward.
2) The most fundamental economic problem is 2)
A) security.
B) the fact the United States buys more goods from foreigners than we sell to foreigners.
C) health.
D) scarcity.
3) Economics is best defined as the study of how people, businesses, governments, and societies 3)
A) make choices to cope with scarcity. B) attain wealth.
C) choose abundance over scarcity. D) use their infinite resources.
4) Economists point out that scarcity confronts 4)
A) the rich but not the poor. B) the poor but not the rich.
C) both the poor and the rich. D) neither the poor nor the rich.
5) Scarcity requires that people must 5)
A) trade. B) compete. C) cooperate. D) make choices.
6) As an economic concept, scarcity applies to 6)
A) neither time nor money. B) both money and time.
C) time but not money. D) money but not time.
7) Which is the most accurate definition of the study of economics? Economics is the study of 7)
A) the distribution of surplus goods to those in need.
B) affluence in a morally bankrupt world.
C) ways to reduce wants to eliminate the problem of scarcity.
D) the choices we make because of scarcity.
8) Which of the following is a macroeconomic topic? 8)
A) why plumbers earn more than janitors
B) the reasons for the rise in average prices
C) whether the army should buy more tanks or more rockets
D) the reasons for a rise in the price of orange juice
9) Which of the following is a microeconomic topic? 9)
A) the reasons for a decline in average prices
B) the reasons why Kathy buys less orange juice
C) the cause of why total employment may decrease
D) the effect of the government budget deficit on inflation
1
,10) Microeconomics focuses on all of the following EXCEPT 10)
A) the effect of increasing the money supply on inflation.
B) the purchasing decisions that an individual consumer makes.
C) the effect of an increase in the tax on cigarettes on cigarette sales.
D) the hiring decisions that a business makes.
11) In broad terms the difference between microeconomics and macroeconomics is that 11)
A) microeconomics studies the effects of government taxes on the national unemployment
rate.
B) macroeconomics studies the effects of government regulation and taxes on the price of
individual goods and services whereas microeconomics does not.
C) they use different sets of tools and ideas.
D) microeconomics studies decisions of individual people and firms and macroeconomics
studies the entire national economy.
12) Studying the determination of prices in individual markets is primarily a concern of 12)
A) negative economics. B) microeconomics.
C) positive economics. D) macroeconomics.
13) The analysis of the behavior of individual decision-making units is the definition of 13)
A) microeconomics. B) macroeconomics.
C) positive economics. D) normative economics.
14) Which of the following topics would be studied in a microeconomics course? 14)
A) how a tax rate increase will impact total production
B) comparing inflation rates across countries
C) how a trade agreement between the United States and Mexico affects both nations'
unemployment rates
D) how rent ceilings impact the supply of apartments
15) Which of the following is a macroeconomic issue? 15)
A) how federal government budget deficits affect interest rates
B) the cause of a decline in the price of peanut butter
C) what determines the amount a firm will produce
D) how a rise in the price of sugar affects the market for sodas
16) Which of the following is an issue in macroeconomics? 16)
A) the purchasing decisions that an individual consumer makes
B) the effect of an increase in the tax on cigarettes on cigarette sales
C) the hiring decisions that a business makes
D) the effect of increasing the money supply on inflation
17) Macroeconomic topics include 17)
A) the impact of government regulation of markets.
B) total, nationwide employment.
C) studying what factors influence the price and quantity of automobiles.
D) studying the determination of wages and production costs in the software industry.
18) Macroeconomics is the branch of economics that studies 18)
A) prices of individual goods. B) important, as opposed to trivial, issues.
C) the way individual markets work. D) the economy as a whole.
2
,19) When an economy produces more houses and fewer typewriters, it is answering the ________ 19)
question.
A) "where" B) "for whom" C) "how" D) "what"
20) When firms in an economy start producing more computers and fewer televisions, they are 20)
answering the ________ question.
A) "where" B) "when" C) "what" D) "for whom"
21) U.S. producers decide to produce more compact cars and fewer SUVs as the price of gasoline 21)
rises. Producers are answering the ________ question.
A) "what" B) "when" C) "how" D) "how many"
22) The question "Should movies or compact discs be produced?" is an example of the 22)
A) "how" question. B) "who" question.
C) "where" question. D) "what" question.
23) Which of the following statements is correct? 23)
A) The percentage of people producing goods in the United States has steadily increased over
the last 60 years.
B) The United States produces an equal amount of goods and services.
C) The United States produces more goods than services.
D) The United States produces more services than goods.
24) Which of the following is correct concerning production in the United States? 24)
A) The percentage of people employed in manufacturing has increased over the last 60 years.
B) The percentage of people employed in farming has decreased over the last 60 years.
C) The percentage of people employed in services has decreased over the last 60 years.
D) The percentage of people employed in construction has increased over the last 60 years.
25) When China builds a dam using few machines and a great deal of labor, it is answering the 25)
________ question.
A) "how" B) "what" C) "where" D) "for whom"
26) When a textile company keeps track of its inventory using a computer and its competitor uses a 26)
spreadsheet and pencil, they are both answering the ________ question.
A) "where" B) "what" C) "for whom" D) "how"
27) Human capital is 27)
A) machinery that meets or exceeds federal safety standards for use by humans.
B) all capital owned by individuals or corporations, but not by governments.
C) the skill and knowledge of workers.
D) all capital owned by individuals, but not by corporations or governments.
28) Entrepreneurs do all of the following EXCEPT 28)
A) bear risk from business decisions.
B) own all the other resources.
C) come up with new ideas about what, how, when and where to produce.
D) organize labor, land, and capital.
29) To answer the "for whom" question, we study 29)
A) business cycles. B) technological change.
C) the global economy. D) income differences.
3
, 30) The fact that people with higher incomes get to consume more goods and services addresses 30)
the ________ question.
A) "how" B) "where" C) "for whom" D) "when"
31) Which of the following is NOT a factor of production? 31)
A) the water used to cool a nuclear power plant.
B) the wages paid to workers.
C) the effort of farmers raising cattle.
D) the management skill of a small business owner.
32) Which of the following is NOT a factor of production? 32)
A) a share of stock issued by a firm.
B) a new computer used by a small business owner.
C) a tractor used by a wheat farmer.
D) the time worked by elementary school teachers.
33) An autoworker is considered ________ and earns ________. 33)
A) labor; wages B) labor; rent
C) capital; rent D) entrepreneurship; wages
34) Overtime worked by a JCPenney associate is considered ________ and earns ________. 34)
A) entrepreneurship; profit B) labor; profit
C) human capital; interest D) labor; wages
35) When a university decides to add to the football stadium instead of adding to the baseball 35)
stadium, it faces the
A) "what" tradeoff. B) "how" tradeoff.
C) macroeconomic question. D) "for whom" tradeoff.
36) When a farmer decides to increase the amount of acreage devoted to wheat and grow fewer 36)
acres of soybeans, the farmer is facing the
A) "how" tradeoff. B) microeconomic question.
C) "what" tradeoff. D) "for whom" tradeoff.
37) When a photographer decides to use a digital camera to take shots versus using film, the 37)
photographer is facing the
A) "what" tradeoff. B) microeconomic question.
C) "for whom" tradeoff. D) "how" tradeoff.
38) The "how" tradeoff occurs when 38)
A) a firm decides to produce refrigerators instead of dishwashers.
B) we answer the macroeconomic question.
C) the government increases income taxes paid by the rich.
D) a farm uses machinery to pick oranges instead of employing migrant workers.
39) When the government decides to provide tax relief for small businesses while placing higher 39)
taxes on large corporations, it is facing the
A) "for whom" tradeoff. B) "what" tradeoff.
C) "how" tradeoff. D) macroeconomic question.
4
