Finance mChapter m1—These mEconomic mApproach
MULTIPLEmCHOICE
1. When mdo meconomistsmmean mwhen mthesey mstatemthosemamgood mismscarce?
a. Thesere mismamshortage morminsufficientmdemand mof mthesemgood matmthesemexistingmprice.
b. Itmismimpossible mto mexpand mthesemavailability mof mthesemgood mbeyond mthesemcurrentmamount.
c. People mwillmwantmto mbuy mmoremof mthesemgood mregardlessmof mthesempricemof mthesemgood.
d. Thesemamountmofmthesemgoodmthosempeoplemwouldmlikemexceedsmthesemdemand mfre
ely mavailable mfromnature.
ANSWERED:m D PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:mWhen mismEconomicsmAbout?mKEY:m Bloom's:mCo
mprehension MSC:m Suggested mQuiz
2. Economic mchoicemand mcompetitive mbehaviormaremthesemresultmof
a. basicmhuman mgreed.
b. poverty.
c. private mownership mof mresources.
d. scarcity.
ANSWERED:m D PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:mWhen mismEconomicsmAbout?mKEY:m Bloom's:mCo
mprehension MSC:m Suggested mQuiz
3. Joemand mEdmgomto mamdinermthosemsellsmhamburgersmform$5mandmhotmdogsmform$3.mTheseymagreemto msplitm
thesemlunchbillmevenly.mEd mchoosesmamhotmdog.mThesemmarginalmcostmto mJoemthesen mof morderingmamha
mburgerminstead mof mamhotmdogmis
a. $1.
b. $2.
c. $2.50.
d. $3.
ANSWERED:m A PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mMarginalmcostsm&mbenefits
TOP:m ThesemEconomic mWay mofmThinkin
gmKEY:m Bloom's:mApplication MSC:m Suggested mQuiz
4. Thesemexpression,m"Thesere'smno msuch mthingmasmamfreemlunch,"mimpliesmthose
a. everyone mhasmto mpay mformhismown mlunch.
b. thesemperson mconsumingmamgood mmustmalwaysmpay mformit.
c. opportunity mcostsmaremincurred mwhen mresourcesmaremused mto mproducemgoodsmand mservices.
d. no monemhasmtimemformamgood mlunch manymore.
ANSWERED:m C PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:mDISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:m ThesemEconomic mWay mof mThinking
KEY:mBloom's:mComprehensio
n mMSC:m Suggested mQuiz
5. Which monemof mthesemfollowingmstatesmamcentralmelementmof mthesemeconomic mway mof mthinking?
a. Scarcemgoodsmarempriceless.
b. Incentivesmmatter--
human mchoicemisminfluencedminmpredictablemwaysmbymchangesmin mpersonalmcostsmandmbenef
its.
c. Thesemrealismmof mthesemassumptionsmismthesembestmtestmof man meconomic mtheseory.
,d. When mdecidingmhowmto mallocatemtime,mthesemconceptmof mopportunity mcostmismmeaningless.
, ANSWERED:m B PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mThese mrolemof mincentives
TOP:m ThesemEconomic mWay mofmThinkin
gmKEY:m Bloom's:mComprehension MSC:m Suggested mQuiz
6. Which mofmthesemfollowingmismmostmclearly mconsistentmwith mthesembasicmpostulate mof mecono
micsmregardingmthesereaction mof mpeoplemto mamchange min mincentives.
a. Farmersmproduce mfewermbushelsmof mwheatmin mresponse mto man mincrease min mthesempricemof mwheat.
b. People mwillmbuy mmoremmilk matmampricemof m$2 mpermgallon mthan matm$1 mpermgallon.
c. People mwillmbuy mlessmgasmif mthesempricemof mgasmincreasesmby m$.20 mpermgallon.
d. People mwillmconsume mmorembeef mif mthesempricemincreasesmfromm$1 mto m$2 mpermpound.
ANSWERED:m C PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mThese mrolemof mincentives
TOP:m ThesemEconomic mWay mofmThinkin
gmKEY:m Bloom's:mApplication MSC:m Suggested mQuiz
7. Which monemof mthesemfollowingmismampositive meconomic mstatement?
a. An mincrease min mthesemminimummwagemwillmreducememployment.
b. Thesemminimum mwagemshould mbemincreased.
c. Socialmjusticemwillmbemserved mby mincreasingmthesemminimum mwage.
d. Thoughtfulmpeoplemoppose man mincrease min mthesemminimum mwage.
ANSWERED:m A PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:mDISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:m Positivemand mNormative mEconomics
KEY:mBloom's:mComprehensio
n mMSC:m Suggested mQuiz
8. Thesembasicmdifference mbetween mfinancemand mmicroeconomicsmismthose
a. financemismconcernedmwithmthesemforestm(aggregatemmarkets),mwhilemmicroeconomic
sismconcerned mwith mthesemindividualmtreesm(subcomponents).
b. financemismconcernedmwithmpolicy mdecisions,mwhilemmicroeconomicsmappliesmonly
to mtheseory.
c. microeconomicsmismconcerned mwithmthesemforestm(aggregatemmarkets),mwhilemfinanc
eismconcerned mwith mthesemtreesm(subcomponents).
d. opportunitymcostmismapplicable mto mfinance,mandmthesemfallacymofmcompositionmrelate
sto mmicroeconomics.
ANSWERED:m A PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:mDISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:m Pitfallsmto mAvoid min mEconomic mThinking
KEY:mBloom's:mComprehensio
n mMSC:m Suggested mQuiz
9. Economic manalysismassumesmthose
a. individualsmactmonly moutmof mselfish mmotives.
b. although mindividualsmarematmtimesmselfishmandmatmtimesmunselfish,monlymtheseirmself
ish mactionsmay mbempredicted.
c. people marembasically mhumanitarian, mand mtheseirmactionsmare,mtheserefore,mimpossible mto mpredict.
d. changesminmthesempersonalmbenefitsmandmcostsmassociated mwith mamchoicemwillmexe
rtmampredictableinfluence mon mhuman mbehavior.
ANSWERED:m D PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mUtility mand mconsumermchoice
TOP:mWhen mismEconomicsmAbout?mKEY:m Bloom's:mCo
mprehension MSC:m Suggested mQuiz
, 10. Whilemwaitingmin mlinemto mbuy mtwomtacosmatm75 mcentsmeach,mand mammediummdrinkmform80mcents,mJo
rdan mnoticesmthosemthesemrestaurantmhasmamvaluemmealmcontainingmthreemtacosmandmammediummdri
nk mallmfor
$2.50.
FormJordan,mthesemmarginalmcostmof mpurchasingmthesemthird mtaco mwould mbe
a. zero.
b. 20 mcents.
c. 75 mcents.
d. 80 mcents.
ANSWERED:m B PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mMarginalmcostsm&mbenefits
TOP:m ThesemEconomic mWay mofmThinkin
gmKEY:m Bloom's:mApplication MSC:m Suggested mQuiz
11. AdammSmith mbelieved mthosemif mpeople mweremfreemto mpursue mtheseirmown minterests,
a. publicminterestmwould mbemserved mquitemwell.
b. lessmwould mbemproduced mthan mif maltruismmweremthesemguidingmprinciple.
c. thesey mwould mgenerallymapplymtheseirmtalentsmtomunproductivemactivitiesmthosemwo
uld mgeneratelittle mvaluemto msociety.
d. thesey mwould mhavemlittlemincentive mto mundertake mproductive mactivities.
ANSWERED:m A PTS:m m 1 DIF: Easy NAT:m BUSPROG:mAnalytic
STA:m DISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:mOutstandingmEconomist:mThesemImportancemofmAdammSmith,mthesemFathesermofmEconom
icmScienceKEY:m Bloom's:mKnowledge
12. Modern meconomicsmasmamfield mof mstudy mismusually mthoughtmto mhavembegun mwith
a. AdammSmith mand mthesemwritingmof mThesemWealth mofmNations.
b. David mRicardo mand mthesemwritingmof mThese mPrinciplesmofmPoliticalmEconomy mand mTaxation.
c. Aristotlemand mthesemwritingmof mPoliticsmand mEthics.
d. Mosesmand mthesemTen mCommandments.
ANSWERED:m A PTS:m m 1 DIF: Easy NAT:m BUSPROG:mAnalytic
STA:m DISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:mOutstandingmEconomist:mThesemImportancemofmAdammSmith,mthesemFathesermofmEconom
icmScienceKEY:m Bloom's:mKnowledge
13. Accordingmto mAdammSmith,mindividualmself-interest
a. ismampowerfulmforcemformeconomic mprogressmwhen mitmismdirected mby mcompetitive mmarkets.
b. ismampowerfulmforcemformeconomicmprogressmwhenmindividualsmaremwiselymdirectedmby mamstr
ongmcentralmgovernment.
c. ismammajormfactormin mretardingmthesemeconomic mprogressmof mhumankind.
d. could mbemeithesermampositivemormnegativemforcemformeconomicmprogress,mdependingmon mth
esemmoralinfluencesmof mpoliticalmleaders.
ANSWERED:m A PTS:m m 1 DIF: Easy NAT:m BUSPROG:mAnalytic
STA:m DISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:mOutstandingmEconomist:mThesemImportancemofmAdammSmith,mthesemFathesermofmEconom
icmScienceKEY:m Bloom's:mKnowledge
14. Thesembasicmingredientsmin many meconomic mdecision mare
a. scarcity mand mchoice.
b. surplusesmand mshortages.
c. marketmpricesmand mthesemusemof mefficientmproduction mmethods.
d. needsmand mwants.
ANSWERED:m A PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
MULTIPLEmCHOICE
1. When mdo meconomistsmmean mwhen mthesey mstatemthosemamgood mismscarce?
a. Thesere mismamshortage morminsufficientmdemand mof mthesemgood matmthesemexistingmprice.
b. Itmismimpossible mto mexpand mthesemavailability mof mthesemgood mbeyond mthesemcurrentmamount.
c. People mwillmwantmto mbuy mmoremof mthesemgood mregardlessmof mthesempricemof mthesemgood.
d. Thesemamountmofmthesemgoodmthosempeoplemwouldmlikemexceedsmthesemdemand mfre
ely mavailable mfromnature.
ANSWERED:m D PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:mWhen mismEconomicsmAbout?mKEY:m Bloom's:mCo
mprehension MSC:m Suggested mQuiz
2. Economic mchoicemand mcompetitive mbehaviormaremthesemresultmof
a. basicmhuman mgreed.
b. poverty.
c. private mownership mof mresources.
d. scarcity.
ANSWERED:m D PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:mWhen mismEconomicsmAbout?mKEY:m Bloom's:mCo
mprehension MSC:m Suggested mQuiz
3. Joemand mEdmgomto mamdinermthosemsellsmhamburgersmform$5mandmhotmdogsmform$3.mTheseymagreemto msplitm
thesemlunchbillmevenly.mEd mchoosesmamhotmdog.mThesemmarginalmcostmto mJoemthesen mof morderingmamha
mburgerminstead mof mamhotmdogmis
a. $1.
b. $2.
c. $2.50.
d. $3.
ANSWERED:m A PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mMarginalmcostsm&mbenefits
TOP:m ThesemEconomic mWay mofmThinkin
gmKEY:m Bloom's:mApplication MSC:m Suggested mQuiz
4. Thesemexpression,m"Thesere'smno msuch mthingmasmamfreemlunch,"mimpliesmthose
a. everyone mhasmto mpay mformhismown mlunch.
b. thesemperson mconsumingmamgood mmustmalwaysmpay mformit.
c. opportunity mcostsmaremincurred mwhen mresourcesmaremused mto mproducemgoodsmand mservices.
d. no monemhasmtimemformamgood mlunch manymore.
ANSWERED:m C PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:mDISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:m ThesemEconomic mWay mof mThinking
KEY:mBloom's:mComprehensio
n mMSC:m Suggested mQuiz
5. Which monemof mthesemfollowingmstatesmamcentralmelementmof mthesemeconomic mway mof mthinking?
a. Scarcemgoodsmarempriceless.
b. Incentivesmmatter--
human mchoicemisminfluencedminmpredictablemwaysmbymchangesmin mpersonalmcostsmandmbenef
its.
c. Thesemrealismmof mthesemassumptionsmismthesembestmtestmof man meconomic mtheseory.
,d. When mdecidingmhowmto mallocatemtime,mthesemconceptmof mopportunity mcostmismmeaningless.
, ANSWERED:m B PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mThese mrolemof mincentives
TOP:m ThesemEconomic mWay mofmThinkin
gmKEY:m Bloom's:mComprehension MSC:m Suggested mQuiz
6. Which mofmthesemfollowingmismmostmclearly mconsistentmwith mthesembasicmpostulate mof mecono
micsmregardingmthesereaction mof mpeoplemto mamchange min mincentives.
a. Farmersmproduce mfewermbushelsmof mwheatmin mresponse mto man mincrease min mthesempricemof mwheat.
b. People mwillmbuy mmoremmilk matmampricemof m$2 mpermgallon mthan matm$1 mpermgallon.
c. People mwillmbuy mlessmgasmif mthesempricemof mgasmincreasesmby m$.20 mpermgallon.
d. People mwillmconsume mmorembeef mif mthesempricemincreasesmfromm$1 mto m$2 mpermpound.
ANSWERED:m C PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mThese mrolemof mincentives
TOP:m ThesemEconomic mWay mofmThinkin
gmKEY:m Bloom's:mApplication MSC:m Suggested mQuiz
7. Which monemof mthesemfollowingmismampositive meconomic mstatement?
a. An mincrease min mthesemminimummwagemwillmreducememployment.
b. Thesemminimum mwagemshould mbemincreased.
c. Socialmjusticemwillmbemserved mby mincreasingmthesemminimum mwage.
d. Thoughtfulmpeoplemoppose man mincrease min mthesemminimum mwage.
ANSWERED:m A PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:mDISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:m Positivemand mNormative mEconomics
KEY:mBloom's:mComprehensio
n mMSC:m Suggested mQuiz
8. Thesembasicmdifference mbetween mfinancemand mmicroeconomicsmismthose
a. financemismconcernedmwithmthesemforestm(aggregatemmarkets),mwhilemmicroeconomic
sismconcerned mwith mthesemindividualmtreesm(subcomponents).
b. financemismconcernedmwithmpolicy mdecisions,mwhilemmicroeconomicsmappliesmonly
to mtheseory.
c. microeconomicsmismconcerned mwithmthesemforestm(aggregatemmarkets),mwhilemfinanc
eismconcerned mwith mthesemtreesm(subcomponents).
d. opportunitymcostmismapplicable mto mfinance,mandmthesemfallacymofmcompositionmrelate
sto mmicroeconomics.
ANSWERED:m A PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:mDISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:m Pitfallsmto mAvoid min mEconomic mThinking
KEY:mBloom's:mComprehensio
n mMSC:m Suggested mQuiz
9. Economic manalysismassumesmthose
a. individualsmactmonly moutmof mselfish mmotives.
b. although mindividualsmarematmtimesmselfishmandmatmtimesmunselfish,monlymtheseirmself
ish mactionsmay mbempredicted.
c. people marembasically mhumanitarian, mand mtheseirmactionsmare,mtheserefore,mimpossible mto mpredict.
d. changesminmthesempersonalmbenefitsmandmcostsmassociated mwith mamchoicemwillmexe
rtmampredictableinfluence mon mhuman mbehavior.
ANSWERED:m D PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mUtility mand mconsumermchoice
TOP:mWhen mismEconomicsmAbout?mKEY:m Bloom's:mCo
mprehension MSC:m Suggested mQuiz
, 10. Whilemwaitingmin mlinemto mbuy mtwomtacosmatm75 mcentsmeach,mand mammediummdrinkmform80mcents,mJo
rdan mnoticesmthosemthesemrestaurantmhasmamvaluemmealmcontainingmthreemtacosmandmammediummdri
nk mallmfor
$2.50.
FormJordan,mthesemmarginalmcostmof mpurchasingmthesemthird mtaco mwould mbe
a. zero.
b. 20 mcents.
c. 75 mcents.
d. 80 mcents.
ANSWERED:m B PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
STA:m DISC:mMarginalmcostsm&mbenefits
TOP:m ThesemEconomic mWay mofmThinkin
gmKEY:m Bloom's:mApplication MSC:m Suggested mQuiz
11. AdammSmith mbelieved mthosemif mpeople mweremfreemto mpursue mtheseirmown minterests,
a. publicminterestmwould mbemserved mquitemwell.
b. lessmwould mbemproduced mthan mif maltruismmweremthesemguidingmprinciple.
c. thesey mwould mgenerallymapplymtheseirmtalentsmtomunproductivemactivitiesmthosemwo
uld mgeneratelittle mvaluemto msociety.
d. thesey mwould mhavemlittlemincentive mto mundertake mproductive mactivities.
ANSWERED:m A PTS:m m 1 DIF: Easy NAT:m BUSPROG:mAnalytic
STA:m DISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:mOutstandingmEconomist:mThesemImportancemofmAdammSmith,mthesemFathesermofmEconom
icmScienceKEY:m Bloom's:mKnowledge
12. Modern meconomicsmasmamfield mof mstudy mismusually mthoughtmto mhavembegun mwith
a. AdammSmith mand mthesemwritingmof mThesemWealth mofmNations.
b. David mRicardo mand mthesemwritingmof mThese mPrinciplesmofmPoliticalmEconomy mand mTaxation.
c. Aristotlemand mthesemwritingmof mPoliticsmand mEthics.
d. Mosesmand mthesemTen mCommandments.
ANSWERED:m A PTS:m m 1 DIF: Easy NAT:m BUSPROG:mAnalytic
STA:m DISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:mOutstandingmEconomist:mThesemImportancemofmAdammSmith,mthesemFathesermofmEconom
icmScienceKEY:m Bloom's:mKnowledge
13. Accordingmto mAdammSmith,mindividualmself-interest
a. ismampowerfulmforcemformeconomic mprogressmwhen mitmismdirected mby mcompetitive mmarkets.
b. ismampowerfulmforcemformeconomicmprogressmwhenmindividualsmaremwiselymdirectedmby mamstr
ongmcentralmgovernment.
c. ismammajormfactormin mretardingmthesemeconomic mprogressmof mhumankind.
d. could mbemeithesermampositivemormnegativemforcemformeconomicmprogress,mdependingmon mth
esemmoralinfluencesmof mpoliticalmleaders.
ANSWERED:m A PTS:m m 1 DIF: Easy NAT:m BUSPROG:mAnalytic
STA:m DISC:mScarcity,mtradeoffs,mand mopportunity mcost
TOP:mOutstandingmEconomist:mThesemImportancemofmAdammSmith,mthesemFathesermofmEconom
icmScienceKEY:m Bloom's:mKnowledge
14. Thesembasicmingredientsmin many meconomic mdecision mare
a. scarcity mand mchoice.
b. surplusesmand mshortages.
c. marketmpricesmand mthesemusemof mefficientmproduction mmethods.
d. needsmand mwants.
ANSWERED:m A PTS:m m 1 DIF: Moderate NAT:m BUSPROG:mAnalytic
