,TESTBANK for Economics Private & Public Choice ,
17th Edition James D. Gwartney
Notes
1- The file is chapter after chapter.
2- We have shown you 10 pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many new
editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
,Name: Class: Date:
Ch 01: Essay
1. If economics is correct in its assumption that people are rational, why then would anyone choose to smoke cigarettes?
ANSWER: Even though the harmful effects of cigarette smoking are documented, more than 20 percent of the U.S. adult
population continues to smoke. The economic model of rational choice suggests that individuals weigh the
marginal benefit of smoking an additional cigarette (the pleasure obtained) against the marginal costs (the
pecuniary cost, the price of the cigarette, and the risk of being afflicted by smoking-related diseases,
discounted by the probability). Since the likelihood of getting a smoking-related disease increases with age, it
is not surprising that more people elect to give up the habit as they get older.
2. A radio station gives "free money" to those listeners whose names are drawn and announced over the airwaves from
postcards the listeners sent into the radio station. Is the money really free for the listener?
ANSWER: While most students can identify the monetary cost of the postcard and stamp, we also must consider the
opportunity cost of listening to the radio. It is true that we can do other activities while the radio is on and
listen attentively when a name is drawn and announced over the airwaves. But there's also the opportunity cost
of not being able to listen to another station, one that might offer more preferred programming.
3. Why would a radio station give money to listeners? Does this violate the economic way of thinking?
ANSWER: Radio stations do surveys to see what types of prizes listeners want (for example, cars, boats, vacations, etc.).
Overwhelmingly, people say they want cash. A radio station that gives away money attracts listeners, and the
more listeners a station has, the more it can charge advertisers. The owners of the radio station clearly believe
the revenue this activity generates, in terms of advertising dollars, exceeds the money given away.
4. William observes that a car in 1925 sold for an average of $500 versus $20,000 for a 2005 model. He concludes that
2005 cars must be 40 times better than 1925 cars. What's wrong with this way of thinking?
ANSWER: Poor William has made several errors. First, a 1925 car differs substantially from a 2005 car. As the saying
goes, he is comparing apples and oranges. Second, the value of the dollar has declined; William, therefore, is
using as his measure a unit that has changed sizes. This is like measuring one room with a 50-inch stick and
another room with a 20-inch stick. We can give both measures in terms of sticks, but they are not very
comparable.
5. Evaluate this statement: "People engaged in economizing behavior will always buy the lowest priced item they can
find."
ANSWER: As long as price is the only factor, we would expect people to buy the lowest priced product. However, once
we consider quality, ease of operation, performance, durability, looks, etc., we can see why people would not
necessarily buy the lowest priced item. While people generally seek products that yield the most benefits
relative to costs, a product that can provide additional benefits would lead to a willingness to pay a higher
price.
6. Homeowners can deduct interest payments on their mortgages from their federal income tax. If this deduction were
removed, how would the housing market be affected?
ANSWER: The deductibility of these interest payments is an attractive feature of home ownership. If this deduction were
removed, we would expect fewer people choosing to own their own homes. Additionally, we would expect to
see more families in rental housing.
7. If people are self-interested, why does anyone give money to public radio?
ANSWER: Since people can listen to public radio without having to contribute, we know this can create a funding
problem. However, since the economic concept of enlightened self-interest is broader than a narrow, selfish
view, we would see people making this choice as contributing to their own interests. These people consider
public radio good for their community. They value their community's well-being and, therefore, support public
radio.
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Ch 01: Essay
8. When Mother Theresa won the Nobel Peace Prize, the monetary award was well in excess of $100,000. Did she accept
the money? If so, what did she do with it?
ANSWER: Mother Theresa used the money to help the poor, whom she spent a lifetime assisting. While we consider
Mother Theresa to have been one of the most unselfish of people, it is clear that she could have gained more of
what she valued if she had more money.
9. Who is more likely to drive carelessly, Camila in her 1980 Ford with bad brakes or Samantha, who has a 2005 BMW
with all the most recent safety options?
ANSWER: On the surface, we might conclude that Samantha will be more careful since she appears to have more to lose
(a higher priced car), but insurance likely will cover any monetary loss. Most people value their life and health
more than material possessions; because of this, we expect Camila to be more careful due to her unsafe car.
Samantha can afford to take more risks since her car is in better condition and has the latest safety features.
10. A popular video program, used to teach primary school children about economics, defines scarcity as "when you don't
have enough of something." Evaluate this definition based on your understanding of the scarcity concept.
ANSWER: This definition is a bit simplistic for college understanding. The video uses the example of three hats and four
children to assert a scarcity of hats. We would more properly view this as a shortage of hats created because
the hats, as presented, have no price. The shortage can be eliminated but scarcity cannot. Scarcity is the
fundamental concept from which economics derives. Besides resources, virtually all other things, including
your time, are scarce. Your textbook's definition will serve you better than the one from the video.
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Ch 01: MC
1. Adam Smith believed that if people were free to pursue their own interests,
a. less would be produced than if altruism were the guiding principle.
b. the public interest would be served quite well.
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.
ANSWER: b
2. 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. John Maynard Keynes and the writing of The General Theory of Employment, Interest and Money.
ANSWER: a
3. Which of the following was a key belief of Adam Smith?
a. he felt that human goodness would provide adequate goods and services to everyone.
b. he stressed that limited exchange and command economies would prevent the exploitation of the poor.
c. he believed that individuals pursuing their own interests would direct economic activity in the most
advantageous way.
d. he lectured about the importance of gold and silver in providing a stable monetary system.
ANSWER: c
4. According to Adam Smith, individual self-interest
a. is a powerful force for economic progress when individuals are wisely directed by a strong central
government.
b. is a powerful force for economic progress when it is directed by competitive markets.
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.
ANSWER: b
5. 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.
ANSWER: a
6. Economic choice and competitive behavior are the result of
a. poverty.
b. public ownership of resources.
c. scarcity.
d. private ownership of resources.
ANSWER: c
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Ch 01: MC
7. For the typical student, taking an introductory course in economics should
a. turn the student into an economist.
b. teach the student solutions to most social problems.
c. teach the student how to answer complex social questions.
d. help the student learn to rationally analyze social problems.
ANSWER: d
8. When a society cannot produce all the goods and services people wish to have, it is said that the economy is
experiencing
a. scarcity.
b. shortages.
c. inefficiencies.
d. inequities.
ANSWER: a
9. Which of the following is the best definition of economics?
a. An investigation of the quantities and prices of the various goods produced by the nations of the world.
b. An analysis of how individuals and societies deal with the problem of scarcity.
c. An examination of the role that money plays in the economy.
d. A study of how goods and services are distributed throughout the world.
ANSWER: b
10. Economics is primarily the study of
a. how to make money in the stock market.
b. how to operate a business successfully.
c. the allocation of scarce resources in an effort to satisfy wants that are virtually unlimited.
d. the methods business firms use to reduce their costs of production.
ANSWER: c
11. Some individuals or families can become completely saturated with a service such as television. This suggests that
a. a highly productive economy may someday be able to satisfy all human desires
b. desires for a single commodity can be satisfied but then the focus will switch to other goods and services
c. resources are not truly fixed in supply as we generally assume
d. scarcity does not exist
ANSWER: b
12. In economics, the term "scarcity" refers to the fact that
a. everything really worthwhile costs money.
b. even in wealthy countries like the United States, some people are poor.
c. no society can produce enough to satisfy fully the desires of people for goods and services.
d. sometimes shortages of a good arise when its price is set below the market equilibrium.
ANSWER: c
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Ch 01: MC
13. When economists say a good is scarce, they mean
a. there are only a limited number of consumers who would be interested in purchasing the good.
b. the human desire for the good exceeds the amount freely available from nature.
c. most people in poorer countries do not have enough of the good.
d. the production of the good has no opportunity cost for society.
ANSWER: b
14. When economists say goods are scarce, they mean
a. consumers are too poor to afford the goods and services available.
b. consumers are unwilling to buy goods unless they have very low prices.
c. goods are generally freely available from nature in most countries.
d. the desire for goods and services exceeds our ability to produce them with the limited resources available.
ANSWER: d
15. If scarcity were eliminated,
a. individuals would have to make trade-offs.
b. individuals would have to make many choices.
c. individuals would have limited resources.
d. all goods would be free.
ANSWER: d
16. If a good is scarce,
a. there will be shortages of it if the good is rationed by markets.
b. the good will have a price in a market setting.
c. there will be enough of the good freely available from nature to satisfy the human desire for it.
d. all goods are free.
ANSWER: b
17. Criteria for rationing goods and resources must be established because of
a. the law of comparative advantage.
b. the use of capitalism as a form of economic organization.
c. the inability of politicians to develop efficient forms of economic organization.
d. scarcity imposed by nature.
ANSWER: d
18. Every economy must ration goods in some way because of
a. overpopulation.
b. poorly-performing markets.
c. the income gap between rich and poor.
d. scarcity.
ANSWER: d
19. Which of the following is true of resources?
a. Physical resources reflect the skills and productive knowledge of human beings.
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Ch 01: MC
b. Human resources represent the productive capabilities of tools and machinery.
c. With the passage of time, investment activities can decrease the availability of resources.
d. Resources are inputs used to produce goods and services.
ANSWER: d
20. Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try
sometime, you just might find you can get what you need." These lyrics indicate that:
a. With scarcity, you may be able to satisfy your wants, but your needs will never be met.
b. While desires for goods are virtually unlimited, you can still get a lot of the things you need.
c. If you try, you can create the supply to meet your own demand.
d. If social welfare is maximized, your wants will be satisfied.
ANSWER: b
21. Capital is a term economists use to refer to
a. man-made resources used to produce other goods and services.
b. resources that are available in nature such as mineral deposits.
c. money that is used to consume goods and services, to distinguish it from money that is saved.
d. the value of the best alternative to an action.
ANSWER: a
22. The three major categories of resources are
a. human resources, physical resources, and natural resources.
b. scarce resources, capital resources, and abundant resources.
c. financial resources, global resources, and local resources.
d. common resources, private resources, and capital resources.
ANSWER: a
23. In economics, man-made resources such as tools, equipment, and structures that are used to produce other goods and
services are referred to as
a. consumer goods.
b. capital.
c. marginal goods.
d. infrastructures.
ANSWER: b
24. Which of the following best describes the difference between an objective concept and a subjective concept?
a. A subjective concept is a fact based on observation that is not subject to personal opinion, while an objective
concept is based on personal preferences and value judgments.
b. An objective concept is a fact based on observation that is not subject to personal opinion, while a subjective
concept is based on personal preferences and value judgments.
c. A subjective concept relates to issues in microeconomics, while an objective concept relates to issues in
macroeconomics.
d. An objective concept can only be illustrated in words, while a subjective concept can usually be illustrated
with a graph.
Copyright Cengage Learning. Powered by Cognero. Page 4
,Name: Class: Date:
Ch 01: MC
ANSWER: b
25. A fact based on observable phenomenon that is not influenced by differences in personal opinion is called
a. an objective concept.
b. a subjective concept.
c. an unintended consequence.
d. ceteris paribus.
ANSWER: a
26. An opinion based on personal preferences and value judgments is called
a. an objective concept.
b. a subjective concept.
c. an unintended consequence.
d. ceteris paribus.
ANSWER: b
27. When price is the rationing criterion, individuals have a strong incentive to
a. ignore the wishes of others when making decisions about how to use their resources.
b. provide services to others in exchange for income.
c. avoid exchanges because in every exchange there will be one person who gains and another who loses.
d. substitute promises for the consistent delivery of a quality product.
ANSWER: b
28. Economics is primarily the study of
a. how to make money in the stock market.
b. how to find lower cost methods of production.
c. the choices we must make among alternatives because of scarcity.
d. the proper form of industrial structure for the United States.
ANSWER: c
29. Which of the following is not scarce?
a. time for leisure activities
b. computers
c. jeans
d. the air we breathe
ANSWER: d
30. The economic way of thinking is
a. a set of historical generalizations that indicates what goods should be produced.
b. a body of statistical data that indicates how an economy should be organized.
c. a set of basic concepts that helps one understand human choices.
d. a set of complex, highly abstract theories that provides persons skilled in statistics with the information
necessary to tell others what choices they should make.
ANSWER: c
Copyright Cengage Learning. Powered by Cognero. Page 5
, Name: Class: Date:
Ch 01: MC
31. Economic theory
a. is a set of definitions, postulates, and principles assembled in a manner that helps make cause-and-effect
relationships clear in economics.
b. focuses primarily on the usage of capital within a society.
c. focuses primarily on the roles and responsibilities of government in a society.
d. is a set of definitions, postulates, and principles that help maximize opportunity costs of a society.
ANSWER: a
32. Which of the following is part of the economic way of thinking?
a. Opportunity costs will not be incurred when scarce resources are used to produce a good.
b. When the cost of an option increases, individuals will be less likely to choose it.
c. Changes in incentives generally have no effect on human behavior.
d. Economic thinking focuses primarily on the usage of labor within a society.
ANSWER: b
33. Which of the following is part of the economic way of thinking?
a. The accuracy of the assumptions is the best test of an economic theory.
b. When an option becomes more expensive, people will be less likely to choose it.
c. The value of a good can be determined objectively by measuring the amount of labor required for its
production.
d. A body of statistical data that indicates how an economy should be organized.
ANSWER: b
34. The expression "There's no such thing as a free lunch" means
a. if one person gains, someone else must lose.
b. each person must pay for exactly what he or she receives.
c. the use of resources to produce a good has an opportunity cost because of scarcity.
d. you cannot have a free lunch at the expense of someone else.
ANSWER: c
35. "There is no such thing as a free lunch." This statement best reflects the fact that
a. consumers are unwilling to pay for a good unless it provides them with value.
b. an opportunity cost is always present when scarce resources are used to produce a good.
c. it generally requires enormous effort to search out the best place to eat lunch.
d. the value of a good to consumers will decrease as they have more of it.
ANSWER: b
36. Which of the following statements is correct about the economic way of thinking?
a. If the buyer of a good gains, the seller must lose an equal amount.
b. The value of goods is objective; it is equal to the cost of supplying the good.
c. Opportunity costs will always be incurred when scarce resources are used to produce a good.
d. Changes in incentives generally have no effect on human behavior.
ANSWER: c
Copyright Cengage Learning. Powered by Cognero. Page 6
17th Edition James D. Gwartney
Notes
1- The file is chapter after chapter.
2- We have shown you 10 pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many new
editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
,Name: Class: Date:
Ch 01: Essay
1. If economics is correct in its assumption that people are rational, why then would anyone choose to smoke cigarettes?
ANSWER: Even though the harmful effects of cigarette smoking are documented, more than 20 percent of the U.S. adult
population continues to smoke. The economic model of rational choice suggests that individuals weigh the
marginal benefit of smoking an additional cigarette (the pleasure obtained) against the marginal costs (the
pecuniary cost, the price of the cigarette, and the risk of being afflicted by smoking-related diseases,
discounted by the probability). Since the likelihood of getting a smoking-related disease increases with age, it
is not surprising that more people elect to give up the habit as they get older.
2. A radio station gives "free money" to those listeners whose names are drawn and announced over the airwaves from
postcards the listeners sent into the radio station. Is the money really free for the listener?
ANSWER: While most students can identify the monetary cost of the postcard and stamp, we also must consider the
opportunity cost of listening to the radio. It is true that we can do other activities while the radio is on and
listen attentively when a name is drawn and announced over the airwaves. But there's also the opportunity cost
of not being able to listen to another station, one that might offer more preferred programming.
3. Why would a radio station give money to listeners? Does this violate the economic way of thinking?
ANSWER: Radio stations do surveys to see what types of prizes listeners want (for example, cars, boats, vacations, etc.).
Overwhelmingly, people say they want cash. A radio station that gives away money attracts listeners, and the
more listeners a station has, the more it can charge advertisers. The owners of the radio station clearly believe
the revenue this activity generates, in terms of advertising dollars, exceeds the money given away.
4. William observes that a car in 1925 sold for an average of $500 versus $20,000 for a 2005 model. He concludes that
2005 cars must be 40 times better than 1925 cars. What's wrong with this way of thinking?
ANSWER: Poor William has made several errors. First, a 1925 car differs substantially from a 2005 car. As the saying
goes, he is comparing apples and oranges. Second, the value of the dollar has declined; William, therefore, is
using as his measure a unit that has changed sizes. This is like measuring one room with a 50-inch stick and
another room with a 20-inch stick. We can give both measures in terms of sticks, but they are not very
comparable.
5. Evaluate this statement: "People engaged in economizing behavior will always buy the lowest priced item they can
find."
ANSWER: As long as price is the only factor, we would expect people to buy the lowest priced product. However, once
we consider quality, ease of operation, performance, durability, looks, etc., we can see why people would not
necessarily buy the lowest priced item. While people generally seek products that yield the most benefits
relative to costs, a product that can provide additional benefits would lead to a willingness to pay a higher
price.
6. Homeowners can deduct interest payments on their mortgages from their federal income tax. If this deduction were
removed, how would the housing market be affected?
ANSWER: The deductibility of these interest payments is an attractive feature of home ownership. If this deduction were
removed, we would expect fewer people choosing to own their own homes. Additionally, we would expect to
see more families in rental housing.
7. If people are self-interested, why does anyone give money to public radio?
ANSWER: Since people can listen to public radio without having to contribute, we know this can create a funding
problem. However, since the economic concept of enlightened self-interest is broader than a narrow, selfish
view, we would see people making this choice as contributing to their own interests. These people consider
public radio good for their community. They value their community's well-being and, therefore, support public
radio.
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Ch 01: Essay
8. When Mother Theresa won the Nobel Peace Prize, the monetary award was well in excess of $100,000. Did she accept
the money? If so, what did she do with it?
ANSWER: Mother Theresa used the money to help the poor, whom she spent a lifetime assisting. While we consider
Mother Theresa to have been one of the most unselfish of people, it is clear that she could have gained more of
what she valued if she had more money.
9. Who is more likely to drive carelessly, Camila in her 1980 Ford with bad brakes or Samantha, who has a 2005 BMW
with all the most recent safety options?
ANSWER: On the surface, we might conclude that Samantha will be more careful since she appears to have more to lose
(a higher priced car), but insurance likely will cover any monetary loss. Most people value their life and health
more than material possessions; because of this, we expect Camila to be more careful due to her unsafe car.
Samantha can afford to take more risks since her car is in better condition and has the latest safety features.
10. A popular video program, used to teach primary school children about economics, defines scarcity as "when you don't
have enough of something." Evaluate this definition based on your understanding of the scarcity concept.
ANSWER: This definition is a bit simplistic for college understanding. The video uses the example of three hats and four
children to assert a scarcity of hats. We would more properly view this as a shortage of hats created because
the hats, as presented, have no price. The shortage can be eliminated but scarcity cannot. Scarcity is the
fundamental concept from which economics derives. Besides resources, virtually all other things, including
your time, are scarce. Your textbook's definition will serve you better than the one from the video.
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Ch 01: MC
1. Adam Smith believed that if people were free to pursue their own interests,
a. less would be produced than if altruism were the guiding principle.
b. the public interest would be served quite well.
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.
ANSWER: b
2. 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. John Maynard Keynes and the writing of The General Theory of Employment, Interest and Money.
ANSWER: a
3. Which of the following was a key belief of Adam Smith?
a. he felt that human goodness would provide adequate goods and services to everyone.
b. he stressed that limited exchange and command economies would prevent the exploitation of the poor.
c. he believed that individuals pursuing their own interests would direct economic activity in the most
advantageous way.
d. he lectured about the importance of gold and silver in providing a stable monetary system.
ANSWER: c
4. According to Adam Smith, individual self-interest
a. is a powerful force for economic progress when individuals are wisely directed by a strong central
government.
b. is a powerful force for economic progress when it is directed by competitive markets.
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.
ANSWER: b
5. 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.
ANSWER: a
6. Economic choice and competitive behavior are the result of
a. poverty.
b. public ownership of resources.
c. scarcity.
d. private ownership of resources.
ANSWER: c
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Ch 01: MC
7. For the typical student, taking an introductory course in economics should
a. turn the student into an economist.
b. teach the student solutions to most social problems.
c. teach the student how to answer complex social questions.
d. help the student learn to rationally analyze social problems.
ANSWER: d
8. When a society cannot produce all the goods and services people wish to have, it is said that the economy is
experiencing
a. scarcity.
b. shortages.
c. inefficiencies.
d. inequities.
ANSWER: a
9. Which of the following is the best definition of economics?
a. An investigation of the quantities and prices of the various goods produced by the nations of the world.
b. An analysis of how individuals and societies deal with the problem of scarcity.
c. An examination of the role that money plays in the economy.
d. A study of how goods and services are distributed throughout the world.
ANSWER: b
10. Economics is primarily the study of
a. how to make money in the stock market.
b. how to operate a business successfully.
c. the allocation of scarce resources in an effort to satisfy wants that are virtually unlimited.
d. the methods business firms use to reduce their costs of production.
ANSWER: c
11. Some individuals or families can become completely saturated with a service such as television. This suggests that
a. a highly productive economy may someday be able to satisfy all human desires
b. desires for a single commodity can be satisfied but then the focus will switch to other goods and services
c. resources are not truly fixed in supply as we generally assume
d. scarcity does not exist
ANSWER: b
12. In economics, the term "scarcity" refers to the fact that
a. everything really worthwhile costs money.
b. even in wealthy countries like the United States, some people are poor.
c. no society can produce enough to satisfy fully the desires of people for goods and services.
d. sometimes shortages of a good arise when its price is set below the market equilibrium.
ANSWER: c
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Ch 01: MC
13. When economists say a good is scarce, they mean
a. there are only a limited number of consumers who would be interested in purchasing the good.
b. the human desire for the good exceeds the amount freely available from nature.
c. most people in poorer countries do not have enough of the good.
d. the production of the good has no opportunity cost for society.
ANSWER: b
14. When economists say goods are scarce, they mean
a. consumers are too poor to afford the goods and services available.
b. consumers are unwilling to buy goods unless they have very low prices.
c. goods are generally freely available from nature in most countries.
d. the desire for goods and services exceeds our ability to produce them with the limited resources available.
ANSWER: d
15. If scarcity were eliminated,
a. individuals would have to make trade-offs.
b. individuals would have to make many choices.
c. individuals would have limited resources.
d. all goods would be free.
ANSWER: d
16. If a good is scarce,
a. there will be shortages of it if the good is rationed by markets.
b. the good will have a price in a market setting.
c. there will be enough of the good freely available from nature to satisfy the human desire for it.
d. all goods are free.
ANSWER: b
17. Criteria for rationing goods and resources must be established because of
a. the law of comparative advantage.
b. the use of capitalism as a form of economic organization.
c. the inability of politicians to develop efficient forms of economic organization.
d. scarcity imposed by nature.
ANSWER: d
18. Every economy must ration goods in some way because of
a. overpopulation.
b. poorly-performing markets.
c. the income gap between rich and poor.
d. scarcity.
ANSWER: d
19. Which of the following is true of resources?
a. Physical resources reflect the skills and productive knowledge of human beings.
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Ch 01: MC
b. Human resources represent the productive capabilities of tools and machinery.
c. With the passage of time, investment activities can decrease the availability of resources.
d. Resources are inputs used to produce goods and services.
ANSWER: d
20. Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try
sometime, you just might find you can get what you need." These lyrics indicate that:
a. With scarcity, you may be able to satisfy your wants, but your needs will never be met.
b. While desires for goods are virtually unlimited, you can still get a lot of the things you need.
c. If you try, you can create the supply to meet your own demand.
d. If social welfare is maximized, your wants will be satisfied.
ANSWER: b
21. Capital is a term economists use to refer to
a. man-made resources used to produce other goods and services.
b. resources that are available in nature such as mineral deposits.
c. money that is used to consume goods and services, to distinguish it from money that is saved.
d. the value of the best alternative to an action.
ANSWER: a
22. The three major categories of resources are
a. human resources, physical resources, and natural resources.
b. scarce resources, capital resources, and abundant resources.
c. financial resources, global resources, and local resources.
d. common resources, private resources, and capital resources.
ANSWER: a
23. In economics, man-made resources such as tools, equipment, and structures that are used to produce other goods and
services are referred to as
a. consumer goods.
b. capital.
c. marginal goods.
d. infrastructures.
ANSWER: b
24. Which of the following best describes the difference between an objective concept and a subjective concept?
a. A subjective concept is a fact based on observation that is not subject to personal opinion, while an objective
concept is based on personal preferences and value judgments.
b. An objective concept is a fact based on observation that is not subject to personal opinion, while a subjective
concept is based on personal preferences and value judgments.
c. A subjective concept relates to issues in microeconomics, while an objective concept relates to issues in
macroeconomics.
d. An objective concept can only be illustrated in words, while a subjective concept can usually be illustrated
with a graph.
Copyright Cengage Learning. Powered by Cognero. Page 4
,Name: Class: Date:
Ch 01: MC
ANSWER: b
25. A fact based on observable phenomenon that is not influenced by differences in personal opinion is called
a. an objective concept.
b. a subjective concept.
c. an unintended consequence.
d. ceteris paribus.
ANSWER: a
26. An opinion based on personal preferences and value judgments is called
a. an objective concept.
b. a subjective concept.
c. an unintended consequence.
d. ceteris paribus.
ANSWER: b
27. When price is the rationing criterion, individuals have a strong incentive to
a. ignore the wishes of others when making decisions about how to use their resources.
b. provide services to others in exchange for income.
c. avoid exchanges because in every exchange there will be one person who gains and another who loses.
d. substitute promises for the consistent delivery of a quality product.
ANSWER: b
28. Economics is primarily the study of
a. how to make money in the stock market.
b. how to find lower cost methods of production.
c. the choices we must make among alternatives because of scarcity.
d. the proper form of industrial structure for the United States.
ANSWER: c
29. Which of the following is not scarce?
a. time for leisure activities
b. computers
c. jeans
d. the air we breathe
ANSWER: d
30. The economic way of thinking is
a. a set of historical generalizations that indicates what goods should be produced.
b. a body of statistical data that indicates how an economy should be organized.
c. a set of basic concepts that helps one understand human choices.
d. a set of complex, highly abstract theories that provides persons skilled in statistics with the information
necessary to tell others what choices they should make.
ANSWER: c
Copyright Cengage Learning. Powered by Cognero. Page 5
, Name: Class: Date:
Ch 01: MC
31. Economic theory
a. is a set of definitions, postulates, and principles assembled in a manner that helps make cause-and-effect
relationships clear in economics.
b. focuses primarily on the usage of capital within a society.
c. focuses primarily on the roles and responsibilities of government in a society.
d. is a set of definitions, postulates, and principles that help maximize opportunity costs of a society.
ANSWER: a
32. Which of the following is part of the economic way of thinking?
a. Opportunity costs will not be incurred when scarce resources are used to produce a good.
b. When the cost of an option increases, individuals will be less likely to choose it.
c. Changes in incentives generally have no effect on human behavior.
d. Economic thinking focuses primarily on the usage of labor within a society.
ANSWER: b
33. Which of the following is part of the economic way of thinking?
a. The accuracy of the assumptions is the best test of an economic theory.
b. When an option becomes more expensive, people will be less likely to choose it.
c. The value of a good can be determined objectively by measuring the amount of labor required for its
production.
d. A body of statistical data that indicates how an economy should be organized.
ANSWER: b
34. The expression "There's no such thing as a free lunch" means
a. if one person gains, someone else must lose.
b. each person must pay for exactly what he or she receives.
c. the use of resources to produce a good has an opportunity cost because of scarcity.
d. you cannot have a free lunch at the expense of someone else.
ANSWER: c
35. "There is no such thing as a free lunch." This statement best reflects the fact that
a. consumers are unwilling to pay for a good unless it provides them with value.
b. an opportunity cost is always present when scarce resources are used to produce a good.
c. it generally requires enormous effort to search out the best place to eat lunch.
d. the value of a good to consumers will decrease as they have more of it.
ANSWER: b
36. Which of the following statements is correct about the economic way of thinking?
a. If the buyer of a good gains, the seller must lose an equal amount.
b. The value of goods is objective; it is equal to the cost of supplying the good.
c. Opportunity costs will always be incurred when scarce resources are used to produce a good.
d. Changes in incentives generally have no effect on human behavior.
ANSWER: c
Copyright Cengage Learning. Powered by Cognero. Page 6
