Econ 1030 - Principles of Microeconomics » Summer 2021 » Test 1

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Question #1
Economics deals with
A.   How people deal with scarcity
B.   Getting rich
C.   Investing
D.   Politics
Question #2
A country's production possibilities curve is bowed outward from the origin. This is caused by the concept known as
A.   The law of increasing returns
B.   The law of increasing opportunity costs
C.   The law of diminishing costs
D.   Ockham's Razor
Question #3
The law referred to in the previous question is based upon the fact that:
A.   Economic resources are perfectly adaptable to alternative uses.
B.   Economic resources are finite.
C.   Economic resources are not completely adaptable to alternative uses.
D.   Economic resources are sometimes misallocated.
Question #4
For a country to function at a point on the production possibilities line, as opposed to inside the line, the country must:
A.   avoid any waste or misallocation of resources.
B.   Operate at full employment, allocate its resources efficiently and avoid any waste or misallocation of resources.
C.   allocate its resources efficiently.
D.   operate at full employment.
Question #5
As an economy grows, its production possibilities line:
A.   starts to bow inward.
B.   becomes straighter.
C.   becomes more curved.
D.   shifts outward.
Question #6
The term consumer sovereignty refers to:
A.   the fact that corporations impose their own wills on the consumer in determining what will be produced.
B.   the fact that the consumer is ruled by the corporation and must play by its set of rules.
C.   the fact that the consumer is king in a market economy, and this dictator will harshly punish any firm that does not quickly respond to his dollar votes.
D.   the fact that the government is ruled by the consumer, which in turn is ruled by the corporation.
Question #7
Which of the following correctly finishes the statement? In our model of a market economy, firms are motivated to:
A.   respond quickly and accurately to the dollar votes of the consumer.
B.   allocate and utilize society's scarce resources as efficiently as they can.
C.   Respond quickly and accurately to the dollar votes of the consumer, allocate and utilize society's scarce resources as efficiently as they can, and continually increase their productivity through technological progress and better uses of society's scarce resources.
D.   continually increase their productivity through technological progress and better uses of society's scarce resources.
Question #8
Without realizing it, we all use _________ in our decision making process because the world is just to complex to fully comprehend. Which of the following correctly fills in the blank?
A.   models
B.   formulas
C.   biases
D.   calculations
Question #9
Which of the following does not correctly complete the sentence? A market economy can be likened unto a machine:
A.   The central processing unit is the price mechanism.
B.   It's purpose is to produce material wealth.
C.   The accelerator/decelerator is the level of total spending. 
D.   It's fuel is money.
Question #10
Which of the following will cause a country's production possibilities line to shift outward?
A.   An increase in the population and technological progress.
B.   Discovery of a new supply of resources.
C.   Technological progress
D.   An increase in the population, technological progress, and discovery of a new supply of resources.
Question #11
When consumer spending goes up, the unemployment rate goes down, ceteris paribus. Which of the following falsely characterizes this statement?
A.   This is a normative statement.
B.   The relationship between consumer spending and the unemployment rate is negative.
C.   This is a positive statement
D.   The line on a graph representing the relationship between these two variables would have a negative slope.
Question #12
Allocative efficiency exists in the economy when:
A.   Ditch diggers and doctors receive the same wage.
B.   All industries receive an equal amount of a particular resource.
C.   All industries are equally satiated with a particular resource
D.   All industries are willing to pay the same price for all resources
Question #13
Productive efficiency exists in the economy when:
A.   The firm is able to charge the highest price possible for the product.
B.   The production of goods and services uses the most “capital intensive” techniques.
C.   The firm uses the most labor intensive method of production.
D.   Firms use “least cost” method of producing goods and services.
Question #14
Distributive efficiency exists in the economy when:
A.   Everyone receives an equal income.
B.   The distribution of income is the fairest.
C.   Everyone receives an income that is equal to the value of their productive contribution to society.
D.   Everyone receives an income that is as high as possible.
Question #15
Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:
A.   marginal benefits that exceed marginal costs
B.   opportunity costs.
C.   normative economics
D.   imperfect information
Question #16
Opportunity costs exist because:
A.   most decisions do not involve sacrifices or trade-offs
B.   households and businesses make rational decisions
C.   the decision to engage in one activity means forgoing some other activity
D.   wants are scarce relative to resources
Question #17
Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact:
A.   contradicts the economic perspective
B.   implies that electronic media sources are displacing print sources for many consumers
C.   implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.
D.   is an example of irrational behavior
Question #18
Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as:
A.   irrational because some neighbors refused his offer
B.   rational self-interest because he is attempting to increase his own income by identifying and satisfying someone else's wants.
C.   selfish because he is asking for a wage that is higher than others might charge
D.   greedy because he is asking for a high wage that some of his neighbors can't afford to pay
Question #19
Kara was out jogging and, despite being tired, decided to run one more mile. Based on her actions, economists would conclude that Kara:
A.   must be an avid runner
B.   decided that the marginal cost of running one more mile would outweigh the benefit of the additional mile
C.   decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile
D.   was not very tired, so the marginal cost of the extra mile was very low
Question #20
Which of the following terms implies the greatest degree of confidence in an economic generalization?
A.   Principle
B.   Hypothesis
C.   Anomaly
D.   Comparison
Question #21
The process by which economists test hypotheses against facts to develop theories, principles, and models is called:
A.   microeconomics
B.   the scientific method
C.   policy economics
D.   the economic perspective
Question #22
In constructing models, economists:
A.   include all available information
B.   make simplifying assumptions
C.   expect to exactly duplicate the real world
D.   must use mathematical equations
Question #23
A positive (as opposed to normative) statement is one that is
A.   objective and is based on facts
B.   subjective and is based on a value judgment
C.   derived by induction
D.   derived by deduction
Question #24
Which of the following is a capital (as opposed to land or labor) resource?
A.   A computer programmer
B.   A piece of software used by a firm
C.   A corporate bond issued by a computer manufacturer
D.   Silicon (sand) used to make computer chips
Question #25
Which of the following is a land resource?
A.   A machine for detecting earthquakes
B.   A farmer
C.   Natural gas
D.   An oil drilling rig
Question #26
The production possibilities curve illustrates the basic principle that:
A.   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.
B.   the production of more of any one good will in time require smaller and smaller sacrifices of other goods.
C.   an economy's capacity to produce increases in proportion to its population size.
D.   an economy will automatically obtain full employment of its resources.
Question #27
Which of the following will not produce an outward shift of the production possibilities curve?
A.   An increase in the quantity of a society's labor force.
B.   The improvement of a society's technological knowledge.
C.   An upgrading of the quality of a nation's human resources.
D.   The reduction of unemployment.
Question #28
A nation's production possibilities curve is bowed out from the origin because:
A.   the originator of the idea drew it this way and modern economists follow this convention.
B.   wants are virtually unlimited.
C.   resources are scarce.
D.   resources are not generally equally efficient in producing every good.
Question #29
Any point inside the production possibilities curve indicates:
A.   the presence of technological change.
B.   that resources are imperfectly substitutable among alternative uses.
C.   the presence of inflationary pressures.
D.   that more output could be produced with the available resources.
Question #30
Which of the following will enable a nation to obtain a combination of consumer goods and capital goods outside its production possibilities curve?
A.   Productive efficiency.
B.   Full employment.
C.   Full production.
D.   International specialization and trade.
Question #31
Copyrights and trademarks are examples of:
A.   capital goods.
B.   public goods.
C.   property rights.
D.   human capital.
Question #32
The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of:
A.   the invisible hand.
B.   derived demand.
C.   consumer sovereignty.
D.   market failure.
Question #33
From society's point of view, the economic function of profits and losses is to:
A.   reallocate resources from less desired to more desired uses.
B.   achieve full employment and price level stability.
C.   contribute to a more equal distribution of income.
D.   promote the equal distribution of real assets and wealth.

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