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

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Question #1
Economics deals with
A.   Investing
B.   How people deal with scarcity
C.   Politics
D.   Getting rich
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 opportunity costs
B.   The law of increasing returns
C.   Ockham's Razor
D.   The law of diminishing costs
Question #3
The law referred to in the previous question is based upon the fact that:
A.   Economic resources are sometimes misallocated.
B.   Economic resources are not completely adaptable to alternative uses.
C.   Economic resources are perfectly adaptable to alternative uses.
D.   Economic resources are finite.
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.   allocate its resources efficiently.
C.   Operate at full employment, allocate its resources efficiently and avoid any waste or misallocation of resources.
D.   operate at full employment.
Question #5
As an economy grows, its production possibilities line:
A.   becomes more curved.
B.   starts to bow inward.
C.   shifts outward.
D.   becomes straighter.
Question #6
The term consumer sovereignty refers to:
A.   the fact that the consumer is ruled by the corporation and must play by its set of rules.
B.   the fact that corporations impose their own wills on the consumer in determining what will be produced.
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.   allocate and utilize society's scarce resources as efficiently as they can.
B.   respond quickly and accurately to the dollar votes of the consumer.
C.   continually increase their productivity through technological progress and better uses of society's scarce resources.
D.   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.
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.   formulas
B.   biases
C.   calculations
D.   models
Question #9
Which of the following does not correctly complete the sentence? A market economy can be likened unto a machine:
A.   It's purpose is to produce material wealth.
B.   It's fuel is money.
C.   The accelerator/decelerator is the level of total spending. 
D.   The central processing unit is the price mechanism.
Question #10
Which of the following will cause a country's production possibilities line to shift outward?
A.   Technological progress
B.   An increase in the population and technological progress.
C.   An increase in the population, technological progress, and discovery of a new supply of resources.
D.   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 positive statement
B.   The relationship between consumer spending and the unemployment rate is negative.
C.   The line on a graph representing the relationship between these two variables would have a negative slope.
D.   This is a normative statement.
Question #12
Allocative efficiency exists in the economy when:
A.   All industries are equally satiated with a particular resource
B.   Ditch diggers and doctors receive the same wage.
C.   All industries are willing to pay the same price for all resources
D.   All industries receive an equal amount of a particular resource.
Question #13
Productive efficiency exists in the economy when:
A.   The firm uses the most labor intensive method of production.
B.   The production of goods and services uses the most “capital intensive” techniques.
C.   Firms use “least cost” method of producing goods and services.
D.   The firm is able to charge the highest price possible for the product.
Question #14
Distributive efficiency exists in the economy when:
A.   Everyone receives an equal income.
B.   Everyone receives an income that is equal to the value of their productive contribution to society.
C.   The distribution of income is the fairest.
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.   normative economics
B.   imperfect information
C.   marginal benefits that exceed marginal costs
D.   opportunity costs.
Question #16
Opportunity costs exist because:
A.   households and businesses make rational decisions
B.   the decision to engage in one activity means forgoing some other activity
C.   most decisions do not involve sacrifices or trade-offs
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.   implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.
B.   contradicts the economic perspective
C.   is an example of irrational behavior
D.   implies that electronic media sources are displacing print sources for many consumers
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.   selfish because he is asking for a wage that is higher than others might charge
B.   greedy because he is asking for a high wage that some of his neighbors can't afford to pay
C.   irrational because some neighbors refused his offer
D.   rational self-interest because he is attempting to increase his own income by identifying and satisfying someone else's wants.
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.   decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile
B.   must be an avid runner
C.   decided that the marginal cost of running one more mile would outweigh the benefit 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.   Hypothesis
B.   Principle
C.   Comparison
D.   Anomaly
Question #21
The process by which economists test hypotheses against facts to develop theories, principles, and models is called:
A.   policy economics
B.   the economic perspective
C.   microeconomics
D.   the scientific method
Question #22
In constructing models, economists:
A.   include all available information
B.   must use mathematical equations
C.   expect to exactly duplicate the real world
D.   make simplifying assumptions
Question #23
A positive (as opposed to normative) statement is one that is
A.   objective and is based on facts
B.   derived by deduction
C.   subjective and is based on a value judgment
D.   derived by induction
Question #24
Which of the following is a capital (as opposed to land or labor) resource?
A.   Silicon (sand) used to make computer chips
B.   A computer programmer
C.   A corporate bond issued by a computer manufacturer
D.   A piece of software used by a firm
Question #25
Which of the following is a land resource?
A.   A machine for detecting earthquakes
B.   Natural gas
C.   A farmer
D.   An oil drilling rig
Question #26
The production possibilities curve illustrates the basic principle that:
A.   the production of more of any one good will in time require smaller and smaller sacrifices of other goods.
B.   an economy's capacity to produce increases in proportion to its population size.
C.   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.
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 upgrading of the quality of a nation's human resources.
B.   The improvement of a society's technological knowledge.
C.   An increase in the quantity of a society's labor force.
D.   The reduction of unemployment.
Question #28
A nation's production possibilities curve is bowed out from the origin because:
A.   wants are virtually unlimited.
B.   the originator of the idea drew it this way and modern economists follow this convention.
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.   that resources are imperfectly substitutable among alternative uses.
B.   the presence of inflationary pressures.
C.   that more output could be produced with the available resources.
D.   the presence of technological change.
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.   International specialization and trade.
B.   Full production.
C.   Full employment.
D.   Productive efficiency.
Question #31
Copyrights and trademarks are examples of:
A.   capital goods.
B.   property rights.
C.   public goods.
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.   market failure.
B.   the invisible hand.
C.   derived demand.
D.   consumer sovereignty.
Question #33
From society's point of view, the economic function of profits and losses is to:
A.   achieve full employment and price level stability.
B.   reallocate resources from less desired to more desired uses.
C.   promote the equal distribution of real assets and wealth.
D.   contribute to a more equal distribution of income.

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