Economics 002- Principles of Economics II » Fall 2022 » Test 1 Ch 1-3
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Question #1
Opportunity cost is an important factor in looking at comparative advantage.
A.
True
B.
False
Question #2
Which of the following does not cause a change in supply?
A.
A change in technology
B.
A change in price
C.
A change in input prices
D.
A change in expectations
Question #3
Which of the following is a normative economic statement?
A.
A reduction in the government deficit by 1% will make interest rates decrease 1%.
B.
The government should commit to reducing income inequality.
C.
The national unemployment rate in January of this year was 5.5%.
D.
The inflation rate next year will be less than 3%.
Question #4
Which of the following is correct?
A.
Economics is defined as a natural science.
B.
Economics is the study of the choices people make.
C.
Economics is the study of the infinite supply of goods.
D.
Economics is the study of the individual.
Question #5
Hierarchy is a way to coordinate the behavior of individuals.
A.
False
B.
True
Question #6
The production possibilities curve will never move outwards.
A.
True
B.
False
Question #7
Kamika travels to visit her parents for her summer vacation. Which of the following is not part of the opportunity cost of her choice?
A.
The cost of hiring a dog-walking service for her beagle, Smokey
B.
The price of her airline ticket
C.
The price of the thank you gift she buys for her friend who checked on her apartment while she was away
D.
The rent on her apartment while she is away
Question #8
In economics, capital includes _____.
A.
money
B.
stocks and bonds
C.
equipment
D.
all of the above
Question #9
What does economics study?
A.
How the government controls the economy and how people earn a living
B.
How businesses can make profits
C.
How society uses its scarce resources to satisfy its unlimited desires
D.
How the allocation of income among different sectors of the economy compares
Question #10
What does demand mean?
A.
Willingness to purchase goods
B.
The willingness and ability to purchase goods
C.
The numerical utility
D.
The ability to purchase goods
Question #11
In economics, markets are an excellent example of which of the following?
A.
Coordination through spontaneous order
B.
Coordination through hierarchy
C.
Centralized control through spontaneous order
D.
Centralized control through hierarchy
Question #12
Positive economics features discussions of _________ and relies heavily on the analysis of ________.
A.
efficiency; facts
B.
fairness; facts
C.
efficiency; opinions
D.
fairness; opinions
Question #13
What is a demand curve?
A.
A graphical representation of the relationship between price and quality of the good demanded
B.
A graphical representation of the relationship between price of the good and the quantity demanded
C.
A demand curve is upward sloping.
D.
An undefined curved line
Question #14
Government controls all market activity in the United States.
A.
False
B.
True
Question #15
Which of the following best illustrates the law of demand?
A.
An increase in income, resulting in decreased purchases of French fries
B.
The price of Big Macs increasing, causing consumers to buy more Whoppers
C.
An increase in income, resulting in increased purchases of Big Macs
D.
Increased purchases of Big Macs as the price of Big Macs decreases
Question #16
If an economist states that "the unemployment rate is 6%," then it is _____.
A.
a positive statement
B.
an opinion
C.
a normative statement
D.
a relative statement
Question #17
The law of demand is based upon which of the following?
A.
A relationship between price and quantity
B.
A relationship between quantity and quality
C.
A relationship between price and income
D.
A relationship between price and quality
Question #18
What will a change in tastes do?
A.
Lead to more uniform goods being produced
B.
Shift the demand curve to the right
C.
Result in a healthier choice
D.
Shift the demand curve
Question #19
What is the supply curve?
A.
A representation of the relationship between quantity and preferences
B.
A representation of the relationship between price and quantity of the goods a seller will supply
C.
A representation of the relationship between price and income.
D.
A representation of the relationship between quality and quantity of the goods the seller is willing to sell.
Question #20
The factors of production include
A.
money and capital
B.
labor and investment
C.
capital and labor
D.
money and labor
Question #21
Florida is famous for its oranges, whereas Idaho is famous for its potatoes. What can we conclude?
A.
There is no demand for oranges in Idaho.
B.
It is technically impossible to grow potatoes in Florida or oranges in Idaho.
C.
Consumers prefer locally produced food.
D.
Florida has a comparative advantage in oranges and Idaho has a comparative advantage in potatoes.
Question #22
Comparative advantage is based on
A.
government subsides
B.
wages
C.
prices of goods
D.
opportunity costs
Question #23
Being impossible to satisfy one person's needs without reducing someone else's needs is called _____.
A.
preferences
B.
choice
C.
economic efficiency
D.
opportunity cost
Question #24
A demand curve is drawn holding constant each of the following except which of the following?
A.
Tastes and preferences
B.
The price of the good
C.
The price of substitute goods
D.
Income level
Question #25
Empirical evidence is based on observation.
A.
False
B.
True
Question #26
What does the law of demand state?
A.
As the price increases, quantity demanded decreases.
B.
As the price increases, quantity demanded remains constant.
C.
As the price decreases, quantity demanded decreases.
D.
As the price increases, quantity demanded increases.
Question #27
What occurs to create a shortage in a market?
A.
Quantity demanded is less than quantity supplied.
B.
Quantity demanded and quantity supplied are equal.
C.
Quantity demanded is more than quantity supplied.
D.
The market is in equilibrium.
Question #28
Coke and Pepsi are substitutes. The price of Pepsi increases. What would we expect?
A.
The supply of Coke to decrease
B.
The demand for Coke to decrease
C.
The supply of Coke to increase
D.
The demand for Coke to increase
Question #29
Which statement is incorrect?
A.
Normative economics is mainly about facts.
B.
Comparative advantage can be used in the analysis of trade.
C.
The three factors in economics are labor, natural resources, and capital.
D.
Opportunity cost is the cost of what is given up.
Question #30
In economics, capital refers to physical objects, not money.
A.
True
B.
False
Question #31
The federal government announces a new gasoline tax of $1.00 per gallon that will be imposed tomorrow at noon. What would predict happening before noon tomorrow?
A.
An increase in the demand for gasoline and shortages of gasoline
B.
An increase in the demand for gasoline and surpluses of gasoline
C.
A decrease in the demand for gasoline and shortages of gasoline
D.
A decrease in the demand for gasoline and surpluses of gasoline
Question #32
A model is used to do which of the following?
A.
Explain an economic relationship
B.
Insure an exact result
C.
Exactly duplicate an economic situation
D.
Help students
Question #33
The law of demand states that as the price of the good increases, _____.
A.
demand increases
B.
demand decreases
C.
quantity demanded decreases
D.
quantity demanded increases
Question #34
Which of the following is true at the equilibrium price?
A.
Quantity demanded will equal quantity supplied.
B.
The supply curve and the demand curve do not intersect.
C.
There will be more than enough output to satisfy consumers.
D.
Firms will have more than enough buyers for their output.
Question #35
Adam Smith in the "Wealth of Nations" spoke about _____.
A.
the labor theory of value
B.
an invisible hand
C.
spontaneous order
D.
a visible hand
Question #36
Oil, gold, silver, and coal are examples of
A.
natural resources
B.
efficient production
C.
labor
D.
capital
Question #37
A.
A decrease in quantity demanded
B.
A decrease in demand
C.
An increase in quantity demanded
D.
An increase in demand
Question #38
What is meant by the term opportunity cost?
A.
A measure of the cost of natural resources
B.
The cost of capital
C.
The purchase price of a productive asset
D.
The value of the next-best option not taken
Question #39
What is true of both an increase in demand and an increase in quantity demanded?
A.
They both involve a movement down along a fixed demand curve.
B.
They both involve a change in the willingness or ability to buy.
C.
They are impacted by a change in the price of the good.
D.
They both involve a shift of the demand curve to the right.
Question #40
Microeconomics is the study of which of the following?
A.
Banks and the U.S. government
B.
Individual economic units
C.
Foreign exchange markets
D.
Money and money markets
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