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Chapter 1—What Economics Is About

MULTIPLE CHOICE

1. The author of the text defines economics as thea. science of efficiency. b. science of scarcity.

c. study of markets.d. study of human activity.

ANS: B PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: )no,!ed-e

. /hen economists s0eak of scarcity they are referrin- to thea. condition in ,hich society is not em0!oyin- a!! its resources in an efficient ,ay. b. condition in ,hich 0eo0!e+s ,ants outstri0 the !imited resources avai!ab!e to satisfy those

,ants.c. economic condition that exists in on!y very 0oor countries of the ,or!d.

d. condition in ,hich society 0roduces too many frivo!ous -oods and not enou-h socia!!ydesirab!e -oods.

ANS: B PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: (om0rehension

3. /hich of the fo!!o,in- is not one of the four broad cate-ories of resources4a. !abor b. -overnmentc. ca0ita!d. entre0reneurshi0

e. !and

ANS: B PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: )no,!ed-e

5. Produced -oods used as in0uts for the 0roduction of other -oods com0rise the resource kno,n asa. natura! resources. b. services.c. ca0ita!.d. entre0reneurshi0.

ANS: ( PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: )no,!ed-e

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6. Entrepreneurship isa. the ta!ent for or-ani7in- the use of !and !abor and ca0ita! amon- other thin-s. b. ski!! in inf!uencin- -overnment re-u!ators and !e-is!ators.c. accumu!ated technica! kno,!ed-e in usin- !abor and ca0ita!.d. kno,!ed-e of the 0articu!ar natura! resources to be found in a -iven area.

ANS: A PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics

)"*: B!oom+s: )no,!ed-e

8. Some years a-o chemists at 32 (or0oration ,ere tryin- to create a su0er9stron- -!ue. Someho, they-ot their mo!ecu!es t,isted and came u0 ,ith one of the ,eakest -!ues ever made. But rather than 0ourin- it do,n the drain they tried coatin- some 0a0er ,ith it and the Post9It Note ,as born. Inthis case 32 ,as actin- as a;n<a. uti!ity. b. rationer.c. entre0reneur.d. abstraction.

ANS: ( PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: A00!ication

=. The 0hysica! and menta! ta!ents 0eo0!e brin- to 0roduction 0rocesses com0rise the resource ca!!eda. entre0reneurshi0. b. natura! resources.c. ca0ita!.d. !abor.

ANS: D PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics


>. The head!ine in the ne,s0a0er reads (ounty Su0ervisors Debate Bui!din- Ne, Schoo!s. Thehead!ine re!ates c!osest to ,hich economic conce0t4a. -oods and bads b. uti!ityc. choiced. efficiency

ANS: ( PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: (om0rehension

?. The o00ortunity cost of attendin- co!!e-e isa. the money one s0ends on co!!e-e tuition books and so forth. b. the hi-hest va!ued a!ternative one forfeits to attend co!!e-e.c. the !east va!ued a!ternative one forfeits to attend co!!e-e.d. e@ua! to the sa!ary one ,i!! earn ,hen one -raduates from co!!e-e.







1. ere are three thin-s you cou!d do if you do not attend your nei-hbor+s barbecue: ,atch te!evision,ith some friends ;you va!ue this at C1=< read a -ood nove! ;you va!ue this at C15< or -o in to ,ork;you cou!d earn C18 durin- the barbecue<. The o00ortunity cost of -oin- to your nei-hbor+s barbecue isa. C18 because this is the on!y a!ternative of the three ,here you actua!!y receive a monetary

0ayment. b. C15 because this is the !o,est va!ued a!ternative forfeited.c. C1= because this is the hi-hest va!ued a!ternative forfeited.d. C5= because this is the tota! do!!ar sum of the a!ternatives forfeited.

ANS: ( PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: A00!ication

11. It usua!!y takes !ess time to buy a six90ack of =9#0 a !oaf of bread and a ha!f9-a!!on of ice cream at asma!! convenience store ;such as a =9"!even< than at a !ar-e fu!!9service -rocery store. /hich of thefo!!o,in- 0ersons is most !ike!y to buy these items at a convenience store4a. a 0erson ,ith hi-h o00ortunity cost of time b. a 0erson ,ith !o, o00ortunity cost of timec. a 0erson ,ho is out of ,ork d. There is not enou-h information to ans,er the @uestion.

ANS: A PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: (om0rehension

1. 2inera!s anima!s ,ater and forests are a!! considered to be the resource kno,n asa. ca0ita! b. entre0reneurshi0c. !abor

d. !ande. none of the above

ANS: D PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: )no,!ed-e

13. The hi-her the o00ortunity cost of attendin- co!!e-ea. the more !ike!y an individua! ,i!! -o to co!!e-e. b. the more economics c!asses an individua! ,i!! take at co!!e-e.c. the fe,er economics c!asses an individua! ,i!! take at co!!e-e.

d. the !ess !ike!y an individua! ,i!! -o to co!!e-e.ANS: D PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: (om0rehension 2S(: "conomics 5=






15. /hich of the fo!!o,in- is an exam0!e of a 0ositive economic statement4a. The #.S. 0ub!ic shou!d devote more resources to education. b. The 0oor shou!d 0ay !o,er taxes and the rich shou!d 0ay hi-her taxes.c. Soa0 o0eras shou!d be taken off te!evision.d. If you dro0 a ba!! from the to0 of a bui!din- it ,i!! fa!! to the -round.

ANS: D PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics

)"*: B!oom+s: A00!ication

16. Attem0ts to determine ,hat is are 0art of EEEEEEEEEE economics.a. 0ositive b. normativec. 0ositive and normatived. neither 0ositive nor normative

ANS: A PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: )no,!ed-e

18. 2icroeconomics is the branch of economics that dea!s ,itha. hi-h!y a--re-ated markets or the entire economy. b. the 0roduction side of the economy exc!usive!y.c. the buyin- side of the economy exc!usive!y.d. human behavior and choices as they re!ate to re!ative!y sma!! units 999 an individua! a

firm an industry.

ANS: D PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: )no,!ed-e

1=. /hich of the fo!!o,in- is a microeconomics to0ic4a. the study of ho, 0rices are determined in the com0uter industry b. the study of unem0!oyment in the economyc. the study of ho, chan-es in the nation+s money su00!y affect the nation+s out0utd. a and ce. b and c

ANS: A PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: (om0rehension

1>. /hich of the fo!!o,in- is a positive macroeconomics statement4a. The centra! bank shou!d increase the nation+s money su00!y. b. The increase in the nation+s money su00!y he!0ed 0ush the nation+s unem0!oyment rate

do,n in the short run.c. ord 2otor (om0any+s ne, advertisin- cam0ai-n ended u0 hurtin- &enera! 2otors+ sa!es.d. The !oca! -overnment ou-ht to s0end more on recreationa! faci!ities.






ANS: B PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: A00!ication

1?. /hich of the fo!!o,in- is a normative macroeconomics statement4a. The centra! bank shou!d increase the nation+s money su00!y. b. The increase in the nation+s money su00!y he!0ed 0ush the nation+s unem0!oyment rate

do,n in the short run.c. ord 2otor (om0any+s ne, advertisin- cam0ai-n ended u0 hurtin- &enera! 2otors+ sa!es.d. The !oca! -overnment ou-ht to s0end more on recreationa! faci!ities.

ANS: A PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: A00!ication

. /hich of the fo!!o,in- is a positive microeconomics statement4a. The centra! bank shou!d increase the nation+s money su00!y. b. The increase in the nation+s money su00!y he!0ed 0ush the nation+s unem0!oyment rate

do,n in the short run.c. ord 2otor (om0any+s ne, advertisin- cam0ai-n ended u0 hurtin- &enera! 2otors+s

sa!es.d. The !oca! -overnment ou-ht to s0end more on recreationa! activities.


1. The condition in an economy that makes a rationin- device a necessity is the fact thata. the economy is or-ani7ed around free markets. b. the economy is centra!!y 0!anned by the -overnment.

c. scarcity exists.d. there are fe,er ty0es of -oods than there are 0eo0!e in the economy.

ANS: ( PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics F DIS(: $eadin- and inter0retin--ra0hs )"*: B!oom+s: (om0rehension

. The !atest 'ady &a-a a!bum is avai!ab!e to be do,n!oaded for C1.??. Is this 0rice a rationin- device4a. No the a!bum ,i!! be so!d to anyone havin- the re@uired number of do!!ars. b. *es because the a!bum ,i!! on!y be 0urchased by 0eo0!e ,ho are ,i!!in- and ab!e to 0ay

C1.??.

c. No for 0rice to be a rationin- device it must be so hi-h that on!y one unit of the item isso!d.d. *es since that is a reasonab!e 0rice.

ANS: B PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic






'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: A00!ication

3. /hat is the most 0rominent rationin- device you ,i!! !ike!y find at your cam0us bookstore4a. do!!ar 0rice b. brute forcec. anti9theft ta-s on the hi-h90riced itemsd. none of the above

ANS: A PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: A00!ication

5. "conomists be!ieve that 0eo0!e+s ,ants area. finite. b. infinite.c. irrationa!.d. unim0ortant because needs are more im0ortant than ,ants.


6. In every economy 0eo0!e vie for the economy+s rationin- device a 0rocess ca!!eda. com0etition. b. entre0reneurshi0.c. mar-ina! benefit.d. 0ositive economics.



8. Scarcity meansa. ,ants are -reater than the !imited resources avai!ab!e to satisfy these ,ants. b. ,ants are !ess than the !imited resources avai!ab!e to satisfy these ,ants.c. resources are infinite.d. ,ants are !imited.e. both c and d

ANS: A PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: (om0rehension

=. The need to make choices is most c!ose!y re!ated to the conce0t of a. o00ortunity cost. b. efficiency.c. inefficiency.d. uti!ity.






e. disuti!ity.

ANS: A PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: (om0rehension N%T: Ne,

>. %00ortunity cost is the va!ue of a. the best ;or most hi-h!y va!ued< forfeited a!ternative. b. the chosen a!ternative.

c. a free -ood.d. a!! forfeited a!ternatives.

ANS: A PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: )no,!ed-e

?. In a!! cases positive economics dea!s ,itha. ,hat is. b. ,hat shou!d be.c. re!ative!y sma!! units in the economy.d. a--re-ates or the entire economy.


3. In a!! cases normative economics dea!s ,itha. ,hat is. b. ,hat shou!d be.c. re!ative!y sma!! units in the economy.d. the entire economy.

ANS: B PTS: 1 DI: Difficu!ty: "asy

NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: (om0rehension

31. In a!! cases microeconomics dea!s ,itha. ,hat is. b. ,hat shou!d be.c. re!ative!y sma!! units in the economy.d. the entire economy.

ANS: ( PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics

)"*: B!oom+s: (om0rehension

3. In a!! cases macroeconomics dea!s ,itha. ,hat is. b. ,hat shou!d be.






c. re!ative!y sma!! units in the economy.d. the entire economy.

ANS: D PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: (om0rehension

33. Positive economics is concerned ,ith

a. va!ue Gud-ments. b. cause9effect re!ationshi0s.c. observations that cannot be 0roved.d. both b and c

ANS: B PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: (om0rehension

35. Normative economics is concerned ,itha. va!ue Gud-ments. b. o0inions.c. cause9effect re!ationshi0s.d. observations that can be 0roved.e. both a and b

ANS: " PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: (om0rehension

36. In economics a synonym for utility isa. usefu!ness. b. satisfaction.

c. sacrifice.d. a service.

ANS: B PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: #ti!ity and consumer choice)"*: B!oom+s: )no,!ed-e

38. The synonym economists common!y use for additional isa. ca0ita!. b. rationa!.c. mar-ina!.d. economic.

ANS: ( PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic '%(: DIS(: 2ar-ina! costs H benefits)"*: B!oom+s: )no,!ed-e

3=. Decision makin- at the mar-in means makin- a choice based on EEEEEEEEEE of a decision.






a. the tota! benefits b. the tota! costsc. com0arin- the tota! benefits and costsd. com0arin- the additiona! benefits and costs

ANS: D PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: 2ar-ina! costs H benefits)"*: B!oom+s: )no,!ed-e

3>. Severa! years a-o a bookstore chain extended its c!osin- time from ? 0.m. to 1 0.m. No, it isconsiderin- a further extension to 11 0.m. In makin- this mar-ina! decision the resu!ts of havin- -onefrom ? 0.m. to 1 0.m. area. no !on-er re!evant to the current decision. b. re!evant if the mar-ina! costs and benefits ,ere une@ua!.c. re!evant since they are 0art of the ca!cu!ation of tota! costs and benefits.d. re!evant if the mar-ina! costs and benefits ,ere e@ua!.

ANS: A PTS: 1 DI: Difficu!ty: (ha!!en-in- NAT: B#SP$%&: Ana!ytic '%(: DIS(: 2ar-ina! costs H benefits)"*: B!oom+s: A00!ication

3?. At the o0tima! or efficient !eve! of an activity the activitys mar-ina! benefit musta. be 7ero. b. be -reater than 7ero.c. e@ua! the mar-ina! cost of the activity.d. exceed the mar-ina! cost of the activity.

ANS: ( PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: 2ar-ina! costs H benefits)"*: B!oom+s: (om0rehension

5. /hich of the fo!!o,in- is a 0ositive economic statement4a. The tem0erature is too hi-h today. b. The tem0erature is 16 de-rees today.

c. It is too hot to Go- today.d. I enGoy summer evenin-s ,hen it coo!s off.

ANS: B PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: (om0rehension

51. In economics scarcity im0!iesa. disuti!ity. b. uti!ity.c. choice.

d. inefficiency.e. a c and d

ANS: ( PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: (om0rehension






5. A!! se!!ers may be tem0ted to raise the 0rice of ,hat they se!! but a ne-ative unintended effect ofraisin- the 0rice cou!d be EEEEEEEEEE in units so!d !ar-e enou-h to EEEEEEEEEE their tota! revenueearned.a. an increaseJ raise b. an increaseJ !o,er c. a decreaseJ raised. a decreaseJ !o,er

ANS: D PTS: 1 DI: Difficu!ty: (ha!!en-in- NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: A00!ication

53. 2ost states have instituted mandatory seatbe!t !a,s to reduce traffic fata!ities. An economist may 0ointout that an unintended effect of these !a,s isa. an increase in the 0rice of automobi!es further reducin- fata!ities. b. an increase in drivin- s0eed reducin- the number of accidents.c. a decrease in drivin- s0eed further reducin- fata!ities.d. an increase in risky drivin- behavior increasin- fata!ities.

ANS: D PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: A00!ication

55. A mandatory seatbe!t !a, ends u0 raisin- the number of traffic fata!ities if it !o,ers fata!ities 0eraccident from .1 to .> ,hi!e raisin- the number of accidents 0er 0eriod from 5 to any morethana. 5>. b. 8.c. 88.d. ==.

ANS: B PTS: 1 DI: Difficu!ty: (ha!!en-in- NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: A00!ication

56. A mandatory seatbe!t !a, ends u0 raisin- the number of traffic fata!ities if it !o,ers fata!ities 0eraccident from .11 to .> ,hi!e raisin- the number of accidents 0er 0eriod from 1 to any morethana. 1>. b. 111111.c. 13=6.d. 11.

ANS: ( PTS: 1 DI: Difficu!ty: (ha!!en-in- NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: A00!ication






58. A mandatory seatbe!t !a, ends u0 raisin- the number of traffic fata!ities if it !o,ers fata!ities 0eraccident from .1 to .= ,hi!e raisin- the number of accidents 0er 0eriod from 36 to any morethana. 36. b. 3>6.c. 3=56.d. 6.

ANS: D PTS: 1 DI: Difficu!ty: (ha!!en-in-

NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: A00!ication

5=. The branch of economics that studies the decisions of individua!s and firms is ca!!eda. macroeconomics. b. microeconomics.c. microeconomics and macroeconomics.d. 0ositive economics.e. normative economics.


5>. /hich of the fo!!o,in- ,ou!d N%T be considered a macroeconomic to0ic4a. the reasons for a dec!ine in the 0rice of crude oi! b. the cause of a do,nturn in the economyc. the effect of the -overnment bud-et deficit on inf!ationd. the causes of inf!ation and unem0!oyment



5?. /hich of the fo!!o,in- statements is false4a. There are a!,ays o00ortunity costs to makin- choices. b. Because of scarcity choices must be made.c. "!ementary education at 0ub!ic schoo!s is free.d. /hen -overnment bui!ds a ne, hi-h,ay tax0ayers end u0 ,ith !ess of some of the thin-s

they ,ou!d other,ise have.

ANS: ( PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: Ana!ysis

6. /hich of the fo!!o,in- issues is most unlikely to be addressed by an economist 0racticin- 0ositiveeconomics4a. the re!ationshi0 bet,een the minimum ,a-e and the number of unem0!oyed unski!!ed

,orkers b. the effect of a minimum ,a-e increase on inner9city crime rates






c. the desirabi!ity of a minimum ,a-e increased. the conse@uences of im0!ementin- a minimum ,a-e !a, in (hina


61. The @uestion of ho, a tax chan-e mi-ht im0act #.S. economic out0ut is most c!ose!y associated ,ith

the study of a. microeconomics. b. mana-eria! economics.c. macroeconomics.d. consumer economics.

ANS: ( PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: (om0rehension

6. Amy+s o00ortunity cost of -oin- to the movies isa. the 0rice of the ticket. b. 7ero if she has a free 0ass.c. the 0rice of the ticket 0!us the va!ue to Amy of ,hat she ,ou!d have chosen to do ,ith her

time had she not chosen to -o to the movies.d. both b and c

ANS: ( PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: A00!ication

63. The o00ortunity cost of attendin- co!!e-ea. consists of the tuition costs on!y. b. consists of the tuition costs 0!us the costs of room and board and other ex0enses.

c. is 7ero if the student receives a scho!arshi0 that covers the costs of tuition room and board and other ex0enses.

d. varies from 0erson to 0erson.e. both b and c

ANS: D PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: A00!ication

65. Prior to attendin- co!!e-e Darius is offered a !ucrative four9year contract as an actor in a daytime soa0o0era. Assumin- that actin- and attendin- co!!e-e are Darius+ 0referred a!ternatives and that he mustchoose bet,een the t,o his cost of attendin- co!!e-e after receivin- the offer

a. increases. b. decreases.c. stays the same.d. increases or stays the same de0endin- on ,hether he acce0ts the offer.

ANS: A PTS: 1 DI: Difficu!ty: 2oderate






NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: A00!ication

66. If it is discovered that usin- dru-s enhances a 0erson+s chance of contractin- a !etha! disease the costof usin- dru-sa. increases. b. decreases.c. is not affected.d. is irre!evant since they are i!!e-a! any,ay.

ANS: A PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: A00!ication

68. The study of an economy+s 0rice !eve! is ex0!icit!y a 0art of a. macroeconomics. b. microeconomics.c. 0ositive economics.d. normative economics.


6=. %00ortunity cost is the EEEEEEEEEE a!ternative forfeited ,hen a choice is made.a. !east9va!ued b. most hi-h!y9va!uedc. most convenientd. most recent!y considered

ANS: B PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: )no,!ed-e

6>. In an intervie, an economist states This 0rob!em shou!d be of -reater concern to the federa!-overnment. /e can ex0!icit!y 0ut this statement in the cate-ory of a. microeconomics. b. macroeconomics.c. 0ositive economics.d. normative economics.

ANS: D PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: (om0rehension

6?. The absence of va!ue Gud-ments is the essence of a. normative economics. b. 0ositive economics.c. microeconomics.d. macroeconomics.







8. If variab!e K -oes u0 as variab!e * -oes do,n then K and * area. direct!y re!ated. b. inverse!y re!ated.

c. inde0endent.d. 0ositive!y re!ated.

ANS: B PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic '%(: DIS(: $eadin- and inter0retin- -ra0hs)"*: B!oom+s: (om0rehension 2S(: A00endix A

81. If variab!e K -oes do,n as variab!e * -oes do,n then K and * area. direct!y re!ated. b. ne-ative!y re!ated.c. inverse!y re!ated.d. inde0endent.

ANS: A PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic '%(: DIS(: $eadin- and inter0retin- -ra0hs)"*: B!oom+s: (om0rehension 2S(: A00endix A

8. T,o variab!es are inde0endent if as one variab!e EEEEEEEEEE the other variab!e EEEEEEEEEE.a. risesJ rises. b. fa!!sJ fa!!s.c. risesJ fa!!s.d. chan-esJ does not chan-e.

ANS: D PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic '%(: DIS(: $eadin- and inter0retin- -ra0hs

)"*: B!oom+s: (om0rehension 2S(: A00endix A

83. The conce0t that re!ates ho, much one variab!e chan-es as another variab!e chan-es isa. s!o0e. b. !ine.c. curve.d. -ra0h.

ANS: A PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: $eadin- and inter0retin- -ra0hs)"*: B!oom+s: )no,!ed-e 2S(: A00endix A

85. 'et K be the number of hours you s0end studyin- for an exam on /ednesday afternoon and * be your

chances of ,innin- the /ednesday ni-ht state !ottery. /hat kind of a re!ationshi0 do you most !ike!yex0ect bet,een K and *4a. direct b. inversec. !inear






d. 569de-ree !inee. inde0endent

ANS: " PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: $eadin- and inter0retin- -ra0hs)"*: B!oom+s: (om0rehension 2S(: A00endix A

86. Scarcity is defined as the condition in ,hicha. both ,ants and resources are !imited.

b. ,ants are finite and resources infinite.c. both ,ants and resources are infinite.d. ,ants are infinite and resources finite.

ANS: D PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: )no,!ed-e

88. The reason 0eo0!e can+t have everythin- they ,ant is becausea. 0eo0!e are se!fish. b. scarcity exists.c. there is not enou-h economic -ro,th in the ,or!d.d. none of the above


8=. In the text economics is defined as the science of a. money and business. b. choices.c. scarcity.d. 0rice.e. individua!s+ actions.

ANS: ( PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: )no,!ed-e

8>. Somethin- that 0rovides uti!ity is ca!!ed aa. -ood. b. bad.c. ,ant.d. need.e. a and d

ANS: A PTS: 1 DI: Difficu!ty: "asy

NAT: B#SP$%&: Ana!ytic '%(: DIS(: #ti!ity and consumer choice)"*: B!oom+s: )no,!ed-e

8?. Somethin- that 0rovides disuti!ity is ca!!ed aa. -ood.






b. ,ant.c. need.d. bad.e. none of the above

ANS: D PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic '%(: DIS(: #ti!ity and consumer choice)"*: B!oom+s: )no,!ed-e

=. A -ood 0rovides EEEEEEEEEE and a bad 0rovides EEEEEEEEEE.a. uti!ityJ satisfaction b. disuti!ityJ uti!ityc. dissatisfactionJ satisfactiond. uti!ityJ disuti!itye. satisfactionJ uti!ity

ANS: D PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: #ti!ity and consumer choice)"*: B!oom+s: )no,!ed-e

=1. /hich of the fo!!o,in- statements is false4a. To an economist the resource land inc!udes natura! resources such as minera!s forests

,ater and unim0roved !and. b. To an economist the resource capital consists of un0roduced -oods that can be turned into

0roduced -oods.c. To an economist the resource labor consists of the 0hysica! and menta! ta!ents 0eo0!e

contribute to the 0roduction 0rocess.d. To an economist the resource entrepreneurship refers to a 0articu!ar ta!ent that some

0eo0!e have for or-ani7in- the resources of !and !abor and ca0ita! to 0roduce -oods seekne, business o00ortunities and deve!o0 ne, ,ays of doin- thin-s.

ANS: B PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics


=. A 0erson -oes into a store and buys a com0uter for C11. In this case 0rice is actin- as aa. resource. b. -ood.c. rationin- device.d. ca0ita! instrument.e. factor of 0roduction.

ANS: ( PTS: 1 DI: Difficu!ty: "asy NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics


=3. If 0eo0!e ,ant more cars than there are cars avai!ab!e then it is necessari!y true thata. cars are scarce. b. there is a sur0!us of cars.c. there is a decreased su00!y of cars.






d. none of the above


=5. /hy do societies need rationin- devices4a. Because 0eo0!e have too many needs and not enou-h ,ants. b. Because 0rice exists.

c. Because scarcity exists.d. Because 0eo0!e have o00ortunity costs.

ANS: ( PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: (om0rehension

=6. o, is scarcity re!ated to com0etition4a. (om0etition is an effect of scarcity. b. Scarcity is an effect of com0etition.c. Both scarcity and com0etition are effects of a rationin- device.d. Both scarcity and com0etition are effects of o00ortunity cost.e. Scarcity 0roduces disuti!ity and com0etition 0roduces uti!ity.


=8. "very time you make a EEEEEEEEEE you incur a ;an< EEEEEEEEEE.a. decisionJ unintended effect b. choiceJ o00ortunity costc. com0etitive moveJ 0riced. decisionJ mistakee. none of the above


==. If you hadn+t -one to dinner ,ith your friends you ,ou!d have stayed home and surfed the Internet.It fo!!o,s thata. surfin- the Internet is the o00ortunity cost of havin- dinner ,ith your friends. b. the 0rice of havin- dinner ,ith your friends is more than the 0rice you ,ou!d have had to

0ay to surf the Internet.c. the o00ortunity cost of havin- dinner ,ith your friends is !o,er than the o00ortunity cost

of surfin- the Internet.d. it is !ess cost!y to surf the Internet than to have dinner ,ith your friends.

ANS: A PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: A00!ication






=>. The EEEEEEEEEE the o00ortunity cost of doin- somethin- the EEEEEEEEEE !ike!y a 0erson ,i!! do thatsomethin-.a. !o,erJ !ess b. !o,erJ morec. hi-herJ mored. hi-herJ !esse. b and d

ANS: " PTS: 1 DI: Difficu!ty: 2oderate

NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: (om0rehension

=?. If scarcity didn+t exist neither ,ou!da. rationin- devices. b. com0etition.c. !abor.d. ca0ita!.e. a and b

ANS: " PTS: 1 DI: Difficu!ty: (ha!!en-in- NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: (om0rehension

>. The cost of bui!din- a ne, interstate hi-h,ay system is re0orted to be hi-h at C6 bi!!ion. Does itnecessari!y fo!!o, that the interstate hi-h,ay is not ,orth bui!din-4a. *es because it is better to s0end C6 bi!!ion on endin- 0overty than on bui!din- another

interstate hi-h,ay system. b. No because bui!din- a ne, interstate hi-h,ay system 0romotes economic -ro,th ,hich

he!0s everyone.c. No because the benefits of bui!din- a ne, interstate hi-h,ay system may be -reater than

C6 bi!!ion.d. *es because the benefits of bui!din- a ne, interstate hi-h,ay system may be -reater than

C6 bi!!ion.

ANS: ( PTS: 1 DI: Difficu!ty: (ha!!en-in- NAT: B#SP$%&: Ana!ytic '%(: DIS(: 2ar-ina! costs H benefits)"*: B!oom+s: (om0rehension

>1. /hich of the fo!!o,in- statements is true4a. %i! is c!assified in the resource cate-ory !and. b. A 0erson ,orkin- for a com0any is c!assified in the resource cate-ory ca0ita!.c. A machine in a factory is c!assified in the resource cate-ory !and.d. A 0erson ,ith the 0articu!ar ta!ent for or-ani7in- the resources of !and !abor and ca0ita!

to 0roduce -oods seek ne, business o00ortunities and deve!o0 ne, ,ays of doin- thin-sis c!assified in the resource cate-ory !abor.

e. a and d

ANS: A PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: (om0rehension






>. Sayin- the mar-ina! costs are -reater than the mar-ina! benefits is the same as sayin-a. the avera-e costs are -reater than the avera-e benefits. b. the tota! costs are -reater than the avera-e benefits.c. the benefits are -reater than the costs.d. the additiona! costs are -reater than the additiona! benefits.e. the costs minus the benefits e@ua! the net costs.

ANS: D PTS: 1 DI: Difficu!ty: (ha!!en-in- NAT: B#SP$%&: Ana!ytic '%(: DIS(: 2ar-ina! costs H benefits


>3. /hat does it mean if a 0erson makes a decision at the mar-in4a. The 0erson com0ares additiona! benefits and additiona! costs ,hen decidin- ,hat to do. b. The 0erson ,ei-hs the -ood a-ainst the bad and then decides ,hat to do.c. The 0erson is more !ike!y to say yes than to say no.d. The 0erson com0ares mar-ina! benefits and tota! costs and then decides ,hat to do.e. The 0erson makes a decision based on a condition.

ANS: A PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: 2ar-ina! costs H benefits)"*: B!oom+s: (om0rehension

>5. Is it 0ossib!e for mandatory seatbe!t !a,s to increase vehic!e fata!ities4a. *es if the number of accidents increases by a -reater 0ercenta-e than the number of

deaths 0er accident decreases. b. No because ,earin- seatbe!ts decreases the number of deaths 0er accident.c. No because ,earin- seatbe!ts decreases the number of accidents.d. There is not enou-h information to ans,er the @uestion.

ANS: A PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: A00!ication

>6. /hich of the fo!!o,in- is a positive economic statement4a. /e shou!d raise the minimum ,a-e in order to 0rovide a decent ,a-e for more 0eo0!e. b. (onsumers bou-ht fe,er cars ,hen the re!ative 0rice of cars increased.c. The bud-et deficit has been risin- in recent years.d. edera! -overnment s0endin- ou-ht to be curtai!ed.e. b and c

ANS: " PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: (om0rehension

>8. /hich of the fo!!o,in- statements is false4a. 2icroeconomics is the branch of economics that dea!s ,ith human behavior and choicesas they re!ate to re!ative!y sma!! units9an individua! a firm an industry and a sin-!emarket.

b. 2acroeconomics is the branch of economics that dea!s ,ith human behavior and choicesas they re!ate to hi-h!y a--re-ate markets.






c. Positive economics attem0ts to determine ,hat is.d. Normative economics addresses ,hat shou!d be.e. Positive and normative economics both address ,hat shou!d be.

ANS: " PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic'%(: DIS(: The study of economics and definitions of economics)"*: B!oom+s: )no,!ed-e

>=. /hich of the fo!!o,in- is !east !ike!y to be an effect of scarcity4a. rationin- device b. choicec. o00ortunity costd. do!!ar 0ricee. uti!ity

ANS: " PTS: 1 DI: Difficu!ty: 2oderate NAT: B#SP$%&: Ana!ytic '%(: DIS(: Scarcity tradeoffs and o00ortunity cost)"*: B!oom+s: (om0rehension

>>. o, are chan-es in o00ortunity cost 0redicted to affect behavior4a. The !o,er the o00ortunity cost of doin- K the !ess !ike!y K ,i!! be done. b. The hi-her the o00ortunity cost of doin- K the !ess !ike!y K ,i!! be done.c. The !o,er the o00ortunity cost of doin- K the more !ike!y K ,i!! be done.d. a and ce. b and c

ANS: "

>?. In most societies do!!ar 0rice acts as the main rationin- device. If do!!ar 0rice ,eren+t the mainrationin- device ,ou!d there sti!! be a need for some rationin- device to take its 0!ace4a. No because ,ith do!!ar 0rice there ,ou!d be no scarcity a!thou-h shorta-es ,ou!d sti!!

exist. b. *es because there is a need for a rationin- device as !on- as scarcity exists.

c. *es because there is a need for a rationin- device as !on- as the ,or!d+s 0o0u!ation is so!ar-e.

d. No because do!!ar 0rice creates scarcity and ,ithout money 0rice scarcity ,ou!dn+t exist.e. none of the above

ANS: B

?. /hich of the fo!!o,in- statements is false4a. (a0ita! consists of 0roduced -oods that can be used as in0uts for further 0roduction. b. The terms resources inputs, and factors of production are synonyms.c. 'abor consists of the 0hysica! but not menta! ta!ents of 0eo0!e ,ho contribute to the

0roduction 0rocess.

d. "ntre0reneurshi0 is one of the four cate-ories of resources.e. The resource cate-ory !and inc!udes natura! resources such as minera!s forests ,ater andunim0roved !and.

ANS: (






?1. Decidin- at the mar-in is EEEEEEEEEE an a!!9or9nothin- decision.a. consistent ,ith b. inconsistent ,ithc. the same as makin-d. conditioned u0on makin-

ANS: B

?. /hich of the fo!!o,in- is an unintended effect of 0!acin- safety ca0s on medicines4

a. It is no, harder for 0eo0!e to o0en their medicine containers. b. Peo0!e !eave their medicine containers o0en more often ,hich ends u0 makin- it easier

for chi!dren to -et into the medicine.c. e,er 0eo0!e -et sick and need medicine.d. 2edicine 0rices fa!! shar0!y.

ANS: B

?3. Lariab!e K rises as a resu!t of variab!e * risin-. Lariab!es K and * area. inverse!y re!ated. b. direct!y re!ated.c. inde0endent of each other.d. smooth!y re!ated.e. none of the above

ANS: B

?5. In -enera! there is a EEEEEEEEEEEEEE re!ationshi0 bet,een the number of hours s0ent studyin- for atest and the -rade earned on the test.a. inde0endent b. directc. inversed. smooth

ANS: B

?6. Lariab!es K and * are inde0endent of each other. If ,e 0!ot K on the hori7onta! axis and * on thevertica! axis the !ine that connects combinations of K and * in a t,o9variab!e dia-ram isa. 0ara!!e! to the hori7onta! axis. b. do,n,ard9s!o0in- ;!eft to ri-ht<.c. 0ara!!e! to the vertica! axis.d. u0,ard9s!o0in- ;!eft to ri-ht<.e. a or c

ANS: "

?8. Lariab!es A and B are inverse!y re!ated. If ,e 0!ot A on the hori7onta! axis and B on the vertica! axis

the !ine that connects combinations of A and B in a t,o9variab!e dia-ram isa. 0ara!!e! to the hori7onta! axis. b. do,n,ard9s!o0in- ;!eft to ri-ht<.c. 0ara!!e! to the vertica! axis.d. u0,ard9s!o0in- ;!eft to ri-ht<.






e. a or c

ANS: B

?=. Lariab!es A and B are direct!y re!ated. If ,e 0!ot A on the hori7onta! axis and B on the vertica! axis the!ine that connects combinations of A and B in a t,o9variab!e dia-ram isa. 0ara!!e! to the hori7onta! axis. b. do,n,ard9s!o0in- ;!eft to ri-ht<.c. 0ara!!e! to the vertica! axis.

d. u0,ard9s!o0in- ;!eft to ri-ht<.e. a or c

ANS: D

?>. The coordinates of 0oint A are units of K and 5 units of *. The coordinates of 0oint B are unitsof K and 3 units of *. /ith K on the hori7onta! axis and * on the vertica! axis the s!o0e of the !ine bet,een 0oints A and B isa. M 6. b. M .c. M .33d. 9 .e. 9 6.

ANS: "

??. A !ine is 0ara!!e! to the vertica! axis. The s!o0e of the !ine isa. 7ero. b. infinite.c. indicative of an inverse re!ationshi0 bet,een t,o variab!es.d. indicative of a direct re!ationshi0 bet,een t,o variab!es.e. b and d

ANS: B

1. A !ine is 0ara!!e! to the hori7onta! axis. The s!o0e of the !ine isa. infinite. b. indicative of an inverse re!ationshi0 bet,een t,o variab!es.c. indicative of a direct re!ationshi0 bet,een t,o variab!es.d. 7ero.e. b and d

ANS: D

11. By !ookin- at the different s!ices of a 0ie chart and com0arin- one s!ice to another it is 0ossib!e to@uick!y estimatea. re!ative re!ationshi0s. b. abso!ute re!ationshi0s.

c. the s!o0e of a !ine.d. the s!o0e of a curve.e. none of the above

ANS: A






1. A characteristic of a 569de-ree !ine is thata. any 0oint on the !ine is e@uidistant from the t,o axes. b. it bisects a ri-ht an-!e.c. its s!o0e is 1.d. a and ce. a b and c

ANS: "

13. The ans,er is This is 0rinci0a!!y used to exhibit chan-es in data over time. The @uestion isa. /hat is a 0ie chart4 b. /hat is a 569de-ree !ine4c. /hat is a tan-ent !ine4d. /hat is a !ine -ra0h4e. b and d

ANS: D

15. /hich of the fo!!o,in- is a 0ossib!e rationin- device4a. do!!ar 0rice b. first9come9first9servedc. brute forced. a and be. a b and c

ANS: "

Exhibit 1-1

2 a r - i n a ! B e n e f i t 1

2 a r - i n a ! ( o s t

Time S0ent Studyin- ;hours<

2(

2B

. 5 8 >

16. $efer to "xhibit 191. The student ,hose study habits are i!!ustrated here ,i!! maximi7e the net

benefits of studyin- ,hen she has studieda. hours b. 5 hoursc. 8 hoursd. > hours






ANS: (

18. $efer to "xhibit 191. If the student ,hose study habits are i!!ustrated here is current!y studyin- for the>th hour she shou!da. cut back on the number of hours she is studyin- because the mar-ina! benefit of studyin-

for the >th hour is !ess than the mar-ina! cost of doin- so. b. cut back on the number of hours she is studyin- because the mar-ina! benefit of studyin-

for the >th -reater than the mar-ina! cost of doin- so.

c. increase the number of hours she is studyin- because the mar-ina! benefit of studyin- forthe >th hour is !ess than the mar-ina! cost of doin- so.

d. increase the number of hours she is studyin- because the mar-ina! benefit of studyin- forthe >th hour is -reater than the mar-ina! cost of doin- so.

ANS: A

1=. $efer to "xhibit 191. If the student ,hose study habits are i!!ustrated here is current!y studyin- for thend hour she shou!da. cut back on the number of hours she is studyin- because the mar-ina! benefit of studyin-

for the nd hour is !ess than the mar-ina! cost of doin- so. b. cut back on the number of hours she is studyin- because the mar-ina! benefit of studyin-

for the nd hour is -reater than the mar-ina! cost of doin- so.c. increase the number of hours she is studyin- because the mar-ina! benefit of studyin- for

the nd hour is !ess than the mar-ina! cost of doin- so.d. increase the number of hours she is studyin- because the mar-ina! benefit of studyin- for

the ndhour is -reater than the mar-ina! cost of doin- so.

ANS: D

1>. To an economist utility means:a. additiona!. b. usefu!ness.c. satisfaction.d. mar-ina!.

ANS: (

1?. Accordin- to economists com0etition exists because of a. scarcity. b. ca0ita!ism.c. money.d. unintended effects.

ANS: A

11. 2any 0eo0!e buy one ne,s0a0er 0er day but rare!y do they buy t,o of the same ne,s0a0ers on the

same day. /hat is the economic Gustification for this behavior4a. The mar-ina! benefit of 0urchasin- the second ne,s0a0er exceeds the mar-ina! cost of

0urchasin- that 0a0er. b. The mar-ina! cost of 0urchasin- the second ne,s0a0er exceeds the mar-ina! benefit of

0urchasin- that 0a0er.






c. The mar-ina! benefit of 0urchasin- the second ne,s0a0er e@ua!s the mar-ina! cost of 0urchasin- that 0a0er.

d. none of the above is an a00ro0riate economic Gustification for this behavior.

ANS: B

Exhibit 1-

Point ! "

A 1 1 B 116C 3 136

D 5 186

111. $efer to "xhibit 19. Accordin- to the data 0rovided in this tab!e ,hat is the s!o0e of the !ine bet,een 0oints A and B if these data ,ere -ra0hed ,ith K on the hori7onta! axis and * on the vertica! axis4a. 91.6 b. 9.8=c. 1.6d. .8=

ANS: (

11. $efer to "xhibit 19. Accordin- to the data 0rovided in this tab!e ,hat is the s!o0e of the !ine bet,een 0oints ( and D if these data ,ere -ra0hed ,ith K on the hori7onta! axis and * on the vertica! axis4a. 93. b. 9.33c. 3.d. .33e. none of the above

ANS: (

113. $efer to "xhibit 19. Based on the data 0rovided in this tab!e if these data ,ere 0!otted in a t,o9variab!e dia-ram the resu!t ,ou!d be a EEEEEEEEEEEEEE s!o0in- EEEEEEEEEEEEEEEEEEEE.a. do,n,ardJ ;non!inear< curve. b. do,n,ardJ ;strai-ht< !ine.c. u0,ardJ ;non!inear< curve.d. u0,ardJ ;strai-ht< !ine.e. none of the above

ANS: (

115. $efer to "xhibit 19. Based on the data 0rovided in this tab!e ,hat ty0e of re!ationshi0 exists bet,een variab!es K and *4a. inverse

b. directc. inde0endentd. There is no re!ationshi0 bet,een variab!es K and *.

ANS: B






Exhibit 1-#

Point ! "

A 6 > B 1 8C 16 5

D

116. $efer to "xhibit 193. Accordin- to the data 0rovided in this tab!e ,hat is the s!o0e of the !ine bet,een 0oints ( and D ;if these data ,ere -ra0hed ,ith K on the hori7onta! axis and * on the vertica! axis<4a. 9.5 b. 9.6c. .5d. .6e. none of the above

ANS: A

118. $efer to "xhibit 193. Accordin- to the data 0rovided in this tab!e ,hat is the s!o0e of the !ine bet,een

0oints A and B if these data ,ere -ra0hed ,ith K on the hori7onta! axis and * on the vertica! axis4a. 9.5 b. 9.6c. .5d. .6e. none of the above

ANS: A

11=. $efer to "xhibit 193. Based on the data 0rovided in this tab!e if these data ,ere 0!otted in a t,o9variab!e dia-ram the resu!t ,ou!d be a EEEEEEEEEEEEEE s!o0in-a. do,n,ardJ ;non!inear< curve.

b. do,n,ardJ ;strai-ht< !ine.c. u0,ardJ ;non!inear< curve.d. u0,ardJ ;strai-ht< !ine.e. none of the above

ANS: B

11>. $efer to "xhibit 193. Based on the data 0rovided in this tab!e ,hat ty0e of re!ationshi0 exists bet,een variab!es K and *4a. inverse b. directc. inde0endentd. There is no re!ationshi0 bet,een variab!es K and *.

ANS: A

11?. A theory isa. bui!t on the maGor factors or variab!es that the theorist be!ieves ex0!ain some event.






b. a sim0!ified abstract re0resentation of the rea! ,or!d.c. used to understand the rea! ,or!d.d. a and be. a b and c

ANS: "

1. Ceteris paribus meansa. one variab!e too many.

b. the correct re!ationshi0 s0ecified.c. assumin- economic motives.d. a!! other thin-s he!d constant or nothin- e!se chan-es.

ANS: D

11. /hich of the fo!!o,in- statements uses the term ceteris paribus correct!y4a. In economics there are numerous theories ceteris paribus. b. Ne, *ork (ity is a maGor American city ceteris paribus.c. The 0rice of 0inea00!es is !o, in a,aii ceteris paribus.d. The more ice cream you eat the more ,ei-ht you ,i!! -ain ceteris paribus.e. none of the above

ANS: D

1. If an economist says the hi-her the 0rice of oran-es the fe,er oran-es individua!s ,i!! buy ceteris paribus this means thata. individua!s don+t !ike hi-h90riced oran-es. b. as the 0rice of oran-es rises individua!s+ 0references chan-e and they no !on-er !ike

oran-es as much as they once did.c. as the 0rice of oran-es rises individua!s+ 0references do not chan-e nor does anythin-

e!se but individua!s buy fe,er oran-es in res0onse to the hi-her 0rice of oran-es.d. the hi-her the 0rice of oran-es the fe,er oran-es individua!s ,i!! buy assumin- that

0eo0!e have economic motives.

ANS: (

13. The 0ur0ose of the ceteris paribus condition is to a!!o, economists toa. determine the re!ationshi0 amon- severa! variab!es. b. determine the im0act of severa! variab!es on another variab!e.c. iso!ate the im0act of one variab!e on severa! variab!es.d. iso!ate the re!ationshi0 bet,een t,o variab!es.

ANS: D

15. The condition often used in economics to iso!ate the re!ationshi0 bet,een t,o variab!es isa. causation. b. abstraction.c. ceteris paribus.d. efficiency.

ANS: (






16. A three9,ord synonym for the term ceteris paribus isa. nothin- e!se chan-es. b. in my o0inion.c. it is 0roved.d. under this assum0tion.

ANS: A

18. /hich statement uses the term ceteris paribus correct!y4

a. If you exercise re-u!ar!y you ,i!! be hea!thier ceteris paribus. b. B!ue is to -reen ceteris paribus as red is to 0ur0!e.c. 2ost 0eo0!e consider Sunday to be the first day of the ,eek ceteris paribus.d. Interest rates usua!!y rise in %ctober ceteris paribus.e. a and d

ANS: A

1=. "conomists use the ceteris paribus assum0tion 0rimari!y in order toa. make their ana!yses easier for them to conduct. b. desi-nate ,hat they be!ieve is the correct re!ationshi0 bet,een t,o variab!es.c. ex0!ain ,hy 0eo0!e sometimes consume more of a -ood ,hen its 0rice rises.d. ex0!ain ,hy those thin-s that come first do not necessari!y cause those thin-s that come

!ater.e. desi-nate the difference bet,een normative and 0ositive economics.

ANS: B

1>. A theory is an abstract re0resentation of rea!ity. This means a theorya. is descri0tive of the ,ay the ,or!d is. b. is an unrea!istic re0resentation of rea!ity.c. omits certain factors ,hen tryin- to ex0!ain somethin-.d. is usua!!y ex0ressed in 0rofessiona! Gar-on.e. none of the above

ANS: (

1?. "fficiency is consistent ,itha. maximi7in- net benefits. b. e@uatin- mar-ina! benefits and mar-ina! costs.c. maximi7in- tota! benefits.d. minimi7in- tota! costs.e. a and b

ANS: "

13. /hich of the fo!!o,in- is not one of the four broad cate-ories of resources4a. !abor b. moneyc. ca0ita!d. entre0reneurshi0






e. !and

ANS: B

131. ere are three thin-s you cou!d do if you choose not to -o to c!ass one day next ,eek: s!ee0 !ater ;youva!ue this at C16< han- out ,ith friends ;you va!ue this at C15< or -o in to ,ork ;you cou!d earn C1durin- c!ass<. The o00ortunity cost of -oin- to c!ass isa. C1 because this is the on!y a!ternative of the three ,here you actua!!y receive a monetary

0ayment.

b. C1 because this is the !o,est va!ued a!ternative forfeited.c. C16 because this is the hi-hest va!ued a!ternative forfeited.d. C51 because this is the tota! do!!ar sum of the a!ternatives forfeited.

ANS: (

13. The coordinates of 0oint A are 3 units of K and 5 units of *. The coordinates of 0oint B are >units of K and 3 units of *. /ith K on the hori7onta! axis and * on the vertica! axis the s!o0e of the!ine bet,een 0oints A and B isa. M .6 b. M .c. M .33d. 9 .e. 9 .6

ANS: A

133. The coordinates of 0oint A are 6 units of K and = units of *. The coordinates of 0oint B are 58 unitsof K and =8 units of *. /ith K on the hori7onta! axis and * on the vertica! axis the s!o0e of the !ine bet,een 0oints A and B isa. M 1.6 b. M .8=c. M .33d. 9 1.6e. 9 .8=

ANS: D

135. Somethin- that motivates or encoura-es 0eo0!e to take an action is referred to as a;n<a. uti!ity. b. abstract.c. market.d. incentive.

ANS: D

T$UE%&AL'E

1. The branch of economics that studies the decisions made by individua!s and firms is ca!!edmacroeconomics .

ANS:






. 2acroeconomics dea!s ,ith issues invo!vin- !ar-e cor0orations ,hi!e microeconomics exc!usive!ydea!s ,ith issues invo!vin- sma!! businesses.

ANS:

3. The effect of a decrease in interest rates u0on economic -ro,th is an exam0!e of 0ositive economics.

ANS: T

5. "conomists use the ,ord utility to describe the satisfaction one receives from a -ood.

ANS: T

6. If variab!e K rises as variab!e * fa!!s then K and * have an inverse re!ationshi0.

ANS: T

8. In the text economics is defined as the science of scarcity.

ANS: T

=. In economics ca0ita! is defined as a financia! asset such as stocks and bonds.

ANS:

>. A rationin- device is a method used to reso!ve ,ho -ets ,hat.

ANS: T

?. /hen a 0erson is makin- a decision at the mar-in he or she is com0arin- the additiona! benefit of thatactivity to the additiona! cost of the 0ro0osed action.

ANS: T

1. "conomists use the terms resource and input as synonyms.

ANS: T

11. To an economist the terms factor and resource are synonyms.

ANS: T

1. Accordin- to economists money is a resource.

ANS:

13. The hi-her the o00ortunity cost of doin- somethin- the more !ike!y it ,i!! be done.

ANS:






15. Price is the on!y rationin- device that can be used in a modern economy.

ANS:

16. The resource termed labor consists of the 0hysica! but not the menta! ta!ents that 0eo0!e contribute tothe 0roduction 0rocess.

ANS:

18. "conomists sometimes refer to the resource cate-ory land as natural resources.

ANS: T

1=. Scarcity affects everyone even bi!!ionaires.

ANS: T

1>. If someone -ives you a free ticket to the movies then there is no o00ortunity cost invo!ved ,ith -oin-to the movies.

ANS:

1?. Accordin- to the text British so!diers ,ere re@uired to ,ear bri-ht red coats durin- the $evo!utionary/ar in order to make it easier to find deserters.

ANS: T

. Some economic studies have sho,n that mandatory seat be!t !a,s do not !ead to a reduction in trafficfata!ities.

ANS: T

1. The s!o0e of a hori7onta! !ine is a!,ays e@ua! to 7ero.

ANS: T

. The s!o0e of a curve varies from one 0oint to another.

ANS: T

3. The s!o0e of a strai-ht !ine is a!,ays e@ua! to either 1. or 91..

ANS:

5. Scarcity occurs in both ,ea!thy societies and 0oor societies.

ANS: T









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