Question 1

What is the best economic explanation for why a person would drop out of college in order to start a business?

Accepted Answer

A)   The person has a good idea for starting a business.
B)   The person has to pay a higher tuition to attend college.
C)   The expected future benefits from starting a business now are greater than the costs.
D)   The opportunity cost of starting a business is high now but will be low later in life.E) All of the above
F) A) and B)

Question 2

The opportunity cost to a consumer who smokes cigarettes consists of the

Accepted Answer

A)   costs imposed on others who inhale second-hand smoke.
B)   products that the consumer could have bought instead of cigarettes.
C)   amount of cigarette taxes paid by this consumer.
D)   cost of complementary products such as lighters, ashtrays, and cigarette holders.E) A) and D)
F) A) and C)

Question 3

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities schedule.  The marginal opportunity cost of the fourth unit of tanks is

Accepted Answer

A)   4 units of tanks.
B)   300 units of autos.
C)   350 units of autos.
D)   1,000 units of autos.E) A) and B)
F) C) and D)

Question 4

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule.  The marginal opportunity cost of the third unit of steel is

Accepted Answer

A)   18.3 units of wheat.
B)   25 units of wheat.
C)   20 units of wheat.
D)   55 units of wheat.E) A) and C)
F) A) and B)

Question 5

If a nation is initially on its production possibilities curve, then it can increase its production of one good only by

Accepted Answer

A)   decreasing the production of the other good.
B)   increasing the production of the other good.
C)   holding constant the production of the other good.
D)   decreasing the price of the other good.E) A) and D)
F) None of the above

Question 6

The optimal point on a production possibilities curve is achieved where

Accepted Answer

A)   the smallest physical amounts of inputs are used to produce each good.
B)   each good is produced at a level where marginal benefits equal marginal costs.
C)   large amounts of capital goods are produced relative to consumer goods.
D)   large amounts of consumer goods are produced relative to capital goods.E) B) and D)
F) B) and C)

Question 7

The role of the entrepreneur in society is to

Accepted Answer

A)   provide capital to the firm, which the management combines with labor.
B)   bring the factors of production together and take the risks of producing output.
C)   control the land upon which all production takes place and to get the most rent.
D)   regulate what products are considered safe to market.E) A) and D)
F) B) and D)

Question 8

From an economic perspective, when a student decides to go to the movies instead of studying for a test, it indicates that in the student's thinking, the marginal

Accepted Answer

A)   benefit of studying is greater than the marginal cost of studying.
B)   cost of going to the movies is less than the marginal benefit of going to the movies.
C)   benefit of studying are greater than the marginal benefit of going to the movies.
D)   cost of going to the movies is greater than the marginal cost of studying.E) B) and C)
F) A) and D)

Question 9

In drawing a particular budget line, money income and the prices of the two products are fixed.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following terms implies the greatest degree of confidence in an economic generalization?

Accepted Answer

A)   hypothesis
B)   comparison
C)   theory
D)   anomalyE) A) and D)
F) B) and C)

Question 11

The production possibilities curve has

Accepted Answer

A)   a positive slope that increases as we move along it from left to right.
B)   a negative slope that increases as we move along it from left to right.
C)   a negative slope that decreases as we move along it from left to right.
D)   a negative slope that is constant as we move along it from left to right.E) All of the above
F) A) and B)

Question 12

Which question is an illustration of a microeconomic question?

Accepted Answer

A)   Is the volume of wine produced in one year dependent upon the price of wine?
B)   Does government spending influence interest rates in the economy?
C)   Is the purchasing power of the dollar higher or lower today than it was in 2008?
D)   Which economic system is better for consumers and firms?E) C) and D)
F) B) and D)

Question 13

In a graph with "crop yield" on the vertical axis and "rainfall" on the horizontal axis, the vertical intercept refers to the

Accepted Answer

A)   steepness or flatness of the graph.
B)   amount of rainfall when "crop yield" is zero.
C)   amount of crop yield when "rainfall" is zero.
D)   total crop yield during a given period of time.E) C) and D)
F) A) and C)

Question 14

Which of the following is considered a firm's "factor of production"?

Accepted Answer

A)   money or cash balances of the firm
B)   the firm's shares of common stock
C)   U.S. Treasury bonds owned by the firm
D)   the office building occupied by the firmE) B) and D)
F) B) and C)

Question 15

"Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is

Accepted Answer

A)   positive but incorrect.
B)   positive and correct.
C)   normative but incorrect.
D)   normative and correct.E) A) and B)
F) A) and C)

Question 16

Which of the following statements is correct?

Accepted Answer

A)   The value of the independent variable is determined by the value of the dependent variable.
B)   The value of the dependent variable is determined by the value of the independent variable.
C)   The dependent variable designates the "cause" and the independent variable the "effect."
D)   Dependent variables graph as upsloping lines; independent variables graph as downsloping lines.E) B) and D)
F) A) and B)

Question 17

The law of increasing opportunity costs states that

Accepted Answer

A)   costs of production increase for one good, but costs decrease for the other good.
B)   increases in wages and other resource costs is what the increasing opportunity costs refer to.
C)   increases in the production of one good require larger and larger sacrifices of the other good.
D)   increases in the production of one good make the production of that good easier.E) A) and C)
F) None of the above

Question 18

The question below is based on the following four sets of data-pairs: (1)  A and B, (2)  C and D, (3)  E and F, and (4)  G and H. In each set, the independent variable is in the left column and the dependent variable is in the right column.  The vertical intercept is 6 in which of the above data sets?

Accepted Answer

A)   1
B)   2
C)   3
D)   4E) B) and C)
F) A) and D)

Question 19

The best output or the optimal production of the nation is

Accepted Answer

A)   a combination of products at the midpoint of the production possibilities curve.
B)   a combination of products at either of the two endpoints of the production possibilities curve.
C)   determined by equalizing the marginal benefits and marginal costs of each product.
D)   the production combination where the opportunity costs are minimized.E) A) and C)
F) A) and B)

Question 20

Answer the question on the basis of the following information. Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment, so investment would be zero. But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion. If the interest rate were 12 percent, $20 billion would be invested. Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate. Refer to the information. Which of the following correctly expresses the indicated relationship as an equation?

Accepted Answer

A)   i = 20 - 4I.
B)   i = 20 - .4I.
C)   i = 24 - .4I.
D)   i = 20 - 10I.E) C) and D)
F) None of the above

Exam 1: Limits, Alternatives, and Choices

The role of the entrepreneur in society is to

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
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Which question is an illustration of a microeconomic question?

Correct Answer
verified

The best output or the optimal production of the nation is

Correct Answer
verified

Which of the following terms implies the greatest degree of confidence in an economic generalization?

Correct Answer
verified

Which of the following is considered a firm's "factor of production"?

Correct Answer
verified

Correct Answer
verified

The question below is based on the following four sets of data-pairs: (1) A and B, (2) C and D, (3) E and F, and (4) G and H. In each set, the independent variable is in the left column and the dependent variable is in the right column. The vertical intercept is 6 in which of the above data sets?

Correct Answer
verified

In a graph with "crop yield" on the vertical axis and "rainfall" on the horizontal axis, the vertical intercept refers to the

Correct Answer
verified

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities schedule. The marginal opportunity cost of the fourth unit of tanks is

Correct Answer
verified

In drawing a particular budget line, money income and the prices of the two products are fixed.

Correct Answer
verified

The optimal point on a production possibilities curve is achieved where

Correct Answer
verified

The production possibilities curve has

Correct Answer
verified

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule. The marginal opportunity cost of the third unit of steel is

Correct Answer
verified

If a nation is initially on its production possibilities curve, then it can increase its production of one good only by

Correct Answer
verified

The opportunity cost to a consumer who smokes cigarettes consists of the

Correct Answer
verified

From an economic perspective, when a student decides to go to the movies instead of studying for a test, it indicates that in the student's thinking, the marginal

Correct Answer
verified

The law of increasing opportunity costs states that

Correct Answer
verified

What is the best economic explanation for why a person would drop out of college in order to start a business?

Correct Answer
verified

"Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is

Correct Answer
verified

Exam 1: Limits, Alternatives, and Choices

The role of the entrepreneur in society is to

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which question is an illustration of a microeconomic question?

Correct AnswerverifiedShow Answer

The best output or the optimal production of the nation is

Correct AnswerverifiedShow Answer

Which of the following terms implies the greatest degree of confidence in an economic generalization?

Correct AnswerverifiedShow Answer

Which of the following is considered a firm's "factor of production"?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The question below is based on the following four sets of data-pairs: (1) A and B, (2) C and D, (3) E and F, and (4) G and H. In each set, the independent variable is in the left column and the dependent variable is in the right column. The vertical intercept is 6 in which of the above data sets?

Correct AnswerverifiedShow Answer

In a graph with "crop yield" on the vertical axis and "rainfall" on the horizontal axis, the vertical intercept refers to the

Correct AnswerverifiedShow Answer

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities schedule. The marginal opportunity cost of the fourth unit of tanks is

Correct AnswerverifiedShow Answer

In drawing a particular budget line, money income and the prices of the two products are fixed.

Correct AnswerverifiedShow Answer

The optimal point on a production possibilities curve is achieved where

Correct AnswerverifiedShow Answer

The production possibilities curve has

Correct AnswerverifiedShow Answer

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule. The marginal opportunity cost of the third unit of steel is

Correct AnswerverifiedShow Answer

If a nation is initially on its production possibilities curve, then it can increase its production of one good only by

Correct AnswerverifiedShow Answer

The opportunity cost to a consumer who smokes cigarettes consists of the

Correct AnswerverifiedShow Answer

From an economic perspective, when a student decides to go to the movies instead of studying for a test, it indicates that in the student's thinking, the marginal

Correct AnswerverifiedShow Answer

The law of increasing opportunity costs states that

Correct AnswerverifiedShow Answer

What is the best economic explanation for why a person would drop out of college in order to start a business?

Correct AnswerverifiedShow Answer

"Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is

Correct AnswerverifiedShow Answer

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