test1

Question 1

The term “ceteris Paribus” means that number of relevant variables are assumed to be constant.

Answer 1

True

Question 2

The GDP of the United States include production by foreign-owned firms that are located in the USA.

Answer 2

True

Question 3

The existence of alternative uses for a resource implies it is scarce.

Answer 3

False

Question 4

Rent, interest, wages, and profit are the payments to the faour factors of production-land, capital, labor, and entrepreneurship, respectively.

Answer 4

True

Question 5

A change in the quantity supplied of a commodity can only be caused by change in the price of the commodity.

Answer 5

True

Question 6

If the terms of trade are not between the opportunity cost of two countries, then the two countries will have no reason to trade.

Answer 6

True

Question 7

A change in the demand for a commodity is caused by any factors other than the price of the commodity.

Answer 7

True

Question 8

Specialization and international trade increase total world output.

Answer 8

True

Question 9

Economics does not include the study of how to improve society.

Answer 9

False

Question 10

A capitalistic economy does not require the institution of private property as long as markets are competitive.

Answer 10

False

Question 11

Opportunity cost is the value of the alternative purchased.

Answer 11

False

Question 12

“Capitalism” describes an economic system that uses vast amounts of capital.

Answer 12

False

Question 13

Normative statements are expression of facts

Answer 13

False

Question 14

Marginal analysis means that decision-makers compare the extra benefits with the extra costs of a specific choice.

Answer 14

True

Question 15

The entrepreneur’s sole function is to combine other resources (land, labor, and capital) in the production of some good or service.

Answer 15

True

Question 16

Economic growth is the increase in the per capita productive capacity of the nation.

Answer 16

True

Question 17

A “mixed economy” involves both private and public decision making on how, what, and for whom.

Answer 17

True

Question 18

Although sleeping in on a work day or school day has an opportunity cost, sleeping late on the weekend does not.

Answer 18

False

Question 19

Specialization may expand total output even though the individuals involved may have identical abilities.

Answer 19

False

Question 20

other things equal, an increase in productivity will shift the supply curve rightward.

Answer 20

true

Question 21

If every country specialized in what it produces best, more will be produced than if each country tries to produce everything to meet its need.

Answer 21

True

Question 22

comparative advantage refers to the ability to produce output with fewer resources than any other country.

Answer 22

True

Question 23

A theory or model is a simplification of reality, much in the same way that a road map shows only those features needed to get from one point to another.

Answer 23

True

Question 24

Nations have the same quantities and qualities of economic resources and they also have the same combinations to these economic resources.

Answer 24

False

Question 25

If there are unused resources an economy is operating inefficiently

Answer 25

True

Question 26

Economists do not view money as capital

Answer 26

True

Question 27

Education and training are examples of investments in human-capital.

Answer 27

True

Question 28

The primary purpose of NAFTA is to:a. Encourage the development of the Mexican and Canadian economiesb. Protect U.S. and Canada workers from unfair competition from Mexicoc. Increase employment and income in Mexico, Canada and the U.S. by encouraging free traded. Ensure that there are no losers as the result of trade agreements between Mexico, Canada, and the U.S.e. None of the above

Answer 28

c. Increase employment and income in Mexico, Canada and the U.S. by encouraging free trade

Question 29

. An answer to the question “What goods are produced?” determines:a. who receives the goods that are producedb. how tastes and preferences are determinedc. how resources are combined in the production of goodsd. the quantity of society’s natural resource endowmentse. the types and quantities of goods and services produced

Answer 29

e. the types and quantities of goods and services produced

Question 30

Macroeconomics is concerned with:a. the operation of a particular firmb. the labor marketc. the individual consumer behaviord. the entire economye. a detailed examination of how price and output decisions are made in specific markets

Answer 30

d. the entire economy

Question 31

A decrease in supply is caused-by:a. a decrease in resource pricesb. an increase in the number of sellers in the marketc. suppliers’ expectations of higher prices in the futured. an advancement in the technology for producing the goode. a decrease in the price of a good using the same resources.

Answer 31

c. suppliers’ expectations of higher prices in the future

Question 32

All of the following statements are true EXCEPT:a. economic efficiency cannot be achieved without technical efficiencyb. technical efficiency can be achieved without economic efficiencyc. technical and economic efficiency may be achievable at the same timed. in most cases, economic efficiency is socially more desirable than technical efficiencye. technical efficiency is dependent on consumer preferences whereas economic efficiency is not

Answer 32

b. technical efficiency can be achieved without economic efficiency

Question 33

Comparative advantage refers to:a. The ability of a country to produce a specific good with fewer resources than another country.b. A country’s monopoly power in the world market for a specific good.c. When a country’s production curve is curved.d. All of the abovee. A distribution curve

Answer 33

a. The ability of a country to produce a specific good with fewer resources than another country

Question 34

In terms of a society’s production-possibilities curve, the optimum of best combination of output, if it exists, is always found at a point locate somewhere:a. inside the curveb. outside the curvec. on or inside the curved. on or outside the curvee. on the curve

Answer 34

e. on the curve

Question 35

In the simple circular-flow model, there are:a. two flows–a physical flow of goods and resources a dollar flowb. two sets of markets–products markets and resources marketsc. two types of suppliers and demanders–households and business firmsd. two sets of prices established–one for final goods and services and one for resourcese. all of the above

Answer 35

e. all of the above

Question 36

A “mixed economy”, means one that:a. is confused and fouledb. utilizes a variety of production techniquesc. enjoys a two-party systemd. combines executive legislative, and judicial branches in governmente. none of the above

Answer 36

e. none of the above

Question 37

The government sector is synonymous with the:a. private sectorb. public sectorc. household sectord. business sectore. foreign sector

Answer 37

b. public sector

Question 38

The law of demand operates because:a. people can afford to buy less of a good if its price increasesb. people can afford to buy more of a good if its price increasesc. the more of a good you consume the more satisfaction it providesd. when the price of one good decreases it increases relative to the prices of other goodse. When the price of one good increases it decreases relative to the prices of other goods

Answer 38

a. people can afford to buy less of a good if its price increases

Question 39

An increase in supply, with no change in demand, will lead to in equilibrium quantity and in equilibrium price:a. an increase; an increaseb. an increase; a decreasec. a decrease; an increased. a decrease; a decreasee. no change; no change

Answer 39

b. an increase; a decrease

Question 40

The concept of “economic man” implies that:a. people want to produce the most goods for societyb. people are rational and motivated by economic forcesc. people are a product of the economic environment in which they lived. people are economical and like to save moneye. people have no concerns except economic ones

Answer 40

b. people are rational and motivated by economic forces

Question 41

A principal objective of GATT is to:a. equality in the distribution of incomeb. economic growthc. protect import-competing nationsd. economic stabilitye. reduce barriers of trade

Answer 41

e. reduce barriers of trade

Question 42

The annual total of rent, interest, wages, and profit for a nation is referred to as:a. national debtb. national securityc. national incomed. national productivitye. none of the above

Answer 42

c. national income

Question 43

A single proprietorship is a firm owned by:a. A small number of individuals who are liable for the firm’s debts and obligations.b. many people who own shares/stocks of the firm, but who are not liable for the firm’s debtc. one individual who is liable for the firm’s obligation and debt.d. all of the abovee. none of the above

Answer 43

c. one individual who is liable for the firm’s obligation and debt

Question 44

The economic role of government can be considered to consist of:a. promotion and regulation of the private sectorb. provision of social goodsc. accumulating debtsd. none of the abovee. “a” and “b” only

Answer 44

e. “a” and “b” only

Question 45

Which of the following in not a factor of production?a. moneyb. landc. labord. entrepreneurshipe. all of the above

Answer 45

a. money

Question 46

If the resources of an economy are not fully utilized:a. the economy will not have a production-possibilities curveb. the economy will be at a point inside its production-possibilities curvec. the economy will be at a point outside its production-possibilities curved. all of the abovee. none of the above

Answer 46

b. the economy will be at a point inside its production-possibilities curve

Question 47

Scarcity is a concept which:a. implies that choices must be madeb. means that some people will have to live in povertyc. applies only to tangible or “material” thingsd. does not apply to the very riche. all of the above

Answer 47

a. implies that choices must be made

Question 48

The providing of national defense is primarily a responsibility of:a. consumersb. governmentc. businessesd. monetary policye. those who love a war

Answer 48

b. government

Question 49

The factor that organizes production is:a. land b. moneyc. labor d. capitale. entrepreneurship

Answer 49

e. entrepreneurship

Question 50

The circular-flow model of economic activity showshow:a. firms determine the prices they chargeb. wages rates are established by unions and managementc. taxes are established by governmentd. prices influence wages and taxese. sectors of the economy are linked to one another through the economy’s markets

Answer 50

e. sectors of the economy are linked to one another through the economy’s markets

Question 51

In a standard Supply-and-demand diagram, what happens when demand decreases?a. price declines and quantity demanded risesb. price rises and quantity demanded declinesc. price and quantity supplied rised. price and quantity supplied declinee. price and quantity demanded rise

Answer 51

b. price rises and quantity demanded declines

Question 52

A country will not trade unless:a. It has an absolute advantageb. The terms of trade are superior to domestic opportunitiesc. Its balance of trade is in a surplusd. All of the abovee. None of the above

Answer 52

b. The terms of trade are superior to domestic opportunities

Question 53

“Wealth” is best defined as:a. a flow of dollars per unit of timeb. wages and salariesc. the total value of capital and consumer goodsd. anything that has value because it is capable of producing incomee. financial instruments, such as stocks and bonds

Answer 53

c. the total value of capital and consumer goods

Question 54

An underlying assumption about a production-possibilities curve is that:a. the number of workers available for jobs varies directly with the size of the populationb. changes in technology affect the output of capital goods more than consumption goodsc. when all resources are fully employed, further increases in the output of one good can be achieved only be decreasing the output of anotherd. trade-offs are made between resources, not between products

Answer 54

c. when all resources are fully employed, further increases in the output of one good can be achieved only be decreasing the output of another

Question 55

Macroeconomics is mostly likely to be concerned with the:a. amount of unemployment in a specific industryb. economic behavior of a particular householdc. economic behavior of specific parts or units of the economyd. “forest” of economic behavior, rather than the individual “trees”e. “trees” of economic behavior, rather than the entire “forest”

Answer 55

d. “forest” of economic behavior, rather than the individual “trees”

Question 56

In the simple, two-sector circular-flow model of the economy, the economic question “What to produce?” is primarily answered by the:a. stock marketsb. labor marketsc. product marketsd. resource marketse. financial markets

Answer 56

d. resource markets

Question 57

When the United States has a trade deficit:a. Exports exceed importsb. The U.S. produces more than it consumesc. Trade balance is zerod. none of the abovee. all of the above

Answer 57

d. none of the above

Question 58

Which of the following would not cause a change in the supply of a commodity?a. a change in its priceb. a change in the price of a related goodc. a change in resource pricesd. a change in expectations about future pricese. an improvement in technology

Answer 58

a. a change in its price

Question 59

Capitalism:a. provides people with incentives to make the best use of their propertyb. encourages peoples to accumulate wealthc. makes people depend on one anotherd. all of the abovee. none of the above

Answer 59

e. none of the above

Question 60

Economics, “Distribution” refers to the question of:a. retailing, wholesaling, and transportationb. whatc. howd. for whome. none of the above

Answer 60

d. for whom

Question 61

Capital is best defined as:a. money needed to run a businessb. the primary factor in productivityc. produced goods used for further productiond. private propertye. the lifeblood of an enterprise system

Answer 61

c. produced goods used for further production

Question 62

When the overall foreign trade account for a balance for a nation is zero:a. Merchandise exports equal merchandise importsb. The service trade balance must be zeroc. Exports equal importsd. National defense is in troublee. None of the above.

Answer 62

c. Exports equal imports

Question 63

Which of the following will not cause a change in the demand for a good?a. a change in the price of substitute goodsb. be a change in the price of the goodc. a change in tastesd. a change in incomee. a change in the price of complementary goods

Answer 63

b. be a change in the price of the good

Question 64

Which of the following will shift the market demand curve for a product to the left?a. a decrease in buyers’ incomeb. an increase in the number of buyers in the marketc. an increase in the price of the productd. a change in technologye. an increase in buyers’ incomes

Answer 64

c. an increase in the price of the product

Question 65

Suppose 2 cars take the same resources as producing 1 truck in the U.S. But in Japan 2 cars take the same resources as 3 trucks. In the production of cars, we can conclude:a. Japan has the absolute advantageb. The U.S. has the absolute advantagec. The U.S. has the comparative advantaged. Japan has the comparative advantagee. None of the above

Answer 65

c. The U.S. has the comparative advantage

Question 66

In the absence of international trade, a country’s consumption possibilities are:a. Limited to its domestic production possibilitiesb. More than its terms of tradec. Less than its trade balanced. Greater than with tradee. All of the above

Answer 66

a. Limited to its domestic production possibilities

Question 67

In a purely capitalistic or market economy, most incomes tend to be distributed according to:a. the decisions of a central authorityb. competitive forces of supply and demand in the resources market.c. powers exerted by businesses and unionsd. humanitarian considerations, based on the needs of individualse. the arbitrary decisions of capitalists, since they are the ones who control the amount of wages paid to workers

Answer 67

e. the arbitrary decisions of capitalists, since they are the ones who control the amount of wages paid to workers

Question 68

Economics is a:a. social science that studies goods with no alternative usesb. natural science that studies goods with no alternative usesc. social science concerned chiefly with the way society employs its limited resourcesd. natural science concerned chiefly with reasons why society has unlimited resourcese. social science concerned chiefly with reasons why society has unlimited resources

Answer 68

c. social science concerned chiefly with the way society employs its limited resources

Question 69

Terms of trade refer to:a. The opportunity costs incurred in tradeb. The rate at which goods are exchangedc. The degree to which one country has an absolute advantaged. Which country pays the transportation cost when trade occurs.e. All of the above

Answer 69

b. The rate at which goods are exchanged

Question 70

The law of increasing costs says that:a. costs of production always tend to increaseb. increase in wages cause increases in the costs of productionc. along a production-possibilities curve, increases in the production of one type of good require larger and larger sacrifices of the other type of goodd. along a production-possibilities curve, decrease in the production of one type of good require larger and larger sacrifices of the other type of goode. labor unions are the chief cause of rising production costs

Answer 70

c. along a production-possibilities curve, increases in the production of one type of good require larger and larger sacrifices of the other type of good

Question 71

A total market demand schedule is obtained by adding up the quantities of:a. a single good demanded by all buyers at each priceb. a single good demanded by all buyers at the equilibrium pricec. a single good demanded by a typical buyer at each priced. a range of goods demanded by a typical buyer at each pricee. a range of goods demanded by a typical buyer at the equilibrium price

Answer 71

a. a single good demanded by all buyers at each price

Question 72

The law of supply is illustrated by a supply curve that is:a. horizontalb. downward-slopingc. verticald. upward-sloppinge. directly related to the law of demand

Answer 72

d. upward-slopping

Question 73

The two broad types of resources are:a. land resources and capital resourcesb. material resources and human resourcesc. physical capital and financial capitald. labor resources and human resourcese. labor resources and human capital

Answer 73

c. physical capital and financial capital

Question 74

If the actual price in the market for a commodity is below the market equilibrium price:a. the actual price will remain unchangedb. the actual price will decline clear the marketc. the quantity supplied exceeds the quantity demandedd. the quantity demanded exceeds the quantity suppliede. the quantity demanded equals the quantity supplied

Answer 74

c. the quantity supplied exceeds the quantity demanded

Question 75

The private sector includes:a. only state and local governmentsb. only federal and state governmentsc. federal, state, and local governmentsd. households, businesses, and a foreign sectore. federal, state, and local governments, households, businesses, and a foreign sector

Answer 75

d. households, businesses, and a foreign sector

Question 76

If the price of a commodity decrease, you would expect the:a. supply to decreaseb. quantity supplied to increasec. quantity supplied to decreased. supply curve to shift to the righte. supply curve to shift to the left

Answer 76

c. quantity supplied to decrease

Question 77

The expansion of world output as a result of trade is mainly dye to the effects of:a. Higher trade barriersb. Improved terms of tradec. Specialization according to comparative advantaged. Specialization according to absolute advantagee. All of the above

Answer 77

c. Specialization according to comparative advantage

Question 78

The manufactured good that is used to produce other goods is:a. landb. moneyc. labord. capitale. entrepreneurship

Answer 78

d. capital

Question 79

If the price of a commodity increases, you would expect the:a. supply to increaseb. quantity supplied to increasec. quantity supplied to decreased. supply curve to shift to the righte. supply curve to shift to the left

Answer 79

b. quantity supplied to increase

Question 80

The law of demand is illustrated by a demand curve that is:a. horizontalb. downward-slopingc. verticald. upward-slopinge. directly related to the law of supply

Answer 80

b. downward-sloping

Question 81

Dumping is said to occur when:a. Foreign producers sell their goods in the U.S. at prices lower than their marginal cost of productionb. Foreign producers sell their goods in the U.S. at prices lower than the U.S. average cost of productionc. Foreign producers sell their goods in the U.S. at prices lower than those prevailing in their own countryd. The foreign countries have trade surpluses and the U.S. has a trade deficit.e. All of the above

Answer 81

c. Foreign producers sell their goods in the U.S. at prices lower than those prevailing in their own country

Question 82

Protectionism achieves which one of the following goals:a. Greater consumption possibilities through greater specializationb. Protection of Infant industriesc. Protection of comparative advantaged. Protection of absolute advantagee. None of the above

Answer 82

b. Protection of Infant industries

Question 83

The fact that a society’s production-possibilities curve is bowed out or concave to the origin of a graph demonstrates the law of:a. increasing cost b. decreasing costc. constant cost d. fluctuating coste. concave cost

Answer 83

a. increasing cost

Question 84

Specialization usually leads to:a. a greater division of laborb. an increase in self-sufficiencyc. a decline in exchanged. less interdependence among the members of societye. a decline in the volume of total output

Answer 84

a. a greater division of labor

Question 85

An increase in demand and a decrease in supply, will lead to in equilibrium quantity and in equilibrium pricea. a decrease; a decreaseb. an indeterminant change; an increasec. an indeterminant change; a decreased. an increase; an indeterminant changee. a decrease; an indeterminant change

Answer 85

b. an indeterminant change; an increase

Question 86

The circular flow of income describes:a. the flow of income from domestic firms to the non-production sector and back againb. the amount of money in the economyc. the sum of all injections into the economyd. the sum of all withdrawals from the economye. all of the above

Answer 86

e. all of the above

Question 87

Supply is best defined as:a. a relation showing the various amounts of a commodity that sellers would be able to make available for sale at alternative prices during a given period of timeb. a relation showing the various amounts of a commodity that sellers would be willing to make available for sale at alternative prices during a given period of timec. a relation showing the various amounts of a commodity that sellers would be willing and able to make available for sale at alternative prices during a given period of timed. the amount of a commodity that sellers would be willing and able to make available for sale at a specific quantity of a good

Answer 87

c. a relation showing the various amounts of a commodity that sellers would be willing and able to make available for sale at alternative prices during a given period of time

Question 88

Demand is best defined as:a. the amount of a commodity that buyers would be willing and able to purchase at a specific priceb. the price that buyers would be willing and able to pay for a specific quantity of a goodc. a relation showing the various amounts of a commodity that buyers would be willing to purchase at alternative prices during a given period of timed. a relation showing the various amounts of a commodity that buyers would be able to purchase at alternative prices during a given period of timee. a relation showing the various amounts of a commodity that buyers would be willing and able to purchase at alternative prices during a given period of time

Answer 88

e. a relation showing the various amounts of a commodity that buyers would be willing and able to purchase at alternative prices during a given period of time

Question 89

Opportunity cost is:a. only incurred in socialist economiesb. only incurred in capitalist economiesc. the value or benefit that is foregone by acquiring a free goodd. the value or benefit that is foregone by choosing one alternative rather than anothere. the value or benefit received by choosing one alternative rather than another

Answer 89

d. the value or benefit that is foregone by choosing one alternative rather than another

Question 90

A decrease in supply is caused by:a. an increase in resource pricesb. an increase in the number of sellers in the marketc. suppliers’ expectations of lower prices in the futuresd. an advancement in the technology for producing the goode. a decrease in the price of a good using the same resources

Answer 90

a. an increase in resource prices

Question 91

An increase in supply is caused by:a. an increase in resource pricesb. a decrease in the number of sellers in the marketc. suppliers’ expectations of higher prices in the futured. an advancement in the technology for producing the goode. an increase in the price of a good using the same resources

Answer 91

d. an advancement in the technology for producing the good

Question 92

International trade:a. Lowers prices to consumersb. Alters the mix of domestic productionc. Redistributes income from imports-competing industries to export industriesd. All of the abovee. None of the above

Answer 92

d. All of the above

Question 93

The primary difference between-a change in demand and a change in the quantity demanded is:a. a change in demand is a movement along the demand curve and a change in quantity demanded is a shift in the demand curveb. a change in quantity demanded is a movement along the demand curve and a change in demand is a shift in the demand curvec. both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directionsd. both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directionse. only a change in quantity demanded is related to the demand curve, and a change in demand is related to shifts in the supply curve

Answer 93

b. a change in quantity demanded is a movement along the demand curve and a change in demand is a shift in the demand curve

Question 94

The doctrine of laissez faire is based on the belief that:a. Markets are more likely to do a better job of allocating resources than governmentb. Government directives are more likely to do a better job of allocating resources than marketsc. Government failures do existd. Markets result in an unfair distribution of incomee. All of the above

Answer 94

a. Markets are more likely to do a better job of allocating resources than government

Question 95

A scarce resource is one that:a. is freeb. is abundantc. has alternative usesd. has no alternative usese. is unlimited in supply

Answer 95

c. has alternative uses

Question 96

The combination of federal, state, and local governments is the:a. income sectorb. output sectorc. public sectord. private sectore. business sector

Answer 96

c. public sector

Question 97

The term “land,” as employed in economics, is best illustrated by:a. land on which factories are locatedb. land zoned for industrial or commercial, but not residential, usec. farmlandd. land suitable for mininge. natural resource used in production

Answer 97

e. natural resource used in production

Question 98

The law of supply usually operates because:a. producers are willing to sell less of a good if its price increasesb. producers are willing and able to sell more of a good if its price increasec. when the price of one good decreases, it increases relative to the prices of other goodsd. when the price of one good increases, it decreases relative to the prices of other goodse. the costs of production decline as more of a good is produced

Answer 98

b. producers are willing and able to sell more of a good if its price increase

Question 99

Scarcity exists because:a. society’s resources are limited relative to society’s wantsb. society’s resources are approximately equal to society’s wantsc. society’s resources exceed society’s wantsd. our economy is too capitalistice. our economy’s resources are not governmental owned

Answer 99

a. society’s resources are limited relative to society’s wants

Question 100

Which of the following will shift the market demand curve for a product to the right?a. a decrease in the number of buyers in the marketb. a decrease in buyers’ incomec. a decrease in the price of the productd. a change in technologye. an increase the buyers’ income

Answer 100

c. a decrease in the price of the product

Question 101

“Income” is best defined as:a. the gain derived from the use of human or material resourcesb. wages and salaries before taxesc. wages and salaries after taxesd. wages, salaries, and returns from investment in securitiese. a “stock,” as distinct from a “flow,” of values

Answer 101

a. the gain derived from the use of human or material resources

Question 102

Market equilibrium is best described as:a. a state of domination of the demand over the supplyb. a state of domination of the supply over the demandc. a state of balance between the opposing forces of demand and supplyd. a state in which the buyers are able to obtain all of the goods they desiree. a state in which the sellers are able to sell all of the goods they have available

Answer 102

c. a state of balance between the opposing forces of demand and supply

Question 103

Other things remaining the same, an increase in the price of Chevrolets will cause the demand curve for Fords to:a. shift to the rightb. shift to the leftc. remain unchangedd. become straightere. become more curved

Answer 103

a. shift to the right

Question 104

An answer to the question “For whom are goods produced?” determines:a. who receives the goods that are producedb. how tastes and preferences are determinedc. how resources are combined in the production of goodsd. the quantity of society’s natural resource endowmentse. the types and quantities of goods and services produced

Answer 104

a. who receives the goods that are produced