Test 1 Ch 1-3

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Question #1

The “law of demand” implies that as prices fall, the demand shifts.

A False

B True

Question #2

In economics, capital refers to physical objects, not money.

A False

B True

Question #3

Suppose you are deciding whether to spend your tax rebate check on a new iPod player or a new digital camera. You are dealing with the concept of

A opportunity costs.

B the fallacy of composition.

C comparative advantage.

D equity.

Question #4

The “law of demand” implies that as prices decrease, the quantity demanded increases.

A False

B True

Question #5

Efficiency in production refers to a situation in which it is possible, given available productive resources and existing knowledge, to produce more of one good without forgoing the opportunity to produce other goods.

A True

B False

Question #6

A change in the quantity demanded of pizza is the same as a change in demand for pizza.

A False

B True

Question #7

Which of the following would an economist classify as capital?

A a $50 bill

B a bull dozer used by a construction company

C a post office employee

D a corporate bond

Question #8

Spontaneous order and hierarchy coordinate economic activity similarly.

A True

B False

Question #9

Elastic demand means the price has little or no effect on quantity demanded.

A False

B True

Question #10

Someone has a comparative advantage in producing a good if they can produce that good

A at a lower opportunity cost.

B using more capital and less labor.

C in greater quantities.

D using more labor and less capital.

Question #11

If you own a building and you decide to use that building to open a book store,

A there is an opportunity cost of using this building for a book store because it could have been used in other ways.

B there is never an opportunity cost of using this building for a book store.

C the only cost relevant to this decision is the taxes paid to the local government.

D the opportunity costs always equal $100.

Question #12

The rate of economic growth or the level of poverty in a country are topics related to microeconomics.

A True

B False

Question #13

Investments never require a trade-off of present consumption for future consumption.

A False

B True

Question #14

What does demand mean?

A The ability to purchase goods

B Willingness to purchase goods

C The numerical utility

D The willingness and ability to purchase goods

Question #15

For the company to produce at a point beyond its current Production Possibility Frontier, the firm must

A be more efficient.

B increase its factors of production

C reduce inputs.

D waste less.

Question #16

Inflation and unemployment

A are a focus of microeconomics.

B are the focus of normative economics.

C are a focus of macroeconomics.

D are a focus of positive economics.

Question #17

The “law of supply” states that as prices decrease, the quantity supplied increases.

A False

B True

Question #18

That which we forgo, or give up, when we make a choice or decision is called

A opportunity cost.

B real cost.

C marginal cost.

D out-of-pocket cost.

Question #19

The production possibility frontier is drawn on which of the following the assumptions?

A Resources can be increased or decreased as needed.

B The economy has a steady rate of growth.

C Consumption preferences are known and fixed.

D All scarce resources are being used efficiently.

Question #20

If the elasticity of demand for electricity is 0.13, the demand for electricity is:

A unit elastic

B elastic

C perfectly inelastic

D inelastic

Question #21

The value of the best alternative foregone is the opportunity cost of making a decision.

A True

B False

Question #22

If an increase in the price of gasoline causes a movement upward along the gasoline demand curve, it is anticipated that it will also cause a shift for the demand of SUVs.

A True

B False

Question #23

If more people become interested in reading an economics book, what will happen to the demand curve?

A It will shift to the left.

B It will disappear

C It will shift to the right.

D It will remain constant.

Question #24

In economics, investment refers to which of the following?

A Buying goods, such as video game systems and clothing for the winter

B Buying stock on the stock market

C Increasing the stock of capital

D Printing more money

Question #25

The focus on the human dimension of scarcity and choice is part of what makes economics a social science.

A True

B False

Question #26

The reason that opportunity costs arise is that

A resources are scarce.

B there are never alternative decisions that could be made.

C people never have wants.

D an economy relies on money to facilitate exchange of goods and services.

Question #27

Society’s wants cannot fully be satisfied with our existing resources. This issue is the problem of _____.

A scarcity

B efficiency in distribution

C opportunity cost

D comparative advantage

Question #28

The three factors of production include natural resources, capital, and freedom.

A True

B False

Question #29

The demand curve is always upward sloping.

A True

B False

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