Economics , 8th Edition Test Bank

Preview (16 of 728 Pages)

100%

Purchase to unlock

Loading page image...

ExamName___________________________________MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.1)The problem of scarcity is directly relevant:1)A)only to those periods of history before mass production.B)only to developing countries low in resources.C)only to those on low incomes.D)to all countries and all individuals.E)only to those times when rationing has been enforced.Answer:DExplanation:A)B)C)D)E)2)Assume that a firm can produce 6 units of good X or 12 units of good Y per hour with its currentresources. The opportunity cost of a unit of X is:2)A)2 units of Y.B)72 units of Y.C)12 units of Y.D)1/2 a unit of Y.E)6 units of Y.Answer:AExplanation:A)B)C)D)E)3)Economists define inflation as:3)A)a decrease in the overall price level.B)an increase in the overall level of economic activity.C)an increase in the overall price level.D)a decrease in the overall level of economic activity.Answer:CExplanation:A)B)C)D)1

Loading page image...

4)Economic growth may occur when:4)A)a society acquires new resources.B)a society learns to produce more using existing resources.C)the society begins to produce the combination of goods society wants most.D)both A and BAnswer:DExplanation:A)B)C)D)5)Which of the following is an example of a positive statement?5)A)Local Authorities ought to impose rent controls to allow people to afford housing.B)The government should impose taxes on imported goods to protect the jobs of Britishworkers.C)The government should be required to have a balanced budget.D)Studies indicate that the current UK minimum wage has not increased unemployment.Answer:DExplanation:A)B)C)D)6)Normative economics is an approach to economics that:6)A)examines the role of government in the economy.B)applies statistical techniques and data to economic problems.C)analyses outcomes of economic behaviour, evaluates them as good or bad, and may prescribepreferred courses of action.D)seeks to understand behaviour and the operation of systems without making judgements.Answer:CExplanation:A)B)C)D)7)A study of how increases in the corporate income tax rate will affect the national unemploymentrate is an example of:7)A)normative economics.B)descriptive economics.C)macroeconomics.D)microeconomics.Answer:CExplanation:A)B)C)D)2

Loading page image...

8)The study of how wages are set for school teachers would be considered as:8)A)financial economics.B)macroeconomics.C)descriptive economics.D)microeconomics.Answer:DExplanation:A)B)C)D)9)The price mechanism resolves resource allocation in the:9)A)equilibrium economy.B)free-market economy.C)command economy.D)opportunity economy.Answer:BExplanation:A)B)C)D)10)The branch of economics that examines the functioning of individual industries and the behaviourof individual decision-making units is:10)A)macroeconomics.B)positive economics.C)microeconomics.D)normative economics.Answer:CExplanation:A)B)C)D)11)In terms of the production possibility curve, an increase in productivity attributable to newtechnology would best be shown by:11)A)a movement toward the origin.B)a movement from a point inside the curve to a point on it.C)a movement along the curve.D)the production possibility curve shifting up and to the right.Answer:DExplanation:A)B)C)D)3

Loading page image...

12)Macroeconomics is the branch of economics that examines:12)A)outcomes of economic behaviour, evaluates them as good or bad, and prescribes preferredcourses of action.B)the economic behaviour of aggregatesNincome, employment, and outputNon a national scale.C)ways to understand behaviour and the operation of systems without making judgements.D)the functioning of individual industries and the behaviour of individual decision-makingunits, that is, business firms and households.Answer:BExplanation:A)B)C)D)13)Inflation and unemployment:13)A)is the focus of economic history.B)is the focus of positive economics.C)is the focus of macroeconomics.D)is the focus of microeconomics.Answer:CExplanation:A)B)C)D)14)Economists say that there is unemployment when:14)A)at the going wage rate there are people who want to work but cannot find work.B)there is excess demand in the labour market.C)there are people who are not willing to work at the going wage rate.D)there are less unfilled vacancies than there are people seeking work.Answer:AExplanation:A)B)C)D)15)Opportunity cost is:15)A)the additional cost of producing an additional unit of output.B)that which we forgo, or give up, when we make a choice or a decision.C)the additional cost of buying an additional unit of a product.D)a cost that cannot be avoided, regardless of what is done in the future.Answer:BExplanation:A)B)C)D)4

Loading page image...

16)Which of the following is a normative statement?16)A)The government should reduce interest rates in order to encourage private investment.B)When the price of a good falls, suppliers will reduce the amount that they produce.C)When the price of a good rises, people demand less of it.D)All of the aboveE)None of the aboveAnswer:AExplanation:A)B)C)D)E)17)Consider two countries, Germany and Sweden. Germany devotes a larger portion of its productionto investment. Which of the following statements is most likely true?17)A)Sweden is producing inside its production possibility curve, while Germany is producing at apoint on its production possibility curve.B)Germany will move up its production possibility curve faster than Sweden.C)Germany's production possibility curve will shift up and out farther and faster thanSweden's.D)Germany is a poorer country than Sweden.Answer:CExplanation:A)B)C)D)18)The circular flow of income diagram shows:18)A)how firms sell goods to households.B)how households sell productive services to firms.C)how households produce services for their own use.D)A and BE)A, B and CAnswer:DExplanation:A)B)C)D)E)19)For an economy to produce at a point beyond its current production possibility curve, the economymust:19)A)reduce inputs.B)waste less.C)be more efficient.D)increase inputs.Answer:DExplanation:A)B)C)D)5

Loading page image...

20)The equilibrium price represents the:20)A)maximum price.B)price at which there is no shortage or surplus.C)best price.D)minimum price.Answer:BExplanation:A)B)C)D)21)When the price of a good rises there is an incentive for:21)A)revision of the five-year plan.B)firms to produce more.C)consumers to buy more.D)firms to produce less.Answer:BExplanation:A)B)C)D)22)You own a videotape ofLord of the Rings.The opportunity cost of watchingLord of the Rings:22)A)is the value of the alternative use of the time you spend watching the videotape.B)cannot be calculated.C)is zero.D)is one-half the cost of the videotape, since this is the second time you have watched it.Answer:AExplanation:A)B)C)D)23)Which of the following is an example of a normative statement?23)A)Equilibrium price implies that quantity demanded equals quantity supplied.B)People under six feet tall are the best stockbrokers.C)Higher prices cause consumers to buy less.D)There should be no unemployment in an advanced industrial society.Answer:DExplanation:A)B)C)D)6

Loading page image...

24)Which of the following is an element of a centrally planned economy?24)A)The market decides distribution.B)Production decisions are centralised.C)The means of production are privately owned.D)The market decides what will be produced.Answer:BExplanation:A)B)C)D)25)A rise in demand will most likely:25)A)lengthen queues.B)reduce price.C)increase price.D)reduce supply.Answer:CExplanation:A)B)C)D)26)Which of the following is NOT a potential advantage of a command economy?26)A)It ensures that producers respond automatically to consumer wishes.B)The planning authority can obtain an overall view of the whole economy and ensure abalanced expansion of its various parts.C)Unemployment can be avoided.D)Resources can be distributed according to need.E)Resources can be diverted from consumption to investment if it is desired to increase the rateof economic growth.Answer:AExplanation:A)B)C)D)E)27)The reason that opportunity costs arise is that:27)A)there are no alternative decisions that could be made.B)resources are scarce.C)an economy relies on money to facilitate exchange of goods and services.D)people have unlimited wants.Answer:BExplanation:A)B)C)D)7

Loading page image...

28)An improvement in technology will cause:28)A)the production possibility curve to shift back and to the left.B)the economy to move closer to its production possibility curve.C)the economy to move down the production possibility curve.D)the production possibility curve to shift up and to the right.Answer:DExplanation:A)B)C)D)29)Which of the following is a reason to study economics?29)A)To understand global affairsB)To understand societyC)To be an informed voterD)All of the aboveAnswer:DExplanation:A)B)C)D)30)A society can produce two goods: bread and biscuits. The society's production possibility curve isnegatively sloped and 'bowed outward' from the origin. As this society moves down its productionpossibility frontier producing more and more units of biscuits, the opportunity cost of producingbiscuits:30)A)decreases.B)could decrease or increase depending on the technology.C)remains constant.D)increases.Answer:DExplanation:A)B)C)D)31)Capital, as economists use the term:31)A)refers to things that have been produced and are used to produce other things.B)refers to the process by which inputs are transformed in to outputs.C)is the value of a firm to its shareholders.D)is the current value of the firm's shares on the stock exchange.Answer:AExplanation:A)B)C)D)8

Loading page image...

32)Which of the following statements is NOT true for a centrally planned economy?32)A)The amount of a good supplied always equals the amount of the good demanded.B)The state decides how to distribute what is produced.C)The government decides what is produced.D)Consumers have some choices concerning what they buy.Answer:AExplanation:A)B)C)D)33)As more of a good, such as television sets, is produced the opportunity cost of producing itincreases. This most likely occurs because:33)A)consumers would be willing to pay higher prices for the good as more of the good isproduced.B)as more of a good is produced the quality of the technology available to produce additionalunits of the good declines and therefore the costs of production increase.C)resources are not equally well suited to producing all goods and as more of a good isproduced it is necessary to use resources less well suited to the production of the good.D)as more of a good is produced the inputs used to produce that good will increase in price.Answer:CExplanation:A)B)C)D)34)Costs that cannot be avoided, regardless of what is done in the future, because they have alreadybeen incurred are:34)A)marginal costs.B)implicit costs.C)sunk costs.D)total costs.Answer:CExplanation:A)B)C)D)35)In a free-market economy________what gets produced, how it is produced, and who gets it.35)A)the central government authority determinesB)the behaviour of buyers and sellers determinesC)firms but not consumers determineD)consumers but not firms determineAnswer:BExplanation:A)B)C)D)9

Loading page image...

36)The study of why a person may decide to go to university instead of accepting a£10,000a year jobwould be considered:36)A)macroeconomics.B)microeconomics.C)public finance.D)industrial relations.Answer:BExplanation:A)B)C)D)37)A cut in the income tax rate, which was meant to encourage people to work more would be called:37)A)a supply-side policy.B)an incomes policy.C)a demand-side policy.D)a microeconomic policy.Answer:AExplanation:A)B)C)D)38)If the opportunity costs of producing a good increase as more of that good is produced, theeconomy's production possibility curve will be:38)A)negatively sloped and 'bowed outward' from the origin.B)negatively sloped and 'bowed upward' toward the origin.C)a negatively sloped straight line.D)a positively sloped straight line.Answer:AExplanation:A)B)C)D)39)An institution through which buyers and sellers interact and engage in exchange is a:39)A)laissez-faire.B)central authority.C)market.D)production curve.Answer:CExplanation:A)B)C)D)40)That which we forgo, or give up, when we make a choice or decision is called the ________ cost ofthat decision.40)A)marginalB)monetaryC)realD)opportunityAnswer:DExplanation:A)B)C)D)10

Loading page image...

41)Positive economics is an approach to economics that:41)A)examines the role of government in the economy.B)seeks to understand behaviour and the operation of systems without making judgements.C)analyses outcomes of economic behaviour, evaluates them as good or bad, and may prescribepreferred courses of action.D)applies statistical techniques and data to economic problems.Answer:BExplanation:A)B)C)D)42)A planned motorway connecting two cities was originally thought to cost£200 million. Afterbuilding part of the system at a cost of£150 million, the government realised that the total cost ofthe system would be£260 million, not£200 million. At this point, the MARGINAL cost ofcompleting the motorway is best estimated as:42)A)£60 million.B)£110 million.C)£260 million.D)£50 million.Answer:BExplanation:A)B)C)D)43)Which of the following is the best definition of economics?43)A)The study of how the government allocates tax revenueB)The study of how individuals and societies choose to use the scarce resources that nature andprevious generations have providedC)The study of how firms decide what inputs to hire and what outputs to produceD)The study of how consumers spend their incomeAnswer:BExplanation:A)B)C)D)44)Which of the following is NOT true of a market economy?44)A)Decisions are regulated by a central agency.B)It relies upon millions of individual economic decisions to determine economic outcomes.C)In its pure form, it is also know as a laissez-faire economy.D)The interaction between buyers and sellers answers the basic economic questions of what getsproduced, how it gets produced, and who gets it.Answer:AExplanation:A)B)C)D)11

Loading page image...

45)Which of the following statements is incorrect?45)A)If poverty were eliminated there would be no reason to study economics.B)Economics is a behavioural science.C)In large measure, economics is the study of how people make choices.D)Economic analysis can be used to explain how both individuals and societies make decisions.Answer:AExplanation:A)B)C)D)46)Studying how the management of Corus decides how many tons of steel to produce and the priceto charge for its steel would be considered:46)A)descriptive economics.B)empirical economics.C)macroeconomics.D)microeconomics.Answer:DExplanation:A)B)C)D)47)A rise in supply will most likely:47)A)reduce demand.B)reduce price.C)reduce warehouse space.D)increase price.Answer:BExplanation:A)B)C)D)48)A study of whether or not employers discriminate against women by paying them lower wagesand assigning them to lower-level positions than men would be in the area of:48)A)microeconomics.B)macroeconomics.C)industrial relations.D)law and economics.Answer:AExplanation:A)B)C)D)49)If you own a building and you decide to use that building to open a restaurant:49)A)there is an opportunity cost of using this building for a restaurant because it could have beenused in other ways.B)there is no opportunity cost of using this building for a restaurant because you own it.C)the only cost relevant to this decision is the price you paid for the building.D)there are no irretrievable costs involved in this decision.Answer:AExplanation:A)B)C)D)12

Loading page image...

50)Given the current state of technology it is possible to produce one more lorry if two fewer cars areproduced. However in Microland, to produce one more lorry the production of cars must bereduced by three. This situation would be illustrated by Microland ________ its productionpossibility curve for cars and lorries.50)A)being onB)being at the origin ofC)being outsideD)being insideAnswer:DExplanation:A)B)C)D)51)Macroeconomics is the branch of economics that examines:51)A)the economic behaviour of aggregatesNincome, employment, and outputNon a national scale.B)ways to understand behaviour and the operation of systems without making judgements.C)outcomes of economic behaviour, evaluates them as good or bad, and prescribes preferredcourses of action.D)the functioning of individual industries and the behaviour of individual decision-makingunits, that is, business firms and households.Answer:AExplanation:A)B)C)D)52)A recession is a period of six months or more when:52)A)output is falling.B)prices are falling.C)prices are falling rapidly.D)unemployment is rising.Answer:AExplanation:A)B)C)D)53)Studying how Mary allocates her time between work and leisure is an example of:53)A)macroeconomics.B)descriptive economics.C)microeconomics.D)industrial relations.Answer:CExplanation:A)B)C)D)13

Loading page image...

54)A retired individual decides to spend the day golfing. The opportunity cost of this decision:54)A)is best measured by using the wage rate this individual earned prior to retirement.B)equals the cost of the golf outing plus the value of the individual's alternative use of time.C)is equal to the cost of the golf outing.D)is zero, since the individual is retired and is not foregoing any income to spend the daygolfing.Answer:BExplanation:A)B)C)D)55)Which of the following is NOT an opportunity cost of attending college?55)A)The alternative uses of the time you spend studyingB)The cost of the food that you consume while you are attending collegeC)The tuition fees that you or your Local Authority paysD)The income that you could have earned if you did not attend collegeAnswer:BExplanation:A)B)C)D)56)The branch of economics that examines the economic behaviour of aggregates such as income andemployment is:56)A)positive economics.B)macroeconomics.C)microeconomics.D)normative economics.Answer:BExplanation:A)B)C)D)57)During the Persian Gulf War many of Kuwait's oil refineries were destroyed. This would best berepresented by:57)A)a movement off Kuwait's production possibility curve to some point inside the curve.B)a movement up Kuwait's production possibility curve.C)a movement down Kuwait's production possibility curve.D)a shift of Kuwait's production possibility curve back and to the left.Answer:DExplanation:A)B)C)D)14

Loading page image...

58)The study of economics:58)A)is concerned with proving that capitalism is better than socialism.B)focuses on how a business should function.C)is a way of analysing decision-making processes caused by scarcity.D)is a very narrow endeavour.Answer:CExplanation:A)B)C)D)SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.59)What do economists mean by a mixed economy?59)Answer:Economists refer to free-market economies, and command economies.In the first, the government takes no economic decisions and in the second, it takesall economic decisions. A mixed economy would be somewhere in the middle, withan important, but not dominant, role for the government.The term is not very precise, and is used differently by economists from differentcountries and with different political opinions.Explanation:60)What does 'ceteris paribus' mean?60)Answer:It is Latin for 'other things being equal'.If we say that price goes up when demand goes up, we should also say, 'all otherthings being equal'. We mean that if only demand changes, and nothing else, thenprice will change in the same direction. Obviously if other things are changing, atthe same time as demand changes, price might also be affected by them.So, the phrase is a way of saying that we are trying to isolate the particular causeand effect relationship that we are discussing. In physics we could do a controlledexperiment, but in the social sciences we can only isolate particular causes andeffects statistically.Explanation:61)Explain the purpose of a production possibility curve. Why might it be concave to theorigin?61)Answer:A production possibility curve shows all the possible combinations of two goodsthat a country can produce within a specified time period with all its resources fullyand efficiently employed. It can be used to illustrate the concept of opportunity cost.If more of one good is to be produced, less of the other can be produced. There is atrade-off. If a production possibility curve is drawn concave to the origin, it isdemonstrating increasing opportunity cost. As more of one good is produced,ever-increasing amounts of the other have to be sacrificed. It is because, as more ofone good is produced, resources that are less and less suitable for its productionhave to be used. Increasing opportunity costs will lead to a production possibilitycurve that is bowed out from the origin-this is known as a concave curve.Explanation:15

Preview Mode

This document has 728 pages. Sign in to access the full document!

Report

Study Now!

Document Details

Related Documents

Analysis of McDonald

The Effect of Exercise on Clothespin Squeezing

Analyzing Coca-Cola's Demand, Supply and Market St

Emerging Economies and Globalization

Principles of Managerial Economics

Emerging Economies and Globalization

United States Fiscal Policy

Economic Policy Recommendation

Assignment 2: Market Forms

Should the U.S. convert to a Zero Personal Income Tax

Company

Explore

Study Tools