1. When constructing an economic model, economists (Points: 1) rely mostly on their own value judgments and ignore the far more complex world of facts always try to duplicate reality by including all available information use assumptions that are true for the individual but never true for the whole economy must rely on simplifying assumptions that abstract from the complexity of the real world
2. Which of the following is a positive statement? (Points: 1) An unemployment rate of 7 percent or higher is a national disgrace. Unemployment is a less important problem than inflation. When the national unemployment rate is 7 percent, the unemployment rate for inner-city youth is often close to 40 percent. Unemployment and inflation are equally important problems.
3. The difference between a positive economic statement and a normative statement is that (Points: 1) a positive statement must be true; a normative statement is often not true a normative statement must be true; a positive statement is often not true a positive statement can be verified; a normative statement cannot a normative statements can be verified; a positive statement cannot
4. One might commit the fallacy of composition by concluding that (Points: 1) statements that are true during prosperity are necessarily true during depression what is good for the individual is necessarily good for the group an event that precedes another is necessarily the cause of the latter intentions need not coincide with actions
5. Someone who commits the fallacy of composition is likely to assume that (Points: 1) the simplest model is the best predictor event B, which follows event A, was caused by event A event B, which follows event A, was not necessarily caused by event A what is true for the individual is also true for the group
6. The opportunity cost of an activity is (Points: 1) zero if you choose the activity voluntarily the amount of money spent on the activity the value of the best alternative not chosen the sum of benefits from all of the sacrificed alternatives the difference between the benefits and the costs of that activity
7. Any movement along the production possibilities frontier involves the production of (Points: 1) more of both goods more of one good and less of the other less of both goods more resources better technology
8. Which of the following would shift the production possibilities frontier outward? (Points: 1) a reduction in inefficiency a reduction in the size of the labor force an improvement in technology a change in the combination of goods produced increasing opportunity costs
9. Which economic question does the decision to give all of the butter the economy produces to the homeless answer? (Points: 1) What to produce? How to produce? For whom to produce? Who has a comparative advantage in butter production? Who has an absolute advantage in butter production?
10. The economic question of what will be produced is (Points: 1) primarily answered by the government in a system of pure capitalism primarily answered by markets in a command economy faced by all economies regardless of their wealth does not have to be answered by economies possessing great wealth cannot be illustrated by the economic concept of the production possibilities frontier
11. Owners of corporations are referred to most frequently as (Points: 1) entrepreneurs limited partners managers stockholders
12. In terms of total sales, the dominant form of business firm in the U.S. economy is the (Points: 1) corporation sole proprietorship partnership nonprofit organization
13. Which of the following is a defining characteristic of a public good? (Points: 1) It is produced and distributed by the government. The decision to produce it is made by the public through the voting process. It is produced and distributed by private firms according to government regulations. It is freely available to everyone once it is produced.
14. Gross Domestic Product is the value of all (Points: 1) goods and services produced during a particular year goods and services sold during a particular year final goods and services sold during a particular year final goods and services produced during a particular year
15. Which of the following taxes is most clearly based on the benefits-received principle of taxation? (Points: 1) corporate income tax gasoline tax personal income tax payroll tax
16. A decrease in demand for a good could mean that (Points: 1) consumers are willing to buy larger quantities of the good at each price the demand curve has shifted to the left consumers are willing to pay a higher price for each quantity of the good the demand curve has undergone a parallel shift to the right
17. Which of the following is true of an increase in quantity supplied of a given good? (Points: 1) It is represented by a rightward shift in the supply curve. It could result from a technological improvement. The price of a key resource used to produce the good may have decreased. It is caused by an increase in the price of the good.
18. A surplus occurs whenever (Points: 1) current price is greater than equilibrium price quantity supplied exceeds quantity demanded at the equilibrium price quantity demanded is greater than quantity supplied the problem of scarcity of a good is solved some buyers would be willing and able to pay even more for it than they have to at equilibrium
19. Economists emphasize the importance of equilibrium in markets because (Points: 1) trading in markets can only occur at the equilibrium price and quantity the behavior of buyers and sellers will automatically guide the market toward the equilibrium price and quantity all buyers and sellers are better off at the equilibrium point than any other price and quantity combination it represents a compromise between sellers hoping for low prices and buyers searching for high prices
20. The effect of an increase in consumer income on equilibrium price and quantity of Florida orange juice (a normal good) is (Points: 1) to increase equilibrium price and quantity to decrease equilibrium price and quantity to increase equilibrium price and decrease equilibrium quantity to increase equilibrium quantity and decrease equilibrium price
21. If demand increases and supply decreases, (Points: 1) equilibrium price will fall and equilibrium quantity will rise equilibrium price will rise; equilibrium quantity will either rise, fall, or remain unchanged equilibrium price and quantity will both rise equilibrium quantity will rise; equilibrium price will either rise or fall
22. Demand is elastic whenever (Points: 1) price elasticity has an absolute value of 1 price elasticity has an absolute value greater than 1 price elasticity has an absolute value less than 1 price elasticity is negative
23. The total revenue from selling trucks is equal to (Points: 1) the price of a truck times the quantity sold the change in quantity sold divided by the change in price average cost times quantity produced the price of a truck times the quantity produced
24. A good that takes up a very large percentage of the consumer's budget will tend to have (Points: 1) an elastic demand a perfectly elastic demand an inelastic demand an upward-sloping demand curve
25. If supply is perfectly elastic, the supply curve is (Points: 1) vertical horizontal any straight-line supply curve any supply curve intersecting a perfectly elastic demand curve
Economics MCQ 1-25
