- 1. Suppose that in the land of Plenty there is no
scarcity. We can conclude that:
- A. all resources are fully employed.
- B. the production possibilities curve is concave to the
origin.
- C. opportunity costs are zero when the production of
bread increases.
- D. all goods are free.
- E. both c and d are correct.
- 2. All of the following are examples of opportunity cost
except:
- A. the leisure time sacrificed to study for an exam.
- B. the tuition fees paid to a university.
- C. the income which could have been earned by a college
student had he or she worked full time instead of
attending college.
- D. the building which could have been built with the
construction materials and labor used to build a new
university library.
- E. all of the above are examples of opportunity costs.
- 3. Suppose you have to wait in line to purchase a soft
drink at a Missouri State - Tulsa football game. The drink costs one
dollar. While, waiting in line, you hear the crowd roar
as someone scores a touchdown. While running back to your
seat, you fall and spill your drink on another spectator.
What is your opportunity cost for the drink?
- A. the cost of the drink plus the lost enjoyment of not
seeing Missouri State score another touchdown (it couldn't have been
Tulsa).
- B. the cost of the drink, the lost enjoyment of not
seeing the Missouri State touchdown, your thirst (you didn't get a
drink), and the discomfort (to the other spectator) of
sitting in the sun with wet, sticky clothing.
- C. the lost enjoyment of not seeing the Missouri State touchdown,
your thirst (you didn't get a drink), and the discomfort
(to the other spectator) of sitting in the sun with wet,
sticky clothing.
- D. the lost enjoyment of not seeing the Missouri State touchdown,
your thirst (you didn't get a drink), and your discomfort
(assuming the other spectator responded by throwing his
drink in your lap) of sitting in the sun with wet, sticky
clothing.
- 4. Which of the following is the best definition of
opportunity costs?
- A. the amount of one good that must be given up in order
to produce one more unit of another good.
- B. the amount of money that must be paid in order to
purchase one more unit of a good.
- C. the amount of an input that must be used in order to
produce one more unit of a good.
- D. the price of a good that must be charged in order for
a merchant to sell one more unit.
- E. none of the above.
- 5. A free good is not scarce because:
- A. individuals can have all they desire at zero price.
- B. price rations the good so that all individuals willing
to pay the market price can buy the good and it is,
therefore, not scarce.
- C. human desires for the good exceed the amounts
available at a zero money price.
- D. it is an abundant natural resource.
- E. a and b.
- 6. Which of the following statements could not be tested
by economic analysis?
- A. Higher tax rates cause tax revenues to fall.
- B. Only cigarette companies are harmed by higher
cigarette taxes.
- C. Gambling should be legalized to raise tax revenue.
- D. Outlawing bars will reduce drunk driving.
- 7. Which of the following is a positive statement?
- A. An unemployment rate of 7 percent is a national
disgrace.
- B. Unemployment is not so important a problem as
inflation.
- C. When the national unemployment rate is 7 percent, the
unemployment rate for inner-city youth is often close to
40 percent.
- D. Unemployment and inflation are equally important
problems.
- 8. All of the following statements are positive except:
- A. "My administration will balance the federal
budget by 1983." (Ronald Reagan, campaign promise,
1980.)
- B. "It is an economic contradiction for airline
passengers to pay higher fares to fly shorter distances
than longer ones." (Hobart Rowen, Washington Post,
1985.)
- C. "inflation makes everyone worse off by lowering
the purchasing power of people's income."
- D. "rent controls are preferable to income grants
for assisting low-income families."
- E. all of the above are positive statements.
- 9. Microeconomics is not concerned with:
- A. the quantities of each good produced.
- B. the size of aggregate money flows in the economy.
- C. the distribution of goods among households.
- D. the allocative function of changes in relative prices.
- E. microeconomics is concerned with all of the above.
- 10. Most of economic theory:
- A. views charitable human actions as especially moral.
- B. assumes that groups of people often behave
irrationally.
- C. is based on the notion that politicians,
entrepreneurs, and criminals are especially selfish and
greedy.
- D. views individuals as home economists.
- E. assumes that individuals act purposefully and
rationally to maximize their own self interest.
- 11. If it is impossible to make somebody better off
without making someone else worse off, the current
situation must:
- A. be allocatively efficient.
- B. not be optimal.
- C. be inequitable.
- D. cure the problem of scarcity.
- 12. Inefficiency:
- A. implies the existence of economic inequity.
- B. occurs whenever it is possible to make someone better
off without making someone else suffer.
- C. exists whenever maximum output is achieved given the
resources available.
- D. whenever present, implies that more total output could
always be produced given an economy's resources.
- 13. All of the following basic economic questions deal
with microeconomics except:
- A. How is the supply of goods allocated among the members
of the society?
- B. What goods and services are being produced and in what
quantities?
- C. By what methods are goods and services being produced?
- D. Is the economy's capacity to produce goods growing
over time?
- E. all of the above
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