Question 1

Suppose that a consumer purchases just two goods, X and Y. The slope of the budget line would indicate the

Accepted Answer

A)   opportunity cost of good Y in terms of good X given up for each unit of Y.
B)   opportunity cost of good X in terms of good Y given up for each unit of X.
C)   maximum quantity of good Y that the consumer could buy with a given budget.
D)   maximum quantity of good X that the consumer could buy with a given budget.

Question 2

Answer the question on the basis of the data given in the following production possibilities table.  Refer to the table. A total output of 3 units of capital goods and 4 units of consumer goods

Accepted Answer

A)   is irrelevant because the economy is capable of producing a larger total output.
B)   will result in the maximum rate of growth available to this economy.
C)   would involve an inefficient use of the economy's scarce resources.
D)   is unobtainable in this economy.

Question 3

A recurring theme in economics is that people

Accepted Answer

A)   have unlimited resources but limited economic wants.
B)   can increase resources by limiting their economic wants.
C)   have limited economic wants and limited resources.
D)   have unlimited economic wants but limited resources.

Question 4

If falling gasoline prices are good for the consumers, then they must be good everyone in the economy.

Accepted Answer

A) True 
 B)False

Question 5

Answer the question on the basis of the following five data sets, wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis.  Refer to the data sets. The equation for data set 3 is

Accepted Answer

A)   P = 90 - .5N.
B)   P = 90 + .5N.
C)   P = .5N.
D)   P = 40 + .5N.

Question 6

The optimal allocation of resources is found

Accepted Answer

A)   where MB = MC.
B)   at every point along a production possibilities curve.
C)   where the marginal benefit is at its greatest.
D)   where the marginal cost is at its lowest.

Question 7

Which of the following illustrates the fallacy of composition?

Accepted Answer

A)   Whatever goes up must come down.
B)   Facts are more important than theories.
C)   What is true for the part is necessarily also true for the whole.
D)   If event B occurs after event A, event A must have caused event B.

Question 8

When a nation is under-allocating resources to the production of a good, then the

Accepted Answer

A)   marginal benefit is greater than the marginal cost of the good.
B)   marginal benefit is less than the marginal cost of the good.
C)   marginal cost of producing the good is decreasing.
D)   marginal benefit of producing the good is increasing.

Question 9

All of the following would affect the position and shape of a nation's production possibilities curve, except

Accepted Answer

A)   the amount of labor available.
B)   the level of unemployment.
C)   the amount of the capital resources.
D)   the rate of technological progress.

Question 10

Marginal analysis is the valuation of insignificant or small benefits from doing things.

Accepted Answer

A) True 
 B)False

Question 11

Macroeconomics is concerned with the study of the nationwide market for specific goods like oranges.

Accepted Answer

A) True 
 B)False

Question 12

The slope of a line parallel to the horizontal axis is

Accepted Answer

A)   zero.
B)   one.
C)   infinite.
D)   one-half.

Question 13

(Last Word)  A study found that the incidence of skin cancer increases along with the amount of time people work under fluorescent light, leading some people to conclude that fluorescent lighting is a cause of skin cancer. But further analysis found that people who work in offices, where fluorescent light is common, suffer more sunburn on their vacations than other workers. The sunburns, not the fluorescent light, were the cause of the higher incidence of skin cancer. The original conclusion illustrates

Accepted Answer

A)   the fallacy of composition.
B)   confusion of correlation and causation.
C)   identifying marginal costs and marginal benefits.
D)   biases and loaded terminology.

Question 14

The opportunity cost of doing or getting something is defined as

Accepted Answer

A)   the difference between the marginal cost and benefit of doing something.
B)   the materials used in doing or getting something.
C)   the value of the best alternative that is given up in order to do or get something.
D)   the money spent in doing or getting something.

Question 15

(Last Word)  The "after this, therefore because of this" fallacy states that

Accepted Answer

A)   because event A precedes event B, A is necessarily the cause of B.
B)   the very attempt to accomplish a certain objective may create conditions that prohibit the achievement of that objective.
C)   events may drastically alter plans; one's intentions and actual accomplishments may differ considerably.
D)   generalizations that are accurate at the level of microeconomics may be inaccurate at the level of macroeconomics.

Question 16

In constructing models, economists

Accepted Answer

A)   make simplifying assumptions.
B)   include all available information.
C)   must use mathematical equations.
D)   attempt to duplicate the real world.

Question 17

The present choice of position on the production possibilities curve will not influence the future location of the curve.

Accepted Answer

A) True 
 B)False

Question 18

If an inverse relationship exists between two variables, then

Accepted Answer

A)   as one variable increases, the other decreases.
B)   as one variable increases, so does the other.
C)   the two variables are close substitutes for each other.
D)   both variables increase over time.

Exam 1: Limits, Alternatives, and Choices

In constructing models, economists

Correct Answer
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A recurring theme in economics is that people

Correct Answer
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All of the following would affect the position and shape of a nation's production possibilities curve, except

Correct Answer
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The present choice of position on the production possibilities curve will not influence the future location of the curve.

Correct Answer
verified

Which of the following illustrates the fallacy of composition?

Correct Answer
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Suppose that a consumer purchases just two goods, X and Y. The slope of the budget line would indicate the

Correct Answer
verified

Marginal analysis is the valuation of insignificant or small benefits from doing things.

Correct Answer
verified

If falling gasoline prices are good for the consumers, then they must be good everyone in the economy.

Correct Answer
verified

When a nation is under-allocating resources to the production of a good, then the

Correct Answer
verified

Answer the question on the basis of the data given in the following production possibilities table. Refer to the table. A total output of 3 units of capital goods and 4 units of consumer goods

Correct Answer
verified

Correct Answer
verified

If an inverse relationship exists between two variables, then

Correct Answer
verified

Correct Answer
verified

(Last Word) The "after this, therefore because of this" fallacy states that

Correct Answer
verified

Macroeconomics is concerned with the study of the nationwide market for specific goods like oranges.

Correct Answer
verified

The opportunity cost of doing or getting something is defined as

Correct Answer
verified

The optimal allocation of resources is found

Correct Answer
verified

The slope of a line parallel to the horizontal axis is

Correct Answer
verified

Exam 1: Limits, Alternatives, and Choices

In constructing models, economists

Correct AnswerverifiedShow Answer

A recurring theme in economics is that people

Correct AnswerverifiedShow Answer

All of the following would affect the position and shape of a nation's production possibilities curve, except

Correct AnswerverifiedShow Answer

The present choice of position on the production possibilities curve will not influence the future location of the curve.

Correct AnswerverifiedShow Answer

Which of the following illustrates the fallacy of composition?

Correct AnswerverifiedShow Answer

Suppose that a consumer purchases just two goods, X and Y. The slope of the budget line would indicate the

Correct AnswerverifiedShow Answer

Marginal analysis is the valuation of insignificant or small benefits from doing things.

Correct AnswerverifiedShow Answer

If falling gasoline prices are good for the consumers, then they must be good everyone in the economy.

Correct AnswerverifiedShow Answer

When a nation is under-allocating resources to the production of a good, then the

Correct AnswerverifiedShow Answer

Answer the question on the basis of the data given in the following production possibilities table. Refer to the table. A total output of 3 units of capital goods and 4 units of consumer goods

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If an inverse relationship exists between two variables, then

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

(Last Word) The "after this, therefore because of this" fallacy states that

Correct AnswerverifiedShow Answer

Macroeconomics is concerned with the study of the nationwide market for specific goods like oranges.

Correct AnswerverifiedShow Answer

The opportunity cost of doing or getting something is defined as

Correct AnswerverifiedShow Answer

The optimal allocation of resources is found

Correct AnswerverifiedShow Answer

The slope of a line parallel to the horizontal axis is

Correct AnswerverifiedShow Answer

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