Economics Scarcity and Choice

Chapter 1

Economics: Scarcity and Choice

1) BM01 \ A \\ Scarcity \ 2 \\

People all over the world confront the problem of scarcity at all times because:(a) limited resources and time preclude producing all the goods people want.(b) greedy capitalist monopolies charge excessively high prices.(c) international markets are plagued by flawed systems of distribution.(d) the opportunity costs of production for many goods are too high to allow reasonable profits.(e) advertising stimulates artificial wants that far exceed what people truly need to survive.

2) BM01 \ C \\ Scarcity \ 1 \\

The problem of scarcity implies that the basis for all economic activity is to:(a) facilitate political and social freedom.(b) maximize employment, purchasing power, and economic growth.(c) provide goods for people who want them.(d) ensure the survival of human beings as a species.(e) maximize the profits of business firms.

3) BM01 \ D \\ Scarcity \ 1 \\

The concept of scarcity applies to:(a) only the poor.(b) low and medium social classes only.(c) only those who cannot manage their budgets.(d) each and every human being.

4) BM01 \ C \\ Scarcity \ 1 \\

A good is considered scarce whenever people:(a) lack the funds needed to ensure their survival.(b) need to consume large amounts of it.(c) want more of it than the amounts available if it were free.(d) can have as much as they want without paying for it.

5) BM01 \ D \\ Scarcity \ 2 \\

A program that provides health care at no charge to patients would make:(a) top-quality health care available to everybody.(b) health care a free good.(c) medical personnel work for nothing.(d) non-price rationing of health care necessary.

Ralph Byrns Chapter 1: Economics: Scarcity and Choice Test Bank Two 1

6) BM01 \ A \\ Scarcity \ 2 \\

Alex wants an unlimited supply of ice cream, candy bars, and flip-flops. However, limited resources and the time required to produce these staples leaves Alex facing a problem known as:(a) scarcity.(b) disappointment.(c) insufficiency.(d) inadequacy.(e) hunger.

7) BM01 \ A \\ Scarcity \ 2 \\

Every society confronts the problem of scarcity because:(a) human wants are virtually unlimited relative to the resources available.(b) resources, technology, and human potential are unlimited.(c) most people can't afford the goods they need.(d) human beings become satiated as consumption increases.(e) government bureaucracies make production inefficient.

8) BM01 \ A \\ Scarcity \ 2 \\

NO economic reform could possibly:(a) eliminate scarcity.(b) reduce the average costs of production.(c) eliminate equality in income distribution.(d) raise wages for most workers.

9) BM01 \ D \\ Economics \ 2 \\

Economists are LEAST concerned with the:(a) gains and losses from changes in government policies.(b) adjustments people make when tax structures change.(c) causes of inflation and unemployment.(d) ethics of political campaigning.

10) BM01 \ B \\ Economics \ 2 \\

A general approach to economics involves studying how:(a) charging interest on loans can be ethical.(b) resources are allocated to satisfy human wants.(c) individuals and government must balance their budgets.(d) to get the best bargains when you go shopping.(e) athletes invest their salaries.

© 2004 EconomicsInteractive.com Contemporary Economics 2

11) BM01 \ B \\ Economics \ 1 \\

The study of economics is LEAST concerned with:(a) humanity in its wealth-getting and wealth-using activities.(b) physiological interpretations of labor resources.(c) how people try to deal with scarcity.(d) choices and their consequences.

12) BM01 \ C \\ Theory \ 1 \\

Economic analysis:(a) focuses solely on financial relationships.(b) is a step-by-step guide to gaining wealth.(c) centers on choice and decision making.(d) is useful for understanding market economies, but not socialism.

13) BM01 \ C \\ Choices \ 2 \\

Society's BASIC economic problems do NOT include deciding:(a) what goods to produce.(b) how to produce the goods chosen.(c) what occupation each person should pursue.(d) who should get to use the goods produced.

14) BM01 \ A \\ Free Goods \ 2 \\

An example of a free good would be:(a) a cool breeze on a hot humid day.(b) DVDs given as door prizes to the first 100 shoppers at the grand opening of a Best Buy.(c) the care and attention mothers give babies.(d) trinkets at the Dollar Store that cost only $1 each.(e) every fifth haircut at Super Cuts, after you’ve paid for the first four.

15) BM01 \ C \\ Free Goods \ 2 \\

All of the following are free goods EXCEPT the enjoyment people derive from:(a) rain that waters our lawns and refreshes the air we breathe.(b) breathing air of current quality.(c) watching Law and Order reruns on cable television.(d) sunshine energy that warms the earth.

16) BM01 \ D \\ Free Good \ 2 \\

If all people can consume as much of a good as they want at zero cost, it is a:(a) welfare good.(b) bonus for buying something else.(c) surplus supply good.(d) free good.


17) BM01 \ A \\ Bad \ 1 \\

A thing is called a "good" (as opposed to a "bad") if:(a) its use enhances human happiness.(b) its production requires capital and labor.(c) its usefulness to society is limited.(d) it is a service to people, like housecleaning.

18) BM01 \ B \\ Bads \ 2 \\

Smog is:(a) a good because it gives the air texture.(b) a bad since most people would pay to get rid of it.(c) a free good since you could consume all you want without having to pay for it.(d) an inefficient use of resources.

19) BM01 \ A \\ Production \ 2 \\

Using knowledge and/or technology to apply energy to alter materials, thereby making the materials more valuable is:(a) production.(b) demand.(c) a complete cure for scarcity.(d) economically profitable.

20) BM01 \ B \\ Technology \ 2 \\

Technological advances would not include:(a) Native Americans showing Pilgrims how crops grow faster if rotten fish are dropped in

with seeds they plant.(b) pouring coffee from a coffee pot you received as a birthday gift.(c) new brighter light bulb filaments that burn less electricity.(d) Henry Ford’s development of the assembly line.(e) researchers discovering gene therapies that reduce the likelihood of death or crippling

illnesses later in life.

21) BM01 \ C \\ Resources \ 2 \\

The four basic categories for economic resources are:(a) matter, energy, technology, and information.(b) wages, rent, interest, and profits.(c) land, labor, capital, and entrepreneurship.(d) machinery, energy, workers, and government.


22) BM01 \ B \\ Resources \ 2 \\

Resources (factors of production) do NOT include:(a) entrepreneurship.(b) competition.(c) land.(c) capital.(d) labor.

23) BM01 \ B \\ Resources \ 2 \\

Land, labor, and capital are all scarce because:(a) human wants are limited.(b) less is available than people want.(c) each productive resource requires a monetary return for its use.(d) once utilized they cannot be used again.

24) BM01 \ D \\ Resources \ 2 \\

The economists’ resource category of “land” would not include:(a) coal, petroleum, and other minerals.(b) the fish and water in the ocean.(c) sunlight and climate.(d) roads and highways.(e) forests and wildlife.

25) BM01 \ D \\ Capital \ 2 \\

Examples of economic capital do NOT include:(a) buildings.(b) tools.(c) machinery.(d) stocks and bonds.

26) BM01 \ D \\ Capital \ 2 \\

Capital goods are:(a) machines, equipment, buildings, and other improvements to natural resources.(b) goods that indirectly contribute to human satisfaction.(c) resources that have been altered for use in the production of other goods.(d) All of the above.


27) BM03 \ D \\ Investment \ 3 \\

Suppose Michael Jordan buys the New Jersey Nets basketball franchise and, expecting an explosion of sales at his car dealerships, he orders 200 new extra Toyotas. From an economic perspective, his purchase of the Nets franchise is:(a) smart marketing strategy.(b) complementary economic investment.(c) likely to generate economic losses.(d) a financial investment.

28) BM01 \ A \\ Investment \ 3 \\

If gross investment is $100 billion while $10 billion of capital is worn out, then net investment is:(a) $90 billion.(b) $100 billion.(c) $110 billion.(d) impossible to calculate without more information.

29) BM01 \ B \\ Investment \ 3 \\

If a firm buys $50 million worth of new machinery to replace worn out equipment that originally cost $3 million, gross investment for this period would be:(a) $47 million.(b) $50 million.(c) $53 million.(d) $3 million less than net investment.

30) BM01 \ A \\ Resources \ 2 \\

If Farmer MacDonald decides to plant a field full of rutabagas, the economic capital involved in this crop production process would include the:(a) tractor he rides.(b) land he farms.(c) physical effort he puts into farming.(d) money invested from his savings.(e) All of the above.

31) BM01 \ D \\ 0 \\ Resources \ 2 \\

Land, labor, capital, and entrepreneurship are all examples of:(a) producer's supplies.(b) goods and services.(c) income streams.(d) productive resources.


32) BM01 \ C \\ 0 \\ Entrepreneur \ 2 \\

Economic profit is the entrepreneur's:(a) payment to managers for their services.(b) capital stock minus depreciation.(c) reward for innovation and bearing risks.(d) difference between total income and monetary cost.(e) opportunity cost for capital.

33) BM01 \ E \\ Entrepreneurs \ 1 \\

The economic profits realized from organizing production, taking risks, bearing uncertainty, and innovating are rewards to:(a) corporate managers.(b) astute financial investors.(c) corporate stockholders.(d) creative inventors.(e) entrepreneurs.

34) BM01 \ C \\ Entrepreneurs \ 1 \\

The payments to entrepreneurs are the:(a) interest earned from saving money and managing major corporations.(b) rental payments from extensive land holdings.(c) profits arising from bearing risk and uncertainty , innovating new goods and technologies,

and organizing production.(d) interest earned from wise financial investments. (e) rewards gained from skills at parent selection.

35) BM01 \ C \\ Self Interest \ 2 \\

According to the view of humans as Homo economicus, individuals:(a) can easily achieve states of complete satisfaction.(b) should learn to get by with what they have.(c) desire to maximize personal satisfaction through self-interested behavior.(d) have fewer needs as they become self-actualized.

36) BM01 \ D \\ 0 \\ Self Interest \ 2 \\

Standard economic theory assumes that individuals behave:(a) with charity towards others if they are especially moral.(b) irrationally when they are in large groups.(c) like home economists if they are Homo sapiens.(d) purposefully and rationally to maximize their own self interests.


37) BM01 \ E \\ Scarcity and Opportunity Costs \ 1 \\

Every decision involves opportunity costs because of the basic facts that underpin:(a) limits to human reason.(b) production technology.(c) limits to human wants.(d) demand and supply analysis.(e) scarcity.

38) BM01\ B \\ Opportunity Costs \ 2 \\

Economic scarcity is pervasive, which makes choices necessary. Consequently, rationally optimal decisions hinge on tradeoffs that necessarily reflect:(a) using cooperative allocative mechanisms to minimize inequity.(b) opportunity costs.(c) competitive social behavior.(d) optimally balancing surpluses and shortages.(e) maximizing individual decision makers’ self interests.

39) BM01 \ C \\ Opportunity Costs and Decisionmaking \ 1 \\

Decisions based on opportunity costs are not involved in a direct way when:(a) you fail to buckle up before driving a car.(b) a brilliant high school graduate works as a fast food cook instead of attending college.(c) lightning starts a major forest fire on an uninhabited desert island.(d) global warming increases the probability of deadly hurricanes.

40) BM01 \ C \\ 0 \\ Opportunity Costs \ 2 \\

When people buy something, its opportunity cost is the:(a) monetary price they paid.(b) enjoyment they get from their purchase.(c) satisfaction they lost by not buying something else.(d) time they must work to pay their bills.

41) BM01 \ D \\ Opportunity Costs \ 1 \\

The opportunity cost of any decision is measured by the:(a) market price of career and education opportunities.(b) value of the worst alternative choice sacrificed.(c) market price of the resources used in production.(d) value of the best alternative choice sacrificed.


42) BM01 \ A \\ Opportunity Cost \ 1 \\

The value of the best foregone alternative describes:(a) opportunity costs.(b) monetary costs.(c) irrational behavior by a consumer.(d) retail price margins over production costs.

43) BM01 \ E \\ Costs \ 3 \\

The closest of the following to being a free good would be:(a) affection and support from your parents.(b) a $100 bill you found after a stiff breeze blew it onto your porch.(c) health insurance provided by a firm to all its employees.(d) the second bag of Fritos you got at a “buy one, get one free” sale.(e) rain that waters your lawn in July.

44) BM01 \ D \\ Costs \ 2 \\

Providing new public housing "rent-free" to the poor:(a) makes public housing a free good.(b) involves no opportunity cost.(c) is the only way to shelter the homeless.(d) merely transfers costs from one group to another.

45) BM01 \ A \\ Costs \ 1 \\

Opportunity cost is defined as the value of the:(a) best alternative given up for the decision made.(b) sum of all alternative choices when a decision is made.(c) monetary cost of making a decision.(d) cost incurred when one ignores alternative choices.

46) BM01 \ A \\ Opportunity Costs \ 2 \\

Desirable items without opportunity costs are known as:(a) free goods.(b) economic goods.(c) capital goods.(d) financial goods.(e) gifts of nature.

47) BM01 \ B \\ Prices and Markets \ 3 \\

The functions of prices do not include the use of relative prices as:(a) rationing devices.(b) mediums of exchange.(c) information.(d) incentives.


48) BM01 \ D \\ Prices and Markets\ 2 \\

Prices are:(a) used to ration free goods and resources.(b) zero for some scarce goods and resources.(c) the only efficient way to allocate luxury goods.(d) one mechanism for rationing scarce goods and resources.

49) BM01 \ A \\ Relative Prices \ 2 \\

Suppose a deluxe hamburger is $5, an Oreo blizzard is $3, and a soda is $1. Then the relative price of the hamburger is:(a) 1.6 blizzards.(b) four sodas and half of a blizzard.(c) two blizzards.(d) a blizzard and one soda.

50) BM01 \ A \\ Absolute Prices \ 1 \\

If the overall price level increases, then there are changes in:(a) absolute prices.(b) subjective values.(c) relative prices.(d) objective prices.(e) tax rates.

51) BM01 \ E \\ Prices \ 3 \\

The behavior on the following list most consistent with relative prices serving as a rationing device, and not primarily as incentives, would be:(a) Marcia, a status-seeking social climber, turning down Wayne’s requests for dates after seeing

tiny numbers on his pay stub.(b) Bob cautiously driving the speed limit because he is afraid of a sixth (and final) speeding ticket.(c) soaring prices for pickled chicken feet inducing Arkansas chicken breeders to boost output.(d) Carla flunking economics because instead of studying an extra six hours, she partied and woke

up with a hangover.(e) Marcia reheating burritos for dinner again because refried beans are cheaper than steak.

52) BM01 \ C \\ Prices \ 2 \\

Choosing NOT to spend the extra money needed to improve the safety of a dangerous traffic intersection is an example of:(a) macroeconomic policy decisions.(b) positive economics.(c) how society assigns prices to human lives.(d) economic inefficiency.(e) comparative advantage.


53) BM01 \ A \\ Prices \ 2 \\

Inflation most affects:(a) absolute prices.(b) subjective values.(c) relative prices.(d) objective prices.(e) tax rates.

54) BM01 \ C \\ Economic Efficiency \ 2 \\

In broad economic terms "efficiency" requires:(a) an upward shift in the production curve.(b) full employment.(c) it being impossible to make someone better off without making someone else worse off.(d) producing cars with low gas consumption.

55) BM01 \ B \\ Economic Efficiency \ 2 \\

If it is possible to make somebody better off without making anybody worse off, the current situation is:(a) efficient.(b) inefficient.(c) optimal.(d) easily improved.

56) BM01 \ B \\ Economic Efficiency \ 2 \ KW \

An economic system is economically efficient if and only if:(a) economic inequity has been eliminated.(b) any gains to someone through some possible rearrangement of goods or resources would

necessitate losses on the part of someone else.(c) more output could be produced at lower cost.(d) maximum net costs are incurred while generating a specific amount of total social benefits.


Economic efficiency for society does not require that:(a) the greatest possible satisfaction is enjoyed by all consumers given their individual budgets.(b) maximum possible value of output from available resources.(c) specific goods are used by a majority of people equally.(d) opportunity costs being minimized for all activities.



If goods are efficiently distributed among households, then every family is:(a) sure to lose if any income redistribution occurs.(b) treated equitably.(c) as well off as possible without making any other family worse off.(d) capable of gaining through a better distribution of goods.

59) BM01 \ C \\ Allocative Efficiency \ 2 \\

Consider the many possible goods currently producible in the United States, given our available technologies and resources. If we produced only cat litter and razor blades, there would be a failure to achieve:(a) distributive efficiency.(b) economic equity.(c) allocative efficiency.(d) representative democracy.(e) productive efficiency.

60) BM01 \ C \\ Productive Efficiency \ 2 \\

An economically efficient combination of resources:(a) may or may not be technologically efficient.(b) will be technologically inefficient.(c) will not be technologically inefficient.(d) automatically assures equity.

61) BM01 \ B \\ Productive Efficiency \ 3 \\

If 6 units of capital can be substituted for 1 unit of labor without changing total steel output, while 4 units of capital can be substituted for 1 unit of labor without changing the output of wheat, then:(a) there is an optimal allocation of resources between steel and wheat.(b) it would be more efficient if labor was reallocated from wheat to steel and capital was

reallocated from steel to wheat.(c) it would be more efficient to reallocate labor from steel to wheat and capital from wheat to

steel.(d) there is insufficient information to answer this question definitively.

62) BM01 \ B \\ Distributive Efficiency \ 2 \\

If goods are traded and some families gain without worsening other families' well-being, then the initial distribution of goods must have been:(a) optimal.(b) distributively inefficient.(c) superior to the new distribution.(d) inequitable.


63) BM01 \ D \\ Economic Inefficiency \ 3 \\

Economic inefficiency is most obviously a problem when:(a) Elmer hates Alpo but eats it so he can afford a cheap daily bottle of Gertrude's Hi-Test

Wine.(b) Emma forgot to turn off the water and it runs down the street into a storm sewer six blocks

away.(c) Mr. & Mrs. Smurf are dismayed when their son Clyde, a soap opera addict, flunks out of

school.(d) Elvis sings 10 times better and drives a truck twice as well as Ralph, but both sing and

drive because no trade occurs.(e) Orpheus and Eurydice fall in love and live happily ever after.

64) BM01 \ A \\ Economic Efficiency \ 2 \\

Economic efficiency requires:(a) distributive, allocative, and productive efficiency.(b) dynamic and engineering efficiency.(c) sociological and historical efficiency.(d) physical and chemical efficiency.

65) BM01 \ C \\ Efficiency \ 2 \\

Bobby Joe Bob owns a hog feed factory in Los Angeles, CA. Oddly enough, there is not a large market for hog feed in L.A. Bobby Joe Bob moves his operation to a small, backwards town known as The Sticks, NC, where a huge market for hog feed awaits him. Such a move has directly increased his:(a) allocative efficiency.(b) distributive efficiency.(c) productive efficiency.(d) the relocation did not affect efficiency.

66) BM01 \ D \\ Economic Efficiency \ 2 \\

Economy-wide efficiency:(a) may only be achieved in a command economy.(b) is typically the most important goal of public policies.(c) has little to do with price or market conditions.(d) requires that further gains to anyone entails losses to someone else.

67) BM01 \ D \\ Distributive Efficiency \\ 2 \\

Ted and Willy are eating lunch. Ted has a Snowball and Willy a Ding Dong for dessert. Both strongly prefer Ding Dongs. A compulsory trade of Willy's Ding-Dong for Ted's Snowball would be likely to improve:(a) distributive efficiency because Fred is better off.(b) allocative efficiency since Fred's gain exceeds Willy's loss.(c) production efficiency since Willy does not gain from the transaction.(d) Ted's happiness, but comparing his gain to Willy's loss is inherently normative.


68) BM01 \ E \\ Distributive Efficiency \\ 2 \\

Economic efficiency is most clearly enhanced when:(a) a new Wal-Mart opens in a rural community.(b) less-developed countries grow faster than more developed countries.(c) taxes are collected in accord with the principle of progressivity.(d) India increases its production of luxury automobiles.(e) Chandra and Niki trade items in their school lunches about one-third of the time.

69) BM01 \ C \\ Distributive Efficiency \ 2 \\

I found a seashell that you would really like to have, and you found a coconut that I would really like to have. Trading your coconut for my seashell would enhance:(a) allocative efficiency.(b) productive efficiency.(c) distributive efficiency.(d) qualitative efficiency.(e) quantitative efficiency.

70) BM01 \ B \\ Theory \ 1 \\

Scientific attempts to relate facts to generate understanding of how things work are known as:(a) mathematics.(b) theories or models.(c) Occam's razor.(d) common sense.

71) BM01 \ C \\ Theory \ 2 \\

Good economic theories tend to be:(a) detailed pictures of real-world economic behavior.(b) based on value judgments.(c) simple and logical explanations of real world behavior.(d) aimed at maximizing capitalists' profits.

72) BM01 \ D \\ Theory \ 2 \\

Recently developed theory is least likely to evolve into common sense if it fails to:(a) conform to the principle of Occam’s razor.(b) be consistent with widely-accepted previous theories.(c) have realistic assumptions.(d) accurately explain or predict the behavior of the phenomena being studied.(e) be testable according to standard normative principles.


73) BM01 \ A \\ Theories and Models \ 2 \\

A wristwatch is a model of the passage of time because it provides a:(a) simple representation of a complex process.(b) good example of modern technology.(c) way to coordinate human activity.(d) unique statement of one's personality.

74) BM01 \ B \\ “All-Else-Equal” Assumptions \ 2 \ KW \

Economic models are most commonly based on:(a) specification of all interdependencies between all relevant economic variables.(b) “other things equal” assumptions.(c) equations that specify how to maximize financial profits.(d) a goal of minimizing equilibrium inefficiency.(e) computer simulations of behavior.

75) BM01 \ D \\ Occam’s Razor \ 1 \\

Unnecessarily complicated theories violate:(a) common sense.(b) the principle of nonsatiety.(c) the laws of supply and demand.(d) Occam's razor.

76) BM01 \ B \\ Weak Assumptions, Occam’s Razor and the Power of Theory\ 3 \\

Philosopher-mathematician Henri Poincaré asserted, “If a phenomenon admits of a complete mechanical explanation it will admit of any infinity of others which will account equally well for all of the peculiarities disclosed by the experiment.” Occam’s razor asserts that the best models are the simplest workable models, and amounts to a preference for theories based on:(a) empirical observations.(b) weak assumptions.(c) common sense.(d) strong assumptions.(e) logical reasoning.

77) BM01 \ A \\ Economic Reasoning \ 2 \\

Occam’s razor refers to the idea that when evaluating a theory:(a) good theory explains the phenomenon as simply as possible, but not moreso.(b) complexity is unavoidable to ensure that correct answers are reached.(c) conformity with reality doesn’t matter.(d) every detail must be considered explicitly to explain any situation in a scientifically

complete manner.(e) the end justifies the means.


78) BM01 \ C \\ Economic Reasoning \ 2 \\

According to the economic assumption of rationality, people:(a) always behave with perfect rationality.(b) never behave in random or erratic ways.(c) tend to make decisions consistent with their goals.(d) foresee perfectly the effects of their actions.

79) BM01 \ C \\ Positive Economics \ 1 \\

Positive scientific statements:(a) require value judgments.(b) must be valid by definition.(c) can be tested and proved or disproved by fact and logic.(d) are the best guides in specifying economic policies.

80) BM01 \ D \\ Positive Economics \ 2 \\

A positive scientific statement about college life is that:(a) college deans are more moral than department chairs.(b) elite colleges often admit the wrong students.(c) history professors and accounting professors deserve the same pay.(d) on average, student’s grades are negatively related to how much they know about a subject.(e) increases in tuition unfairly burden out-of-state students from poor families.

81) BM01 \ D \\ Positive Economics \ 2 \\

Positive economics is LEAST concerned with the:(a) allocation of economic resources.(b) conflict of available resources and societal wants.(c) mechanisms by which resources are used to satisfy societal desires.(d) moral dimensions of social decisions.

82) BM01 \ C \\ Positive Economics \ 2 \\

The statement "Wages are payments for labor" is an example of a:(a) macroeconomic statement.(b) normative statement.(c) positive statement.(d) negative statement.


83) BM01 \ B \\ Positive Economics \ 2 \\

The essence of positive economic statements is that they:(a) must be correct, or they become normative statements.(b) yield predictions that can be tested for validity.(c) clearly resolve moral or ethical issues.(d) focus on cheerful instead of depressing events.(e) provide clear guides for economic policies.

84) BM01 \ A \\ Positive Economics \ 2 \\

A scientific approach to economics entails:(a) positive questions because it cannot resolve normative issues.(b) normative questions because it cannot resolve positive issues.(c) positive and normative questions because it can resolve all issues.(d) addressing issues that never arise in the real world.

85) BM01 \ A \\ Positive Economics \ 2 \\

Economic theory is a positive science only to the extent that it yields:(a) scientifically testable predictions.(b) moral answers to ethical disputes.(c) absolutely correct descriptions of how the world works.(d) optimistic, rather than pessimistic, answers to life's problems.(e) rigid definitions of social phenomenon.

86) BM01 \ B \\ Positive Economics \ 3 \\

Which of the following is a positive scientific statement?(a) The Miss America contest is tasteless and sexist.(b) The moon is made of green cheese.(c) Microsoft’s record of innovation justifies Bill Gates’ incredible wealth.(d) Capitalism enhances people’s happiness far more than socialism does.(e) Policies to replace intense competition with greater cooperation among all people would

facilitate psychological health.

87) BM01 \ A \ 0 \\ Positive Economics \ 2 \\

Predicting a fall in the national unemployment rate with a new untested economic model is an example of:(a) positive economic analysis.(b) normative economic analysis.(c) a microeconomic prediction.(d) predictability no better than a call to the psychic hotline.


88) BM01 \ D \\ Normative Economics \ 2 \\

A statement that requires no value judgments would be that an optimal distribution of goods is:(a) invariably best for society.(b) better for society than any non-optimal distribution of goods.(c) better for society only if it conforms to the will of the majority of voters.(d) None of the above.

89) BM01 \ A \\ Normative Macroeconomics \ 2 \\

To say that high unemployment rates in this prosperous country are a national disgrace would be an example of a:(a) normative macroeconomic statement.(b) positive macroeconomic statement.(c) positive microeconomic statement.(d) normative microeconomic statement.


Which of the following is a normative economic statement?(a) Most Republicans favor the death penalty for murderers.(b) Punishment that is surer, swifter, and harsher reduces the rates of violent crime.(c) Most Democrats oppose the death penalty for murderers.(d) Appellate processes that reverse errors in criminal cases ensure fairness in our system of

justice.(e) Capital punishment actually decreases murder rates.


If an economic change makes 1 person worse off and 1,000 persons better off, it is:(a) good for society.(b) bad for society.(c) neither bad nor good for society.(d) impossible to assess without a value judgment.


Normative goals of microeconomics include:(a) economic growth.(b) price-level stability.(c) high employment.(d) equity in the distribution of income.


93) BM01 \ B \\ Normative Economics \ 1 \\

Disagreements between economists arise most commonly in the area of:(a) microeconomic theory.(b) normative aspects of economic policy.(c) positive statements.(d) "common sense."(e) mathematical economics.


Normative statements would include assertions that:(a) harsh prison terms and capital punishment decrease rates of violent crime.(b) on average, Americans are more prosperous when no single political party controls the

presidency, the US Senate, and the House of Representatives.(c) the entire cosmos, including our universe, revolves around the earth.(d) more effective teachers should be paid more, and less effective teachers should be paid less.(e) college students who drink a lot of beer are likely to have lower GPAs.

95) BM01 \ E \\ Normative Economics \ 3 \\

Which of the following LEAST explains the widespread but erroneous view that economists seldom agree?(a) The media focuses on controversy, not agreement.(b) Political considerations, more than economic logic, determine policies.(c) Some economists may feel obligated to agree publicly with the president though they

disagree privately.(d) Economic policies depend on controversial value judgments.(e) Economic policy is more scientific than economic theory.

96) BM01 \ C \\ Gains from Trade and Economic Consensus \ 2 \ KW \

When considering current events and issues, economists and the general public seem to disagree relatively the most about:(a) what to do about the War in Iraq.(b) whether Democrats or Republicans should win the next election.(c) the relative costs and benefits of freer international trade versus using import tariffs and

quotas to protect American jobs from “outsourcing.”(d) global warming and other environmental issues.(e) the optimal size of government.

97) BM01 \ D \\ Micro - Macro \ 2 \\

Macroeconomics and microeconomics address:(a) exactly the same questions.(b) completely different questions.(c) incompatible sets of value judgments.(d) economic issues at somewhat different levels.


98) BM01 \ A \\ Macroeconomics \ 2 \\

Examples of macroeconomic aggregates would NOT include the:(a) tax liabilities of a family.(b) unemployment rate.(c) level of national income.(d) supply of money.(e) rate of inflation.

99) BM01 \ E \\ Micro - Macro \ 1 \\

Microeconomic analysis is more concerned than macroeconomics with the:(a) banking and monetary systems.(b) rates of unemployment and inflation.(c) inequity caused by major depressions.(d) rate of economic growth.(e) decisions of firms and households.

100) BM01 \ C \\ Macroeconomic Theory \ 1 \\

Analysis of the aggregate economy, or the economy as a whole, is:(a) positive economics.(b) microeconomics.(c) macroeconomics.(d) normative economics.

101) BM01 \ C \\ Macroeconomic Theory \ 1 \\

Macroeconomic theory would be least relevant in analyzing the consequences of:(a) alternative ways of funding deficits in international trade.(b) U.S. federal budget deficits.(c) consumer items purchased by middle-income families.(d) deficit spending by the United Nations.

102) BM01 \ A \\ Public Policies \ 2 \\

Widely accepted normative macroeconomic policy goals include:(a) full employment and economic growth.(b) allocative, productive, and distributive efficiency.(c) maximum freedom and economic profits.(d) job security and equality in the distribution of income.


103) BM01 \ D \\ Public Policies \ 2 \\

Widely accepted goals for microeconomic policy include:(a) full employment.(b) general price stability.(c) economic growth.(d) efficiency, equity and freedom.

104) BM01 \ C \\ Microeconomics \ 2 \\

Microeconomics primarily involves the study of:(a) unemployment, inflation, and our monetary system.(b) capitalism versus socialism.(c) individual decision making within households, firms, and industries.(d) rational budgeting by government and large corporations.

105) BM01 \ D \\ Micro-Macro \ 2 \\

Which of the following is the best statement of the relationship between microeconomics and macroeconomics?(a) Macroeconomics and microeconomics deal with completely independent types of

problems.(b) A clear line separates microeconomic questions from macroeconomic questions.(c) Microeconomics and macroeconomics are, in effect, different names for the same thing.(d) Microeconomics and macroeconomics are related branches of the same subject, with

overlapping areas of focus.

106) BM01 \ B \\ Microeconomics \ 2 \\

Individual decision making and how prices and outputs are determined are the primary focus of:(a) Occam’s razor(b) microeconomic analysis.(c) macroeconomic theory.(d) economic efficiency

107) BM01 \ B \\ Microeconomics \ 1 \\

Analysis of individual firms, households, and markets is:(a) macroeconomics.(b) microeconomics.(c) normative economics.(d) positive economics.


Economics Scarcity and Choice

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Transcript of Economics Scarcity and Choice