Basic Economic Concepts

Which of the following does Economics primarily study?

• how scarcity can be eliminated

• how firms manipulate prices

• how government influences resource allocation decisions

• the problem of scarce resources relative to human wants

Suppose you have a $20 iTunes gift card with which you can buy (download) songs or videos. Songs cost $1.00 each and videos cost $2.00 each. What is the opportunity cost of one video?

• It is constant and equal to ½ song
  

• It is constant and equal to 2 songs

• It is $1.00

• An increases in cost as more videos are purchased

If you decide to study an extra hour tonight, what would be the economic outcome?

• The marginal cost of studying an extra hour exceeds its marginal benefit.

• The marginal benefit of studying an extra hour exceeds its marginal cost.

• Studying harder will always improve your test scores.

• You will most likely get a lower than expected grade on your last exam.

Answer the question on the basis of the data given in the following production possibilities table. According to the data in the table, what is required as indicated by increasing production of capital goods?

• The increase in sacrifices of consumer goods.

• The decrease in sacrifices of consumer goods.

• There are no sacrifices of consumer goods.

• The constant sacrifices of consumer goods.

Consider the problem Marsha faces of how to allocate her weekly allowance between books and videos. How will an increase in Marsha's allowance affect her budget on a supply and demand curve?

• Rotate her budget line, allowing her to buy more books but not more videos.
  

• Rotate her budget line, allowing her to buy more videos but not more books.

• Shift her budget line to the right.

• Shift her budget line to the left.

What is best illustrated by the negative slope of the production possibilities curve?

• Some resources are always unemployed.

• Opportunity costs are constant.

• When resources are fully employed, an economy can produce more of one thing only by producing less of something else.

• Businesses can sell more goods when their prices are low.

What would a microeconomist most likely study?

• The relationship between the size of the money supply and the rate of inflation.

• The effects of aggregate consumer debt on overall consumption spending.

• The effects of an income tax reduction on the size of the national budget deficit.

• How consumers respond to a change in gasoline prices.

Refer to the production possibilities diagram for the following Question.

Production of which of the points in the diagram is currently unattainable given the economy's resources?

• Point A

• Point B

• Point C

• Point D

What does the fundamental problem of economics imply?

• Governments must be relied upon to supply essential goods and services.

• Inflation and unemployment are unavoidable.

• Growing populations will deplete natural resources.

• Individuals and communities must make choices among competing alternatives.

Margaret decides to stay home and study for her exam rather than going out to a movie with her friends. Which of the following best reflects her dilemma?

• The economic perspective

• Marginal analysis

• Opportunity cost

• Allocative efficiency