Economics Intro Test Review

Which of the following is a subject that economists study?

• The Growth in Average Income

• The Fraction of the Population that cannot find work

• The Rate at which prices are rising

• All of the above

A __________________ Economy is one in which people can make their own decisions and businesses can produce what they want to.

• Command

• Booming

• Free Market

• All of the Above

You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been wiped out by drought and that this will cause the price of peanuts to double by the end of the year. As a result, your demand for peanut butter

• Will increase but not till the end of the year

• Increases today

• decreases as you look for a substitute good

• shifts left today

College-age athletes who drop out of college to play professional sports

• are not rational decision makers

• are well aware that their opportunity cost of attending college is very high

• are concerned more about present circumstances than their future

• underestimate the value of a college education

Efficiency means that

• society is conserving resources in order to save them for the future.

• society's goods and services are distributed equally among society's members.

• society's goods and services are distributed fairly, though not necessarily equally, among society's members.

• society is getting the maximum benefits from its scarce resources.

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that

• trade can make everyone better off

• people face trade offs

• rational people think at the margin

• decisions made at the margin are not particularly important

The principle that "people face tradeoffs" applies to

• individuals

• families

• societies

• all of the above

A decrease in the price of a good will

• increase supply

• decrease supply

• increase quantity supplied

• decrease quantity supplied

An increase in the price of a good will

• increase demand

• decrease demand

• increase quantity demanded

• decrease quantity demanded

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

• goods are scarce

• people face tradeoffs

• income must be earned

• households face many decisions