WorksheetsEconomics Quiz
Total questions: 75
Worksheet time: 43mins
Which of the following activities describes the opportunity cost of attending an economics class?
The value of the time it takes to get to campus every day
The cost of the gasoline needed to drive a car to campus
The value of the highest valued alternative that must be forgone because of attending the class
Transportation costs plus the cost of tuition and textbooks for the course
When private ownership rights are well-defined and enforced, owners
can ignore the wishes of others, without bearing the cost.
have little incentive to take care of things.
can do anything they want with their property.
can be held accountable for damage to others through misuse of their property.
Entrepreneurs are
profit-seeking decision makers who decide which business projects to undertake.
people who loan money to other business decision makers.
managers who generally work for a salary because they are unwilling to take risks.
people who carry out the auditing and checking of a company's books and records.
The process by which new products and methods of production are continuously replacing old ones is known as
the invisible hand principle.
the production possibilities frontier.
creative destruction.
the fallacy of composition.
Which of the following most accurately reflects the opportunity cost to a pharmacist who drives a taxi?
The dollars spent on his previously acquired education in pharmacy
The revenue derived from operating the cab
Zero if the pharmacist received his education on a scholarship that paid his full tuition
The value of the pharmacist’s time in its highest valued use other than driving a cab
The creation of a new product or process, often facilitated by the knowledge of engineering and scientific relationships, is known as
invention.
innovation.
application.
sublimation.
In a market economy,
a larger income for one person means a smaller one for another.
the government answers all the basic economic questions.
a larger income for one person means it is possible for others to earn more too.
economic output shrinks as we discover better ways of doing things.
The government enforces property rights by
requiring property owners to pay property taxes.
providing police and courts to apprehend and prosecute people who destroy or take property that does not belong to them.
forcing people to own property.
providing public parks and recreation facilities.
A system of economic organization in which the ownership and control of productive capital assets rests with the state and in which resources are allocated through central planning and political decision making is called
socialism.
a market economy.
a corporate economy.
capitalism.
Entrepreneurs have a strong incentive to
discover new production techniques that reduce costs.
provide accounting services to large companies.
produce goods that are valued less than the resources required for their production.
introduce innovative new products even if consumers do not value them as much as the resources required for their production.
Creative destruction refers to the process where
new products and methods of production are continuously replacing old ones
producing more of one good causes you to produce less of another
everybody involved is made worse off
new ways to destroy buildings are employed
Every economy must ration goods in some way because of
overpopulation.
poorly-performing markets.
the income gap between rich and poor.
scarcity.
Refer to Figure 2-4. Which of the following is true?
Point A is unattainable.
Point B is efficient.
Point C is attainable.
Point B is inefficient.
The number of cattle slaughtered every year for meat far exceeds the number of elephants slaughtered every year for their ivory. Despite this, cows can be found everywhere while elephants are on the verge of extinction in some countries. Which of the following best explains this difference?
Cows can be privately owned while in many countries elephants cannot.
The demand for ivory far exceeds the demand for beef.
Animals slaughtered for their meat are generally better conserved by humans than animals slaughtered for nonfood uses.
People tend to protest more every year to prevent cow extinction than they do for elephant extinction.
Which of the following most accurately states the function of middlemen?
Middlemen add to the expense of buyers and sellers without providing any benefit.
Our economy would work just as well without middlemen since they do not expand the availability of physical goods.
Middlemen reduce the number of transactions since they increase the buyer's price and reduce the seller's net revenue.
Middlemen create value by arranging trades and providing information to buyers and sellers.
The opportunity cost of an action is
the monetary payment the action required.
the total time spent by all parties in carrying out the action.
the value of the best opportunity that must be sacrificed in order to take the action.
the cost of all alternative actions that could have been taken, added together.
In economics, the term that refers to the time, effort, and other resources needed to search out, negotiate, and consummate an exchange is
transaction costs.
specialization costs.
pecuniary costs.
comparative costs.
A point outside the production possibilities curve represents a combination of goods that is
inefficient.
efficient.
unattainable.
attainable.
Noah values his car at $10,000, and Kiara values it at $14,000. If Kiara buys it from Noah for $11,000, which of the following is true?
Noah gains $1,000 of value, and Kiara gains $3,000 of value.
Noah gains $11,000 of value, and Kiara loses $11,000 of value.
Noah gains $10,000 of value, and Kiara loses $14,000 of value.
Noah and Kiara both gain $11,000 of value.
A profit-seeking decision maker who decides which business projects to undertake and how they should be undertaken is called
a key man.
an entrepreneur.
a progessor.
a stakeholder.
The basic difference between macroeconomics and microeconomics is that
microeconomics is concerned with aggregate markets and the entire economy, while macroeconomics is concerned with specific individual markets.
macroeconomics is concerned with policy decisions, while microeconomics applies only to theory.
microeconomics is concerned with individual markets and the behavior of people and firms, while macroeconomics is concerned with aggregate markets and the entire economy.
macroeconomics is concerned with positive economics, while microeconomics is concerned with normative economics.
A fact based on observable phenomenon that is not influenced by differences in personal opinion is called
an objective concept.
a subjective concept.
an unintended consequence.
ceteris paribus.
Over time, an increase in a nation's stock of physical capital will
shift the production possibilities curve inward.
cause an economy to operate inside its production possibilities curve.
shift the production possibilities curve outward.
eliminate the basic economic problem of scarcity.
Refer to Figure 2-7. If the economy moves from point A to point D, the opportunity cost is
10 toasters.
20 toasters.
30 toasters.
30 toothbrushes.
Which of the following is true?
The production possibilities curve indicates that it will be impossible to expand total output with the passage of time.
As long as resources are scarce, output cannot be increased.
The size of the economic pie is fixed, and therefore, if one individual has more income, others must have less.
Over time, the output of goods and services can be increased through human ingenuity and discovery of better ways of doing things.
If Tao can produce more bagels in one day than Zion can produce in one day, then
Tao has a comparative advantage in the production of bagels.
Zion has a comparative advantage in the production of bagels.
Tao has an absolute advantage in the production of bagels.
Tao should produce bagels and Zion should spend her time on a different activity.
If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that
cheating will be completely eliminated.
fewer students will attempt to cheat.
the amount of cheating will be unaffected.
any of the above is possible because student behavior is unpredictable.
What are the three basic questions faced by every economy?
What, how, and for whom will goods be produced?
When, where, and how much will be produced?
Why, where, and when will goods be produced?
How, how much, and why will goods be produced?
Hutch Technology makes computer monitors, which sell for $500 each. What is the opportunity cost of producing ten monitors?
$5,000
The other goods that could be produced with the resources that produce the ten monitors
The profits that Hutch earns when it sells the ten monitors
The profits that Hutch loses if it does not produce the monitors
Refer to Table 2-5. If Crusoe and Friday want to maximize their consumption possibilities,
Crusoe should specialize in producing good X and Friday in producing good Y, but no trade should be allowed.
Crusoe should specialize in producing good X and Friday in producing good Y; trade should occur to maximize joint consumption.
Crusoe should specialize in producing good Y and Friday in producing good X; trade should occur to maximize joint consumption.
Both individuals should strive for self-sufficiency, which always maximizes output.
The successful introduction and adoption of a new product or process is known as
invention.
innovation.
origination.
adaptation.
Which of the following is true of a production possibilities curve?
It reveals the maximum amount of any two goods that can be produced from a fixed quantity of resources.
It reveals the ideal level of technology for a country.
It assumes that the prices of the two products are equal.
For a country that could produce many different goods, it shows which two goods are most important to produce.
Jayden can produce 10 pens or 20 pencils in one hour while Alexandra can produce 15 pens or 5 pencils in one hour. Which of the following statements is correct?
Alexandra has a comparative advantage over Jayden in the production of pencils.
Alexandra has a comparative advantage over Jayden in the production of pens.
Jayden has a comparative advantage over Alexandra in the production of pens.
Alexandra and Jayden cannot gain from specialization and exchange.
The fallacy of composition is the incorrect view that
everything else is always held constant when a change occurs.
a small change in an economic variable will have unrecognizable but significant consequences on the economy.
when two events are associated, the one observed first must have caused the second.
if something is true for an individual, then it must also be true for the group.
The opportunity cost of an action is
objective and will be the same for all individuals.
a measure of the undesirable aspects involved in the action.
applicable only to choices involving material goods like commodities.
the highest valued alternative forgone as the result of choosing an option.
In voluntary exchange, if the seller of a product gains,
the buyer will generally lose an amount greater than the gain to the seller.
the buyer must lose an amount equal to what the seller gains.
someone else must lose an equal amount.
the buyer must also gain; mutual gain provides the foundation for exchange.
Rational choice requires that opportunity cost be
considered for individual choices, but not for societal choices.
computed, but not actually used in making a decision.
used as the sole decision criterion.
considered as part of making a decision.
The opportunity cost of an activity
depends on the individual's subjective values and opinions
is the same for everyone
must be calculated and known before undertaking that activity
is irrelevant to decision making
Matthew values his camper at $4,000, and Nicole values it at $9,000. If Nicole buys it from Matthew for $7,000, which of the following is true?
Matthew gains $3,000 of value, and Nicole gains $2,000 of value.
Matthew gains $7,000 of value, and Nicole loses $7,000 of value.
According to the law of comparative advantage, both individuals and nations will be able to produce a larger joint output if each productive activity is undertaken by
the high opportunity cost producer.
the low opportunity cost producer.
the producer who is able to hire workers at the lowest wage.
the party that can complete the productive activity most rapidly.
The law of comparative advantage implies that a nation, individual, or region should produce those economic goods for which it
has an absolute advantage.
is a low opportunity cost producer.
is a high opportunity cost producer.
pays the highest wage rate.
A middleman is a person who
specializes in arranging trades and selling, guaranteeing, and servicing items traded.
acts as a middle person between the top management of a business firm and the hourly employees who actually produce the goods and services.
adds to the seller's expense and the buyer's buying price without providing a service to either.
levies a tax on private sector activity and uses the funds to support government activities.
Criteria for rationing goods and resources must be established because of
the law of comparative advantage.
the use of capitalism as a form of economic organization.
the inability of politicians to develop efficient forms of economic organization.
scarcity imposed by nature.
A nation with cheap, efficient communications is likely to be
richer, ceteris paribus, because transaction costs will be lower and trade greater.
richer only if production of goods is cheaper, too, since trade itself cannot create value.
poorer since it spends so much on communication instead of true productivity.
spending too much on communications, which adds nothing to the value of output.
Positive economics
postulates a relationship that is potentially refutable and then seeks to determine whether the stated relationship is correct.
uses value judgments to determine which policy alternatives should be chosen.
is of no use to policy makers because it reflects the value judgments of the researcher.
is the scientific study of 'what ought to be' among economic relationships.
Gabriel can drive or fly from Jacksonville, Florida to Atlanta, Georgia, for a one-day business trip. If he drives, he will be able to work three hours once he arrives in Atlanta, whereas traveling by plane will enable him to work eight hours. His expected income from each hour of work in Atlanta is $30. If Gabriel is a rational decision maker, he will fly if and only if the price differential (air cost minus driving cost) is less than
$30.
$90.
$150.
$240.
Refer to Table 2-4.
If Crusoe and Friday want to maximize their consumption possibilities,
Crusoe should specialize in producing good X and Friday in producing good Y, but no trade should be allowed.
Crusoe should specialize in producing good X and Friday in producing good Y; trade should occur to maximize joint consumption.
Crusoe should specialize in producing good Y and Friday in producing good X; trade should occur to maximize joint consumption.
Not enough information is provided to conclusively answer this question.
The notion that specialization in goods that one can produce at a low opportunity cost will make it possible for trading partners to produce a larger joint output is called
the law of absolute advantage.
the law of comparative advantage.
the law of production possibilities.
the exchange maximum principle.
Retired persons travel by bus and automobile more frequently than do business executives, who more commonly use air travel. An economic explanation for this would be that
business executives have more time to travel.
it is more important for retired persons to save time.
business executives value their time more highly.
retired persons have more money than do business executives.
When economists say goods are scarce, they mean
consumers are too poor to afford the goods and services available.
consumers are unwilling to buy goods unless they have very low prices.
the desire for goods and services exceeds our ability to produce them with the limited resources available.
In economics, secondary effects refer to the
best alternative that must be forgone as the result of a choice.
unintended consequences of a change that are not immediately identifiable but are felt only with time.
immediate and visible intended consequences of a change.
impact of the scarcity of resources on the scarcity of the goods that are produced with those resources.
A point on the production possibilities curve represents a combination of goods that is
inefficient.
efficient.
unattainable.
beyond the economy's full employment potential output.
Based on the idea of opportunity cost, which of the following students would be most likely to drop out of college before completing their degree?
A senior mathematics major with a solid B average
A junior physical therapy student who has just read about the fantastic job offers available to students with degrees in her area
A star college football player in his junior year that just received a $5 million offer from a professional team
A junior economics major who wants to attend graduate school
In economics the term utility refers to
the subjective benefit or satisfaction a person expects to receive from a choice or course of action.
the number of possible uses for a resource.
the fact that human desire for goods is unlimited while the resources available to meet those desires is limited.
the highest valued alternative that must be sacrificed when a choice is made.
The economic principle that states that individuals or nations can gain by specializing in the production of goods that they produce cheaply and exchanging for other desired goods that they could only produce at a higher cost is
the law of absolute advantage.
the law of comparative advantage.
the law of production possibilities.
the exchange maximum principle.
The three major categories of resources are
human resources, physical resources, and natural resources.
scarce resources, capital resources, and abundant resources.
financial resources, global resources, and local resources.
common resources, private resources, and capital resources.
Statistical data provided by the U.S. Department of Transportation shows that the median income of individuals traveling on the nation's bus systems is $18,000 compared to $65,000 for those who normally travel by air. This finding is best explained by which of the following statements?
Persons with high income are more likely to fly because the opportunity cost of their time is generally higher than those with lesser income
Traditionally, lower income groups prefer slower methods of transportation.
Wealthy individuals own stock in the airlines and, therefore, receive preferential treatment.
Low-income groups are generally located near bus stations; wealthy groups congregate around airports.
Persons with high income are more likely to fly because the opportunity cost of their time is generally higher than those with lesser income.
Persons with high income are more likely to fly because the opportunity cost of their time is generally higher than those with lesser income.
Traditionally, lower income groups prefer slower methods of transportation.
Wealthy individuals own stock in the airlines and, therefore, receive preferential treatment.
Low-income groups are generally located near bus stations; wealthy groups congregate around airports.
Because information is costly to acquire, people will generally choose to become as fully informed as possible when making decisions.
people will rationally choose not to become fully informed when making decisions.
people will generally choose to become as fully informed as possible when making decisions.
people will generally choose to acquire no information that would be relevant to their decisions.
people will generally pay a lot of money to become fully informed when making decisions.
If the government provides free schooling for all students, an economist would say education is
a free good, having no cost.
scarce even though its cost is paid by taxpayers rather than by students.
an example of a good that is no longer scarce.
a result of the fallacy of composition.
The difference between a positive economic statement and a normative statement is that
a positive statement must be true; a normative statement is often not true
a normative statement must be true; a positive statement is often not true
a positive statement can be proved; a normative statement cannot
a normative statement can be proved; a positive statement cannot
When private ownership rights are well-defined and enforced, owners of physical assets and resources
have no incentive to consider the desires of others.
incur the opportunity cost of ignoring the wishes of others.
are not responsible if the use of their assets impose harm on others.
have little incentive to take care of their assets.
The wages of house painters will tend to rise when
more people recognize that house painters have very low incomes.
the alternative earning opportunities of house painters improve.
house painters can no longer find good paying alternatives for their labor.
unemployment in the economy is high and there are few alternative jobs available for house painters.
Economics is primarily the study of
how to make money in the stock market.
how to find lower cost methods of production.
the choices we must make among alternatives because of scarcity.
the proper form of industrial structure for the United States.
n the stock market.
Specialization in production is beneficial because
it allows everyone to have a job that they like.
it permits people to expand production and achieve rates of output that would otherwise be unattainable.
it allows everyone to be self-sufficient.
it eliminates the need for the division of labor.
The consequences of an economic change that are not immediately identifiable but are felt only with the passage of time are known in economics as
opportunity costs.
utility curves.
secondary effects.
comparative advantages.
In an informed and voluntary exchange,
both parties receive something they value more than what they gave up.
both parties place an equal value on what they received and what they gave up.
neither party can gain more than the other.
one trader can gain only at the expense of the other.
The Latin phrase "ceteris paribus" means
that one event causes another.
that one event is associated with, but not caused by, another.
that other potential causes are assumed to remain constant.
the way things should be.
In economics, the term for a person who reduces transaction costs by arranging trades for buyers and sellers is
an exchange broker.
a middleman.
a transactions specialist.
an opportunity finder.
Opportunity cost is defined
only in terms of money spent
as the value of all alternatives not chosen
as the value of the best alternative not chosen
as the difference between the benefits from a choice and the benefits from the next best alternative
Which of the following countries does not have a socialist economy?
Venezuela
Cuba
North Korea
Sweden
Which of the following attributes of trade explain why it is important for economic prosperity?
Trade moves goods to people with the greatest comparative advantage.
Trade makes it possible to produce a larger output as a result of lower per unit costs that often accompany large-scale production.
Trade makes it possible to produce a larger output due to low labor costs.
Trade moves goods to people with the greatest absolute advantage.
The law of comparative advantage indicates that
a group of people will reduce their output when each good or service is supplied by the low opportunity cost producer.
trading partners lose when they can acquire a good through trade cheaper than they can produce it.
trade is most effective when people trade only among those in their own nation.
a group of people can increase their output when each good or service is supplied by the low opportunity cost producer.
Explain the idea of capital investment by using the story of Robinson Crusoe. What is sacrificed, and what is gained?
It can be said that, ultimately, consumers are the driving force in answering the three basic economic questions. Explain the consumer's role in providing these answers.
