Question 1

A nation's production possibilities curve shows the maximum combinations of resources that a nation can use.

Accepted Answer

A) True 
 B)False

Question 2

Economic models do not reflect the full complexity of reality, but instead are based on:

Accepted Answer

A)   Simplifications
B)   Tradeoffs
C)   Value judgments
D)   PredictionsE) B) and D)
F) B) and C)

Question 3

Another way of saying "ceteris paribus" is:

Accepted Answer

A)   Other things equal
B)   In general
C)   In reality
D)   Because of thisE) A) and B)
F) None of the above

Question 4

If a nation is initially on its production possibilities curve, then it can increase its production of one good only by:

Accepted Answer

A)   Decreasing the production of the other good
B)   Increasing the production of the other good
C)   Holding constant the production of the other good
D)   Decreasing the price of the other goodE) All of the above
F) A) and C)

Question 5

A society can consume a combination of goods outside its production possibilities if there is:

Accepted Answer

A)   Lower unemployment
B)   International specialization and trade
C)   A change in consumers' tastes
D)   A change in pricesE) None of the above
F) C) and D)

Question 6

If two variables are directly related, the relationship will have a graph that:

Accepted Answer

A)   Is a straight line
B)   May either be upward-sloping or downward-sloping
C)   Is an upward-sloping line
D)   Is horizontalE) B) and D)
F) B) and C)

Question 7

In the graph for the linear equation S = 15 - 5T, with T on the horizontal axis, the vertical intercept of the graph is -5.

Accepted Answer

A) True 
 B)False

Question 8

In graphing a relationship between two variables, economists always follow the mathematical convention. Thus, if price is the independent variable then it is measured on the horizontal axis.

Accepted Answer

A) True 
 B)False

Question 9

A person observes that consumer prices often fall when a nation experiences economic growth. The person then concludes that falling consumer prices leads to economic growth. This would be an example of:

Accepted Answer

A)   The fallacy of composition
B)   Biases
C)   Confusing correlation and causation
D)   The use of loaded terminologyE) B) and C)
F) None of the above

Question 10

Refer to the above graph. Which point in the graph would allow a simultaneous increase in the production of both investment and consumer goods?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) None of the above
F) All of the above

Question 11

The post hoc, ergo propter hoc fallacy consists of:

Accepted Answer

A)   Using an example to "prove" a different point
B)   Inferring causality from chronological sequence
C)   Jumping to conclusions from an inadequate number of cases
D)   Arguing for or against a person's character rather than his view or opinionE) A) and D)
F) A) and C)

Question 12

When a state government chooses to build more roads, the resources used are no longer available for public education programs. This dilemma illustrates the concept of:

Accepted Answer

A)   Production expenses
B)   Unemployment issues
C)   Unintended consequences
D)   Opportunity costE) None of the above
F) C) and D)

Question 13

Economic analysis is primarily concerned with marginal changes from the status quo, as a result of a certain action or decision.

Accepted Answer

A) True 
 B)False

Question 14

What does "there is no such thing as a free lunch" mean in economics?

Accepted Answer

A)   That scarce resources are used up to provide "freebies" and giveaways
B)   That sometimes people may take friends out to lunch and pay for them
C)   That all items in the lunch menu have specific prices
D)   That products only have value because people are willing to pay for themE) B) and C)
F) A) and B)

Question 15

Which of the following is considered a firm's "factor of production"?

Accepted Answer

A)   Money or cash balances of the firm
B)   The firm's shares of common stock
C)   U.S. Treasury bonds owned by the firm
D)   The office building occupied by the firmE) B) and C)
F) A) and B)

Question 16

Increasing the share of your income that you save is good for you. Therefore it would be good for the whole economy if everyone saved more. This exemplifies the:

Accepted Answer

A)   Post hoc fallacy
B)   Fallacy of composition
C)   Use of loaded terminology
D)   Confusion between correlation and causationE) C) and D)
F) A) and D)

Question 17

Which of the following statements is an explanation for the law of increasing opportunity costs?

Accepted Answer

A)   Many economic resources are better at producing one product rather than another
B)   The economy is employing all of its available resources
C)   In any economy, the state of technology is changing and resources are variable
D)   The economy is achieving productive efficiency by producing goods at the least costE) A) and B)
F) A) and C)

Question 18

Economics is a social science that studies how individuals, institutions, and society may:

Accepted Answer

A)   Expand the amount of resources available to them
B)   Attain a minimum level of production
C)   Best use resources to maximize satisfaction of economic wants
D)   Reduce the amount of goods and services they needE) B) and C)
F) None of the above

Question 19

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 Y
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 budgetE) B) and C)
F) All of the above

Question 20

If a linear relation is described by the equation was C = 35 - 5D, then the vertical intercept of the graph (where C is on the vertical axis)  is:

Accepted Answer

A)   35
B)   -5
C)   30
D)   Not knownE) B) and C)
F) A) and C)

Exam 1: Limits, Alternatives, and Choices

Increasing the share of your income that you save is good for you. Therefore it would be good for the whole economy if everyone saved more. This exemplifies the:

Correct AnswerverifiedShow Answer

A nation's production possibilities curve shows the maximum combinations of resources that a nation can use.

Correct AnswerverifiedShow Answer

If a linear relation is described by the equation was C = 35 - 5D, then the vertical intercept of the graph (where C is on the vertical axis) is:

Correct AnswerverifiedShow Answer

A person observes that consumer prices often fall when a nation experiences economic growth. The person then concludes that falling consumer prices leads to economic growth. This would be an example of:

Correct AnswerverifiedShow Answer

In the graph for the linear equation S = 15 - 5T, with T on the horizontal axis, the vertical intercept of the graph is -5.

Correct AnswerverifiedShow Answer

What does "there is no such thing as a free lunch" mean in economics?

Correct AnswerverifiedShow Answer

In graphing a relationship between two variables, economists always follow the mathematical convention. Thus, if price is the independent variable then it is measured on the horizontal axis.

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

Refer to the above graph. Which point in the graph would allow a simultaneous increase in the production of both investment and consumer goods?

Correct AnswerverifiedShow Answer

A society can consume a combination of goods outside its production possibilities if there is:

Correct AnswerverifiedShow Answer

If two variables are directly related, the relationship will have a graph that:

Correct AnswerverifiedShow Answer

The post hoc, ergo propter hoc fallacy consists of:

Correct AnswerverifiedShow Answer

Economic models do not reflect the full complexity of reality, but instead are based on:

Correct AnswerverifiedShow Answer

Which of the following statements is an explanation for the law of increasing opportunity costs?

Correct AnswerverifiedShow Answer

Another way of saying "ceteris paribus" is:

Correct AnswerverifiedShow Answer

Which of the following is considered a firm's "factor of production"?

Correct AnswerverifiedShow Answer

If a nation is initially on its production possibilities curve, then it can increase its production of one good only by:

Correct AnswerverifiedShow Answer

When a state government chooses to build more roads, the resources used are no longer available for public education programs. This dilemma illustrates the concept of:

Correct AnswerverifiedShow Answer

Economics is a social science that studies how individuals, institutions, and society may:

Correct AnswerverifiedShow Answer

Economic analysis is primarily concerned with marginal changes from the status quo, as a result of a certain action or decision.

Correct AnswerverifiedShow Answer

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