ANSWER ALL MULTIPLE CHOICE QUESTIONS

1. Which of the following statements is INCORRECT?

a.Economics is a behavioral science.

b.In large measure, economics is the study of how people make choices.

c.If poverty were eliminated there would be no reason to study economics.

d.Economic analysis can be used to explain how both individuals and societies make decisions.

2. The concept of opportunity cost

a.is relevant only to economics.

b.can be applied to the analysis of any decision-making process.

c.applies to consumers but not to firms.

d.refers only to actual payments and incomes.

3. Studying how the management of US Steel, a large steel-producing company, decides how many tons of steel to produce and the price to charge for its steel would be considered

a.descriptive economics.

b.empirical economics.

c.microeconomics.

d.macroeconomics.

4. Inflation and unemployment

a.are the focus of economic history.

b.are the focus of microeconomics.

c.are the focus of positive economics.

d.are the focus of macroeconomics.

5. Which of the following is an example of a positive statement?

a.The federal government should be required to have a balanced budget.

b.Local governments ought to impose rent controls to allow people to afford housing.

c.Studies indicate that the imposition of a minimum wage increases unemployment.

d.The government should impose taxes on imported goods to protect the jobs of American workers.

6. Which of the following is a normative question?

a.Should the government provide health insurance for any individual who cannot afford it?

b.What will happen to the speed with which new drugs are developed if the government places price controls on prescription drugs?

c.Why is the infant mortality rate higher in the United States than in most other developed countries?

d.Will physicians' incomes increase or decrease if national health insurance is instituted in the United States?

7. Economic theory is derived from

a. laboratory analysis

b. laws of nature

c. building and testing models

d. government legislation

8. Which of the following would an economist classify as a capital resource (input)?

a.natural gas

b.a typewriter

c.a corporate bond

d.a federal government employee

9. Canada has nationalized health care, so that everyone has some access to health care. Based on this observation, Canada has decided that "everyone, regardless of their ability to pay" is the answer to what question?

a.how will health care be produced?

b.for whom will health care be produced?

c.what type of health care will be produced?

d.none of the above

10.An industry (market) is a group of firms

a.located in the same geographical area

b.producing similar products

c.that supply the different inputs needed to produce a final product

d.owned by a corporation

11.In which market structure do firms have no price setting power

a.perfect competition

b.monopolistic competition

c.oligopoly

d.monopoly

12. Economists consider households to be suppliers in which of the following markets?

a.product and labor markets

b.labor and capital markets

c.product and capital markets

d.product market only

13.Which of the following is held constant along the demand curve?

a.price of the good

b.quantity

c.income

d.both a and b

14.What effect is working when the price of a good falls and consumers tend to buy it instead of other goods?

a.the income effect.

b.the substitution effect.

c.the diminishing marginal utility effect.

d.the ceteris paribuseffect.

15. In response to news reports that taking aspirins daily can reduce an individual's risk of a heart attack, there will most likely be

a.an increase in the supply of aspirins.

b.a decrease in the supply of aspirins.

c.an increase in the demand for aspirins.

d.an increase in the quantity demanded of aspirins.

16.During an economic downturn when consumer income falls, the demand for ice cream increases and the demand for chocolate cake decreases. This implies that

a.ice cream and chocolate cake are complements.

b.ice cream is a normal good and chocolate cake is an inferior good.

c.ice cream is an inferior good and chocolate cake is a normal good.

d.ice cream is an economic bad and chocolate cake is an economic good.

17.Refer to Figure 4.7.If pizza and beer are complements, a decrease in the price of beer will cause a movement/shift from point B on demand curve D2to

a.demand curve D1.

b.demand curve D3.

c.point A on demand curve D2.

d.point C on demand curve D2.

4 B Price of pizza D3 D1 D2 Number of pizzas Q per month Figure 4.7Person A Person B 12 12 Price Price 10 r 10 F- - - D D 7 3 Q 4 5 Compact disks Compact disks Figure 4.9