Practice Quiz 1

1) Fill in the blank: Economics is the study of ________ and its ________.

A) greed; desirable consequences

B) choice; unintended consequences

C) money; financial consequences

D) competition; legal consequences

2) Economics is the study of

A) Why people are greedy.

B) Why the government is ruining our lives.

C) Why the Dow Jones Industrial Average moves around.

D) The choices people make when confronted with scarcity.

3) Economic theory assumes people want

A) material goods primarily.

B) money in preference to all other goods.

C) more of everything.

D) to advance the projects in which they are interested.

4) To economize means to

A) allocate available resources in a way that yields the most value to the economizer.

B) behave in a selfish rather than generous manner.

C) conserve as much as possible for future use.

D) put economic theory to work.

5) The economic way of thinking

A) studies facts without using theories.

B) explains how social order and cooperation emerge from the actions of individuals.

C) is free of biases and assumptions.

D) includes all of the above features.

6) Competition would probably be abolished if society could find a way to abolish

A) inequality.

B) scarcity.

C) money.

D) economists.

7) Rich and poor people have which of the following in common?

A) Scarcity

B) Economizing behavior

C) Pursuing the plans and projects in which they are interested

D) All of the above.

8) Economic theory assumes people

A) rarely act generously.

B) consistently act selfishly.

C) make choices based on a comparison of cost and benefits.

D) are fundamentally complex. Therefore, no general theory can be deduced to make sense out of the decisions and choices people make.

9) In the economic way of thinking, private property rights provide people with

A) rules of the game.

B) dependable information.

C) incentives.

D) all of the above.

10) The economic system of the United States

A) was designed by mercantilists and capitalists.

B) was designed by the framers of the U.S. constitution.

C) was designed to maximize individual freedom.

D) was the result of human intentions but not anyone's design.

Practice Quiz 2

1) Wealth consists ultimately of

A) gold.

B) land.

C) money.

D) whatever people value.

2) A truly voluntary exchange

A) has nothing to do with values, only with things.

B) is always an exchange of equal values.

C) is not an exchange of equal values.

D) is usually an exchange of equal values.

3) An event is productive as long as

A) it is incurred without any opportunity cost.

B) it increases wealth.

C) the value of the inputs exactly equals the value of the output.

D) it creates a new material object.

4) Jack trades his basketball for Jim's baseball glove. This simple trade is

A) unproductive, because nothing new has been produced.

B) productive, because Jack and Jim expect to be better off by trading.

C) costless, because no money was involved in the deal.

D) a cost to the manufacturer because neither Jack nor Jim bought a new ball or glove.

5) Which of the following would be likely to change the relative efficiency of trucks versus trains in carrying freight?

A) Higher wages for truck drivers

B) More powerful locomotives

C) Tolls on interstate highways

D) All of the above.

6) Land can be used to grow commercial Christmas trees or pulpwood. Which is the more "economically efficient" use of the land?

A) Raising commercial Christmas trees

B) Raising pulpwood

C) Raising a mixed combination of commercial Christmas trees and pulpwood

D) It depends in part on the relative prices of Christmas trees and pulpwood.

7) There are very few gasoline stations in the downtown areas of large cities basically because

A) it would be too dangerous.

B) it would be an inefficient use of land for the land's owners.

C) most people don't want to buy gasoline while they are downtown.

D) zoning laws prohibit it.

8) "Opportunity cost" is

A) any lost opportunity.

B) the next-best opportunity one sacrifices when making a choice.

C) equal to the ratio between an opportunity gained and an opportunity sacrificed.

D) measured only by monetary payments for a scarce good or service.

9) Lu Thier is an accomplished violin and viola maker. He can make either 6 violins or 6 violas each year, or a combination such as 3 violins and 3 violas. Which statement below is true?

A) The opportunity cost of producing 1 violin is 1 viola.

B) The opportunity cost of producing 1 violin is 3 violas.

C) The opportunity cost of producing 1 violin is 6 violas.

D) The opportunity cost of producing 1 violin is 9 violas.

10) With a good on each axis, the production possibilities frontier is downward-sloping, which suggests

A) there is no limit to the amount of each good that can be produced.

B) the production of one good ultimately means sacrificing production of the other.

C) there are no opportunity costs of producing either of the goods.

D) All of the above are true.

11) Market specialization and the rise of the division of labor

A) create important conditions for economic growth.

B) help explain why some nations are wealthier than others.

C) do both of the above.

D) do none of the above.

12) The textbook defines a "well-organized" market as a market in which

A) all information available to sellers and buyers is also available to other parties to exchange transactions.

B) bids and offers of buyers and sellers are brought together to establish a single price over a wide area.

C) the government regulates maximum and minimum prices.

D) the terms of exchange between buyers and sellers are controlled by a professional marketing association.

13) "We offer the best deal in town. If somebody charges a lower price, bring in their ad and we'll beat it!" From the economic point of view, the firm promising to match its competitor's low prices is attempting to

A) lie.

B) cheat.

C) learn more about the market.

D) do nothing more than bait and switch their customers.

14) A sensible buyer will want to acquire additional information before committing herself as long as the expected value of the information she is gathering

A) is greater than the anticipated value of the purchase.

B) is greater than the expected cost of acquiring it.

C) will enable her to avoid all mistakes.

D) will enable her to avoid possible mistakes she will subsequently regret having made.

15) According to your text, who among the following have a comparative advantage in providing information that reduce transaction costs?

A) The consumer

B) The bureaucrat

C) The middleman

D) The career politician

16) Let's assume producers in Canada can make 200 units of beef or 50 units of oranges, and U.S. producers can make 50 units of beef or 200 units of oranges per time period. Which country faces the lowest opportunity cost of producing beef?

A) The U.S.

B) Canada

C) Both countries

D) Neither country

17) Jones and Smith are teaching assistants. Jones can grade 20 essays or 50 problem sets a day, while Smith can grade 20 essays or 10 problem sets a day. Therefore

A) Smith is more efficient than Jones at grading essays.

B) Jones has a comparative advantage in grading problem sets.

C) a larger combination of essays and problem sets can be graded in a day if Jones specializes in problem sets and Smith specializes in essays.

D) all of the above are true.

18) Fill in the blank: a combination of two goods that lies beyond the production possibilities frontier ________.

A) can be produced with the current set of resources

B) cannot be produced with the current set of resources

C) can never be produced with any set of resources

D) can be produced but only if the producer becomes more greedy