QUESTION 1

1. Which of the following best describes a fiscal policy tool?

		government spending
		bank lending
		financial capital markets
		household spending

QUESTION 2

1. Which of the following is generally accepted as a valid criticism of the production of useful goods and services?

		government involvement
		the black market
		environmental pollution
		economic freedom

QUESTION 3

1. In the circular flow diagram model:

		households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses.
		businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households.
		households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses.
		Both (a) and (b) are correct.

QUESTION 4

1. Scarcity exists because of:

		the market mechanism.
		specialization and division of labor.
		the allocation of goods by prices
		unlimited wants and limited resources.

QUESTION 5

1. Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy:

		is not using its resources efficiently.
		is using its resources efficiently while producing clothing but no food.
		is using its resources efficiently while producing food but no clothing.
		is using its resources efficiently to produce both food and clothing.

QUESTION 6

1. The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.

		consumption
		marginal analysis
		diminishing marginal utility
		utility

QUESTION 7

1. Which of the following lies primarily within the realm of macroeconomics?

		a study of the demand for gasoline
		a study of how tax cuts stimulate aggregate production
		an analysis of supply and demand conditions in the electricity market
		a study of the impact of "mad cow" disease on the price of beef worldwide

QUESTION 8

1. Which of the following would reduce the supply of microcomputers?

		a technological improvement that lowers the cost of producing the computers
		higher wage rates for the workers that assemble the computers
		a reduction in the price of computer chips used to produce the computers
		a reduction in the price of computers.

QUESTION 9

1. The term "ceteris paribus" means that:

		everything is variable.
		all variables except those specified are constant.
		no one knows which variables will change and which will remain constant.
		what is true for the individual is not necessarily true for the whole.

QUESTION 10

1. The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.

		utility
		marginal benefit
		opportunity cost
		sunk costs

QUESTION 11

1. The elasticity of supply is defined as the ________ change in quantity supplied divided by the _______ change in price.

		total; percentage
		percentage; marginal
		marginal; percentage
		percentage; percentage

QUESTION 12

1. The demand schedule for a good:

		indicates the quantity that people will buy at the prevailing price.
		indicates the quantities that suppliers will sell at various market prices.
		is determined primarily by the cost of producing the good.
		indicates the quantities that will be purchased at alternative market prices.

QUESTION 13

1. The demand for a product is unit elastic. At a price of $20, 10 units of a product are sold. If the price is increased to $40, then one would expect sales to equal:

		20 units.
		10 units.
		5 units.
		0 units.

QUESTION 14

1. The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.

		allocative efficiency
		the production possibilities frontier
		trade-offs
		scarcity

QUESTION 15

1. When economists are sketching examples of a demand or supply curve that is close to horizontal, they refer to that demand or supply curve as ____________.

		elastic
		inelastic
		having zero elasticity
		price inelasticity

QUESTION 16

1. When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as _________.

		inelastic
		elastic
		unitary elasticity
		income elasticity

QUESTION 17

1. __________ is the change in what is on the horizontal axis (quantity) divided by the change in what is on the vertical axis (price).

		Elasticity
		Demand
		Supply
		Revenue

QUESTION 18

1. Youth smoking seems to be more __________ than adult smoking-that is, the quantity of youth smoking will fall by a greater percentage than the quantity of adult smoking in response to a given percentage increase in price.

		unitary elastic
		inelastic
		elastic
		cross-price elastic

QUESTION 19

1. Saving money is a(n) ____________________, because it involves less consumption in the present, but the ability to consume more in the future.

		budget constraint
		intertemporal choice
		risk premium
		opportunity cost

QUESTION 20

1. Refer to the diagram Fig 6-3 below. Which of the following is a true statement?
   

Refer to the diagram Fig 6-3 below. Which of the following is a true statement? Real Individual Labour Wage Supply (2) Rate Individual Labour Supply (1) L1 L3 L2 Hours of Work Supplied (LS)Good X X* 13 12 BC Y* Good YA Wine C G D BreadB A D Price C Quantity