ECON 201 ANSWERS
1. Normative statements are concerned primarily with
A. facts and theories.
B. what ought to be.
C. what is.
D. rational choice involving costs and benefits.
2. A positive statement is concerned primarily with
A. some goal that is desirable to society.
B. what should be.
C. what is.
D. the formulation of economicpolicy.
3. "Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statementis
A. positive but incorrect.
B. positive and correct.
C. normative but incorrect.
D. normative and correct.
4. Ben says that "an increase in the tax on beer will raise its price." Holly argues that "taxes should be increasedon beer because collegestudents drink too much." We can conclude that
A. Ben's statement is normative, but Holly's is positive.
B. Holly's statement is normative, but Ben's is positive.
C. Both statements are normative.
D. Both statements are positive.
5. "Macroeconomics is the part of economics concerned with individual units, such as a person, a household, a firm, or an industry." This statementis
A. positive but incorrect.
B. positive and correct.
C. normative but incorrect.
D. normative and correct.
6. The economizing problem is
A. the need to make choices because economic wants exceed economic means.
B. how to distribute resources equally among all members of society.
C. that people's means often exceed their wants.
D. that peopledo not know how to rationally allocateresources.
7. The economizing problem is one of deciding howto make the best use of
A. virtually unlimited resources to satisfy virtually unlimited wants.
B. limited resources to satisfy virtually unlimited wants.
C. unlimited resources to satisfy limited wants.
D. limited resources to satisfy limited wants.
8. Scarcity
A. persists only because countries have failedto achieve continuous full employment.
B. persists because economic wants exceed availableresources.
C. has been solved in all industrialized nations.
D. has been eliminated in affluent societies such as the United States and Canada.
9. The alternative combinations of two goods that a consumercan purchase with a specific money income is shown by
A. a production possibilities curve.
B. a demand curve.
C. a consumer expenditure line.
D. a budget line.
10. The budget line shows
A. the amount of productX that a consumer is willingto give up to obtainone more unit of product Y.
B. all possible combinations of two goods that can be purchased, given money incomeand the prices of the goods.
C. the minimum amount of two goods that a consumercan purchase with a specific money income.
D. all possible combinations of two goods that yield the same level of utility to the consumer.
63.
Refer to the budget line shown in the diagram. If the consumer's money income is $50, the
A. prices of C and D cannot be determined.
B. priceof C is $5 and the price of D is $10.
C. consumer can obtaina combination of 5 units of both C and D.
D. price of C is $10 and the price of D is $5.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 01-04 Explain the individuals economizing problem and how trade-offs, opportunity costs, and attainable combinations can be illustrated with budgetlines.
Test Bank: I Topic: Individuals Economizing Problem
64.
Refer to the budget line shown in the diagram. Which of the followingcombinations of goods is unattainable for this consumer?
A. 4 units of C and 6 unitsofD
B. 5 units of C and no units of D
C. 1 unit of C and 8 units of D
D. 2 units of C and 6 units of D
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 01-04 Explain the individuals economizing problem and how trade-offs, opportunity costs, and attainable combinations can be illustrated with budget lines.
Test Bank: I Topic: Individuals Economizing Problem
65.
Refer to the budget line shown in the diagram. The absolute value of the slope of the budget line is
A. MUC / MUD.
B. one-half.
C. PD / PC.
D. PC / PD.
66.
Refer to the budget line shown in the diagram. The absolute value of the slope of the budget line is
A. two.
B. one-half.
C. five.
D. ten.
67. In moving along a given budget line,
A. the prices of both products and money incomeare assumed to be constant.
B. eachpoint on the line will be equallysatisfactory to consumers.
C. money income varies, but the prices of the two goods are constant.
D. the prices of both products are assumed to vary, but money income is constant.
68. An increase in money income
A. shifts the consumer's budget line to the right.
B. shifts the consumer's budget line to the left.
C. increases the slope of the budget line.
D. has no effect on the budget line.
69.
The shift of the budget line from cd to ab in the figure is consistent with
A. decreases in the prices of both M and N.
B. an increasein the price of M and a decrease in the price of N.
C. a decreasein money income.
D. an increase in money income.
70. Any combination of goods lying outside of the budget line
A. implies that the consumer is not spending all of the consumer’s income.
B. yields less utility than any point on the budget line.
C. yields less utility than any point inside the budget line.
D. is unattainable, given the consumer's income.
71.
Suppose you have a money income of$10, all of which you spend onCoke and popcorn.In the diagram, the prices of Coke and popcorn,respectively, are
A. $.50 and $1.00. B. $1.00 and $.50. C. $1.00 and $2.00. D. $.40 and $.50.
72. Other things equal, an increasein a consumer's money income
A. increases the amount of utilitya consumer receives from a given quantity of a good.
B. shifts the individual's budget line rightward because she can now purchase more of both products.
C. eliminates the individual's economizing problem.
D. causes the consumer to choose a different combination of goods alonga given budget line.
73. The slope of a budget line reflectsthe
A. desirability of the two products.
B. price ratio of the two products.
C. amount of the consumer's income.
D. utility ratioof the two products.
74.
Suppose Elroy's budget line is as shown on the diagram. If his tastes change in favor of Coke and against popcorn,the budget line will
A. become steeper.
B. become flatter.
C. shift rightward.
D. be unaffected.
75. Assume the price of product Y (the quantity of which is on the vertical axis) is $15 and the price of product X (the quantityof which is on the horizontalaxis) is $3. Also assumethat money income is $60. The absolute value of the slope of the resulting budget line is
A. 5.
B. 1/5.
C. 4. D. 20.
76.
Refer to the graphs. Assume that pizza is measured in slices and beer in pints. In which of the graphs is the opportunity cost of a pint of beerequal to one slice of pizza?
A. graph A
B. graph B
C. graph C
D. graph D
77.
Refer to the graphs. Assume that pizza is measured in slices and beer in pints. In which of the graphs is the opportunity cost of a pint of beer the lowest?
A. graph A
B. graph B
C. graph C
D. graph D
78. Suppose that Julia receives a $20 gift card for the local coffee shop, where she only buys lattes and muffins. If the price of a latte is $4 and the price of a muffin is $2, then we can conclude that Julia
A. should only buy muffins.
B. should only buy lattes.
C. can buy 5 lattes or 10 muffins if she chooses to buy only one of the two goods.
D. can buy 5 lattes and 10 muffins with her $20 gift card.
79. Camille is at the candy store with Grandma Mary, who offers to buy her $6 worth of candy. If lollipopsare $1 each and candy bars are $2 each, what combination of candy can Camille's Grandma Mary buy her?
A. six lollipops and three candy bars
B. two lollipops and two candy bars
C. three lollipops and two candy bars
D. one lollipop and three candy bars
80. Which of the followingis a labor resource?
A. a computer programmer
B. a computer
C. silicon (sand) used to make computer chips
D. software used by a firm
AACSB:
81. Which of the following is a capitalresource?
A. a computer programmer
B. a corporate bond issued by a computermanufacturer
C. silicon (sand) used to make computer chips
D. software used by a firm
82. The four factors of production are
A. land, labor, capital, and money.
B. land, labor, capital, and entrepreneurial ability.
C. labor, capital, technology, and entrepreneurial ability.
D. labor, capital, entrepreneurial ability, and money.
83. Which of the followingis a land resource?
A. a farmer
B. an oil drilling rig
C. a machine for detecting earthquakes
D. natural gas
84. Which of the followinglists includes only capital resources (and therefore no labor or land resources)?
A. an ice arena,a professional hockey player,hockey uniforms
B. the owner of a new start-up firm, a chemistry lab, a researcher
C. a hydroelectric dam, water behind the dam, power lines
D. autos owned by a car rental firm, computers at the car rental agency, vans used to shuttle rental customers to and from the airport
85. Money is not an economic resourcebecause
A. money, as such, does not produceanything.
B. idle money balances do not earn interestincome.
C. it is not scarce.
D. money is not a free gift of nature.
86. Economic resources are also called
A. free gifts of nature.
B. consumption goods.
C. units of money capital.
D. factors of production.
87. Which of the followingdo economists consider to be capital?
A. a pair of stockings
B. a construction crane
C. a savings account
D. a share of IBM stock
88. The main function of the entrepreneur is to
A. make routine pricing decisions.
B. innovate.
C. purchase capital.
D. create market demand.
89. Which of the followingis not amain function of the entrepreneur?
A. to make routine pricing decisions
B. to innovate
C. to assume the risk of economic losses
D. to make strategic business decisions
90. The processof producing and accumulating capital goods is called
A. money capital.
B. depreciation.
C. investment.
D. consumption.
91. Which of the followingis not considered by economists to be an economic resource?
A. money
B. factory workers
C. computers at a retail store.
D. a forest
92. Which of the following would not be classified as an economic resource by economists?
A. a professional soccer player
B. water in a town's reservoir
C. money in a business checking account
D. the manager of the local hamburgerrestaurant
93. The production possibilities curve illustrates the basic principle that
A. the production of more of any one good will in time requiresmaller and smaller sacrifices of other goods.
B. an economywill automatically obtain full employment of its resources.
C. if all the resources of an economy are in use, more of one good can be producedonly if less of another good is produced.
D. an economy's capacityto produce increasesin proportion to its population size.
94. Which of the followingwill not produce an outward shift of the production possibilities curve?
A. upgrading the quality of a nation's human resources
B. reducing unemployment
C. increasing the quantity of a society's laborforce
D. improving a society's technological knowledge
95. Unemployment
A. causes the production possibilities curve to shift outward.
B. can exist at any point on a production possibilities curve.
C. is illustrated by a point outside the production possibilities curve.
D. is illustrated by a point insidethe production possibilities curve.
96. If the production possibilities curve is a straight line,
A. the two goods will sell at the same marketprices.
B. economic resources are perfectly substitutable between the production of the two goods.
C. the two goods are equally important to consumers.
D. equal quantities of the two goods will be producedat each possible point on the curve.
97. A production possibilities curve illustrates
A. scarcity.
B. market prices.
C. consumer preferences.
D. the distribution of income.
98. A production possibilities curve shows
A. that resources are unlimited.
B. that peopleprefer one of the goods more than the other.
C. the maximum amounts of two goods that can be produced,assuming the full use of available resources.
D. combinations of capital and labornecessary to produce specificlevels of output.
99. A nation's production possibilities curve is bowed out from the origin because
A. resources are not generally equally efficient in producing everygood.
B. opportunity costs of producing a good tend to fall as more of the good is produced.
C. resources are scarce.
D. wants are virtually unlimited.
Refer to the table.If the economy is producing at production alternative C, the opportunity cost of the 10th unit of consumer goods will be
A. 4 units of capital goods.
B. 2 units of capital goods.
C. 3 units of capital goods.
D. ⅓ of a unit of capitalgoods.
101.
Answer the question on the basis of the data given in the following production possibilities table.
Production Possibilities (Alternatives)
Refer to the table. As compared to production alternative D, the choice of alternative C would
A. tend to generate a more rapid growth rate.
B. be unattainable.
C. entail unemployment.
D. tend to generate a slower growth rate.
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