,Chapter 01 Economics: The World Around You
MULTIPLE CHOICE
1. Which of the following categories of educated workforce in the U.S., aged between 25 and 64, usually
receive the highest income?
a. College graduates
b. Individuals with professional degrees
c. Individuals with a master degree
d. College drop-outs
e. High school students
ANS: B DIF: Easy REF: 1.a OBJ: ch. 01, 1
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
2. The wage disparity between college-educated and non-college-educated workers in the U.S. has
declined since 2001 because:
a. more Americans are pursuing college education.
b. the colleges emphasize on technical education rather then textual knowledge.
c. most of the skilled sector jobs have been outsourced to India and China.
d. the variety of courses offered by the U.S. institutions have increased.
e. the number of non-college-educated workers in the workforce has declined.
ANS: C DIF: Moderate OBJ: ch. 01, 1
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
3. Which of the following trends has been observed in the U.S. with respect to higher education?
a. Students from less educated families stand a better chance of getting admitted to colleges.
b. The divorce rate for college grads is twice as high as that of high school grads.
c. The divorce rates for college grads are accelerating every year.
d. High school grads are twice as likely to smoke as college grads.
e. College grads are likely to live shorter and less healthy lives than high school grads.
ANS: D DIF: Moderate REF: 1.a OBJ: ch. 01, 1
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
4. According to the U.S. Census Bureau, what is the difference between the earnings of a high school
diploma holder and a medical practitioner between the ages of 25 and 64?
a. $3.2 million
b. $1.2 million
c. $5 million
d. No wage disparity
e. $8.5 million
ANS: A DIF: Moderate REF: 1.a OBJ: ch. 01, 1
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
5. Approximately how many American adults hold a college degree?
a. 70 percent
b. 10 percent
, c. 30 percent
d. 45 percent
e. 50 percent
ANS: C DIF: Easy REF: 1.a OBJ: ch. 01, 1
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
6. Identify the logic of economics that those who have not studied economics may fail to understand.
a. The implicit cost of a commodity is always higher than the explicit cost.
b. Individual wants are limited by means.
c. Private goods do not have a social cost.
d. Public goods are available to us freely.
e. There are costs to everything.
ANS: E DIF: Easy REF: 1.b OBJ: ch. 01, 1
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
7. In its most fundamental sense, economics is the study of:
a. production and cost.
b. supply and demand.
c. scarcity and choice.
d. specialization and trade.
e. externality and public goods.
ANS: C DIF: Easy REF: 2 OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
8. Economics is the study of how people cope with:
a. limited human wants.
b. scarcity.
c. unlimited resources.
d. greed.
e. limited time and unlimited income.
ANS: B DIF: Easy REF: 2.a OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
9. Which of the following is considered to be the basic economic problem across all countries of the
world?
a. Inflation
b. Unemployment
c. Poverty
d. Scarcity
e. Wage disparity
ANS: D DIF: Easy OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
10. The heart of the economic problem is to:
a. provide for full employment.
, b. stimulate GDP growth.
c. improve the standard of living of people.
d. allocate limited resources among unlimited uses.
e. increase leisure.
ANS: D DIF: Moderate REF: 2.a OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
11. A good or service is said to be scarce when:
a. its price is too low.
b. it is offered only to high income earners.
c. no one wishes to purchase it.
d. it cannot be transported easily.
e. at a price of zero, there will not be enough to satisfy everyone’s desire for it.
ANS: E DIF: Moderate REF: 2.a OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
12. The statement "people have unlimited wants," implies that people:
a. always want more goods/services than they can purchase with their incomes.
b. always have a desire to hold liquid money.
c. always strive to be the best they can be.
d. generally desire for goods and services which they can afford out of their income.
e. try to earn more and more money as their experience at work increases.
ANS: A DIF: Easy OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
13. Goods are scarce when:
a. their price is too high.
b. their price is too low.
c. the amount people want is more than the amount available at a zero price.
d. they are necessities.
e. their price is controlled.
ANS: C DIF: Moderate REF: 2.a OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
14. Which of the following defines an economic good?
a. Anything that is provided by the government
b. Anything that is provided by the nonprofit institutions
c. Anything with a price on it
d. Anything that has a very high demand in the market
e. Anything that has a very high supply in the market
ANS: C DIF: Easy REF: 2.a OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
15. To say that “there is a scarcity of gold” means that:
a. gold prices will plummet.
MULTIPLE CHOICE
1. Which of the following categories of educated workforce in the U.S., aged between 25 and 64, usually
receive the highest income?
a. College graduates
b. Individuals with professional degrees
c. Individuals with a master degree
d. College drop-outs
e. High school students
ANS: B DIF: Easy REF: 1.a OBJ: ch. 01, 1
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
2. The wage disparity between college-educated and non-college-educated workers in the U.S. has
declined since 2001 because:
a. more Americans are pursuing college education.
b. the colleges emphasize on technical education rather then textual knowledge.
c. most of the skilled sector jobs have been outsourced to India and China.
d. the variety of courses offered by the U.S. institutions have increased.
e. the number of non-college-educated workers in the workforce has declined.
ANS: C DIF: Moderate OBJ: ch. 01, 1
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
3. Which of the following trends has been observed in the U.S. with respect to higher education?
a. Students from less educated families stand a better chance of getting admitted to colleges.
b. The divorce rate for college grads is twice as high as that of high school grads.
c. The divorce rates for college grads are accelerating every year.
d. High school grads are twice as likely to smoke as college grads.
e. College grads are likely to live shorter and less healthy lives than high school grads.
ANS: D DIF: Moderate REF: 1.a OBJ: ch. 01, 1
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
4. According to the U.S. Census Bureau, what is the difference between the earnings of a high school
diploma holder and a medical practitioner between the ages of 25 and 64?
a. $3.2 million
b. $1.2 million
c. $5 million
d. No wage disparity
e. $8.5 million
ANS: A DIF: Moderate REF: 1.a OBJ: ch. 01, 1
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
5. Approximately how many American adults hold a college degree?
a. 70 percent
b. 10 percent
, c. 30 percent
d. 45 percent
e. 50 percent
ANS: C DIF: Easy REF: 1.a OBJ: ch. 01, 1
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
6. Identify the logic of economics that those who have not studied economics may fail to understand.
a. The implicit cost of a commodity is always higher than the explicit cost.
b. Individual wants are limited by means.
c. Private goods do not have a social cost.
d. Public goods are available to us freely.
e. There are costs to everything.
ANS: E DIF: Easy REF: 1.b OBJ: ch. 01, 1
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
7. In its most fundamental sense, economics is the study of:
a. production and cost.
b. supply and demand.
c. scarcity and choice.
d. specialization and trade.
e. externality and public goods.
ANS: C DIF: Easy REF: 2 OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
8. Economics is the study of how people cope with:
a. limited human wants.
b. scarcity.
c. unlimited resources.
d. greed.
e. limited time and unlimited income.
ANS: B DIF: Easy REF: 2.a OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
9. Which of the following is considered to be the basic economic problem across all countries of the
world?
a. Inflation
b. Unemployment
c. Poverty
d. Scarcity
e. Wage disparity
ANS: D DIF: Easy OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: Why Study Economics? MSC: Knowledge
10. The heart of the economic problem is to:
a. provide for full employment.
, b. stimulate GDP growth.
c. improve the standard of living of people.
d. allocate limited resources among unlimited uses.
e. increase leisure.
ANS: D DIF: Moderate REF: 2.a OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
11. A good or service is said to be scarce when:
a. its price is too low.
b. it is offered only to high income earners.
c. no one wishes to purchase it.
d. it cannot be transported easily.
e. at a price of zero, there will not be enough to satisfy everyone’s desire for it.
ANS: E DIF: Moderate REF: 2.a OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
12. The statement "people have unlimited wants," implies that people:
a. always want more goods/services than they can purchase with their incomes.
b. always have a desire to hold liquid money.
c. always strive to be the best they can be.
d. generally desire for goods and services which they can afford out of their income.
e. try to earn more and more money as their experience at work increases.
ANS: A DIF: Easy OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
13. Goods are scarce when:
a. their price is too high.
b. their price is too low.
c. the amount people want is more than the amount available at a zero price.
d. they are necessities.
e. their price is controlled.
ANS: C DIF: Moderate REF: 2.a OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
14. Which of the following defines an economic good?
a. Anything that is provided by the government
b. Anything that is provided by the nonprofit institutions
c. Anything with a price on it
d. Anything that has a very high demand in the market
e. Anything that has a very high supply in the market
ANS: C DIF: Easy REF: 2.a OBJ: ch. 01, 2
NAT: Analytic | The Study of Economics, and Definitions in Economics
TOP: The Definition of Economics MSC: Knowledge
15. To say that “there is a scarcity of gold” means that:
a. gold prices will plummet.
