,Chapter 1—Economics and the World Around You
MULTIPLE CHOICE
1. Which of the following is a reason to study economics?
a. Economic analysis explains daily events.
b. It helps us understand why people, firms and government behave in a certain way.
c. We need to understand relevant economic applications and policy issues.
d. It provides useful logic for solving complex problems.
e. All of these
ANS: E PTS: 1 DIF: Easy
NAT: BPROG: Reflective Thinking TOP: Preface KEY: BLOOM'S: Knowledge
2. According to the text, why are some countries rich and others very poor?
a. Some countries have no oil.
b. People have no property rights.
c. Access to education is very limited.
d. High tariffs prevent international trade.
e. All of these.
ANS: B PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Whole chapter
KEY: BLOOM'S: Knowledge
3. The primary reason to explain why some nations are rich and others poor is
a. A democratic government
b. A strong judicial system
c. Access to education
d. Private ownership
e. A stable currency
ANS: D PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
4. It can be said that ____ laid the foundation for the Industrial Revolution.
a. the discovery of the Americas
b. private property rights
c. the invention of the cotton gin
d. the discovery of gold
e. the development of a strong judicial system
ANS: B PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
5. Private property rights are important because
a. they create incentives for people to improve their standard of living.
b. the Constitution says so.
c. they allow students to choose their major field of study in college.
d. an economy cannot grow without them.
e. all of these
ANS: A PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
, 6. GDP per capita is one way to measure an economy's growth. China and India began to progress when
they allowed private ownership, in about ____. Since then there has been steady, strong growth in
these economies.
a. 1960
b. 1970
c. 1980
d. 1990
e. 2000
ANS: D PTS: 1 DIF: Easy
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
7. Overfishing, and in some cases extinction of species result from:
a. scarcity
b. greedy fishermen who cheat and take more than their fair share
c. no one has an incentive to take care of it
d. lack of laws to control the amount of fish taken
e. all of these
ANS: C PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Application
8. Sonia works at a restaurant where tips are pooled and divided equally. Anna works at a different
restaurant where she keeps the tips her customers leave for her. Which of the following is true?
a. Both work equally hard because their hourly wage from the employer is low, and they can
make up for this with tips
b. Sonia works harder, because she receives the same amount of tips as other workers.
c. Anna works harder, because she works at an expensive restaurant.
d. Anna works harder because her tips are her private property.
e. It's impossible to say without more information.
ANS: D PTS: 1 DIF: Challenging
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Application
9. The main reason villagers in Xiaogang produced more rice than those in surrounding villages was
a. they had better farmland.
b. they were given better seeds.
c. they were able to keep the output they produced individually.
d. they made each family responsible for a certain, higher quota
ANS: C PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
10. In 1981, in San Francisco Solano, Argentina, about 1,800 families took over a piece of wasteland. The
resulting houses varied greatly, based on whether the residents received title. Those who received title
also behaved differently, having fewer children, and the children experienced more education and
better health. This is an example of (the results from)
a. Scarcity
b. Economic growth
c. Economic freedom
d. Private property rights
e. Quality of life
ANS: D PTS: 1 DIF: Easy
, NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
11. One of the reasons communism failed was
a. government ran out of money.
b. workers received the same pay whether or not they worked hard.
c. there was no unemployment.
d. Leonid Brezhnev and Mao Zedong passed away.
e. technology lagged non-communistic countries.
ANS: B PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
12. Economic freedom is
a. the right to own property.
b. not having to pay taxes.
c. exists only in some countries.
d. affects only poor people.
e. the ability to engage in voluntary trade.
ANS: E PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Economic Freedom
KEY: BLOOM'S: Knowledge
13. Economic freedom generally leads to
a. a higher standard of living.
b. a better living conditions.
c. longer life expectancy.
d. better education.
e. all of these.
ANS: E PTS: 1 DIF: Easy
NAT: BPROG: Reflective Thinking TOP: Economic Freedom
KEY: BLOOM'S: Knowledge
14. Scarcity
a. ensures people become satisfied with less than they want.
b. exists only during a recession.
c. exists only in some countries.
d. affects only poor people.
e. requires people to make choices.
ANS: E PTS: 1 DIF: Moderate NAT: BPROG: Analytic
TOP: Scarcity and Opportunity Costs KEY: BLOOM'S: Evaluation
15. Which of the following is not a limitation one faces when shopping for clothes?
a. The amount of time available to shop
b. One's budget
c. The various styles that are available
d. The store's selection
e. The freedom to make rational choices
ANS: E PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Scarcity and Opportunity Costs
KEY: BLOOM'S: Evaluation
MULTIPLE CHOICE
1. Which of the following is a reason to study economics?
a. Economic analysis explains daily events.
b. It helps us understand why people, firms and government behave in a certain way.
c. We need to understand relevant economic applications and policy issues.
d. It provides useful logic for solving complex problems.
e. All of these
ANS: E PTS: 1 DIF: Easy
NAT: BPROG: Reflective Thinking TOP: Preface KEY: BLOOM'S: Knowledge
2. According to the text, why are some countries rich and others very poor?
a. Some countries have no oil.
b. People have no property rights.
c. Access to education is very limited.
d. High tariffs prevent international trade.
e. All of these.
ANS: B PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Whole chapter
KEY: BLOOM'S: Knowledge
3. The primary reason to explain why some nations are rich and others poor is
a. A democratic government
b. A strong judicial system
c. Access to education
d. Private ownership
e. A stable currency
ANS: D PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
4. It can be said that ____ laid the foundation for the Industrial Revolution.
a. the discovery of the Americas
b. private property rights
c. the invention of the cotton gin
d. the discovery of gold
e. the development of a strong judicial system
ANS: B PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
5. Private property rights are important because
a. they create incentives for people to improve their standard of living.
b. the Constitution says so.
c. they allow students to choose their major field of study in college.
d. an economy cannot grow without them.
e. all of these
ANS: A PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
, 6. GDP per capita is one way to measure an economy's growth. China and India began to progress when
they allowed private ownership, in about ____. Since then there has been steady, strong growth in
these economies.
a. 1960
b. 1970
c. 1980
d. 1990
e. 2000
ANS: D PTS: 1 DIF: Easy
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
7. Overfishing, and in some cases extinction of species result from:
a. scarcity
b. greedy fishermen who cheat and take more than their fair share
c. no one has an incentive to take care of it
d. lack of laws to control the amount of fish taken
e. all of these
ANS: C PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Application
8. Sonia works at a restaurant where tips are pooled and divided equally. Anna works at a different
restaurant where she keeps the tips her customers leave for her. Which of the following is true?
a. Both work equally hard because their hourly wage from the employer is low, and they can
make up for this with tips
b. Sonia works harder, because she receives the same amount of tips as other workers.
c. Anna works harder, because she works at an expensive restaurant.
d. Anna works harder because her tips are her private property.
e. It's impossible to say without more information.
ANS: D PTS: 1 DIF: Challenging
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Application
9. The main reason villagers in Xiaogang produced more rice than those in surrounding villages was
a. they had better farmland.
b. they were given better seeds.
c. they were able to keep the output they produced individually.
d. they made each family responsible for a certain, higher quota
ANS: C PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
10. In 1981, in San Francisco Solano, Argentina, about 1,800 families took over a piece of wasteland. The
resulting houses varied greatly, based on whether the residents received title. Those who received title
also behaved differently, having fewer children, and the children experienced more education and
better health. This is an example of (the results from)
a. Scarcity
b. Economic growth
c. Economic freedom
d. Private property rights
e. Quality of life
ANS: D PTS: 1 DIF: Easy
, NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
11. One of the reasons communism failed was
a. government ran out of money.
b. workers received the same pay whether or not they worked hard.
c. there was no unemployment.
d. Leonid Brezhnev and Mao Zedong passed away.
e. technology lagged non-communistic countries.
ANS: B PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Ownership KEY: BLOOM'S: Knowledge
12. Economic freedom is
a. the right to own property.
b. not having to pay taxes.
c. exists only in some countries.
d. affects only poor people.
e. the ability to engage in voluntary trade.
ANS: E PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Economic Freedom
KEY: BLOOM'S: Knowledge
13. Economic freedom generally leads to
a. a higher standard of living.
b. a better living conditions.
c. longer life expectancy.
d. better education.
e. all of these.
ANS: E PTS: 1 DIF: Easy
NAT: BPROG: Reflective Thinking TOP: Economic Freedom
KEY: BLOOM'S: Knowledge
14. Scarcity
a. ensures people become satisfied with less than they want.
b. exists only during a recession.
c. exists only in some countries.
d. affects only poor people.
e. requires people to make choices.
ANS: E PTS: 1 DIF: Moderate NAT: BPROG: Analytic
TOP: Scarcity and Opportunity Costs KEY: BLOOM'S: Evaluation
15. Which of the following is not a limitation one faces when shopping for clothes?
a. The amount of time available to shop
b. One's budget
c. The various styles that are available
d. The store's selection
e. The freedom to make rational choices
ANS: E PTS: 1 DIF: Moderate
NAT: BPROG: Reflective Thinking TOP: Scarcity and Opportunity Costs
KEY: BLOOM'S: Evaluation
