Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which of the following is the best definition of economics? 1)
A) The study of how firms decide what inputs to hire and what outputs to produce
B) The study of how consumers spend their income
C) The study of how the government allocates tax revenue
D) The study of how individuals and societies choose to use the scarce resources that nature
and previous generations have provided
2) Which of the following statements is incorrect? 2)
A) In large measure, economics is the study of how people make choices.
B) Economics is a behavioural science.
C) If poverty were eliminated there would be no reason to study economics.
D) Economic analysis can be used to explain how both individuals and societies make
decisions.
3) The study of economics: 3)
A) focuses on how a business should function.
B) is a way of analysing decision-making processes caused by scarcity.
C) is a very narrow endeavour.
D) is concerned with proving that capitalism is better than socialism.
4) Which of the following is a reason to study economics? 4)
A) To understand global affairs B) To understand society
C) To be an informed voter D) All of the above
5) Capital, as economists use the term: 5)
A) is the current value of the firm's shares on the stock exchange.
B) is the value of a firm to its shareholders.
C) refers to things that have been produced and are used to produce other things.
D) refers to the process by which inputs are transformed in to outputs.
6) A recession is a period of six months or more when: 6)
A) output is falling. B) prices are falling rapidly.
C) unemployment is rising. D) prices are falling.
7) Economists define inflation as: 7)
A) a decrease in the overall price level.
B) an increase in the overall level of economic activity.
C) a decrease in the overall level of economic activity.
D) an increase in the overall price level.
8) A cut in the income tax rate, which was meant to encourage people to work more would be 8)
called:
A) a microeconomic policy. B) a demand-side policy.
C) an incomes policy. D) a supply-side policy.
1
, 9) Economists say that there is unemployment when: 9)
A) there are people who are not willing to work at the going wage rate
B) there is excess demand in the labour market
C) there are less unfilled vacancies than there are people seeking work
D) at the going wage rate there are people who want to work but cannot find work
10) Opportunity cost is: 10)
A) that which we forgo, or give up, when we make a choice or a decision.
B) the additional cost of producing an additional unit of output.
C) a cost that cannot be avoided, regardless of what is done in the future.
D) the additional cost of buying an additional unit of a product.
11) The reason that opportunity costs arise is that: 11)
A) resources are scarce.
B) there are no alternative decisions that could be made.
C) an economy relies on money to facilitate exchange of goods and services.
D) people have unlimited wants.
12) A retired individual decides to spend the day golfing. The opportunity cost of this decision: 12)
A) equals the cost of the golf outing plus the value of the individual's alternative use of time.
B) is best measured by using the wage rate this individual earned prior to retirement.
C) is equal to the cost of the golf outing.
D) is zero, since the individual is retired and is not foregoing any income to spend the day
golfing.
13) Which of the following is NOT an opportunity cost of attending college? 13)
A) The income that you could have earned if you did not attend college
B) The alternative uses of the time you spend studying
C) The tuition fees that you or your Local Authority pays
D) The cost of the food that you consume while you are attending college
14) If you own a building and you decide to use that building to open a restaurant: 14)
A) there are no irretrievable costs involved in this decision.
B) the only cost relevant to this decision is the price you paid for the building.
C) there is no opportunity cost of using this building for a restaurant because you own it.
D) there is an opportunity cost of using this building for a restaurant because it could have
been used in other ways.
15) You own a videotape of Lord of the Rings. The opportunity cost of watching Lord of the Rings : 15)
A) is one -half the cost of the videotape, since this is the second time you have watched it.
B) cannot be calculated.
C) is the value of the alternative use of the time you spend watching the videotape.
D) is zero.
16) Given the current state of technology it is possible to produce one more lorry if two fewer cars 16)
are produced. However in Microland, to produce one more lorry the production of cars must be
reduced by three. This situation would be illustrated by Microland ________ its production
possibility curve for cars and lorries.
A) being at the origin of B) being on
C) being inside D) being outside
2
,17) A society can produce two goods: bread and biscuits. The society's production possibility curve 17)
is negatively sloped and 'bowed outward' from the origin. As this society moves down it's
production possibility frontier producing more and more units of biscuits, the opportunity cost
of producing biscuits:
A) increases.
B) remains constant.
C) could decrease or increase depending on the technology.
D) decreases.
18) If the opportunity costs of producing a good increase as more of that good is produced, the 18)
economy's production possibility curve will be:
A) negatively sloped and 'bowed upward' toward the origin.
B) a negatively sloped straight line.
C) a positively sloped straight line.
D) negatively sloped and 'bowed outward' from the origin.
19) As more of a good, such as television sets, is produced the opportunity costs of producing it 19)
increases. This most likely occurs because:
A) consumers would be willing to pay higher prices for the good as more of the good is
produced.
B) as more of a good is produced the quality of the technology available to produce
additional units of the good declines and therefore the costs of production increase.
C) as more of a good is produced the inputs used to produce that good will increase in price.
D) resources are not equally well suited to producing all goods and as more of a good is
produced it is necessary to use resources less well suited to the production of the good.
20) Economic growth may occur when: 20)
A) a society learns to produce more using existing resources.
B) a society acquires new resources.
C) the society begins to produce the combination of goods society wants most.
D) both A and B
21) During the Persian Gulf War many of Kuwait's oil refineries were destroyed. This would best be 21)
represented by:
A) a movement off Kuwait's production possibility curve to some point inside the curve.
B) a shift of Kuwait's production possibility curve back and to the left.
C) a movement up Kuwait's production possibility curve.
D) a movement down Kuwait's production possibility curve.
22) For an economy to produce at a point beyond its current production possibility curve, the 22)
economy must:
A) reduce inputs. B) waste less.
C) be more efficient. D) increase inputs.
23) In terms of the production possibility curve, an increase in productivity attributable to new 23)
technology would best be shown by:
A) a movement toward the origin.
B) a movement from a point inside the curve to a point on it.
C) the production possibility curve shifting up and to the right.
D) a movement along the curve.
3
, 24) An improvement in technology will cause: 24)
A) the production possibility curve to shift back and to the left.
B) the economy to move down the production possibility curve.
C) the economy to move closer to its production possibility curve.
D) the production possibility curve to shift up and to the right.
25) The price mechanism resolves resource allocation in the: 25)
A) opportunity economy. B) free -market economy.
C) equilibrium economy. D) command economy.
26) The equilibrium price represents the: 26)
A) maximum price.
B) best price.
C) price at which there is no shortage or surplus.
D) minimum price.
27) A rise in demand will most likely: 27)
A) reduce supply. B) increase price.
C) reduce price. D) lengthen queues.
28) A rise in supply will most likely: 28)
A) reduce demand. B) increase price.
C) reduce price. D) reduce warehouse space.
29) When the price of a good rises there is an incentive for: 29)
A) consumers to buy more. B) revision of the five-year plan.
C) firms to produce less. D) firms to produce more.
30) Consider two countries, Germany and Sweden. Germany devotes a larger portion of its 30)
production to investment. Which of the following statements is most likely true?
A) Germany will move up its production possibility curve faster than Sweden.
B) Sweden is producing inside its production possibility curve, while Germany is producing
at a point on its production possibility curve.
C) Germany's production possibility curve will shift up and out farther and faster than
Sweden's.
D) Germany is a poorer country than Sweden.
31) The circular flow of income diagram shows: 31)
A) how firms sell goods to households.
B) how households sell productive services to firms.
C) how households produce services for their own use.
D) A and B
E) A, B and C
32) A planned motorway connecting two cities was originally thought to cost £200 million. After 32)
building part of the system at a cost of £150 million, the government realised that the total cost of
the system would be £260 million, not £200 million. At this point, the MARGINAL cost of
completing the motorway is best estimated as:
A) £110 million. B) £50 million. C) £260 million. D) £60 million.
4
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which of the following is the best definition of economics? 1)
A) The study of how firms decide what inputs to hire and what outputs to produce
B) The study of how consumers spend their income
C) The study of how the government allocates tax revenue
D) The study of how individuals and societies choose to use the scarce resources that nature
and previous generations have provided
2) Which of the following statements is incorrect? 2)
A) In large measure, economics is the study of how people make choices.
B) Economics is a behavioural science.
C) If poverty were eliminated there would be no reason to study economics.
D) Economic analysis can be used to explain how both individuals and societies make
decisions.
3) The study of economics: 3)
A) focuses on how a business should function.
B) is a way of analysing decision-making processes caused by scarcity.
C) is a very narrow endeavour.
D) is concerned with proving that capitalism is better than socialism.
4) Which of the following is a reason to study economics? 4)
A) To understand global affairs B) To understand society
C) To be an informed voter D) All of the above
5) Capital, as economists use the term: 5)
A) is the current value of the firm's shares on the stock exchange.
B) is the value of a firm to its shareholders.
C) refers to things that have been produced and are used to produce other things.
D) refers to the process by which inputs are transformed in to outputs.
6) A recession is a period of six months or more when: 6)
A) output is falling. B) prices are falling rapidly.
C) unemployment is rising. D) prices are falling.
7) Economists define inflation as: 7)
A) a decrease in the overall price level.
B) an increase in the overall level of economic activity.
C) a decrease in the overall level of economic activity.
D) an increase in the overall price level.
8) A cut in the income tax rate, which was meant to encourage people to work more would be 8)
called:
A) a microeconomic policy. B) a demand-side policy.
C) an incomes policy. D) a supply-side policy.
1
, 9) Economists say that there is unemployment when: 9)
A) there are people who are not willing to work at the going wage rate
B) there is excess demand in the labour market
C) there are less unfilled vacancies than there are people seeking work
D) at the going wage rate there are people who want to work but cannot find work
10) Opportunity cost is: 10)
A) that which we forgo, or give up, when we make a choice or a decision.
B) the additional cost of producing an additional unit of output.
C) a cost that cannot be avoided, regardless of what is done in the future.
D) the additional cost of buying an additional unit of a product.
11) The reason that opportunity costs arise is that: 11)
A) resources are scarce.
B) there are no alternative decisions that could be made.
C) an economy relies on money to facilitate exchange of goods and services.
D) people have unlimited wants.
12) A retired individual decides to spend the day golfing. The opportunity cost of this decision: 12)
A) equals the cost of the golf outing plus the value of the individual's alternative use of time.
B) is best measured by using the wage rate this individual earned prior to retirement.
C) is equal to the cost of the golf outing.
D) is zero, since the individual is retired and is not foregoing any income to spend the day
golfing.
13) Which of the following is NOT an opportunity cost of attending college? 13)
A) The income that you could have earned if you did not attend college
B) The alternative uses of the time you spend studying
C) The tuition fees that you or your Local Authority pays
D) The cost of the food that you consume while you are attending college
14) If you own a building and you decide to use that building to open a restaurant: 14)
A) there are no irretrievable costs involved in this decision.
B) the only cost relevant to this decision is the price you paid for the building.
C) there is no opportunity cost of using this building for a restaurant because you own it.
D) there is an opportunity cost of using this building for a restaurant because it could have
been used in other ways.
15) You own a videotape of Lord of the Rings. The opportunity cost of watching Lord of the Rings : 15)
A) is one -half the cost of the videotape, since this is the second time you have watched it.
B) cannot be calculated.
C) is the value of the alternative use of the time you spend watching the videotape.
D) is zero.
16) Given the current state of technology it is possible to produce one more lorry if two fewer cars 16)
are produced. However in Microland, to produce one more lorry the production of cars must be
reduced by three. This situation would be illustrated by Microland ________ its production
possibility curve for cars and lorries.
A) being at the origin of B) being on
C) being inside D) being outside
2
,17) A society can produce two goods: bread and biscuits. The society's production possibility curve 17)
is negatively sloped and 'bowed outward' from the origin. As this society moves down it's
production possibility frontier producing more and more units of biscuits, the opportunity cost
of producing biscuits:
A) increases.
B) remains constant.
C) could decrease or increase depending on the technology.
D) decreases.
18) If the opportunity costs of producing a good increase as more of that good is produced, the 18)
economy's production possibility curve will be:
A) negatively sloped and 'bowed upward' toward the origin.
B) a negatively sloped straight line.
C) a positively sloped straight line.
D) negatively sloped and 'bowed outward' from the origin.
19) As more of a good, such as television sets, is produced the opportunity costs of producing it 19)
increases. This most likely occurs because:
A) consumers would be willing to pay higher prices for the good as more of the good is
produced.
B) as more of a good is produced the quality of the technology available to produce
additional units of the good declines and therefore the costs of production increase.
C) as more of a good is produced the inputs used to produce that good will increase in price.
D) resources are not equally well suited to producing all goods and as more of a good is
produced it is necessary to use resources less well suited to the production of the good.
20) Economic growth may occur when: 20)
A) a society learns to produce more using existing resources.
B) a society acquires new resources.
C) the society begins to produce the combination of goods society wants most.
D) both A and B
21) During the Persian Gulf War many of Kuwait's oil refineries were destroyed. This would best be 21)
represented by:
A) a movement off Kuwait's production possibility curve to some point inside the curve.
B) a shift of Kuwait's production possibility curve back and to the left.
C) a movement up Kuwait's production possibility curve.
D) a movement down Kuwait's production possibility curve.
22) For an economy to produce at a point beyond its current production possibility curve, the 22)
economy must:
A) reduce inputs. B) waste less.
C) be more efficient. D) increase inputs.
23) In terms of the production possibility curve, an increase in productivity attributable to new 23)
technology would best be shown by:
A) a movement toward the origin.
B) a movement from a point inside the curve to a point on it.
C) the production possibility curve shifting up and to the right.
D) a movement along the curve.
3
, 24) An improvement in technology will cause: 24)
A) the production possibility curve to shift back and to the left.
B) the economy to move down the production possibility curve.
C) the economy to move closer to its production possibility curve.
D) the production possibility curve to shift up and to the right.
25) The price mechanism resolves resource allocation in the: 25)
A) opportunity economy. B) free -market economy.
C) equilibrium economy. D) command economy.
26) The equilibrium price represents the: 26)
A) maximum price.
B) best price.
C) price at which there is no shortage or surplus.
D) minimum price.
27) A rise in demand will most likely: 27)
A) reduce supply. B) increase price.
C) reduce price. D) lengthen queues.
28) A rise in supply will most likely: 28)
A) reduce demand. B) increase price.
C) reduce price. D) reduce warehouse space.
29) When the price of a good rises there is an incentive for: 29)
A) consumers to buy more. B) revision of the five-year plan.
C) firms to produce less. D) firms to produce more.
30) Consider two countries, Germany and Sweden. Germany devotes a larger portion of its 30)
production to investment. Which of the following statements is most likely true?
A) Germany will move up its production possibility curve faster than Sweden.
B) Sweden is producing inside its production possibility curve, while Germany is producing
at a point on its production possibility curve.
C) Germany's production possibility curve will shift up and out farther and faster than
Sweden's.
D) Germany is a poorer country than Sweden.
31) The circular flow of income diagram shows: 31)
A) how firms sell goods to households.
B) how households sell productive services to firms.
C) how households produce services for their own use.
D) A and B
E) A, B and C
32) A planned motorway connecting two cities was originally thought to cost £200 million. After 32)
building part of the system at a cost of £150 million, the government realised that the total cost of
the system would be £260 million, not £200 million. At this point, the MARGINAL cost of
completing the motorway is best estimated as:
A) £110 million. B) £50 million. C) £260 million. D) £60 million.
4
