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MACROECONOMICS EC112 QUESTIONS
WITH DETAILED VERIFIED ANSWERS
Technological progress has made it possible for firms such as Apple and
Alivecor to develop small electronic devices, including smartwatches,
smartphones, and products that can be attached to the smartwatches
and smartphones, to serve consumers who have become more health
conscious and wish to monitor various health conditions. These firms are
reacting to which of the three key economic ideas?
A) firms attempt to maximize revenues
B) optimal decisions are made at the margin
C) people are rational
D) people respond to economic incentives Ans: d
The term "market" in economics refers to ______________
A) a place where money changes hands.
B) a legal institution where exchange can take place.
C) a group of buyers and sellers of a product and the arrangement by
which they come together to trade.
D) an organization which sells goods and services. Ans: c
Which of the following best describes an assumption economists make
about human behavior?
A) They assume that individuals act rationally all the time in all
circumstances.
B) They assume that rational behavior is useful in explaining choices
people make even though people may not behave rationally all the time.
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C) They assume that people take into account the question of fairness in
all decisions they make.
D) They assume that individuals act randomly. Ans: b
1. In the first six months of 2003, branches of Commerce Bank in New
York City were robbed 14 times. The New York City Police recommended
steps the bank could take to deter robberies, including the installation of
plastic barriers called "bandit barriers." The police were surprised the
bank did not take their advice. According to a deputy commissioner of
police, "Commerce does very little of what we recommend. They've told
our detectives they have no interest in ever putting in the barriers."
It would seem that Commerce Bank would have a strong incentive to
install "bandit barriers" to deter robberies. Why wouldn't they do it?
A) The banks would rather delay installation of any theft deterring
equipment in anticipation of new, lower-cost innovations in the security
devices market.
B) The banks must have weighed the cost of installing bandit barriers
against the benefits and decided that they have "no interest in Ans: b
Economics promotes which of the following as the way to make the best
decision?
A) Continue an enjoyable activity as long as you do not have to pay for it.
B) Continue an enjoyable activity until it is no longer enjoyable.
C) Continue an enjoyable activity until you cannot afford to pursue it.
D) Continue an enjoyable activity up to the point where its marginal
benefit equals its marginal cost. Ans: d
Which of the following is an example of a "how much" decision?
A) Octavia is debating whether to buy a pair of Jimmy Choo shoes or
Steve Madden boots.
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B) Humberto has taken a second job to earn money to buy a Harley-
Davidson SuperLow Sportster.
C) You plan on going to Las Vegas for your birthday and are deciding if
you should fly or drive.
D) Diana is trying to decide if she should open her pet shop on Sundays.
Ans: d
Every society faces economic trade-offs. This means ______
A) me people live better than others do.
B) not everyone can have enough goods to survive.
C) producing more of one good means less of another good can be
produced.
D) society's output cannot be made available to all. Ans: c
Which of the following statements is false?
A) Anytime you have to decide which action to take you are facing an
economic trade-off.
B) Trade-offs do not apply when the consumers purchase a product for
which there is excess supply, such as a stock clearance sale.
C) Every individual, no matter how rich or poor, is faced with making
trade-offs.
D) Economics is a social science that studies the trade-offs we are forced
to make because of scarcity. Ans: b
Who, in a modern mixed economy, decides what goods and services will
be produced with the scarce resources available in that economy?
A) the government
B) producers
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C) consumers
D) consumers and producers
E) the government, consumers, and producers Ans: e
In a market economy, who decides what goods and services will be
produced?
A) only the producers
B) only consumers
C) consumers and producers
D) the government Ans: c
How does a market system prevent people from getting as many goods
and services as they wish?
A) Governments interfere with the market mechanism to influence the
allocation of goods and services.
B) In a market system, firms can charge any price they want, thus
preventing poor people from getting as many goods and services as they
wish.
C) The market system allocates goods and services to those who are able
to pay for those products and therefore income is a limiting factor.
D) The government imposes taxes on those who earn beyond a certain
amount of income. Ans: c
When every good or service is produced up to the point where the last
unit provides a marginal benefit to society equal to the marginal cost of
producing it, ________ occurs
A) allocative efficiency
B) productive efficiency
MACROECONOMICS EC112 QUESTIONS
WITH DETAILED VERIFIED ANSWERS
Technological progress has made it possible for firms such as Apple and
Alivecor to develop small electronic devices, including smartwatches,
smartphones, and products that can be attached to the smartwatches
and smartphones, to serve consumers who have become more health
conscious and wish to monitor various health conditions. These firms are
reacting to which of the three key economic ideas?
A) firms attempt to maximize revenues
B) optimal decisions are made at the margin
C) people are rational
D) people respond to economic incentives Ans: d
The term "market" in economics refers to ______________
A) a place where money changes hands.
B) a legal institution where exchange can take place.
C) a group of buyers and sellers of a product and the arrangement by
which they come together to trade.
D) an organization which sells goods and services. Ans: c
Which of the following best describes an assumption economists make
about human behavior?
A) They assume that individuals act rationally all the time in all
circumstances.
B) They assume that rational behavior is useful in explaining choices
people make even though people may not behave rationally all the time.
, Page | 2
C) They assume that people take into account the question of fairness in
all decisions they make.
D) They assume that individuals act randomly. Ans: b
1. In the first six months of 2003, branches of Commerce Bank in New
York City were robbed 14 times. The New York City Police recommended
steps the bank could take to deter robberies, including the installation of
plastic barriers called "bandit barriers." The police were surprised the
bank did not take their advice. According to a deputy commissioner of
police, "Commerce does very little of what we recommend. They've told
our detectives they have no interest in ever putting in the barriers."
It would seem that Commerce Bank would have a strong incentive to
install "bandit barriers" to deter robberies. Why wouldn't they do it?
A) The banks would rather delay installation of any theft deterring
equipment in anticipation of new, lower-cost innovations in the security
devices market.
B) The banks must have weighed the cost of installing bandit barriers
against the benefits and decided that they have "no interest in Ans: b
Economics promotes which of the following as the way to make the best
decision?
A) Continue an enjoyable activity as long as you do not have to pay for it.
B) Continue an enjoyable activity until it is no longer enjoyable.
C) Continue an enjoyable activity until you cannot afford to pursue it.
D) Continue an enjoyable activity up to the point where its marginal
benefit equals its marginal cost. Ans: d
Which of the following is an example of a "how much" decision?
A) Octavia is debating whether to buy a pair of Jimmy Choo shoes or
Steve Madden boots.
, Page | 3
B) Humberto has taken a second job to earn money to buy a Harley-
Davidson SuperLow Sportster.
C) You plan on going to Las Vegas for your birthday and are deciding if
you should fly or drive.
D) Diana is trying to decide if she should open her pet shop on Sundays.
Ans: d
Every society faces economic trade-offs. This means ______
A) me people live better than others do.
B) not everyone can have enough goods to survive.
C) producing more of one good means less of another good can be
produced.
D) society's output cannot be made available to all. Ans: c
Which of the following statements is false?
A) Anytime you have to decide which action to take you are facing an
economic trade-off.
B) Trade-offs do not apply when the consumers purchase a product for
which there is excess supply, such as a stock clearance sale.
C) Every individual, no matter how rich or poor, is faced with making
trade-offs.
D) Economics is a social science that studies the trade-offs we are forced
to make because of scarcity. Ans: b
Who, in a modern mixed economy, decides what goods and services will
be produced with the scarce resources available in that economy?
A) the government
B) producers
, Page | 4
C) consumers
D) consumers and producers
E) the government, consumers, and producers Ans: e
In a market economy, who decides what goods and services will be
produced?
A) only the producers
B) only consumers
C) consumers and producers
D) the government Ans: c
How does a market system prevent people from getting as many goods
and services as they wish?
A) Governments interfere with the market mechanism to influence the
allocation of goods and services.
B) In a market system, firms can charge any price they want, thus
preventing poor people from getting as many goods and services as they
wish.
C) The market system allocates goods and services to those who are able
to pay for those products and therefore income is a limiting factor.
D) The government imposes taxes on those who earn beyond a certain
amount of income. Ans: c
When every good or service is produced up to the point where the last
unit provides a marginal benefit to society equal to the marginal cost of
producing it, ________ occurs
A) allocative efficiency
B) productive efficiency
