Doral Academy Preparatory School



1)

Which of the following best defines economics?

A)

Economics teaches how to limit our wants.

B)

Economics studies how to choose the best alternative when coping with scarcity.

C)

Economics helps you earn as much money as possible.

D)

Economics analyzes all aspects of human behavior in general.

E)

Economics is concerned with prices and quantities of goods and services, both at the individual level and at the industry level.

2) Scarcity means we can't

A)

consume all the available goods and services.

B)

satisfy all our wants.

C)

increase our standard of living.

D)

choose among alternatives.

E)

work as much as we'd like.

3) Whether a company produces fishing rods mostly by hand or using high-tech machinery is a question of

A)

for whom will goods be produced.

B)

when will the goods be produced.

C)

where will the goods be produced.

D)

E)

how will the goods be produced.

why will the goods be produced

E)

4)If a decision is made and it is the best choice for society, the decision is said to be

A)

a valid economic choice.

B)

made in self-interest.

C)

made in social interest.

D)

consist with scarcity.

E)

a want-maximizing choice.

5)An opportunity cost is

A)

the dollar amount that is paid.

B)

anything the decision maker believes costs to be.

C)

the benefits of the highest-valued alternative forgone.

D)

whatever is paid out and cannot be reduced or reversed.

E)

another term for all the sunk costs.

6)The benefit from a good or service that you purchase is measured by

A)

the dollar amount that is paid for the good or service.

B)

the dollar amount you can get by selling the good or service.

C)

what you are willing to give up to obtain the good or service.

D)

how strong the incentives were that lead to buying the good or service.

E)

None of the above answers is correct because there is no way to measure the benefit you receive from purchasing a good or service.

[pic]

7)

In the above figure, as the y variable increases,

A)

the x variable is constant.

B)

the x variable increases.

C)

the x variable decreases.

D)

the x variable at first increases but then decreases.

E)

the x variable probably changes but more information is needed to determine if it increases, decreases, or stays the same.

8) What is the relationship between wants, resources, scarcity, and choices? Discuss the relationship for an individual and for a society.

9) An example of a consumption good is

A)

an iron-melting furnace.

B)

an oil-drilling platform.

C)

a water-purifying plant.

D)

a home cable-TV satellite dish.

E)

a road.

10) Items bought by individuals to provide personal enjoyment are termed

A)

consumption goods.

B)

personal goods.

C)

consumption or investment goods.

D)

standard goods.

E)

pleasure goods.

11) Land, as a factor of production, includes

A)

all natural resources.

B)

all natural resources owned by businesses.

C)

all natural resources currently being used in production.

D)

the quantity of land available for production.

E)

all non-human resources

12) The quality of labor is termed

A)

entrepreneurship.

B)

skill level.

C)

human capital.

D)

skill capital.

E)

work effort.

13) Capital, as a factor of production, refers to

A)

money, stocks, and bonds.

B)

the production technology used by firms.

C)

the physical goods used to produce other goods and services.

D)

the production factors imported from abroad.

E)

stocks, and bonds but not money.

14) ____ paid for the use of land; ____ paid for the services of labor; and ____ paid for the use of capital.

A)

Rent is; wages are; interest is

B)

Rent is; interest is; wages are

C)

Interest is; wages are; profit is

D)

Mortgages are; interest is; wages are

E)

Rent is; wages are; profit is

15) When the total U.S. production of goods and services is divided into consumption goods and services, capital goods, government goods and services, and export goods and services, the largest component is

A)

consumption goods and services.

B)

capital goods.

C)

government goods and services.

D)

export goods and services.

E)

capital goods and government goods and services tie for the largest component.

16) Identify the four factors of production, and tell what type of income is earned by each factor.

17) The United States has a vast amount of resources,

A)

so our production capability is unlimited.

B)

therefore we can produce as much or as little as we desire.

C)

thus we are not constrained by making choices.

D)

but our production capability is limited by our available resources and technology.

E)

so for most people scarcity is not a problem.

18) When drawing a production possibilities frontier, which of the following is held constant?

A)

the amount of money in the economy

B)

the available factors of production and the state of technology

C)

the prices of goods and services

D)

the quantity of the goods and services that are produced.

E)

None of the above because nothing is held constant when drawing the production possibilities frontier.

19) When all of the available factors of production are being efficiently employed, the

A)

economy is producing at a point within its PPF.

B)

economy is producing at a point on its PPF.

C)

economy is producing at a point beyond its PPF.

D)

PPF disappears.

[pic]

20)

The figure above shows the production possibilities frontier for a country. In order for it to produce at point E, the

A)

country would need to acquire more resources and/or more advanced technology.

B)

production of compact cars would need to decrease.

C)

production of SUVs would need to decrease.

D)

country would need to use its resources more efficiently.

E)

country would need to determine that compact cars and SUVs are equally important to it.

21) The figure above shows the production possibilities frontier for a country. If the country is producing at point D, then the

A)

resources are being used efficiently.

B)

technology associated with producing SUVs and compact cars is advancing.

C)

resources are not being used efficiently and/or are unemployed.

D)

production of SUVs and compact cars is maximized.

E)

None of the above answers are correct because it is not possible to produce at point D.

22) In order for Ireland to grow more potatoes, wool production must decrease. This situation is an example of

A)

producing at a point that lies beyond the PPF.

B)

zero opportunity cost.

C)

opportunity benefit.

D)

a free lunch.

E)

a tradeoff.

23) As we move along the production possibilities frontier,

A)

the production of one good increases as the production of the other good decreases.

B)

the possibilities of tradeoffs diminish.

C)

a tradeoff is not possible because nations need all goods.

D)

more of both goods can be produced.

E)

less of both goods can be produced.

24) What is a "free lunch"?

A)

a production possibility in which we have to make tradeoffs

B)

a production possibility that requires full employment

C)

a production possibility that is unattainable

D)

a production possibility in which there is an absence of a tradeoff

E)

None of the above answers are correct.

25) When a tradeoff does NOT exist between two goods, the situation is known as

A)

opportunity cost.

B)

scarcity.

C)

a free lunch.

D)

zero cost production

[pic]

26)

The figure above shows the production possibilities frontier for a country. The opportunity cost of a gallon of milk between combination point A and B is

A)

4 gallons of ice cream for a gallon of milk.

B)

3 gallons of ice cream for a gallon of milk.

C)

1 gallon of ice cream for a gallon of milk.

D)

1/3 of a gallon of ice cream for a gallon of milk.

E)

zero because at point A zero milk is being produced.

27) Why is a production possibilities frontier bowed out?

A)

The bowed shape reflects constant opportunity cost.

B)

The bowed shape reflects decreasing opportunity cost.

C)

The bowed shape indicates that opportunity cost at first decreases at a decreasing rate, and then begins to decrease at an increasing rate.

D)

The bowed shape indicates that opportunity cost at first increases at a decreasing rate, and then begins to increase at an increasing rate.

[pic]

28) The table above presents the production possibilities frontier for a nation. Using the information in the table, moving from possibility C to B means that

A)

4 units of capital goods are given up to get 55 units of consumption goods.

B)

2 units of capital goods are given up to get 55 additional units of consumption goods.

C)

4 units of capital goods are given up to get 10 additional units of consumption goods.

D)

4 units of capital goods are given up to get 45 units of consumption goods.

E)

2 units of capital goods are given up to get 10 additional units of consumption goods.

29) The table above presents the production possibilities frontier for a nation. Using the information in the table, when moving from possibility C to D, the cost of 1 unit of a capital good in terms of the consumption goods forgone is _____ consumption goods per capital good.

A)

25

B)

15

C)

20

D)

10

E)

an undefined amount of

30 ) Allocative efficiency refers to

A)

producing the goods and services most highly valued.

B)

using the least amount of labor to produce output.

C)

producing the maximum possible amount of output.

D)

obtaining the least output with the most inputs.

E)

producing at any point on the PPF.

31) Suppose Jennifer derives $100 in marginal benefits from her first skiing trip and $80 from her third trip. Her marginal benefit from her second trip is likely to be

A)

more than $100.

B)

between $100 and $80.

C)

between $79 and $51.

D)

less than $51.

E)

some amount that cannot be calculated without additional information.

32) Marginal cost equals

A)

the profitability derived from producing another unit of output.

B)

all the opportunity cost of producing the amount of output.

C)

or exceeds the marginal benefit.

D)

productive efficiency.

E)

the opportunity cost of producing one more unit of output

33) Any point on the production possibility frontier is

A)

attainable and might be allocatively inefficient.

B)

attainable and must be allocatively efficient.

C)

less production efficient than a point in the interior of the PPF.

D)

always allocatively efficient but might or might not be production efficient.

E)

always production efficient and always allocatively efficient.

34) For country North, the opportunity cost incurred when 3 tractors are produced is 21 watches. For country South, the opportunity cost incurred when 5 tractors are produced is 100 watches. Which country has the comparative advantage in the production of tractors?

A)

North

B)

South

C)

Both have the comparative advantage in the production of tractors.

D)

Neither country has the comparative advantage in the production of tractors.

E)

More information is needed about which country has the comparative advantage in the production of watches.

[pic]

35)

In the above figure, Jack's opportunity cost of producing 1 gallon of soda is ____ of bottled water.

A)

1 gallon

B)

1/2 of a gallon

C)

6 gallons

D)

1/4 of a gallon

E)

2 gallons

36) In the above figure, Jack's opportunity cost of producing 1 gallon of bottled water is ____ of soda.

A)

2 gallons

B)

1/2 of a gallon

C)

6 gallons

D)

1/4 of a gallon

E)

1 gallon

37) Suppose a country starts out producing 100 TV sets and 100 DVD players on its PPF. If the country decides to produce at another point on its PPF, 230 TV sets and 0 DVD players, then the country

A)

also operates on its trade line.

B)

cannot achieve allocation efficiency.

C)

cannot achieve productive efficiency.

D)

has specialized in the production of TV sets.

E)

has avoided a trade off because it no longer produces DVD players.

38) Suppose that after specializing according to comparative advantage, a country is trading with another nation that also specializes according to its comparative advantage. Which of the following statements are true for the first country?

i) It enjoys gains from trade.

ii) It must have an absolute advantage in the production of the good it produces.

iii) It is producing at a point beyond its PPF.

A)

i only.

B)

i and ii.

C)

i and iii.

D)

ii and iii.

E)

i, ii, and iii.

39) production point beyond the production possibilities frontier represents what?

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