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Unit 1 Multiple-Choice Qs

1. Economics is a social science that

A. Is primarily concerned with money and resources

B. Is primarily concerned with how resources are used.

C. Relies solely on the scientific method for analysis.

D. Is primarily concerned with maximizing spiritual well-being

E. Is purely normative

2. When opportunity cost is constant across all production levels, the production possibilities frontier is:

A. Concave to the origin

B. Convex to the origin

C. Undefined

D. A line sloping downward from left to right

E. A straight diagonal line sloping ascending from left to right.

3. The law of increasing costs

A. Does not apply to guns and butter

B. Is the result of resources not being perfectly adaptable between the productions of two goods

C. Implies that prices will rise when the costs of making a good rise

D. Causes the production possibilities frontier to be a straight line.

E. Implies the opportunity costs will raise as production levels fall.

3. Given the following table (combinations that can be produced using resources fully and efficiently)

|Guava |Banana |

|0 |10 |

|3 |5 |

|10 |0 |

The opportunity cost of guava is

A. 5/3 banana

B. 3/5 banana

C. 5/3 guava

D. 3/15 guava

E. 70 % of the banana production

|[pic] |

|4. Refer to the following: |

|[pic] |

| |

|Which of the points in the diagram is currently unattainable given the economy's resources? |

|Point A |

|Point B |

|Point C |

|Point D |

|Point E |

|[|A microeconomist would most likely study |

|p| |

|i|how consumers respond to a change in gasoline prices |

|c| |

|]|the effects of an income tax reduction on the size of the national budget deficit |

| | |

| |the effects of aggregate consumer debt on overall consumption spending |

| | |

| |the relationship between the size of the money supply and the rate of inflation |

| |None of the above |

| | |

| | |

| | |

| | |

| |6. In the circular flow diagram, which of the following flows from firms to factor markets to households? |

| |A. Goods and services |

| |B. Money. |

| |C. Land |

| |D. Labor |

| |E. Capital. |

| | |

| | |

| | |

| |Economics is primarily the study of: |

| |How scarcity can be eliminated |

| |How firms manipulate prices |

| |How government influences resources allocation decisions. |

| |The problem of scarce resources relative to human wants |

| |None of the above |

| |Suppose you have a $20 iTunes gift card with which you can buy (download) songs or videos. Songs cost $1.00 each and videos cost $2.00 |

| |each. The opportunity cost of one video: |

| |increases as more videos are purchased |

| |is $1.00 |

| |is constant and equal to ½ song |

| |is constant and equal to 2 songs |

| |None of the above |

| | |

| |The law of increasing costs |

| |Does not apply to guns and butter |

| |Is the result of resources not being perfectly adaptable between the productions of two goods |

| |Implies that prices will rise when the costs of making a good rise |

| |Causes the production possibilities frontier to be a straight line. |

| |Implies the opportunity costs will raise as production levels fall. |

| | |

| | |

| | |

| | |

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