Multiple Choice Questions

Source: G. Mankiw, Principles of Economics

Multiple Choice Questions p.1/51

Question 1
1. The word economy comes from the Greek word for (a) "environment." (b) "one who participates in a market." (c) "one who manages a household." (d) "conservation."

Multiple Choice Questions p.2/51

Question 2
2. Economics deals primarily with the concept of (a) poverty. (b) scarcity. (c) change. (d) power.

Multiple Choice Questions p.3/51

Question 3
3. Economics is dened as (a) the study of business. (b) the study of how society manages its scarce resources. (c) the study of central planning. (d) the study of government regulation.

Multiple Choice Questions p.4/51

Question 4
4. The scientic method can best be dened as (a) the use of modern electronic testing equipment in understanding the world. (b) the use of controlled experiments in understanding the way the world works.

(c) the dispassionate development and testing o theories about how the world works. (d) nding evidence to support preconceived theories about how the world works.

Multiple Choice Questions p.5/51

Question 5

5. Sir Isaac Newtons development of the theory of gravity after observing an apple fall from a tree is an example of: (a) controlled experiments used to develop scientic theories. (b) being in the right place at the right time. (c) an idea whose time had come.

(d) the interplay between observation and theory in science.

Multiple Choice Questions p.6/51

Question 6
6. The use of theory and observation is more difcult in economics than in sciences such as physics due to (a) the difculty in actually performing an experiment in an economic system. (b) the difculty in devising an economic experiment. (c) the difculty in evaluating an economic experiment. (d) all of the above.

Multiple Choice Questions p.7/51

Question 7
7. Because it is difcult for economists to use experiments to generate economic data, (a) they do without. (c) they make up the data. (d) they ask policymakers to conduct experiments for them.

(b) they use whatever data the world gives them.

Multiple Choice Questions p.8/51

Question 8
8. Efciency means that (a) society is getting the most it can from its scarce resources. (b) society is conserving resources in order to save them for the future. (c) societys goods and services are distributed fairly among societys members. (d) society has lessened its dependence on foreign energy sources.

Multiple Choice Questions p.9/51

Question 9
9. A good denition of equity would be (a) everyone receiving the same income. (b) fairness. (c) efciency. (d) eliminating extreme afuence.

Multiple Choice Questions p.10/51

Question 10
10. An incentive is . . . (a) a common market failure. (b) something that encourages you to work harder, start a new activity etc. (c) the start of an organization or institution. (d) the trade off between equity and efciency.

Multiple Choice Questions p.11/51

Question 11
11. The opportunity cost of an item is

(a) the number of hours needed to earn money to buy it. (b) what you give up to get that item. (c) always less than the dollar value of the item. (d) always equal to the dollar value of the item.

Multiple Choice Questions p.12/51

Question 12
12. A marginal change is (a) a long-term trend. (b) a large, signicant adjustment. (c) a change for the worse. (d) a small incremental adjustment.

Multiple Choice Questions p.13/51

Question 13
13. A rational decisionmaker takes an action only if (a) the marginal benet is greater than the marginal cost.

(b) the marginal benet is less than the marginal cost. (c) the average benet is greater than the average cost. (d) the marginal benet is greater than both the average cost and the marginal cost.

Multiple Choice Questions p.14/51

Question 14
14. Trade between the United States and Thailand (a) is a losing proposition for Thailand because U.S. workers are more productive. (b) is a losing proposition for the U.S. because Thailand has cheaper labor.

(c) is like a sports contest: one side wins and the other side loses.

(d) benets both the United States and Thailand

Multiple Choice Questions p.15/51

Question 15
15. Economists make assumptions (a) to diminish the chance of wrong answers. (b) to make certain that all necessary variables are included. (c) because all scientists make assumptions. (d) to make the world easier to understand.

Multiple Choice Questions p.16/51

Question 16
16. Which of the following is the most accurate statement about economic models? (a) Economic models attempt to mirror reality exactly. (b) Economic models are useful, but should not be used for policy-making. (c) Economic models cannot be used in the real world because they omit details. (d) Economic models omit many details to allow us to see what is truly important.

Multiple Choice Questions p.17/51

Question 17
17. The foundation stones from which economic models are built are (a) economic policies. (b) the legal system. (c) assumptions. (d) statistical forecasts.

Multiple Choice Questions p.18/51

Question 18
18. The art of scientic thinking involves (a) deciding which assumptions to make.

(b) understanding every scientic eld - physics, biology and economics. (c) knowing how the major organs of the human body work.

(d) being able to mathematically express natural forces.

Multiple Choice Questions p.19/51

Question 19
19. What is the goal of theories? (a) to provide an interesting, but not useful, framework of analysis (b) to help scientists understand how the world works (c) to demonstrate that the developer of the theory is capable of logical thinking (d) to provoke stimulating debate in scientic journals

Multiple Choice Questions p.20/51

Question 20
20. Factors of production are (a) inputs into the production process. (b) weather, social, and political conditions that affect production.

(c) the physical relationships between economic inputs and outputs. (d) the mathematical calculations rms make to determine production.

Multiple Choice Questions p.21/51

Question 21
21. In the circular-ow diagram shown, which arrow shows the ow of the factors of production?

(a) A (b) B (c) C (d) D

Multiple Choice Questions p.22/51

Question 22
22. In the circular-ow diagram, (a) rms are sellers in the resource market and the product market. (b) households are sellers in the resource market. (c) rms are buyers in the product market. (d) spending on goods and services ow from rms to households.

Multiple Choice Questions p.23/51

Question 23
23. In the circular-ow diagram, (a) spending on goods and services ow from rms to households. (b) goods and services ow from households to rms. (c) factors of production ow from rms to households. (d) income from factors of production ows from rms to households.

Multiple Choice Questions p.24/51

Question 24
24. In the circular-ow diagram shown, which arrow shows the ow of spending by households? (a) A (b) B (c) C (d) D

Multiple Choice Questions p.25/51

Question 25
25. An economy is said to be efcient if (a) it is possible to produce more of all goods. (b) it is possible to produce more of one good without producing less of another.

(c) it is not possible to produce more of one good without producing less of another.

(d) it is not possible to produce more of one good at any cost.

Multiple Choice Questions p.26/51

Question 26
26. On the production possibilities frontier shown, which point or points are NOT possible for this economy to produce? (a) D (b) E, F (c) A, B, C (d) D, E, F

Multiple Choice Questions p.27/51

Question 27
27. The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as (a) the amount of the other good which must be given up. (b) the price of an additional unit produced. (c) the amount of resources which must be devoted to its production. (d) the money which must be spent for it.

Multiple Choice Questions p.28/51

Question 28

28. Which of the following concepts is NOT illustrated by the production possibilities frontier? (a) efciency (b) opportunity cost (c) equity (d) tradeoffs

Multiple Choice Questions p.29/51

Question 29
29. In the table showing the production possibilities, what is the opportunity cost of increasing the production of toys from 450 to 600? Cars Toys 50 0 (a) 30 cars 40 250 (b) 20 cars 30 450 (c) 10 cars 20 600 (d) 0 cars 10 700 0 750

Multiple Choice Questions p.30/51

Question 30
30. For economists, positive statements are (a) descriptive, making a claim about how the world is. (b) optimistic, putting the best possible interpretation on things. (d) prescriptive, making a claim about how the world ought to be.

(c) afrmative, justifying existing economic policy

Multiple Choice Questions p.31/51

Question 31
31. Normative statements are (a) descriptive, making a claim about how the world is.

(b) statements about the normal condition of the world. (c) prescriptive, making a claim about how the world ought to be. (d) statements which establish production goals for the economy.

Multiple Choice Questions p.32/51

Question 32

32. Which of the following is an example of a positive statement?

(a) If welfare payments increase, the world will be a better place. (b) Prices rise when the government prints too much money.

(c) Ination is more harmful to the economy than unemployment. (d) Improved equity is more important than the reduced efciency.

Multiple Choice Questions p.33/51

Question 33
33. Which of the following is an example of a normative statement? (a) If the price of a product decreases, quantity demanded increases. (b) Reducing tax rates on the wealthy would be good for the country.

(c) If the national saving rate were to increase, so would the rate of economic growth. (d) All of the above are normative statements.

Multiple Choice Questions p.34/51

Question 34
34. Which of the following is NOT correct? (a) Trade allows for specialization. (b) Trade is good for nations. (c) Trade is based on absolute advantage. (d) Trade allows individuals to consume outside of their individual production possibilities curve.

Multiple Choice Questions p.35/51

Question 35

35. If the equation of a production possibility frontier is Meat = 20 4 Potatoes the opportunity cost of 1 kg of Potatoes are (a) 20 kg of Meat (b) 20 kg of Potatoes (c) 4 kg of Meat (d) 4 kg of Potatoes

Multiple Choice Questions p.36/51

Question 36
36. Refer to the table shown. Hours needed kg produced to make 1 kg of: in 20 hours: Meat Potatoes Meat Potatoes Farmer 10 5 2 4 Rancher 4 1 5 20 For the Farmer, the opportunity cost of 1 kg of meat is (c) 2 kg of potatoes. (a) 8 hours of labor. (b) 4 hours of labor. (d) 1/2 kg of potatoes.

Multiple Choice Questions p.37/51

Question 37
37. Refer to the table shown. Hours needed kg produced to make 1 kg of: in 20 hours: Meat Potatoes Meat Potatoes Farmer 10 5 2 4 Rancher 4 1 5 20 The Farmer has an absolute advantage in (a) only meat. (b) only potatoes. (c) both goods. (d) neither good.

Multiple Choice Questions p.38/51

Question 38

38. A countrys consumption possibilities frontier can be outside its production possibilities frontier . . . (a) with trade. (b) by allocating resources differently. (c) by producing a greater variety of goods and services. (d) by lowering unemployment in the country.

Multiple Choice Questions p.39/51

Question 39
39. Trade can make everybody better off because it ... (a) leads to interdependence. (b) increases labor costs. (c) allows people to specialize according to comparative advantage. (d) reduces absolute costs of production.

Multiple Choice Questions p.40/51

Question 40

40. If this is the production possibility frontier of country Blue, what is the opportunity cost of one kg sh?
Fish

3 2 1 0 0 1 2 3 4 Meat Blue

(a) 1/2 kg meat (b) 1 kg meat (c) 2 kg meat (d) 4 kg meat

Multiple Choice Questions p.41/51

Question 41
41. Who has an absolute advantage in the production of sh?
Fish

4 3 2 1 0 0 1 2 3 4 Meat Blue Red

(a) Red (b) Blue

(c) both, Red and Blue

(d) neither Red no Blue

Multiple Choice Questions p.42/51

Question 42
42. Who has an comparative advantage in the production of sh?
Fish

4 3 2 1 0 0 1 2 3 4 Meat Blue Red

(a) Red (b) Blue

(c) both, Red and Blue

(d) neither Red no Blue

Multiple Choice Questions p.43/51

Question 43
43. Who has an comparative advantage in the production of sh?
Fish

4 3 2 1 0 0 1 2 3 4 Meat Blue Red

(a) Red (b) Blue

(c) both, Red and Blue

(d) neither Red no Blue

Multiple Choice Questions p.44/51

Question 44
44. Refer to the tables shown.
Hours needed to Amount produced make one unit of: in 2400 hours: Cars U.S. Japan 40 50 Airplanes 160 150 Cars 60 48 Airplanes 15 16

The opportunity cost of 1 car for Japan is (a) 4 airplanes. (b) 3 airplanes. (c) 1/3 airplane. (d) 1/4 airplane.

Multiple Choice Questions p.45/51

Question 45
45. Refer to the tables shown.
Hours needed to Amount produced make one unit of: in 2400 hours: Cars U.S. Japan 40 50 Airplanes 160 150 Cars 60 48 Airplanes 15 16

The opportunity cost of 1 airplane for Japan is (a) 4 cars. (b) 3 cars. (c) 1/3 car. (d) 1/4 car.

Multiple Choice Questions p.46/51

Question 46
46. Refer to the tables shown.
Hours needed to Amount produced make one unit of: in 2400 hours: Cars U.S. Japan 40 50 Airplanes 160 150 Cars 60 48 Airplanes 15 16

The opportunity cost of 1 airplane for the U.S. is (a) 4 cars. (b) 3 cars. (c) 1/3 car. (d) 1/4 car.

Multiple Choice Questions p.47/51

Question 47
47. Refer to the tables shown.
Hours needed to Amount produced make one unit of: in 2400 hours: Cars Airplanes Cars Airplanes U.S. 40 160 60 15 Japan 50 150 48 16 The U.S. has a comparative advantage in . . . , and Japan has a comparative advantage in . . . (a) airplanes, airplanes (b) cars, airplanes (c) airplanes, cars (d) neither good, cars

Multiple Choice Questions p.48/51

Question 48
48. Absolute advantage is found by (a) comparing opportunity costs. (b) calculating the dollar cost of production. (c) comparing the productivity of one nation to that of another. (d) rst determining which country has a comparative advantage.

Multiple Choice Questions p.49/51

Question 49
49. A production possibilities frontier will be linear and not bowed out if (a) no tradeoffs exist.

(b) the tradeoff between the two goods is always at a constant rate. (c) unemployment is zero. (d) resources are allocated efciently.

Multiple Choice Questions p.50/51

Question 50
50. Trade is based on (a) absolute advantage. (b) comparative advantage. (c) production costs. (d) relative dollar prices.

Multiple Choice Questions p.51/51