Questions from Previous Versions of Quiz 1
1. Using human knowledge to apply energy to materials, thereby making the materials more
valuable in form, location, time when used, or possession (ownership) is most broadly
characterized as: (a) technology. (b) production. (c) commerce. (d) demand and supply. (e)
2. An economic system is economically efficient if and only if: (a) economic inequity has been
eliminated. (b) any gains to someone through some possible rearrangement of goods or resources
would necessitate losses on the part of someone else. (c) more output could be produced at lower
cost. (d) maximum net costs are incurred while generating a specific amount of total social
3. Scarcity would cease to exist and the study of economics would be unnecessary if: (a) capitalism
was replaced by socialism. (b) everyone could have as much as they would like of everything
they could imagine ever wanting. (c) people stopped being so greedy. (d) income was
redistributed so that people all over the world had equal amounts of wealth. (e) foreign
dictatorships became more democratic.
4. Driving a truckload of oranges from Florida to New York is a form of production if and only if:
(a) oranges cannot be grown in New York. (b) the oranges are more highly valued in New York
than if they were sold in Florida. (c) New Yorkers produce something to ship to Florida in
exchange for the oranges. (d) New Yorkers drink Florida orange juice. (e) transportation costs
do not exceed the price of the oranges in Florida.
5. Economists are very likely to be unanimously skeptical when some non-economist sincerely tries
to argue that: (a) something (e.g., the Mona Lisa? love? a rare antique? life? a baby’s smile?) is
priceless. (b) society at large should provide charity to poor people. (c) tax hikes that eliminate a
federal deficit will stabilize the economy. (d) capital punishment (i.e., legal executions) will
reduce crime rates. (e) women should be paid equal wages for equal work.
6. The increases in value as natural resources are transformed into more productive forms, such as
buildings or machinery, reflect: (a) investment in physical capital. (b) new infrastructure. (c)
technological advances. (d) human capital accumulation. (e) incremental entrepreneurial assets.
7. The federal “Clunkers for Cash” program paid $4,500 each from the U.S. Treasury for older “gas
hog” clunkers traded-in more fuel efficient new cars, but required recycling all such subsidized
“clunkers.” This program was intended to stimulate the U.S. auto industry and reduce auto
emissions, but what these clunkers were worth before this program and the scrap vale of metal
and other materials generated by recycling is, in economic terms: (a) deficit spending. (b)
depreciation. (c) negative capitalization. (d) welfare spending. (e) depletion.
8. Broad categories of economic resources do not include: (a) financial capital, such as stocks,
bonds, or money. (b) human labor. (c) all the natural resources that economists classify as land.
(d) entrepreneurial talent. (e) physical capital, such as buildings and equipment.
9. By definition, production occurs whenever: (a) materials become more valuable because people
use knowledge or technology to apply energy to alter the materials in form, place, time, or
ownership. (b) entrepreneurs make profits. (c) spending on consumer goods is less than people’s
total income. (d) land, labor, and capital are combined. (e) government collects taxes.
10. Stocks and bonds, funds in bank accounts, cash, paper titles to boats or cars or other vehicles,
and deeds to real estate are all examples of: (a) national income. (b) debits on balance sheets. (c)
financial capital. (d) net investment. (e) economic capital.
11. Standard economic models of human behavior are least likely to assume that most people’s
decisions are: (a) motivated by self interest. (b) time consistent. (c) based in humanitarianism. (d)
rational. (e) forward looking.
12. The various ways resources can be combined to produce goods are collectively known as: (a)
blue prints. (b) input menus. (c) production plans. (d) technologies. (e) output menus.
13. In his Theory of Moral Sentiments (1759), Adam Smith asserted that human behavior is driven
primarily by self interest, citing as evidence the fact that people tend to be far more focused on:
(a) their own homes than on the state of their neighborhoods. (b) the short run than on the long
run. (c) trivial gossip instead of crucial government policies. (d) minor local news than on major
global trends. (e) relatively minor personal ups-and-downs than about major disasters to
14. In economic terms, few goods are so available that people can costlessly have all they want.
However, you can enjoy gazing at gorgeous scenery without diminishing its beauty for other
sightseers or inhale as much air of the current quality as you choose. Economists categorize such
costless goods as: (a) free goods. (b) bountiful goods. (c) surplus goods. (d) natural resources. (e)
15. If more corn can now be produced from fixed amounts of land, labor, and capital than was
previously possible, then: (a) new capital has been accumulated. (b) technology has improved.
(c) industrial entropy has been reduced. (d) per capita U.S. income has increased. (e) gross
investment has exceeded the rate of depreciation.
16. Economists categorize an activity (an item or a behavior) as, respectively, either a good or a bad
depending on whether: (a) the activity generates profits or losses for the producer. (b) the total
benefits of the activity exceed or are less than the total cost. (c) people enjoy the availability of
the current level of the activity. (d) the benefits of the activity outweigh the production costs. (e)
small increments of the activity tend to increase or decrease human happiness.
17. Economists expect individuals to increase any specific behavior, including activities as varied as
working, eating fudge, playing video games, exercising, kissing a significant other, studying, or
watching TV, whenever the individual perceives that the: (a) activity is both enjoyable and legal.
(b) expected subjective personal benefits from additional small increments of the activity exceed
the expected subjective personal sacrifice entailed in expanding the activity slightly. (c) activity
increases the individual’s monetary income or wealth. (d) total rewards from the activity exceed
the total rewards derived from some other activity. (e) activity will benefit the individual and
harm no other person.
18. Economics as a science is most concerned with: (a) human choices and their consequences. (b)
mathematical formulas to calculate profit. (c) how government agencies price goods and
services. (d) wealth accumulated by private enterprise.
19. Examples of opportunity costs that you might or will have incurred would include: (a) severe
injuries suffered in an accident because you failed to buckle up. (b) the income you could earn if
you weren’t in school. (c) time spent studying economics instead of studying for a calculus exam
scheduled for tomorrow. (d) failing out of school because you partied too much this semester. (e)
All of the above.
20. An example of a positive scientific statement would be: (a) most Americans are too fat. (b) men
shouldn't be nurses. (c) justice requires passage of an Equal Rights Amendment. (d) vegetarians live
longer than people who eat fried chicken. (e) people shouldn't be greedy.
21. If decreasing the abundance of an item would boost human happiness, the item is an economic:
(a) surplus good. (b) free good. (c) excess. (d) bad. (e) negativity.
22. The behavior on the following list least responsive to relative prices serving primarily as
incentives would be: (a) Marcia, a status-seeking social climber, turning down Wayne’s requests
for dates after seeing tiny numbers on his pay stub. (b) Bob cautiously driving the speed limit
because he is afraid of a sixth (and final) speeding ticket (c) soaring prices for pickled chicken
feet inducing Arkansas chicken breeders to boost output. (d) Carla flunking economics because
instead of studying an extra three hours, she partied and woke up with a hangover. (e) Marcia
reheating burritos for dinner because refried beans are cheaper than steak.
23. The idea that costs must eventually increase faster than output when any society expands any
specific type of output follows logically from the law of: (a) diminishing returns. (b) increasing
returns to scale. (c) rising expectations. (d) supply and demand. (e) rational consequences.
24. The knowledge embodied in economic capital and the “recipes” people use to combine energy,
materials, and other resources so that production occurs are commonly referred to as: (a)
capitalism. (b) the production function. (c) materialism. (d) technology. (e) the economic model.
25. The three major normative macroeconomic goals about which there is a reasonable consensus do
not include: (a) high levels of employment and low levels of unemployment. (b) a reasonably
stable price level. (c) balanced international trade. (d) sustained and vigorous economic growth.
26. Resources are limited but human wants appear relatively unlimited, which yields the basic
economic problem of: (a) shortages. (b) allocative inefficiency. (c) competition. (d) scarcity. (e)
27. A negative relationship is most likely to exist between: (a) GPA and time spent studying. (b)
work effort and happiness. (c) a car’s price and miles on its odometer. (d) cholesterol levels and
ingestion of fast food. (e) brainpower and musclepower.
28. Economic production does not occur directly when: (a) Starbuck’s customers who buy double
lattes receive a “free” cappuccino. (b) emission-belching gas hogs traded in for $4500 under a
federal “Cash for Clunkers” program become $200 lumps of scrap even though most were
actually worth more than $1,000 prior to being crushed because of legally-mandated recycling.
(c) students cramming for economics quizzes become more informed voters. (d) fire fighters
extinguish a forest fire before it devastates houses along the Pacific Coast Highway. (e) a kind
friend helps a drunk sophomore find her room after a wild Saturday night party.
29. The most clearly normative of the following statements would be that: (a) less federal legislation
is likely to be enacted if the U.S. President and the majority of senators and representatives in
Congress belong to different parties. (b) representative democracy is more stable, more efficient,
and more equitable than totalitarian government. (c) the majority of Americans today favor the
presidential candidate of the Democratic Party. (d) Republican control of the Congress has
historically yielded more rapid economic growth than when Democrats controlled Congress.
30. Standard economic models assume that: (a) human beings want more of everything. (b) a
resource that is unlimited costs nothing. (c) all human beings want more of something. (d) the
best things in life are free. (e) anything people want involves a positive economic cost.
31. The most clearly scientific and positive of the following statements would be that: (a) capitalism
is morally superior to socialism. (b) the American invasion of Iraq has been a catastrophe. (c)
union leaders and business managers make bargains that cheat stockholders, workers and
customers. (d) women don’t make good leaders. (e) trade barriers tend to reduce the economic
prosperity of a country.
32. The economic profits realized from organizing production, taking risks, bearing uncertainty, and
innovating are rewards to: (a) corporate managers. (b) astute financial investors. (c) corporate
stockholders. (d) creative inventors. (e) entrepreneurs.
33. The idea that the simplest workable theory is also the best is called: (a) the scientific method. (b)
simple-mindedness. (c) hypothesis testing. (d) positive analytics. (e) Occam's razor.
34. Using knowledge and/or technology to apply energy to alter materials, thereby making the
materials more valuable is: (a) production. (b) demand. (c) a complete cure for scarcity. (d)
35. Distributive inefficiency exists when: (a) people are poor because they don’t work very hard. (b)
a tiny percentage of the population controls most of the wealth and income in a country. (c)
redistributing income would enable a country to produce more. (d) a country fails to produce the
feasible mix of goods that people desire. (e) it is possible for all parties to a potential exchange to
gain, but the exchange does not occur.
36. The standard economic assumption that all human beings are ultimately insatiable is
synonymous with the notion that: (a) the best things in life are free. (b) people who have more
money tend to be happier than people who have less money. (c) a resource that is unlimited costs
nothing. (d) even though people may become sated in consuming a particular good as they
consume more and more of that good, all human beings ultimately want more of something. (e)
“there ain’t no such thing as a free lunch” [TANSTAAFL].
37. Commonly agreed-upon normative goals of macroeconomic policy do not include: (a) high
employment. (b) price-level stability. (c) equitable distributions of wealth. (d) economic growth.
38. Opportunity costs are the values of the: (a) exorbitant profits made by greedy entrepreneurs. (b)
monetary costs of goods and services. (c) best alternatives sacrificed when choices are made. (d)
minimal budgets of welfare families. (e) hidden charges passed on to consumers.
39. Economics professors would attribute students’ higher rates of attendance on days when
examinations are administered to the relatively: (a) intensified desires to learn valuable material.
(b) higher opportunity costs of missing class relative to other scheduled class meetings. (c)
irrational exuberance on days when exams are not administered. (d) increased desires to
accumulate human capital. (e) pressure from peers and parents for higher academic performance.
40. Allocative inefficiency is most obviously a problem when: (a) the goods produced are
inconsistent with consumer preferences, given the production possibilities that are available. (b)
limited resources cannot accommodate unlimited human wants. (c) a society produces fewer
necessities than luxury goods. (d) foreign competition causes American workers to lose their
jobs. (e) more resources are used to produce services than to produce commodities.
41. A positive relationship is most likely to exist, on average, between: (a) student consumption of
alcohol and grade point average. (b) exercise and physical health. (c) horsepower of a car’s
engine and miles per gallon. (d) age and measured intelligence quotient. (e) level of education
and consumption of fast food.
42. Deporting all illegal aliens from the United States would be most likely to: (a) increase the
incomes of well educated Americans. (b) decrease the prices of most goods and services in the
United States. (c) increase the cost of food for UNC students. (d) decrease the incomes of
relatively unskilled American workers. (e) increase the literacy of average American citizens.
43. The most clearly normative of the following statements would be that: (a) greater equality in the
income distribution tends to be associated with greater political stability. (b) Democrats are more
likely than Republicans to favor the death penalty. (c) deporting all illegal aliens would increase
American citizens’ per capita incomes. (d) economic efficiency should be emphasized more and
economic equity should be deemphasized. (e) slavery is more widespread in the world today than
at any previous time in human history.
44. When productive resources are employed efficiently: (a) profit is maximized because prices most
greatly exceed production costs for current outputs. (b) domestic production exceeds the value of
foreign output. (c) the value of output cannot be reduced by redistributing resources from lower
priced goods to higher priced goods. (d) equity in the distribution of income and wealth is
assured. (e) opportunity costs are at their minimums in the production of all goods.
45. Macroeconomics focuses primarily on such things as: (a) economy-wide aggregate variables
such as the level of national income and the rate of unemployment. (b) decisions individuals and
firms make when prices change. (c) resource usage and technology bases of firms. (d) taxing and
spending decisions made by local politicians. (e) movements in the prices of specific products.
46. Average men are innately more perceptive than average women in ascertaining people’s moods
and predicting behavior, while average women typically have relatively better depth perception
and intrinsically more accurate geometric intuition. The preceding statement is: (a) a good
explanation for wage gaps between men and women. (b) a normative value judgment. (c) a
consequence of the dominance of men in financial and political activities. (d) definitely
culturally biased. (e) a positive scientific statement.
47. Examples of production would not include: (a) using canned chocolate icing to decorate a cake
made with “store-bought” cake mix. (b) studying for an economics quiz. (c) being caught in a
long traffic jam caused by a car wreck. (d) watering roses and petunias during a drought. (e)
exercising and dieting to drop a few pounds and tone your body.
48. When people sincerely refer to something as "priceless", they most likely mean that it is: (a)
almost meaningless to name a monetary price because its opportunity cost is so high. (b)
worthless junk on which they place no value. (c) irreplaceable by something they view as even
more valuable. (d) valued for aesthetic rather than practical reasons. (e) exchangeable only for
something someone else regards as "priceless."
49. When people develop expertise by dividing up the tasks encountered in major productive
activities such as manufacturing a plane or making a movie, one of the most likely results is: (a)
political instability caused by unavoidable frictions between rich nations and poor nations. (b)
increased poverty for workers at the bottom of the job ladder. (c) rapid evolution from capitalism
towards a socialist form of government. (d) broadly distributed gains from specialized
production and trade. (e) decreases in average lifespans.
50. Economic scarcity is pervasive, which makes choices necessary. Consequently, rationally
optimal decisions consistent with the decision makers’ goals hinge on tradeoffs that reflect: (a)
maximizing individual self interests. (b) opportunity costs. (c) minimizing economic inequity. (d)
competitive economic behavior. (e) cooperation to minimize human greed.
51. Of the following words, the term most synonymous with the phrase “factor of production” is: (a)
technology. (b) innovation. (c) entrepreneur. (d) capital. (e) resource.
52. Economic models are most commonly based on: (a) specification of all interdependencies
between all the relevant variables that might interact. (b) “other things equal” assumptions. (c)
equations that ensure maximum financial profits. (d) computer simulations of behavior.
53. Examples of economic capital would not include a: (a) share of stock in Google. (b) room in
Carroll Hall. (c) button on the copying machine that produced this quiz. (d) stereo in a rental car.
(e) wooden tee in Tiger Woods’ golf bag.
54. When considering current events and issues, economists and the general public appear to
disagree relatively the most about: (a) what to do about the War in Iraq. (b) whether Democrats
or Republicans should win the next election. (c) the relative costs and benefits of freer
international trade versus using import tariffs and quotas to protect American jobs from
“outsourcing.” (d) such environmental issues as global warming. (e) the optimal size of
55. Disagreements among economists about economic policies most commonly arise from
differences in their: (a) political ideologies. (b) access to data about policy-relevant variables. (c)
value judgments. (d) definitions of economic efficiency. (e) graduate school education.
56. After drivers who are trying to leave a crowded airport shift between traffic lanes until it seems
reasonable to expect all exit lines to be equally time-consuming, economists characterize the
result as an example of economic: (a) equilibrium. (b) balance. (c) tradeoffs. (d) integration. (e)
57. Global warming, litter, and pollution are all examples of: (a) produced goods. (b) byproducts. (c)
technological spin-offs. (d) errors in judgment. (e) economic bads.
58. Examples of scientifically positive statements would include the assertion that: (a) executing
jaywalkers and jailing atheists would increase the morality of average Americans. (b) violent
criminal behavior and racial prejudice result from dysfunctional parenting. (c) distributions of
income and wealth should be determined by personal productivity. (d) Child Labor Laws should
be abolished because they increase rates of juvenile delinquency. (e) requests for trans-species
surgical reassignment are positively related to the average monthly temperature.
59. Maximization of the total value of output from a fixed amount of resources yields: (a)
opportunity cost. (b) economic efficiency. (c) potential profitability. (d) comparative advantage.
60. The nature and origins of hardships faced by the families of U.S. workers whose jobs are being
“outsourced” to foreign countries where wage rates are significantly lower than in the U.S. is
most akin to the hardships faced by American families that: (a) experienced job losses by family
breadwinners during the Great Depression because average money wages fell by roughly 25%
while output prices and the average “cost-of-living” fell by roughly one-third. (b) were
dispossessed by greedy Yankee “carpetbaggers” from the vast plantations they had owned before
the Civil War. (c) immigrated into the U.S. as political refugees after military coups in their
home countries. (d) had breadwinners drafted into the military and paid roughly $20 per month
during World War II. (e) were forced to leave family farms between 1800 and today when
technological advances increased agricultural productivity enormously, thereby dramatically
driving down the relative incomes of farmers.
61. Every society must answer questions about “What?”, “How?”, and “for Whom?” because of the
existence of: (a) scarcity. (b) government. (c) biological needs and urges. (d) excessive rates of
population growth. (e) market capitalism.
62. An economic system in which people exchange goods or resources directly with other people for
other goods or resources without using money as a common denominator relies relatively heavily
on: (a) national self sufficiency (b) specialization. (c) divisions of labor. (d) barter. (e)
international cooperation and trade.
63. Using knowledge or technology to apply energy to make materials more valuable is known as:
(a) economic profit. (b) innovation. (c) servicing. (d) production. (e) commodification.
64. A system is economically efficient if and only if: (a) maximum net costs are incurred while
generating a specific amount of total social benefits. (b) more output could be produced at lower
cost. (c) any potential rearrangement of existing goods or resources that might yield gains to
anyone would necessitate losses to someone else. (d) economic inequity has been eliminated. (e)
all firms have succeeded in maximizing their economic profits.
65. Agricultural productivity in colonial Massachusetts soared when Native Americans showed
Pilgrims how crops grow more vigorously and faster if rotten fish are used to fertilize crops
during planting. For the Pilgrims, this new knowledge was an example of: (a) comparative
advantage. (b) technological progress. (c) gains from specialization. (d) geographic adaptation.
(e) economies of scale.
66. A family’s newly constructed home can generate the service of shelter across many years, so
from a macroeconomic perspective, it is most reasonably categorized as: (a) economic capital.
(b) social infrastructure. (c) market capitalization. (d) a financial investment. (e) a fixed cost
67. According to Occam's razor, the best theories are: (a) the most logical and complex. (b) the most
accurate mirrors of every aspect of reality. (c) easily proven if the scientist uses mathematics
appropriately. (d) the simplest possible workable theories. (e) absolutely free of error.
68. An example of a positive scientific statement would be that college graduates who: (a) make
higher incomes than high school drop outs deserve this higher income. (b) charge victims of
hurricanes and other natural disasters outrageous prices should be shot. (c) are women should be
kept barefoot, pregnant, and in the kitchen. (d) have brown eyes have higher incomes than those
with blue eyes. (e) majored in art are more attuned to the true needs of other people than business
69. Changes in relative prices facilitate allocative efficiency by operating as a rationing mechanism
when: (a) Ken and Barbie postpone their wedding because they both lost their jobs during a
recession. (b) political instability in the Middle East increases gasoline prices, causing new car
buyers to buy fuel-efficient hybrids instead of gas-guzzlers. (c) poor people cannot afford plastic
surgery. (d) the price of a corporate stock falls after auditors discover that corporate executives
have been falsifying the firm’s accounting records. (e) technological advances reduce prices for
computer chips and encourage the development of new consumer electronic products.
70. Consider the many possible goods currently producible in the United States, given our available
technologies and resources. If we produced only cat litter and razor blades, there would be a
failure to achieve: (a) distributive efficiency. (b) the circular flow of income. (c) allocative
efficiency. (d) representative democracy. (e) productive efficiency.
71. Economic efficiency requires that, relative to the other goods that different individuals might
consume, all goods must be owned and/or used by the people who value them relatively the
most. This principle is known as: (a) allocative efficiency. (b) productive efficiency. (c)
distributive efficiency. (d) technological efficiency. (e) global efficiency.
72. Economy-wide efficiency requires both allocative and technical efficiency in production and: (a)
equity in the distribution of national income. (b) biological efficiency, in that people's basic
needs must be met. (c) political efficiency, meaning that the votes of the political majority must
rule. (d) distributive efficiency, meaning that people’s purchases must be compatible with their
relative consumer preferences.
73. Examples of normative statements would not include assertions that: (a) the death penalty should
be abolished. (b) Mel Gibson’s racial and ethnic slurs are despicable. (c) women should be paid
just as much as men if they do the same work. (d) the Electoral College is obsolete and should be
abolished. (e) AIDS and HIV are transmitted by sexual contact.
74. People who seek profits and bear risks and uncertainty when they combine land, labor and
capital in productive ways are: (a) socialists. (b) sole proprietors. (c) professional managers. (d)
entrepreneurs. (e) bureaucratic capitalists.
75. The functions of prices do not include the use of relative prices as: (a) rationing devices. (b)
mediums of exchange. (c) information. (d) incentives.
76. Productive (technical) efficiency requires maximization of the: (a) opportunity cost of a given
value of output. (b) resources used to produce a given value of output. (c) value of output
produced for a given total cost. (d) satisfaction attainable from fixed consumer budgets. (e)
amounts of goods yielding fixed total satisfaction.
77. Marrying the one you love involves opportunity costs, primarily because: (a) being married
restricts your freedom to marry someone else, and you must also consider making someone else
happy when making decisions that affect both of you. (b) two can live as cheaply as one. (c)
having children is unavoidable and reduces the time you could work for pay. (d) people who
remain single their entire lives are often ostracized. (e) income taxes on single people are heavier
than on married couples.
78. Net economic investment for the economy as a whole occurs when: (a) Cognitive-Slippage pays
the Chaotic Cab Co. $11,000 for a fully depreciated taxi with 477,164 miles on its odometer. (b)
Punque Roque, a startup sand-and-gravel pit that launched its IPO (initial public offering) today,
sells Jester 100 shares of common stock for $10,000. (c) romance novelist Portia Palpitates buys
a $4 ream of paper from Staples to print out the first draft of her latest masterpiece. (d) Ima Grate
Stoodent, a sophomore, signs a one-year lease on a used double-wide trailer. (e) Microsoft buys
all outstanding IBM stock for $20 billion in a hostile takeover of the former computer monolith.
79. People all over the world confront the problem of scarcity at all times because: (a) greedy
capitalist monopolies underproduce goods. (b) advertising stimulates artificial wants that far
exceed what people truly need to survive. (c) international markets are plagued by flawed
distribution. (d) opportunity costs are too high for certain types of goods to be profitable.(e)
limited resources and time preclude producing all the goods people want.
80. The closest to being a free good of the following would be: (a) a scholarship for a brilliant but
impoverished student. (b) free “meals on wheels” programs for the aged and infirm. (c) a
winning lottery ticket you found on the sidewalk. (d) hugs from a friend you hadn’t seen in
weeks. (e) breathable air of the current atmospheric quality.
81. The first and most important test a positive economic theory must pass to be acceptable entails
an evaluation of how well it conforms to: (a) how things actually work. (b) common sense. (c)
normative economics. (d) positive economics. (e) Occam's razor.
82. Opportunity cost is defined as the value of the: (a) best alternative that must be surrendered when
a decision is made. (b) sum of all alternative choices when a decision is made. (c) monetary cost
of making a decision. (d) cost incurred when one ignores alternative choices.
83. Choosing NOT to spend the extra money needed to improve the safety of a dangerous traffic
intersection is an example of: (a) macroeconomic policy decisions. (b) positive economics. (c)
how society assigns prices to human lives. (d) economic inefficiency. (e) comparative advantage.
84. Economic inefficiency is most obviously a problem when: (a) Elmer hates Alpo but eats it so he
can afford a cheap daily bottle of Gertrude's Hi-Test Wine. (b) Emma forgot to turn off the water
and it runs down the street into a storm sewer six blocks away. (c) Mr. & Mrs. Smurf are
dismayed when their son Clyde, a soap opera addict, flunks out of school. (d) Elvis sings 10
times better and drives a truck twice as well as Ralph, but both sing and drive because no trade
occurs. (e) Orpheus and Eurydice fall in love and live happily ever after.
85. Economic efficiency is most clearly enhanced when: (a) a new Wal-Mart opens in a rural
community. (b) less-developed countries grow faster than more developed countries. (c) taxes
are collected in accord with the principle of progressivity. (d) India increases its production of
luxury automobiles. (e) Chandra and Niki trade items in their school lunches about one-third of
86. Occam’s razor refers to the idea that when evaluating a theory: (a) good theory explains the
phenomenon as simply as possible, but not moreso. (b) complexity is unavoidable to ensure that
correct answers are reached. (c) conformity with reality doesn’t matter. (d) every detail must be
considered explicitly to explain any situation in a scientifically complete manner. (e) the end
justifies the means.
87. Normative statements would include assertions that: (a) harsh prison terms and capital
punishment decrease rates of violent crime. (b) on average, Americans are more prosperous
when no single political party controls the presidency, the US Senate, and the House of
Representatives. (c) the entire cosmos, including our universe, revolves around the earth. (d)
more effective teachers should be paid more, and less effective teachers should be paid less. (e)
college students who drink a lot of beer are likely to have lower GPAs.
88. Macroeconomic theory would be least relevant in analyzing the consequences of: (a) alternative
ways of funding deficits in international trade. (b) U.S. federal budget deficits. (c) changes in the
composition of consumer items purchased by middle-income families. (d) deficit spending by the
89. A good is considered scarce whenever people: (a) lack the funds needed to ensure their survival.
(b) need to consume large amounts of it. (c) want more of it than the amounts available if it were
free. (d) can have as much as they want without paying for it. (e) would benefit from its
90. According to the view of humans as Homo economicus, individuals: (a) who have higher
incomes are more satisfied than poor people. (b) try to maximize their personal satisfaction
through self-interested behavior. (c) should learn to get by with the resources that are available.
(d) have fewer needs as they become self-actualized. (e) can easily achieve states of complete
91. Examples of economic capital would include: (a) a garbage truck. (b) stock in Google. (c) a
college diploma. (d) U.S. Treasury bonds. (e) deeded rights to harvest an old-growth forest.
92. Economic profits realized from organizing production, taking risks, bearing uncertainty, and
innovating new products and technologies are rewards to: (a) entrepreneurs. (b) astute financial
investors. (c) corporate managers. (d) heirs to great fortunes. (e) creative inventors.
93. Widely accepted normative microeconomic goals include: (a) balanced government budgets and
a surplus in international payments. (b) job security and equality in the distribution of income.
(c) efficiency, freedom, and equity. (d) full employment and balanced economic growth. (e) a
stable price level and maximum purchasing power.
94. Economics as a science is LEAST concerned with how people: (a) try to make themselves
happy. (b) use resources to try to satisfy their wants. (c) adjust to changes in government
policies. (d) morally justify cheating on their income taxes.
95. The basic economic questions that every society must address include: (a) what, how, and for
whom. (b) where, when, and why. (c) which, why, and what. (d) when, how, and which. (e) why,
which, and when.
96. Every society confronts the problem of scarcity because: (a) human wants are virtually unlimited
relative to the resources available. (b) resources, technology, and human potential are unlimited.
(c) most people can't afford the goods they need. (d) human beings become satiated as
consumption increases. (e) government bureaucracies make production inefficient.
97. Production broadly occurs when: (a) a corporation makes a profit. (b) weather disperses
economic bads into the environment. (c) resources are combined in a balanced fashion. (d)
knowledge is used to apply energy to make materials more valuable. (e) a dieter sneakily enjoys
a hot fudge sundae.
98. Dividing monetary prices by each other yields: (a) absolute prices. (b) subjective prices. (c)
nominal prices. (d) relative prices. (e) transaction prices.
99. Money is a form of: (a) basic economic resource. (b) the capital stock. (c) financial capital. (d)
100. The basic categories for economic resources are: (a) matter, energy, technology, and information.
(b) wages, rent, interest, and profits. (c) land, labor, capital, entrepreneurship, and human capital.
(d) machinery, energy, workers, and government.
101. Economic capital refers to: (a) money and other financial assets. (b) buildings, machinery, and
equipment. (c) net investment minus depreciation. (d) corporate stocks and bonds.
102. Purchases of newly issued stocks and bonds: (a) merely increase total federal tax revenues. (b)
decrease the profitability of economic capital. (c) are not economic investments because they are
merely mechanisms by which people save. (d) appreciate and cause increases in the amounts of
goods people can buy. (e) are forms of new economic capital.
103. Anything that adds to human happiness is an economic: (a) commodity. (b) good. (c) factor of
production. (d) output. (e) resource.
104. For a given income distribution, economy-wide efficiency would ensure a: (a) distribution of
income that is equal. (b) minimal level of pollution. (c) maximum level of individual identity. (d)
maximum value for total production.
105. Calculating the cost of college education as only the costs of tuition, books, materials, and room
and board: (a) overstates the economic cost of a college education. (b) accurately measures the
economic costs of college. (c) understates the economic cost of a college education. (d)
understates the accounting cost of a college education.
106. The opportunity cost of buying a new car is the: (a) final dollar price one pays for it. (b) cost of
giving up the old car. (c) sticker price minus negotiated discounts. (d) cost of what is given up in
order to buy that car.
107. The payments to entrepreneurs are: (a) profits arising from risk-taking, innovating new goods
and technologies, and organizing production. (b) rental payments from extensive land holdings.
(c) interest from loaning money. (d) interest because of wise investing.
108. Providing new public housing "rent-free" to the poor: (a) makes public housing a free good. (b)
involves no opportunity cost. (c) is the only way to shelter the homeless. (d) merely transfers
costs from one group to another.
109. As an area of study, economics is most broadly focused on: (a) class, status, and power
relationships. (b) government policies to cure poverty. (c) scarcity and decision making. (d)
financial and accounting relationships. (e) profit-maximizing business strategies.
110. Economic efficiency requires that the: (a) output is minimized subject to a given cost. (b)
production cost of a given value of output is minimized. (c) cost is maximized subject to an
output constraint. (d) total dollar value of output exceeds its monetary cost.
111. Which of the following is a positive scientific statement? (a) The Miss America contest is
tasteless and sexist. (b) The moon is made of green cheese. (c) Microsoft’s record of innovation
justifies Bill Gates’ incredible wealth. (d) Capitalism enhances people’s wellbeing far more than
socialism does. (e) Policies to replace intense competition with greater cooperation among all
people would yield superior psychological health.
112. Unnecessarily complicated theories violate: (a) common sense. (b) the principle of nonsatiety. (c)
the laws of supply and demand. (d) Occam's razor. (e) hypothesis testing.
113. Economic efficiency is most often enhanced through: (a) free trade or other systems of voluntary
exchange. (b) maximization of opportunity costs. (c) understanding macroeconomics. (d)
common sense instead of theory. (e) intensive investments in public education.
114. Which of the following probably comes closest to being a free good? (a) Unexpected warmth
from the sun in Chicago in January. (b) A hot school lunch provided for a needy student. (c) A
microwave pizza bought with food stamps. (d) Income earned by picking up aluminum cans in
your spare time. (e) A home entertainment system you won for being Southwest Airlines’ 10-
115. New theories evolve into common sense only after they are found to be: (a) accurate and useful
through extensive testing. (b) in conformity with Newtonian mechanics and Occam's razor. (c) to
have very few and unimportant exceptions. (d) verifiable by the Institute for Advanced Studies.
(e) consistent with existing common sense.
116. According to the economic assumption of rationality, people: (a) always behave with perfect
rationality. (b) never behave in random or erratic ways. (c) usually try to behave rationally to
accomplish their goals. (d) foresee perfectly the effects of their actions. (e) who are rational earn
higher incomes than people who are not.
117. Economic efficiency focuses on the issue of: (a) rewarding people based on the productivity of
their labor and other resources.(b) curing inequity. (c) concentrating wealth more completely. (d)
redistribution from rich to poor. (e) maximizing the value of production or minimizing costs.
118. If goods are exchanged and some families gain without worsening any other families' well-being,
then the initial distribution of goods must have been: (a) optimal. (b) inefficient. (c) superior to
the new distribution. (d) inequitable. (e) based on normative objectives, not productivity.
119. Which of the following is a normative economic statement? (a) Most Republicans favor the
death penalty for murderers. (b) Capital punishment actually increases the rates of violent crime.
(c) Most Democrats oppose the death penalty for murderers. (d) Appeals courts reverse most of
the errors from criminal trials, so our court system is fair. (e) Capital punishment actually
decreases murder rates.
120. The erroneous view that economists seldom agree is probably LEAST attributable to the fact that
economists: (a) receive little media coverage when they agree, while disputes about how
economic theory should be translated into policy are widely publicized. (b) often agree in areas
that yield politically unacceptable policies. (c) in government often publicly support politicians
who appoint them, even if a policy makes little economic sense. (d) concentrate on their own
financial interests when giving policy advice.
121. Our society is probably operating inefficiently if: (a) we could grow more pecans by producing
fewer walnuts. (b) asthmatics would gain if all pollution were eliminated. (c) total medical costs
would be lower and people would be healthier if we devoted more resources to preventive health
care. (d) people would use public transportation more and personal vehicles less if bus fares were
122. Landscaping a garbage dump to create a golf course by covering compacted trash with topsoil,
and then planting grass and trees is an example of creating new: (a) capital. (b) land. (c)
employment. (d) economic profits. (e) natural resources.
123. The best example of a positive scientific statement would be: (a) vegetarians are healthier than
people who gorge on candy and fried chicken. (b) most people are too egotistical and greedy. (c)
justice requires ratification of an Equal Rights Amendment. (d) men shouldn't be nurses. (e) first-
degree murderers deserve the death penalty.
124. A society operates efficiently if: (a) the economic system is purely socialistic. (b) every available
resource is used for production. (c) the value of output is maximized, given limited resources. (d)
resources are minimized. (e) capitalism replaces every other allocative mechanism.
125. Many parents ask children to write lists that prioritize “things” they would like Santa to bring for
Christmas. When gifts from parents are positively related to their children’s wants, this “wish
list” approach enhances: (a) economic equity. (b) allocative efficiency. (c) productive efficiency.
(d) distributive efficiency. (e) social tranquility.
126. The law of diminishing returns refers to the increasing: (a) difficulties encountered in expanding
any activity repeatedly. (b) reductions in costs from expanding large scale production. (c)
knowledge about technology that occurs as time passes. (d) rates of utilization of natural
127. The basic economic questions are "What? How?” and, “For Whom?” If we ask, "For Whom?",
we want to know who will: (a) produce the goods. (b) consume the goods. (c) get the profits. (d)
decide what to produce.
128. When people buy something, its opportunity cost is the: (a) monetary price they paid. (b)
enjoyment they get from their purchase. (c) satisfaction they lost by not buying something else.
(d) time they must work to pay their bills.
129. The closest of the following to being a free good would be: (a) affection and support from your
parents. (b) a $100 bill you found after a stiff breeze blew it onto your porch. (c) the second bag
of Fritos you got at a “buy one, get one free” sale. (d) health insurance provided by a firm to all
its employees. (e) rain that waters your lawn in July.
130. The economic term applied to situations in which people want more of a good than is freely
available is: (a) greed. (b) necessity. (c) scarcity. (d) selfishness. (e) shortage.
131. Economic efficiency for society requires that the: (a) opportunity costs of all goods be at their
lowest possible values. (b) maximum possible benefits are obtained for specified costs. (c)
greatest possible net benefits are squeezed from available resources. (d) greatest possible
satisfaction be enjoyed by all consumers given their budgets. (e) All of the above.
132. To be productively efficient, a country must: (a) maximize the satisfaction attainable from its
budget. (b) be concerned only with macroeconomic analysis. (c) concentrate on eliminating
scarcity. (d) maximize the value of output produced from given resources.
133. A positive scientific statement about college life is that: (a) increases in tuition unfairly burden
out-of-state students from poor families. (b) elite colleges admit the wrong students. (c) history
professors and accounting professors deserve the same pay. (d) on average, student’s grades are
negatively related to how much they know about a subject. (e) deans are more moral than
134. Standard economic theory assumes that individuals behave: (a) with charity towards others if
they are especially moral. (b) irrationally when they are in large groups. (c) like home
economists if they are Homo sapiens. (d) purposefully and rationally to maximize their own self
interests. (e) in perfectly predictable ways based primarily on their genetic endowments [nature]
and their social and cultural experiences [nurture].
135. Microeconomic policy goals would include: (a) full employment. (b) general price stability. (c)
economic growth. (d) equity and efficiency. (e) democratic capitalism.
136. A wristwatch is a model of the passage of time because it provides a: (a) simple representation
of a complex process. (b) good example of modern technology. (c) way to coordinate human
activity. (d) unique statement of one's personality.
137. The requirement for overall efficiency that specific goods be used by the people who value
them relatively the most is. (a) economic equity. (b) allocative efficiency. (c) productive
efficiency. (d) distributive efficiency. (e) technical efficiency.
138. Scarcity exists because human wants are: (a) tiny relative to the means available to satisfy them.
(b) heavily influenced by advertising and desires to “keep up with the Joneses.” (c) usually
illegal or immoral. (d) controllable only through brainwashing. (e) virtually unlimited relative to
the productive resources and technologies available.
139. All of the following are free goods EXCEPT the enjoyment people derive from : (a) rain that
cleanses the air and waters our lawns. (b) breathing air of current quality. (c) watching Law and
Order reruns on cable television. (d) sunshine energy that warms the earth.
140. Suppose Michael Jordan buys the Charlotte Bobcats NBA franchise and, expecting an explosion
of sales at his car dealerships, he orders 200 extra new Nissans. From an economic perspective,
his purchase of the Bobcats franchise is: (a) smart marketing strategy. (b) complementary
economic investment. (c) likely to generate economic losses. (d) a financial investment.
141. People must make choices because of the existence of an economic concept called: (a) survival
of the fittest. (b) rivalry. (c) civilization. (d) competition. (e) scarcity.
142. A thing is defined to be scarce whenever: (a) people are willing to sacrifice something else they
value to obtain more units of that particular thing. (b) the thing is necessary for survival. (c) rich
people buy more of it than poor people do. (d) making more of it available requires combining
land, labor, and capital. (e) an entrepreneur can make a profit by producing it.
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