As a consequence of the condition of scarcity

(TCO 1) As a consequence of the condition of scarcity

there is never enough of anything.

production has to be centrally planned.

things which are plentiful have relatively high prices.

individuals and communities have to make choices from among alternatives.

Question 2. Question :

(TCO 1) The opportunity cost of constructing a new public highway is the

money cost of hiring contractors and construction workers for the new highway.

value of other goods and services that must be sacrificed to construct the new highway.

expected cost of constructing the new highway in a future year.

value of shorter driving times and distances when the new highway is completed.

Question 3. Question :

(TCO 1) A nation can increase its production possibilities by

shifting resources from investment good production to consumer good production.

shifting resources from private goods to public goods.

improving labor productivity.

eliminating discrimination.

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Question 4. Question :

(TCO 1) Which expression is another way of saying “marginal benefit”?

Benefits given up

Unintended gain

Employment benefits

Extra benefit

Question 5. Question :

(TCO 1) The individual who brings together economic resources and assumes the risk of business ventures in a capitalist economy is called the

manager.

entrepreneur.

stockbroker.

banker.

Question 6. Question :

(TCO 1) The Soviet Union economy of the 1980s would best be classified as

a market system.

pure capitalism.

laissez-faire capitalism.

a command system.

Question 7. Question : The simple circular-flow model shows that workers, entrepreneurs, and the owners of land and capital offer their services through

product markets.

resource markets.

employment agencies.

business firms.

Question 8. Question :

(TCO 1) Consumers express self-interest when they

seek the lowest price for a product.

reduce business losses.

collect economic profits.

search for jobs with the highest wages.

Question 9. Question :

(TCO 1) Which is not one of the five fundamental questions that an economy must deal with?

How will the goods and services be produced?

Why should the goods and services be produced?

Who is to receive the goods and services produced in the economy?

In what ways will progress be promoted?

Question 10. Question :

(TCO 1) The major “success indicator” for business managers in command economies like the Soviet Union and China in the past was

the quantity of output.

product quality.

the amount of profits.

worker morale.

Question 11. Question :

(TCO 2) An increase in demand means that

given supply, the price of the product will decline.

the demand curve has shifted to the right.

price has declined and consumers therefore want to purchase more of the product.

the demand curve has shifted to the left.

Question 12. Question :

(TCO 2) At the point where the demand and supply curves intersect

the buying and selling decisions of consumers and producers are inconsistent with one another.

the market is in disequilibrium.

there is neither a surplus nor a shortage of the product.

quantity demanded exceeds quantity supplied.

Question 13. Question :

(TCO 2) Black markets are associated with

price floors and the resulting product surpluses.

price floors and the resulting product shortages.

price ceilings and the resulting product shortages.

price ceilings and the resulting product surpluses.

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Question 14. Question :

(TCO 2) An increase in demand for oil along with a simultaneous increase in supply of oil will

decrease price and increase quantity.

increase price and decrease quantity.

increase quantity, but whether it increases price depends on how much each curve shifts.

increase price, but whether it increases quantity depends on how much each curve shifts.

Question 15. Question :

(TCO 2) If Product Y is an inferior good, a decrease in consumer incomes will

make buyers want to buy less of Product Y.

not affect the sales of Product Y.

shift the demand curve for Product Y to the left.

shift the demand curve for Product Y to the right.

Question 16. Question :

(TCO 2) If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will increase quantity demanded by

20 percent.

0.5 percent.

5 percent.

Question 17. Question :

(TCO 2) Total revenue falls as the price of a good is raised, if the demand for the good is

elastic.

inelastic.

unitary elastic.

perfectly elastic.

Question 18. Question :

(TCO 2) You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than 1. To increase total revenues, you should:

increase the price of the software.

decrease the price of the software.

hold the price of the software constant.

increase the supply of the software.

Question 19. Question :

(TCO 2) A state government wants to increase the taxes on cigarettes to increase tax revenue. This tax would only be effective in raising new tax revenues if the price elasticity of demand is

unity.

elastic.

inelastic.

perfectly elastic.

Question 20. Question :

(TCO 2) When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition

: have elastic demand and students who use financial aid have inelastic demand.

have inelastic demand and students who use financial aid have elastic demand.

view a college education as an inferior good and students who use financial aid view it as a normal good.

view a college education as a normal good and students who use financial aid view it as an inferior good.

Question 21. Question :

(TCO 3) Suppose that you could prepare your own tax return in 15 hours, or you could hire a tax specialist to prepare it for you in two hours. You value your time at $11 an hour. The tax specialist will charge you $55 an hour. The opportunity cost of preparing your own tax return is

$40.

$55.

$110.

$165.

Question 22. Question :

(TCO 3) Economic profits are equal to

total revenues minus fixed costs.

total revenues minus the costs of raw materials.

total revenues minus the opportunity costs of all inputs.

gross profit minus selling and operating expenses.

Question 23. Question :

(TCO 3) The main difference between the short run and the long run is that

firms earn zero profits in the long run.

the long run always refers to a time period of one year or longer.

in the short run, some inputs are fixed.

in the long run, all inputs are fixed.

Question 24. Question :

(TCO 3) The law of diminishing returns only applies in cases where

there is increasing scarcity of factors of production.

the price of extra units of a factor is increasing.

there is at least one fixed factor of production.

capital is a variable input.

Question 25. Question :

(TCO 3) Marginal cost can be defined as the

change in total fixed cost resulting from one more unit of production.

change in total variable cost resulting from one more unit of production.

change in average total cost resulting from one more unit of production.

change in average variable cost resulting from one more unit of production.

Question 26. Question :

(TCO 3) If the price of a fixed factor of production increases by 50 percent, what effect would this have on the marginal-cost schedule facing a firm?

None, because fixed costs do not affect marginal cost.

Marginal cost would increase by 50 percent.

Marginal cost would increase by less than 50 percent.

Marginal cost would increase by more than 50 percent.

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