ECON Chapter 1 Review Quiz. 1) Which statement is the best one to complete a short definition of economics? "Economics is the study of:

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1 ECON Chapter 1 Review Quiz 1) Which statement is the best one to complete a short definition of economics? "Economics is the study of: a) profit maximization by businesses." b) the triumph of the capitalistic system over communism. c) monetary transactions. d) the best use of scarce resources. 2) If Ben is rational, when he buys soup he will: a) never donate any cans of soup to the food bank b) always choose the same brand of soup c) always choose the cheapest brand of soup d) choose the brand of soup that offers the most utility in relation to the price 3) Which of the following is not among the dangers encountered when constructing or applying an economic model? a) it may contain irrelevant facts and be more complex than necessary b) it may come to be accepted as "what ought to be" rather than as "what is" c) it may be overly simplified and so be a very poor approximation of the reality it explains d) it may result in a conclusion that is unacceptable to people 4) Which of the following would not be contained in an economic theory? a) predictions that follow from that theory b) definitions that clearly set out the variables included in the model c) statements of the relationships among the variables in the model d) normative statements about the most preferred outcomes 1

2 5) An examination of the issues, causes, and consequences of unemployment is: a) only a microeconomic topic b) only a macroeconomic topic c) both a microeconomic and a microeconomic topic d) neither a microeconomic and a microeconomic topic 6) If one individual decides to consume less beef, there will be little or no effect on beef prices. To argue, therefore, that if all individuals consume less beef there will be little or no effect on beef prices is an example of: a) the post hoc, ergo propter hoc fallacy b) the fallacy of composition c) an oversimplified generalization d) using loaded terminology 7) A consumer with an income of $500 who buys only bread which costs $2 per loaf and milk which costs $5 per jug can buy any of the following combinations except: a) 250 loaves of bread and no milk b) no bread and 100 jugs of milk c) 150 loaves of bread and 50 jugs of milk d) 150 loaves of bread and 40 jugs of milk 8) When a production possibilities curve is drawn, four assumptions are made. Which is not one of those assumptions? a) only two goods are produced b) wants are unlimited c) the economy has both full employment and full production d) the quantities of all resources available to the economy are fixed 2

3 9) Use the following production possibilities table for Nashia Twang, a singer who can use her time and other resources to perform concerts or write new songs. Alternative A B C D E Concerts Songs The opportunity cost of playing one more concert as Twang moves from alternative C to D is: a) 3/20 song per concert b) 3 songs per concert c) 20 songs per concert d) 6 2/3 songs per concert 0) Use the following diagram. If opportunity costs are constant, instead of increasing, the production possibilities curve will be: a) concave to the origin b) convex to the origin c) a downward sloping straight line d) parallel to the horizontal axis 3

4 11) Use the following diagram. The opportunity cost of producing 0B of tractors is: a) 0D of wheat b) 0E of wheat c) ED of wheat d) 0C of tractors 12) From one point to another along the same production possibilities curve: a) resources remain fixed but are reallocated between the production of the two goods b) resources are increased and are reallocated between the two goods c) resources are increased and production of both goods increased d) idle resources are put to work to increase the production of one good Which of the following would cause a nation's production possibilities curve to shift inward toward the origin? a) more people in the labour force b) increased international trade c) rising unemployment of workers d) not replacing capital equipment as it wears out 14) If there is an increase in the resources available within the economy: 4

5 a) more goods and services will be produced in the economy b) the economy will be capable of producing more goods and services c) the standard of living in the economy will rise d) the technological efficiency of the economy will improve 15) The production possibilities curve will shift for all of the following reasons except: a) a reduction in the size of the labour force b) a fall in the employment rate c) a decrease in the amount of capital resources d) a change in technology 16) If an increase in variable A is associated with a decrease in variable B, then we can conclude that A and B are: a) nonlinear b) directly related c) inversely related d) positively related 17) If y is plotted on the vertical axis and x is on the horizontal axis, which of the following is a false statement regarding the equation y = x? a) the vertical intercept is 100 b) the slope is 0.4 c) when x is 20, y is 108 d) the graph is nonlinear 18) Which of the following has a slope of zero at all points? a) a vertical line b) a horizontal line 5

6 c) a curved line d) a straight line 19) Use the following diagram. The graph indicates that price and quantity supplied are: a) positively related b) negatively related c) indirectly related d) nonlinear 6

7 20) Use the following diagram. The linear equation for the function is: a) p = q b) q = p c) p = q d) q = p KEY 1 d 2 d 3 d 4 d 5 c 6 b 7 c 8 b 7

8 9 a 10 c 11 c 12 a 13 d 14 b 15 b 16 c 17 d 18 b 19 a 20 a 8

1. A decrease in unemployment causes the PPF to shift outward (to the right). ANSWER: False

1. A decrease in unemployment causes the PPF to shift outward (to the right). a. True b. False ANSWER: False 2. The law of increasing opportunity cost results from the varying ability of resources to adapt