ECO 365T Wk 1 – Practice Knowledge Check (2021 New)

In deciding whether to study for an economics quiz or go to a concert, one is confronted by the idea(s) of

Multiple Choice

• scarcity and opportunity costs.
• money and real capital.
• complementary economic goals.
• full production.

Which of the following does not foster innovation and technological advance?

Multiple Choice

• competition in markets
• freedom of choice and enterprise
• self-interest and personal rewards
• fear and avoidance of risk

The distinction between microeconomics and macroeconomics is

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• that microeconomics examines the beach, while macroeconomics looks at the sand, individual rocks, and shells, so to speak.
• so clear-cut that every topic can be readily labeled as either macro or micro.
• that microeconomics studies the behavior of individual consumers, workers, and firms, while macroeconomics studies the economy as a whole.
• that microeconomics seeks to obtain an overview, while macroeconomics observes the details of individual components.

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.

Resource Price Per Unit of resource     Techniques (# of Units of Each Resource Required)

A     B     C     D

Labor      $ 2   3     2     1     2

Land       1     2     1     3     1

Capital    4     1     2     2     3

Entrepreneurship    3     1     2     1     1

If the price of labor increases from $2 to $3, then the results of using Technique C will change from an economic

Multiple Choice

• loss of $2 to a loss of $1.
• profit of $2 to a profit of $1.
• profit of $1 to a profit of $2.
• loss of $1 to a loss of $2.

Microeconomics is concerned with

Multiple Choice

• the aggregate or total levels of income, employment, and output.
• a detailed examination of specific economic units that make up the economic system.
• positive economics, but not normative economics.
• establishing an overall view of the operation of the economic system.

Assume the price of product Y (the quantity of which is on the vertical axis) is $15 and the price of product X (the quantity of which is on the horizontal axis) is $3. Also assume that money income is $60. The absolute value of the slope of the resulting budget line is

Multiple Choice

• 5.
• 1/5.
• 4.
• 20.

The simple circular flow model shows that workers and capital owners offer their services to firms through the

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• product markets.
• resource markets.
• money markets.
• financial markets.

The slope of the typical production possibilities curve

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• is positive.
• becomes steeper as one moves southeast along the curve.
• is constant as one moves down the curve.
• becomes flatter as one moves southeast along the curve.

The simple circular flow model shows that

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• households are on the buying side of both product and resource markets.
• businesses are on the selling side of both product and resource markets.
• households are on the selling side of the resource market and on the buying side of the product market.
• businesses are on the buying side of the product market and on the selling side of the resource market.

A well-tested economic theory is often called

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• a hypothesis.
• a prototype.
• a principle.
• an anomaly.

The economic function of profits and losses is to

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• bring about a more equal distribution of income.
• signal that resources should be reallocated.
• eliminate small firms and reduce competition.
• tell government which industries need to be subsidized.

The major virtues of the market system include all of the following, except

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• it promotes an efficient allocation of resources.
• it leads to equality in the distribution of income.
• it provides incentives for greater production and higher incomes.
• it emphasizes the freedom to pursue self-interest.

Specialization and international trade allow a nation to

Multiple Choice

• produce a combination of goods that is beyond (or outside) its production possibilities.
• consume a combination of goods that is beyond (or outside) its production possibilities.
• have an upward-sloping production possibilities curve.
• consume a lot of goods without having to produce any output.

Answer the question on the basis of the data given in the following production possibilities table.

Production Possibilities (Alternatives)

A     B     C     D     E     F

Capital Goods 5     4     3     2     1     0

Consumer Goods    0     5     9     12    14    15

Refer to the table. If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be approximately

Multiple Choice

• 4 units of capital goods.
• 2 units of capital goods.
• 3 units of capital goods.
• 1/3 of a unit of capital goods.

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

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• What will be produced?
• How will the output be produced?
• How will the system accommodate change?
• Who will get the output?

The scientific method is

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• not applicable to economics because economics deals with human beings.
• also known as the economic perspective.
• employed to form hypotheses out of existing laws and theories.
• used by economists and other social scientists, as well as by physical scientists and life scientists, to formulate and test hypotheses.

Which of the following is not considered by economists to be an economic resource?

Multiple Choice

• money
• factory workers
• computers at a retail store.
• a forest

A nation can produce two products: steel and wheat. The table below is the nation’s production possibilities schedule.

Production Possibilities

Product   A     B     C     D     E     F

Steel       0     1     2     3     4     5

Wheat     100  90    75    55    30    0

In moving stepwise from possibility A to B to C … to F, the marginal opportunity cost of a unit of steel in terms of wheat

Multiple Choice

• increases.
• decreases.
• remains constant.
• increases at first, then decreases.

The development of the digital video camera, which replaced film video cameras, is an example of

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• roundabout production.
• derived demand.
• creative destruction.
• specialization.

The market system is an economic system that

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• produces more consumer goods than capital goods.
• produces more capital goods than consumer goods.
• gives private individuals the right to own resources used in production.
• emphasizes the government’s power to control markets and direct economic activity.

The simple circular flow model shows that workers and capital owners offer their services to firms through the

Multiple Choice

• product markets.
• resource markets.
• money markets.
• financial markets.

In deciding whether to study for an economics quiz or go to a concert, one is confronted by the idea(s) of

Multiple Choice

• scarcity and opportunity costs.
• money and real capital.
• complementary economic goals.
• full production.

The simple circular flow model shows that

Multiple Choice

• households are on the buying side of both product and resource markets.
• businesses are on the selling side of both product and resource markets.
• households are on the selling side of the resource market and on the buying side of the product market.
• businesses are on the buying side of the product market and on the selling side of the resource market.

The purpose of the ceteris paribus assumption used in economic analysis is to

Multiple Choice

• avoid making normative statements.
• distinguish macroeconomics from microeconomics.
• make sure that all relevant factors are considered.
• focus on the effect of a single factor on a certain variable.

Households and businesses are

Multiple Choice

• both buyers in the resource market.
• both sellers in the product market.
• sellers in the resource and product markets respectively.
• sellers in the product and resource markets respectively.

The incentive problem under communist central planning refers to the idea that

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• planners had to direct required inputs to each enterprise.
• workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.
• the immediate effect of more investment was less consumption.
• exports had to be equal to imports for a central plan to work.

Specialization and international trade allow a nation to

Multiple Choice

• produce a combination of goods that is beyond (or outside) its production possibilities.
• consume a combination of goods that is beyond (or outside) its production possibilities.
• have an upward-sloping production possibilities curve.
• consume a lot of goods without having to produce any output.

Competition is more likely to exist when

Multiple Choice

• there is easy entry into and exit out of industries.
• a government-issued license is required to set up a firm in an industry.
• the government purchases most goods and services.
• economic power is concentrated among a few large firms.

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.

Resource Price Per Unit of resource     Techniques (# of Units of Each Resource Required)

A     B     C     D

Labor      $ 2   3     2     1     2

Land       1     2     1     3     1

Capital    4     1     2     2     3

Entrepreneurship    3     1     2     1     1

If the price of labor increases from $2 to $3, then the results of using Technique C will change from an economic

Multiple Choice

• loss of $2 to a loss of $1.
• profit of $2 to a profit of $1.
• profit of $1 to a profit of $2.
• loss of $1 to a loss of $2.

The development of the digital video camera, which replaced film video cameras, is an example of

Multiple Choice

• roundabout production.
• derived demand.
• creative destruction.
• specialization.

Businesses seeking higher profits and resource suppliers seeking higher incomes lead to changes in the allocation of resources among different firms and end up with

Multiple Choice

• consumers at the losing end.
• output that society wants.
• unnecessary conflict and turmoil.
• a need for government action.

Which of the following is not considered by economists to be an economic resource?

Multiple Choice

• money
• factory workers
• computers at a retail store.
• a forest

Refer to the provided graph. Which curve shows a direct relationship between price and quantity?

Multiple Choice

• A
• B
• C

Answer the question on the basis of the data given in the following production possibilities table.

Production Possibilities (Alternatives)

A     B     C     D     E     F

Capital Goods 5     4     3     2     1     0

Consumer Goods    0     5     9     12    14    15

Refer to the table. If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be approximately

Multiple Choice

• 4 units of capital goods.
• 2 units of capital goods.
• 3 units of capital goods.
• 1/3 of a unit of capital goods.

Which of the following does not foster innovation and technological advance?

Multiple Choice

• competition in markets
• freedom of choice and enterprise
• self-interest and personal rewards
• fear and avoidance of risk

The slope of the typical production possibilities curve

Multiple Choice

• is positive.
• becomes steeper as one moves southeast along the curve.
• is constant as one moves down the curve.
• becomes flatter as one moves southeast along the curve.

The invisible hand concept suggests that

Multiple Choice

• market failures imply the need for a national economic plan.
• big businesses are inherently more efficient than small businesses.
• the competitiveness of a capitalistic market economy invariably diminishes over time.
• assuming competition, private and public interests will coincide.

The distinction between microeconomics and macroeconomics is

Multiple Choice

• that microeconomics examines the beach, while macroeconomics looks at the sand, individual rocks, and shells, so to speak.
• so clear-cut that every topic can be readily labeled as either macro or micro.
• that microeconomics studies the behavior of individual consumers, workers, and firms, while macroeconomics studies the economy as a whole.
• that microeconomics seeks to obtain an overview, while macroeconomics observes the details of individual components.

Refer to the diagram. Flow 3 represents

Multiple Choice

• wage, rent, interest, and profit income.
• land, labor, capital, and entrepreneurial ability.
• goods and services.
• consumer expenditures.

The production possibilities curve illustrates the basic principle that

Multiple Choice

• the production of more of any one good will in time require smaller and smaller sacrifices of other goods.
• an economy will automatically obtain full employment of its resources.
• if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
• an economy’s capacity to produce increases in proportion to its population size.