Economics Multiple Choice Questions

Economics Multiple Choice Questions

Multiple Choice

Identify the letter of the choice that best completes the
statement or answers the question.

____ 1. When economists speak of
scarcity, they are referring to the

a.

condition in which society is not employing all its resources in
an efficient way.

b.

condition in which people’s wants outstrip the limited resources
available to satisfy those wants.

c.

economic condition that exists in only very poor countries of
the world.

d.

condition in which society produces too many frivolous goods and
not enough socially desirable goods.

____ 2. Produced goods used as
inputs for the production of other goods comprise the resource known as

a.

natural resources.

b.

services.

c.

capital.

d.

entrepreneurship.

____ 3. Some years ago, chemists at
3M Corporation were trying to create a super-strong glue. Somehow they got their
molecules twisted and came up with one of the weakest glues ever made. But,
rather than pouring it down the drain, they tried coating some paper with it.
Voila! The “Post-It Note” was born. In this case, 3M was acting as

a.

a utility.

b.

a rationer.

c.

an entrepreneur.

d.

an abstraction.

____ 4. Choice is fundamentally a
consequence of

a.

living in a world where there are both goods and bads.

b.

how wealthy one is.

c.

scarcity.

d.

opportunity cost.

____ 5. The opportunity cost of
attending college is

a.

the money one spends on college tuition, books, and so forth.

b.

the highest valued alternative one forfeits to attend college.

c.

the least valued alternative one forfeits to attend college.

d.

equal to the salary one will earn when one graduates from
college.

____ 6. It usually takes less time
to buy a six-pack of 7-Up, a loaf of bread, and a half-gallon of ice cream at a
small convenience store (such as a 7-Eleven) than at a large, full-service
grocery store. Which of the following persons is most likely to buy these items
at a convenience store?

a.

a person with high opportunity cost of time

b.

a person with low opportunity cost of time

c.

a person who is out of work

d.

There is not enough information to answer the question.

____ 7. The higher the opportunity
cost of attending college,

a.

the more likely an individual will go to college.

b.

the more economics classes an individual will take at college.

c.

the fewer economics classes an individual will take at college.

d.

the less likely an individual will go to college.

____ 8. Which of the following best
represents the fallacy of composition?

a.

What is true for one is false for all.

b.

What is good for one is bad for all.

c.

What is good (or true) for one is good (or true) for all.

d.

The more high-calorie food a person eats, the greater his or her
weight will be,ceteris paribus.

____ 9. Ceteris paribus means

a.

one variable too many.

b.

the correct relationship specified.

c.

assuming economic motives.

d.

all other things held constant.

____ 10. Attempts to determine “what
is” are part of __________ economics.

a.

positive

b.

normative

c.

positive and normative

d.

neither positive nor normative

____ 11. Microeconomics is the branch of
economics that deals with

a.

highly aggregated markets or the entire economy.

b.

the production side of the economy, exclusively.

c.

the buying side of the economy, exclusively.

d.

human behavior and choices as they relate to relatively small
units-an individual, a firm, an industry.

____ 12. Which of the following is a
positive macroeconomics statement?

a.

The central bank should increase the nation’s money supply.

b.

The increase in the nation’s money supply helped push the
nation’s unemployment rate down in the short run.

c.

Ford Motor Company’s new advertising campaign ended up hurting
General Motors’ sales.

d.

The local government ought to spend more on recreational
facilities.

____ 13. Which of the following is a
positive microeconomics statement?

a.

The central bank should increase the nation’s money supply.

b.

The increase in the nation’s money supply helped push the
nation’s unemployment rate down in the short run.

c.

Ford Motor Company’s new advertising campaign ended up hurting
General Motors’s sales.

d.

The local government ought to spend more on recreational
activities.

____ 14. Economists believe that people’s
wants are

a.

finite.

b.

infinite.

c.

irrational.

d.

unimportant because needs are more important than wants.

____ 15. Opportunity cost is the value of

a.

the best forfeited alternative.

b.

the chosen alternative.

c.

a free good.

d.

an economic good.

____ 16. Which of the following would NOT
be considered a macroeconomic topic?

a.

the reasons for a decline in the price of crude oil

b.

the cause of a downturn in the economy

c.

the effect of the government budget deficit on inflation

d.

the causes of inflation and unemployment

____ 17. If variable X goes down as
variable Y goes down, then X and Y are

a.

directly related.

b.

negatively related.

c.

inversely related.

d.

independent.

____ 18. Which of the following
illustrates the law of demand?

a.

Jeff buys more pens at $1 per pen than at $2 per pen, ceteris
paribus
.

b.

Sara buys more ice cream at $2 per half-gallon than at $1 per
half gallon, ceteris paribus.

c.

Chris buys fewer trousers at $30 per pair than at $25 per
pair, ceteris paribus.

d.

a, b, and c

e.

a and c

____ 19. One major reason for the law of
demand is that

a.

one price changing requires at least one other price to change
in the opposite direction.

b.

people substitute relatively lower-priced goods for relatively
higher-priced goods.

c.

a higher price never reduces quantity demanded by enough to
lower total revenue.

d.

people are willing to produce more units at a higher price.

____ 20. If an increase in income results
in an increase in the demand for chicken, then

chicken is

a.

a neutral good.

b.

a luxury good.

c.

a normal good.

d.

an inferior good.

____ 21. A decrease in the number of
buyers in an area will result in a

a.

movement up the demand curve.

b.

movement down the demand curve.

c.

leftward shift in the demand curve.

d.

rightward shift in the demand curve.

____ 22. If people begin to favor romance
novels to a greater degree than previously, the demand curve for romance novels

a.

shifts rightward.

b.

shifts leftward.

c.

stays constant.

d.

can shift either rightward or leftward.

____ 23. As the price of good A rises, the
demand for good B rises. Therefore, goods A and B are

a.

normal goods.

b.

inferior goods.

c.

substitutes.

d.

complements.

e.

none of the above

____ 24. “As the price of apples goes
up, the demand for apples goes down.” The author of this statement

a.

implies that price and demand are unrelated.

b.

uses the word “demand” when he should use the word
“supply.”

c.

uses the word “demand” when he should use the words
“quantity demanded.”

d.

implies that demand and price have a direct relationship.

____ 25. If the workers of a firm
successfully negotiate an increase in wages,

a.

the demand curve for the product the firm produces shifts
rightward.

b.

the demand curve for the product the firm produces shifts
leftward.

c.

the supply curve of the product the firm produces shifts
rightward.

d.

the supply curve of the product the firm produces shifts
leftward.

e.

none of the above

____ 26. Which of the following will not shift
a supply curve?

a.

a change in the price of relevant resources

b.

a change in the good’s price

c.

a change in the number of sellers

d.

a change in per-unit costs brought about by a change in taxes.

____ 27. At a price below equilibrium price,
there is

a.

a surplus.

b.

a shortage.

c.

excess supply.

d.

sub-equilibrium.

e.

none of the above

____ 28. On a supply-and-demand diagram,
quantity demanded equals quantity supplied

a.

only at the single equilibrium price.

b.

at every price at or above the equilibrium price.

c.

at every price at or below the equilibrium price.

d.

at every price.

____ 29. On a supply-and-demand diagram,
consider a price for which the horizontal distance to the supply curve exceeds
the horizontal distance to the demand curve. There is a __________ at that
price and we are clearly __________ the equilibrium price.

a.

shortage; above

b.

shortage; below

c.

surplus; above

d.

surplus; below

____ 30. If demand falls by a greater
amount than supply falls, then equilibrium price __________ and equilibrium
quantity __________.

a.

rises; rises

b.

rises; falls

c.

falls; rises

d.

falls; falls

Exhibit 3-1

Economics Multiple Choice Questions.jpg” alt=”http://public.csusm.edu/rarnold/Fall%202005/Econ%20250/sample_test_files/image002.jpg”>

____ 31. Refer to Exhibit 3-1. At a price
of $2 there is a

a.

shortage of 350 units.

b.

shortage of 200 units.

c.

shortage of 150 units.

d.

surplus of 200 units..

e.

surplus of 150 units.

Exhibit 3-2

Economics Multiple Choice Questions.jpg” alt=”http://public.csusm.edu/rarnold/Fall%202005/Econ%20250/sample_test_files/image004.jpg”>

____ 32. Refer to Exhibit 3-2. Suppose
equilibrium is at point B. Something then changes and equilibrium becomes point
C. Which of the following is consistent with the change in equilibrium from
point B to C?

a.

There was an increase in resource prices and income stayed
constant.

b.

There was a decrease in resource prices and income stayed
constant.

c.

There was an increase in resource prices and income decreased.

d.

There was an increase in resource prices and income increased.

____ 33. A rightward shift in the demand
curve for tennis balls could be caused by

a.

a fall in the price of tennis balls.

b.

a fall in the price of tennis rackets.

c.

a rise in the price of tennis lessons.

d.

a fall in income, assuming tennis balls are a normal good.

Exhibit 3-3

Economics Multiple Choice Questions.gif” alt=”http://public.csusm.edu/rarnold/Fall%202005/Econ%20250/sample_test_files/image006.gif”>

____ 34. Refer to Exhibit 3-3. A movement
from point Z to point W would have been the result of

a.

a price reduction.

b.

an increase in population.

c.

a decline in technology.

d.

an increase in the number of buyers.

____ 35. If the supply of and demand for a
product both decrease, then equilibrium

a.

quantity and equilibrium price must both decline.

b.

quantity must decline, but equilibrium price may either rise,
fall, or remain unchanged.

c.

price must fall, but equilibrium quantity may either rise, fall,
or remain unchanged.

d.

quantity must fall and equilibrium price must rise.

____ 36. Given that frozen yogurt and ice
cream are substitutes, a shift in preferences in favor of yogurt would be
predicted to do all of the following EXCEPT

a.

raise the equilibrium price of frozen yogurt.

b.

increase the quantity supplied of frozen yogurt.

c.

increase the supply of ice cream.

d.

increase the demand for frozen yogurt.

____ 37. In moving along a demand curve,
which of the following is NOT held constant?

a.

the prices of substitute goods

b.

the prices of complementary goods

c.

consumer incomes

d.

the price of the good for which the demand curve is relevant

Exhibit 3-5

Economics Multiple Choice Questions.gif” alt=”http://public.csusm.edu/rarnold/Fall%202005/Econ%20250/sample_test_files/image008.gif”>

____ 38. Refer to Exhibit 3-5. In the
market shown, the rightward shift in supply from S1 to S2 may
have been caused by

a.

a decline in the number of buyers in the market.

b.

a decline in the price of a substitute good.

c.

a decrease in income (assuming the good is a normal good).

d.

the imposition of a per-unit tax on the producer.

e.

none of the above

Exhibit 3-6

Economics Multiple Choice Questions.jpg” alt=”http://public.csusm.edu/rarnold/Fall%202005/Econ%20250/sample_test_files/image010.jpg”>

____ 39. Refer to Exhibit 3-6. If D1 is
the relevant demand curve, a decrease in the price of good X may cause

a.

demand to shift from D1 to D2.

b.

demand to shift from D1 to D3.

c.

a movement along D1 from point A to point B.

d.

a movement along D1 from point A to point C.

____ 40. If patients were allowed to sue
their HMO, we would expect

a.

the demand curve for health care services provided by the HMO to
shift to the left and the price of HMO-provided health care coverage to fall.

b.

the supply curve for health care services provided by the HMO to
shift to the left and the price of HMO-provided health care coverage to rise.

c.

the supply curve for health care services provided by the HMO to
shift to the right and the price of HMO-provided health care coverage to
fall.

d.

a and b

e.

none of the above

____ 41. Colleges and universities use
such things as grade point averages and standardized test scores as

a.

a measure of consumer utility.

b.

non-price rationing devices.

c.

a means to shift the supply curve for a college education.

d.

solely to frustrate prospective students.

____ 42. If the purchase and sale of a
currently illegal drug, such as marijuana, were decriminalized, we would expect

a.

an increase in demand and supply of this drug.

b.

an increase in demand and a decrease in supply of this drug.

c.

a decrease in demand and an increase in supply of this drug.

d.

a decrease in demand and supply of this drug.

____ 43. If the government decided to
legalize the purchase and sale of marijuana, the equilibrium quantity would
_________ and the price would ________ if the supply of marijuana increased by
_______ than the demand for marijuana increased.

a.

fall; fall; more

b.

fall; rise; more

c.

rise; fall; more

d.

rise; fall; less

e.

none of the above

____ 44. Since most colleges and
universities charge the same tuition to every student regardless of what time
students choose to take their classes,

a.

the schools must develop some type of non-price rationing
device.

b.

it follows that all classes will have a shortage of seats.

c.

it follows that all classes will have a surplus of seats.

d.

it follows that some classes will likely have a shortage of
seats while other classes may have a surplus of seats.

e.

a and d

____ 45. Which of the following statement
is false?

a.

There is evidence of a shortage in the market for kidneys (for
transplants).

b.

The waiting list for transplanted kidneys is used as a non-price
rationing device.

c.

Kidneys are currently being illegally bought and sold.

d.

In the market for kidneys (for transplants) the legal price is
the equilibrium price.

____ 46. If the price of gold is higher in
New York than in London, people will want to ________ gold in London and _______
it in New York, thus _________ the price in London and _________ the price in
New York.

a.

buy; sell; raising; lowering

b.

sell; buy; raising; lowering

c.

buy; sell; lowering; raising

d.

sell; buy; lowering; raising

____ 47. When congestion occurs on the
freeway (because of a shortage of freeway space), the economist would say that
it is because

a.

the freeway is too small.

b.

there are too many cars.

c.

the price of driving on the freeway is below the equilibrium
price.

d.

a and c

____ 48. If there is a shortage of parking
spaces on campus, economists would argue that it is because

a.

there are not enough spaces.

b.

the price of the spaces is below equilibrium.

c.

the price of the spaces is above equilibrium.

d.

a and b

____ 49. The demand for seats in 10 a.m.
classes at the university is higher than the demand for seats in 8 a.m.
classes. The supply is fixed. If the university prices classes at the price
required to achieve equilibrium at 10 a.m., there will be

a.

a shortage at 8 a.m.

b.

a surplus at 8 a.m.

c.

equilibrium at 8 a.m.

d.

disequilibrium at 8 a.m., but we cannot determine which type.


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