Macroeconomics, 9e (Parkin) Chapter 1 What Is Economics? 1 Definition of Economics 1) All economic questions are about A) how to make money. B) what to produce. C) how to cope with scarcity. D) how to satisfy all our wants. Answer: C Topic: Definition of Economics Skill: Recognition AACSB: Reflective Thinking 2) An incentive A) could be a reward but could not be a penalty. B) could be a penalty but could not be a reward. C) could be either a reward or a penalty. D) is the opposite of a tradeoff. Answer: C Topic: Definition of Economics Skill: Recognition AACSB: Reflective Thinking 3) An inducement to take a particular action is called A) the marginal benefit. B) the marginal cost. C) opportunity cost. D) an incentive. Answer: D Topic: Incentive Skill: Recognition AACSB: Reflective Thinking 4) All economic questions arise because we A) want more than we can get. B) want more than we need. C) have an abundance of resources. D) have limited wants that need to be satisfied. Answer: A Topic: Scarcity Skill: Recognition AACSB: Reflective Thinking 1 Copyright © 2010 Pearson Education, Inc. 5) The most fundamental economic problem is A) security. B) scarcity. C) health. D) the fact the United States buys more goods from foreigners than we sell to foreigners. Answer: B Topic: Scarcity Skill: Recognition AACSB: Reflective Thinking 6) Economics is best defined as the study of how people, businesses, governments, and societies A) choose abundance over scarcity. B) make choices to cope with scarcity. C) use their infinite resources. D) attain wealth. Answer: B Topic: Scarcity Skill: Conceptual AACSB: Reflective Thinking 7) Scarcity is a situation in which A) people cannot satisfy all their wants. B) most people can get only bare necessities. C) people can satisfy all their wants. D) some people can get all they want and some cannot. Answer: A Topic: Scarcity Skill: Recognition AACSB: Reflective Thinking 8) Economists point out that scarcity confronts A) neither the poor nor the rich. B) the poor but not the rich. C) the rich but not the poor. D) both the poor and the rich. Answer: D Topic: Scarcity Skill: Conceptual AACSB: Ethical Reasoning 2 Copyright © 2010 Pearson Education, Inc. 9) Scarcity requires that people must A) cooperate. B) compete. C) trade. D) make choices. Answer: D Topic: Scarcity Skill: Conceptual AACSB: Reflective Thinking 10) All economic questions arise because A) people are greedy. B) production possibilities are unlimited. C) we want more than we can get. D) people are irrational. Answer: C Topic: Scarcity Skill: Recognition AACSB: Reflective Thinking 11) Scarcity is A) our inability to satisfy all our wants. B) a situation that exists during economic recessions but not during economic booms. C) when a child wants a $1.00 can of soda and two 50¢ packs of gum and has $2.00 in her pocket. D) an economic problem only for poor people. Answer: A Topic: Scarcity Skill: Recognition AACSB: Reflective Thinking 12) Scarcity arises from A) inefficient production. B) exploration. C) limited resources and limitless wants. D) limited wants and limitless resources. Answer: C Topic: Scarcity Skill: Recognition AACSB: Reflective Thinking 3 Copyright © 2010 Pearson Education, Inc. 13) When an economist talks of scarcity, the economist is referring to the A) ability of society to employ all of its resources. B) ability of society to consume all that it produces. C) inability of society to satisfy all human wants because of limited resources. D) ability of society to continually make technological breakthroughs and increase production. Answer: C Topic: Scarcity Skill: Recognition AACSB: Reflective Thinking 14) Scarcity is experienced by A) only the wealthy. B) only the poor. C) only producers. D) everyone. Answer: D Topic: Scarcity Skill: Recognition AACSB: Ethical Reasoning 15) Fundamental economic problems basically arise from A) the fact that society has more than it needs. B) turmoil in the stock market. C) the unequal distribution of income. D) our wants exceeding our scarce resources. Answer: D Topic: Scarcity Skill: Recognition AACSB: Reflective Thinking 16) Scarcity exists because A) society and people are greedy and wasteful. B) our wants exceed the resources available to satisfy them. C) of the inefficient choices we make. D) poor people need more food and other goods. Answer: B Topic: Scarcity Skill: Recognition AACSB: Reflective Thinking 4 Copyright © 2010 Pearson Education, Inc. 17) Scarcity can be eliminated through A) the use of market mechanisms. B) exploration that helps us find new resources. C) wise use of our resources. D) None of the above because scarcity cannot be eliminated. Answer: D Topic: Scarcity Skill: Recognition AACSB: Reflective Thinking 18) As an economic concept, scarcity applies to A) both money and time. B) money but not time. C) time but not money. D) neither time nor money. Answer: A Topic: Scarcity Skill: Conceptual AACSB: Reflective Thinking 19) Scarcity is common to all economic systems because resources are A) unlimited due to constant technological advances. B) limited and so are human desires and wants. C) unlimited and so are human desires and wants. D) limited, but human desires and wants are unlimited. Answer: D Topic: Scarcity Skill: Conceptual AACSB: Reflective Thinking 20) People must make choices because A) most people enjoy shopping. B) of scarcity. C) there are many goods available. D) None of the above answers is correct. Answer: B Topic: Scarcity Skill: Conceptual AACSB: Reflective Thinking 5 Copyright © 2010 Pearson Education, Inc. 21) The problem of "scarcity" applies A) only in industrially developed countries because resources are scarce in these countries. B) only in underdeveloped countries because there are few productive resources in these countries. C) only in economic systems that are just beginning to develop because specialized resources are scarce. D) to all economic systems, regardless of their level of development. Answer: D Topic: Scarcity Skill: Conceptual AACSB: Reflective Thinking 22) When a wealthy businessman is unable to buy tickets to the Super Bowl, he or she experiences ________. A) economics B) scarcity C) opportunity costs D) the fallacy of composition Answer: B Topic: Scarcity Skill: Conceptual AACSB: Reflective Thinking 23) In every economic system, choices must be made because resources are ________ and our wants are ________ A) unlimited; limited B) limited; unlimited C) unlimited; unlimited D) limited; limited Answer: B Topic: Scarcity Skill: Conceptual AACSB: Reflective Thinking 24) The fundamental questions in economics result from A) an excess of production over the wants of society. B) technological progress. C) distribution of income. D) scarcity of resources relative to the wants of society. Answer: D Topic: Definition of Economics Skill: Recognition AACSB: Ethical Reasoning 6 Copyright © 2010 Pearson Education, Inc. 25) Economics is best defined as A) how people make money and profits in the stock market. B) making choices from an unlimited supply of goods and services. C) making choices with unlimited wants but facing a scarcity of resources. D) controlling a budget for a household. Answer: C Topic: Definition of Economics Skill: Recognition AACSB: Reflective Thinking 26) The study of economics A) focuses mainly on individual consumers. B) arises from the fact that our wants exceed available resources. C) recognizes that scarcity does not affect rich nations. D) deals mainly with microeconomics. Answer: B Topic: Definition of Economics Skill: Recognition AACSB: Reflective Thinking 27) Economics is best defined as the science of choice and how people cope with A) differences in wants. B) differences in needs. C) scarcity. D) different economic systems. Answer: C Topic: Definition of Economics Skill: Recognition AACSB: Reflective Thinking 28) Which of the following best defines the subject of economics? A) the science that studies unemployment, inflation, and economic stability B) the art of making money C) the study of choices that businesses make to maximize profit D) the study of choices made to cope with scarcity Answer: D Topic: Definition of Economics Skill: Recognition AACSB: Reflective Thinking 7 Copyright © 2010 Pearson Education, Inc. 29) Economics is the study of A) the distribution of surplus goods to those in need. B) affluence in a morally bankrupt world. C) the choices we make because of scarcity. D) ways to reduce wants to eliminate the problem of scarcity. Answer: C Topic: Definition of Economics Skill: Conceptual AACSB: Reflective Thinking 30) Which of the following is a macroeconomic topic? A) the reasons for a rise in the price of orange juice B) the reasons for the rise in average prices C) why plumbers earn more than janitors D) whether the army should buy more tanks or more rockets Answer: B Topic: Microeconomics and Macroeconomics Skill: Recognition AACSB: Reflective Thinking 31) The study of the choices made by individuals is part of the definition of A) microeconomics. B) positive economics. C) macroeconomics. D) normative economics. Answer: A Topic: Microeconomics and Macroeconomics Skill: Recognition AACSB: Reflective Thinking 32) In part, microeconomics is concerned with A) how a business firm decides upon the amount it produces and the price it sets. B) changes in the economy's total output of goods and services over long periods of time. C) factors that explain changes in the unemployment rate over time. D) the Federal Reserve's policy decisions. Answer: A Topic: Microeconomics and Macroeconomics Skill: Recognition AACSB: Reflective Thinking 8 Copyright © 2010 Pearson Education, Inc. 33) The study of the decisions of individual units in the economy is known as A) macroeconomics. B) microeconomics. C) the study of incentives. D) ceteris paribus study. Answer: B Topic: Microeconomics and Macroeconomics Skill: Recognition AACSB: Reflective Thinking 34) Which of the following is an example of a microeconomic decision? A) an individual deciding how to allocate the time he or she has for work and leisure B) a small shoe factory deciding how much leather to purchase for the next quarter's production need C) a multinational company deciding where to relocate its world headquarter D) All of the above answers are correct. Answer: D Topic: Microeconomics and Macroeconomics Skill: Recognition AACSB: Reflective Thinking 35) Which term best describes the study of the decisions of people and businesses and the interaction of these decisions? A) marginal study B) macroeconomics C) microeconomics D) scarcity science Answer: C Topic: Microeconomics and Macroeconomics Skill: Recognition AACSB: Reflective Thinking 36) Which of the following questions is a topic that would be studied by microeconomics? A) Why did production and the number of jobs shrink in 2008? B) Will the current budget deficit affect the well-being of the next generation? C) How will a lower price of digital cameras affect the quantity of cameras sold? D) What is the current unemployment rate in the United States? Answer: D Topic: Microeconomics and Macroeconomics Skill: Conceptual AACSB: Reflective Thinking 9 Copyright © 2010 Pearson Education, Inc. 37) An example of a question that might be explored in microeconomics is to determine A) the number of workers employed by Intel. B) savings by the household sector. C) why the U.S. economy has grown more rapidly than the Japanese economy. D) the total employment within the U.S. economy. Answer: A Topic: Microeconomics and Macroeconomics Skill: Conceptual AACSB: Reflective Thinking 38) One topic of study for a microeconomist would be the A) factors that lead to inflation. B) factors that affect aggregate unemployment. C) effects an increase in the price of gasoline has on an individual. D) effects of an increase in government spending on the nation's production. Answer: C Topic: Microeconomics and Macroeconomics Skill: Conceptual AACSB: Reflective Thinking 39) In part, microeconomics is concerned with the study of A) unemployment and economic growth. B) the Federal Reserve's policies. C) the effect government regulation has on the price of a product. D) national output of goods and services. Answer: C Topic: Microeconomics and Macroeconomics Skill: Conceptual AACSB: Reflective Thinking 40) The branch of economics that deals with the analysis of the whole economy is called A) macroeconomics. B) marginal analysis. C) microeconomics. D) metroanalysis. Answer: A Topic: Microeconomics and Macroeconomics Skill: Recognition AACSB: Reflective Thinking 10 Copyright © 2010 Pearson Education, Inc.