Test Bank For The Macro Economy Today Bradley Schiller 15 Edition
The Macro Economy Today, 15e (Schiller)
Chapter 1 Economics: The Core Issues
1) Which of the following is not one of the three core economic issues that must be resolved?
A) How to produce the goods and services we select.
B) What to produce with unlimited resources.
C) Who should get the goods and services we produce.
D) What to produce with limited resources.
2) The fundamental problem of economics is
A) The law of increasing opportunity costs.
B) The scarcity of resources relative to human wants.
C) How to get government to operate efficiently.
D) How to create employment for everyone.
3) In economics, scarcity means that
A) A shortage of a particular good will cause the price to fall.
B) A production possibilities curve cannot accurately represent the trade-off between two goods.
C) Society’s desires exceed resources available.
D) The market mechanism has failed.
4) Given that resources are scarce,
A) A “free lunch” is possible, but only for a limited number of people.
B) Opportunity costs are experienced whenever choices are made.
C) Poor countries must make choices, but rich countries with abundant resources do not have to make choices.
D) Some choices involve opportunity costs while other choices do not.
5) A consequence of the economic problem of scarcity is that
A) Choices have to be made about how resources are used.
B) There is never too much of any good or service produced.
C) The production of goods and services must be controlled by the government.
D) The production possibilities curve is bowed outward.
6) The basic factors of production include
A) Land, labor, money, and capital.
B) Land, labor, money, and inputs.
C) Labor and money.
D) Land, labor, capital, and entrepreneurship.
7) Factors of production are
A) Scarce in every society.
B) Scarce only in advanced countries.
C) Scarce only in the poorest countries of the world.
D) Unlimited in quantity.
8) Which of the following is not a factor of production?
A) A psychiatrist.
B) $100,000 cash.
C) A bulldozer.
D) Six thousand acres of farmland.
9) With respect to factors of production, which of the following statements is not true?
A) Factors of production are also known as resources.
B) In order to produce any good or service, it is necessary to have factors of production.
C) Factors of production include land, labor, capital, and entrepreneurship.
D) Only those resources that are privately owned are counted as factors of production.
10) Which of the following is the best example of land?
A) The ethanol refined from corn.
B) A factory that produces new goods and services.
C) The water used to make a soft drink.
D) A barber’s chair.
11) Capital, as economists use the term, refers to
A) The cash needed to start a new business.
B) The costs of operating a business.
C) Shares of stock issued by businesses.
D) Final goods that are used to produce other goods and services.
12) Which economist argued that free markets unleashed the “animal spirits” of entrepreneurs, propelling innovation, technology, and growth?
A) Lord Kelvin.
B) Kenneth Olsen.
C) Irving Fisher.
D) John Maynard Keynes.
13) The role of the entrepreneur in an economy is to
A) Bring the factors of production together and assume the risk of production.
B) Work with government planners to determine what goods are produced.
C) Arrange bank financing for the owners of new businesses.
D) Ensure full employment of labor.
14) Economics can be defined as the study of
A) For whom resources are allocated to increase efficiency.
B) How society spends the income of individuals.
C) How scarce resources are allocated.
D) None of the choices are correct.
15) Opportunity cost is
A) Measured only in dollars and cents.
B) The total dollar cost to society of producing the goods.
C) The difficulty associated with using one good in place of another.
D) What is given up in order to get something else.
16) Opportunity cost may be defined as the
A) Goods or services that are forgone in order to obtain something else.
B) Dollar prices paid for final goods and services.
C) Dollar cost of producing a particular product.
D) Difference between wholesale and retail prices.
17) The opportunity cost of studying for an economics test is
A) Negative because it may improve your grade.
B) Zero because you knew when you registered for the class that studying would be required.
C) The money you spent on tuition for the class.
D) The activity that is the best alternative use of your time.
18) The “guns versus butter” dilemma that all nations confront is that
A) Guns and butter can be produced using the same resources at the same time.
B) An increase in national defense implies more sacrifices of civilian goods and services.
C) An increase in national defense is possible only if we produce more butter.
D) All of the choices are correct.
19) A production possibilities curve indicates the
A) Combinations of goods and services an economy is actually producing.
B) Maximum combinations of goods and services an economy can produce given its available resources and technology.
C) Maximum combinations of goods and services an economy can produce given unlimited resources.
D) Average combinations of goods and services an economy can produce given its available resources and technology.
20) Which of the following is an assumption under which the production possibilities curve is drawn?
A) Total unemployment is zero.
B) The supply of resources is fixed.
C) The price level is changing.
D) Technology is changing.
21) A point on a nation’s production possibilities curve represents
A) An undesirable combination of goods and services.
B) Combinations of production that are unattainable, given current technology and resources.
C) Levels of production that will cause both unemployment and inflation.
D) The full employment of resources to achieve a particular combination of goods and services.
22) The production possibilities curve illustrates which two of the following essential principles?
A) Factors of production and price signals.
B) Scarce resources and opportunity cost.
C) Market mechanisms and laissez faire.
D) Economic growth and market failure.
23) If an economy experiences constant opportunity costs with respect to two goods, then the production possibilities curve between the two goods will be?
A) Bowed outward or concave from below.
B) A straight, downward-sloping line.
C) Bowed inward or convex from below.
D) Bowed outward until the two goods are equal, and then bowed inward.
24) The production possibilities curve illustrates
A) The limitations that exist because of scarce resources.
B) That there is no limit to what an economy can produce.
C) That there is no limit to the level of output.
D) The existence of unlimited wants and resources.
25) According to the law of increasing opportunity costs,
A) The more one is willing to pay for resources; the smaller will be the possible level of production.
B) Increasing the production of a particular good will cause the price of the good to remain constant.
C) In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods.
D) None of the choices are correct.
26) According to the law of increasing opportunity costs,
A) Greater production leads to greater inefficiency.
B) Greater production means factor prices rise.
C) Greater production of one good requires increasingly larger sacrifices of other goods.
D) Higher opportunity costs induce higher output per unit of input.
27) If an economy experiences increasing opportunity costs with respect to two goods, then the production possibilities curve between the two goods will be
A) Bowed outward or concave from below.
B) A straight, downward-sloping line.
C) Bowed inward or convex from below.
D) Bowed outward until the two goods are equal, and then bowed inward.
28) If the United States decides to convert automobile factories to tank production, as it did during World War II, but finds that some auto manufacturing facilities are not well suited to tank production, then
A) The production possibilities curve between tanks and automobiles will appear as a straight line.
B) The production possibilities curve between tanks and automobiles will shift outward.
C) Decreasing opportunity costs will occur with greater automobile production.
D) Increasing opportunity costs will occur with greater tank production.
29) If North Korea is currently producing at efficiency, and it proceeds to increase the size of its military, then, as long as nothing else changes, its
A) Production possibilities curve will shift outward.
B) Production possibilities curve will shift inward.
C) Production of nonmilitary goods will increase.
D) Production of nonmilitary goods will decrease.
30) When an economy is producing efficiently, it is
A) Producing a combination of goods and services beyond the production possibilities curve.
B) Getting the maximum goods and services possible from the available resources.
C) Experiencing decreasing opportunity costs.
D) Producing equal amounts of all goods.
31) Which of the following is true when an economy is producing efficiently?
A) The economy is producing on the production possibilities curve.
B) The economy is producing outside the production possibilities curve.
C) The economy is getting the fewest goods and services from the available resources.
D) Everyone in the economy is happy.
32) The points on a production possibilities curve show
A) Desired output.
B) Actual output.
C) Potential output.
D) None of the choices are correct.
33) In terms of the production possibilities curve, inefficiency is represented by
A) All points on the curve.
B) All points outside the curve.
C) All points inside the curve.
D) A rightward shift of the curve.
34) If an economy is producing inside the production possibilities curve, then
A) There is full employment of resources.
B) It is operating efficiently.
C) It can produce more of one good without giving up some of another good.
D) There are not enough resources available to produce more output.
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