Economics 201 Multiple-Choce Q1

Economics 201 - Multiple-Choice Quiz #1

February 1, 1999 Glenn Vice©1999

_____ 1. Because scarcity exists,

a. we must make choices

b. there will be competition for the scarce goods

c. there will be discrimination - some people will get the scarce goods and some will not

d. all of the above are true

_____ 2. Economics

a. would exist, even if scarcity did not exist

b. is limited to the study of the financial markets in the economy

c. is the same as accounting

d. "explains why things are as they are, and it predicts what is likely to happen under certain conditions"

e. is or does all of the above

_____ 3. Land, labor, capital and entrepreneurship are

a. scarce

b. goods

c. the factors of production

d. all of the above

_____ 4. The highest valued alternative or opportunity given up in order to have a particular good or to do a particular

thing (e.g., go to a movie), economists call the

a. opportunity cost of the good or action

b. incentive

c. benefit

d. intrinsic value

_____ 5. As rationing devices, Afirst-come, first-served,@ force or intimidation, and a lottery have in common the characteristic that

a. the resulting allocation of goods would be fair

b. everyone would get some of the good

c. the good being rationed would not go to those who value the good most

d. each of the methods is superior to price as a method of rationing scarce goods

_____ 6. An unintended effect of a Asuccessful@ war on drugs is to

a. increase the profitability of being in the illegal drug business

b. reduce the supply of drugs

c. reduce the cost of drugs

d. increase the supply of drugs

_____ 7. The most common and useful assumption made by economists to Ahold other things constant@ is

a. the ceteris paribus assumption

b. the post hoc assumption

c. the fallacy of composition assumption

d. the normative assumption

_____ 8. The category of economics that deals with Awhat is@ or is of the form, AIf event A occurs, then event B will follow,@ is known

a. as microeconomics

b. as normative economics

c. as positive economics

d. as negative economics

_____ 9. When a good is scarce,

a. there will always be competition for that good and therefore an allocation problem

b. there will always be discrimination, because some people will not get as much of the good as they want

c. both of the above will occur

d. the above events may or may not occur, but for sure the price of the good will increase

_____ 10. An outward shift of the PPF curve could result from

a. an increase in the quantity of resources

b. an advance in technology

c. either of the above

d. a movement upward along the PPF curve

_____ 11. If you had crossed your fingers, crossed your arms and spun around twice just before taking an economics exam on which you scored 100, then concluding that this ritual caused your perfect score, would be an example of

a. the post-hoc fallacy

b. the fallacy of composition

c. the workings of voodoo economics

d. the other-conditions fallacy

_____ 12. Older students are more likely to attend evening classes than younger students. An economist would say that this could be explained by

a. the higher opportunity cost for older students of attending day classes

b. the fact that older students have different biological rhythms which make them more productive at night

c. the inclination of older students to want to get an evening out without the spouse and kids

d. the high cost of tuition and fees

_____ 13. The PPF curve

a. is used in the classroom to illustrate scarcity, opportunity cost, economic growth and the necessity of choice

b. is widely used by economists in the Areal world@ to analyze real economic situations with actual numbers

c. is both of the above

_____ 14. The BEST theory or model is usually considered to be the one

a. with the most realistic assumptions

b. that predicts most accurately

c. that is most complex

_____ 15. To believe that, Awhat is true or best for the individual, must necessarily be true or best for the group@ is

a. scientific thinking

b. the fallacy of composition

c. the ceteris paribus assumption

d. known as the association/causation theory

Economics 201 Quiz 1 -- Answers

1. D. Whenever there is scarcity, there must also be competition and discrimination. In fact, when any one of the three occur, all will occur.

2. D. The study of economics exists because we are force to make choices by the existence of scarcity. Without scarcity, we would have all of everything that we want. If there is no scarcity, then there is no need to choose among various goods because all goods would be available to you in any desired amount.

3. D. Land, labor, capital and entrepreneurship are the factors of production, but they are also scarce and they are goods because they provide utility or satisfaction.

4. A. Definition. See the text.

5. C. Among the rationing devices, only price has the advantage of ensuring that scarce goods are allocated to those who value them most. The other methods of rationing may or may not be fair, but none of them is efficient.

6. A. An intended effect of the war on drugs is to reduce the supply, but an unintended effect is that the reduced supply will result in higher prices and more profits for the sellers of illegal drugs.

7. A. Definition. See the text.

8. C. Definition. See the text.

9. C. A good is scarce when more of the good would be demanded at a zero price (free) than would be supplied at a zero price; hence, a scarce good necessitates choice and an allocation problem because not everyone will be able to have as much as they want.

10. C. When the PPF is drawn, we assume that assume that several factors are held constant - the quality and quantity of resources and technology; hence, an increase in any of these will result in an outward shift of the PPF.

11. A. Definition. See the text.

12. A. Older students are more likely to be employed in the day time and hence would have a higher opportunity cost of attending day classes than of attending evening classes.

13. A. The PPF is not really used in the "real world," but is an extremely useful tool in the classroom to illustrate some important concepts in economics.

14. B. The author of your text, agreeing with the vast majority of economists, argues that the best theory is one that accurately predicts events in the real world whether or not the assumptions are realistic.

15. B. Definition. See the text.