Title: What is Economics?
Course: TEST Course

Q: Scarcity is a condition that is everywhere and always, since it is based upon two assumptions that reflect permanent universal conditions. The assumptions are that more output will satisfy more wants and
- there are limited wants.
- the world has unlimited productive resources.
- the world has limited productive resources.
A: the world has limited productive resources.

Q: Which assumption below best reflects a basic understanding economists have about the world?
- There are limited wants.
- More output creates more wants.
- The world has limited productive resources.
A: The world has limited productive resources.

Q: In a world of scarcity, we will never
- use all economic resources such that we satisfy the maximum amount of wants.
- satisfy all basic human needs.
- meet all of society’s wants.
A: meet all of society’s wants.

Q: What will we never do in a world of scarcity?
- Use all economic resources such that we satisfy the maximum amount of wants.
- Satisfy all basic human needs.
- Meet all of society’s wants.
A: Meet all of society’s wants.

Q: When picking up a rental car at an airport car rental agency, some travelers stand in line waiting to sign paperwork and pick up car keys at the rental desk while other travelers can go right to their rental car by using their rental car loyalty club card. In this example, the travelers who move quickly through to the parking lot pick up their car are probably
- experienced travelers that know that making online reservations is the best way to avoid long lines at the rental counter.
- more important than travelers waiting in the longer lines at the rental car counter.
- travelers who value convenience more than those waiting in line and are willing to pay additional club fees for the option of avoiding them.
A: travelers who value convenience more than those waiting in line and are willing to pay additional club fees for the option of avoiding them.

Q: Some highways have commuter or express pass lanes. During rush hour lanes on the highway move slowly or often are stop and go, but the express lanes continue to move at a faster pace. Express pass users pay for a transponder and monthly fees to have express lane access even with no other people in their cars. In this example, the drivers who purchase these express passes are probably
- experienced drivers that know that the best way to avoid commuter lines on the freeway is to leave home earlier to get to work.
- more important than drivers waiting in the longer commute lines on the freeway.
- drivers who value speed and convenience more than those in the stop and go lanes and are willing to pay additional express pass fees for the option of avoiding traffic jams.
A: drivers who value speed and convenience more than those in the stop and go lanes and are willing to pay additional express pass fees for the option of avoiding traffic jams.

Q: Imagine that a high school junior received a bonus check from his boss on the last day of his summer job. He decides to save all of that bonus check to pay for his senior trip coming up next year instead of purchasing a much needed new automobile. From an economist’s perspective, which of the following statements about this decision is likely to be true?
- The decision is irrational because anyone can see that choosing a high school trip over a much needed new automobile is an improper use of scarce resources.
- The decision must have been made haphazardly and is therefore irrational.
- The decision is rational in the sense that it reflects the junior's preference for a senior trip over new automobiles.
A: The decision is rational in the sense that it reflects the junior's preference for a senior trip over new automobiles.

Q: Imagine that a high school junior sold her old car at the end of the summer and now has the funds from the sale in her bank. She decides to purchase a much needed new automobile instead of saving that money to pay for her senior trip coming up next year. From an economist’s perspective, which of the following statements about this decision is likely to be true?
- The decision must have been made haphazardly and is therefore irrational.
- The decision is irrational because anyone can see that choosing a new automobile over a once in a lifetime senior trip is an improper use of scarce resources.
- The decision is rational in the sense that it reflects the junior's preference for a new automobile over a senior trip.
A: The decision is rational in the sense that it reflects the junior's preference for a new automobile over a senior trip.

Q: Land, or natural resources, include(s) the fertility of the land, minerals below it, and
- human capital resources.
- human resources.
- climate.
A: climate.

Q: Natural resources, or land, can include the fertility of the land, minerals below it, and what other aspects?
- human capital resources
- human resources
- climate
A: climate

Q: Economic capital is productive, so it does NOT include
- buildings & equipment.
- tools.
- money.
A: money.

Q: What is NOT included in economic capital?
- buildings and equipment
- tools
- money
A: money

Q: Financial capital, like money, is simply a tool. Once financial capital is converted to economic capital (invested), it produces a resource that is
- profitable.
- expensive.
- productive.
A: productive.

Q: The distinguishing feature of economic capital (as opposed to financial capital, like money) is that it is
- profitable.
- expensive.
- productive.
A: productive.

Q: What are the factors of production?
- money, resources, labor, management
- land, labor, opportunity
- land, economic capital, labor, entrepreneurship
A: land, economic capital, labor, entrepreneurship

Q: What are the factors of production?
- labor, economic capital, ingenuity, money
- land, labor, opportunity
- land, economic capital, labor, entrepreneurship
A: land, economic capital, labor, entrepreneurship

Q: Due to limits on our time, money, and effort, we are best off when we allocate things
- according to what society as a whole would want.
- with the objective of maximizing profit.
- by constantly assessing the opportunity costs of our choices.
A: by constantly assessing the opportunity costs of our choices.

Q: Because of our limited money, time, and effort, we are best off when we allocate things
- by choosing what society as a whole would want.
- with the objective of maximizing output.
- by constantly assessing the opportunity costs of our choices.
A: by constantly assessing the opportunity costs of our choices.

Q: If Kendrick decides to watch t.v. instead of go to the gym, the ________ is a missed workout.
- output cost
- societal cost
- opportunity cost
A: opportunity cost

Q: If Mikael decides to go out with his friends instead of study for his biology test, what is the opportunity cost?
- better relationships with his friends
- the missed opportunity to go to the gym
- preparation for his biology test
A: preparation for his biology test

Q: Economists would say that the decisions we make are influenced by
- output costs.
- societal demands.
- trade-offs.
A: trade-offs.

Q: When decisions need to be made, economists assume a decision will be influenced by its
- output costs.
- societal demands.
- trade-offs.
A: trade-offs.

Q: Every day, 500 airplanes in San Francisco incur an additional 30 minutes of airport delays when flying into or out of the airport. In Chicago, the delays amount to 15 minutes for 1,200 airplanes. If the price of time is $30/hour in San Francisco and $20/hour in Chicago, which airport incurs the largest opportunity cost?
- Chicago
- Neither
- San Francisco
A: San Francisco

Q: Every day, 500 airplanes in San Francisco incur an additional 30 minutes of airport delays when flying into or out of the airport. In Chicago, the delays amount to 15 minutes for 1,400 airplanes. If the price of time is $20/hour in San Francisco and $15/hour in Chicago, which airport incurs the largest opportunity cost?
- San Francisco
- Neither
- Chicago
A: Chicago

Q: The advantages that society gains through trade lie in the ability to
- align output to reflect society’s preferences.
- attain absolute advantage in our trade with other nations.
- specialize resources to the uses where opportunity cost is minimized.
A: specialize resources to the uses where opportunity cost is minimized.

Q: Society gains advantages through trade because of its ability to
- align output to reflect society’s preferences.
- attain absolute advantage in our trade with other nations.
- specialize resources to the uses where opportunity cost is minimized.
A: specialize resources to the uses where opportunity cost is minimized.

Q: A nation that bans trade with other nations
- will more easily achieve specialization in production and end up consuming more.
- can refine their ability to allocate resources and therefore raise consumption.
- will be unable to specialize in what they are good at and therefore end up consuming less.
A: will be unable to specialize in what they are good at and therefore end up consuming less.

Q: If trade between nations is prohibited,
- nations will more easily achieve specialization in production and end up consuming more.
- nations can refine their ability to allocate resources and therefore raise consumption.
- nations will be unable to specialize in what they are good at and therefore end up consuming less.
A: nations will be unable to specialize in what they are good at and therefore end up consuming less.

Q: When tasks involved with producing a good or service are divided, workers and businesses
- miss out on an opportunity to specialize in their business or trade.
- produce less output than if each person or group were to complete the project alone.
- can produce a greater quantity of those goods or services.
A: can produce a greater quantity of those goods or services.

Q: If Stan’s Shoemaker Shop practices the division of labor and employees concentrate on one step of the shoe-making process, this will likely result in
- better quality shoes, but not as many will be made.
- increased production time.
- greater production output.
A: greater production output.

Q: The town of Franklin has an economy composed entirely of two equally sized specialized tire manufacturers. Both company X and company Z produce race car tires and airplane tires. Company X is better at producing race car tires than Company Z which is better at producing airplane tires. In order to maximize output, Company X should
- produce both race car tires and airplane tires on its own and sell its excess race car tires to Company Z for additional airplane tires.
- reduce its production of race car tires in order to commit resources to learn how to better produce airplane tires.
- abandon the production of airplane tires to fully specialize in the production of race car tires and then trade with Company Z for airplane tires.
A: abandon the production of airplane tires to fully specialize in the production of race car tires and then trade with Company Z for airplane tires.

Q: The town of Chester has an economy composed entirely of two equally sized food companies. Both company Q and company R produce peanut butter and jam. Company Q is better at producing jam than Company R which is better at producing peanut butter. In order to maximize output, Company R should
- produce both jam and peanut butter on its own and sell its excess peanut butter to Company Z for additional jam.
- reduce its production of peanut butter in order to commit resources to learn how to better produce jam.
- abandon the production of jam to fully specialize in the production of peanut butter and then trade with Company Q for jam.
A: abandon the production of jam to fully specialize in the production of peanut butter and then trade with Company Q for jam.

Q: Identify the macroeconomic issue among the following statements.
- The electric bill is higher this month.
- Our family business costs will rise due to higher electric rates.
- The average cost of producing electricity nationally is rising.
A: The average cost of producing electricity nationally is rising.

Q: Which topic below best applies to microeconomics?
- The unemployment rate.
- Fiscal policy.
- The price that a farmer asks for her watermelons.
A: The price that a farmer asks for her watermelons.

Q: Identify which of the following microeconomic topics can have an impact on macroeconomic topics?
- What combination of goods and services will best fit their needs and wants, given the budget they have to spend?
- What determines what prices a firm will charge?
- How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means?
A: How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means?

Q: Macroeconomic topics can be impacted by which of the following microeconomic topics?
- What combination of goods and services will best fit their needs and wants, given the budget they have to spend?
- What determines what prices a firm will charge?
- How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means?
A: How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means?

Q: Macroeconomic policies that focus on banking and interest rates or controlling the money supply are called
- fiscal policies.
- federal policies.
- monetary policies.
A: monetary policies.

Q: Macroeconomic policies that focus on government spending and taxes are considered
- monetary policies.
- federal policies.
- fiscal policies.
A: fiscal policies.

Q: A bill was introduced into Congress last year suggesting changes to the income tax code. Congress now passed this new tax reform act in the last session and over the next few years the new laws will begin to impact the nation. This is an example of what type of policy?
- macroeconomic monetary policy
- microeconomic monetary policy
- macroeconomic fiscal policy
A: macroeconomic fiscal policy

Q: Congress must vote whether to increase the government budget so as not to shut down the government this year. The vote passed and the budget ceiling has been increased to keep the government running. This is an example of what type of policy?
- microeconomic monetary policy
- macroeconomic monetary policy
- macroeconomic fiscal policy
A: macroeconomic fiscal policy