Section A: Multiple Choices Question
1. 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.
2. 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
3. The fact that wants cannot be fully satisfied with available resources reflects the definition of
A) the what tradeoff.
C) the big tradeoff.
D) for whom to produce.
4. The opportunity cost of a decision is measured in terms of
B) the price of the alternative we choose.
C) the best alternative given up.
D) the price of a new opportunity that arises
5. Suppose you plan to take summer courses. The cost of tuition and textbooks is $1,200,
housing will cost you $400, and you'll spend $300 on food. If you decide not to take courses in
the summer, you'll live in your parents' house for free and spend only $100 on food. Also, if you
don't take courses in the summer, you'll work full time and could earn at least $5,000. You can
still work part time while taking courses, but the most you can earn is $1,000. What is your
opportunity cost of taking courses in the summer?
6. When an economy produces more houses and fewer typewriters, it is answering the ________
D) "for whom"
7. Whether a company produces fishing rods mostly by hand or using high-tech machinery is a
A) for whom will goods be produced.
B) why will the goods be produced.
C) where will the goods be produced.
D) how will the goods be produced.
8. What are the four categories into which factors of production are grouped?
A) profit, wages, rent, and interest
B) land, labor, capital, and entrepreneurship
C) capital, human capital, land, and labor
D) entrepreneurship, profit, labor, and wages
9. The income earned by the people who sell the services of the factor of production ________ is
A) capital; rent
B) entrepreneurship; wages
C) land; profit
D) entrepreneurship; profit
10. Which of the following is NOT a factor of production?
A) vans used by a bakery company for deliveries
B) a person developing a production schedule for a new product
C) 175 shares of Microsoft stock
D) wilderness areas that have yet to be developed
11. Overtime worked by a JCPenney associate is considered ________ and earns ________.
A) labor; wages.
B) entrepreneurship; profit.
C) human capital; interest.
D) labor; profit.
12. Joy is training to become a chef. The skills she is obtaining from her training and education
will increase what type of resource?
B) physical capital
D) human capital
13. Which of the following is a positive statement?
A) An unemployment rate of 9 percent is a national disgrace.
B) Unemployment is a more important problem than inflation.
C) When the national unemployment rate is 9 percent, the unemployment rate for inner-city
youth is often close to 40 percent.
D) Unemployment and inflation are equally important problems.
14. The statement that "peach ice cream is better than chocolate ice cream"
A) can be tested using the scientific approach.
B) is a normative statement.
C) is a positive statement.
D) provides a basis for predicting which type of ice cream will exhibit the most sales.
15. The production possibilities frontier is the boundary between
A) those combinations of goods and services that can be produced and those that can be
B) those resources that are limited and those that are unlimited.
C) those combinations of goods and services that can be produced and those that cannot.
D) those wants that are limited and those that are unlimited.
Section B : Structured Questions
Production Pizza CDs
point produced produced
A 0 and 42
B 4 and 40
C 8 and 36
D 12 and 30
E 16 and 22
F 20 and 12
G 24 and 0
The table above lists seven points on the production possibilities frontier for pizza and CDs.
Graph the PPF. What is the opportunity cost of producing the first four pizzas? What is the
opportunity cost of producing the 10th pizza. What is the opportunity cost of producing the first
12 CDs? What is the opportunity cost of producing the 26th CD?
The figure above represents the production possibilities frontier for a country.
a) The nation is currently producing at point B and wants to move to point C. What is the
opportunity cost of the move?
b) The nation is currently producing at point B and wants to move to point A. What is the
cost of the move?