1.
For economists, the word "utility" means:
A.
versatility and flexibility.
B.
rationality.
C.
pleasure or satisfaction.
D.
purposefulness.
2.
According to economists, economic self-interest:
A.
is a reality that underlies economic behavior.
B.
has the same meaning as selfishness.
C.
means that people never make wrong decisions.
D.
is usually self-defeating.
3.
Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:
A.
opportunity costs.
B.
marginal benefits that exceed marginal costs.
C.
imperfect information.
D.
normative economics.
4.
The study of economics is primarily concerned with:
A.
keeping private businesses from losing money.
B.
demonstrating that capitalistic economies are superior to socialistic economies.
C.
choices that are made in seeking the best use of resources.
D.
determining the most equitable distribution of society's output.
5.
Opportunity costs exist because:
A.
the decision to engage in one activity means forgoing some other activity.
B.
wants are scarce relative to resources.
C.
households and businesses make rational decisions.
D.
most decisions do not involve sacrifices or trade-offs.
6.
Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as:
A.
rational self-interest because he is attempting to increase his own income by identifying and satisfying someone else's wants.
B.
greedy because he is asking for a high wage that some of his neighbors can't afford to pay.
C.
selfish because he is asking for a wage that is higher than others might charge.
D.
irrational because some neighbors refused his offer.
7.
Which of the following terms implies the least degree of confidence in an economic generalization?
A.
Hypothesis.
B.
Theory.
C.
Principle.
D.
Law.
8.
Macroeconomics can best be described as the:
A.
analysis of how a consumer tries to spend income.
B.
study of the large aggregates of the economy or the economy as a whole.
C.
analysis of how firms attempt to maximize their profits.
D.
study of how supply and demand determine prices in individual markets.
9.
Normative statements are concerned primarily with:
A.
facts and theories.
B.
what ought to be.
C.
what is.
D.
rational choice involving costs and benefits.
10.
The alternative combinations of two goods that a consumer can purchase with a specific money income is shown by:
A.
a production possibilities curve.
B.
a demand curve.
C.
a consumer expenditure line.
D.
a budget line.
11.
The budget line shows:
A.
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