Question

Multiple Choice Questions
1. Which of the following is correct?
A. The word economy comes from the Greek word for “rational thinker.”
B. Economists study the management of scarce resources.
C. Because economists believe that people pursue their best interests, they are not interested in how people interact.
D. All of the above are correct.

2. The overriding reason why households and societies face many decisions is that
A. resources are scarce.
B. goods and services are not scarce.
C. incomes fluctuate with business cycles.
D. people, by nature, tend to disagree.

3. Which of the following statements best represents the principle represented by the adage, “There is no such thing as a free lunch”?
A. Michelle can attend the concert only if she takes her sister with her.
B. Michael is hungry and homeless.
C. Andrea must repair the tire on her bike before she can ride it to class.
D. Dani must decide between going to Florida or Brazil for spring break.
4. When the government redistributes income from the wealthy to the poor,
A. efficiency is improved, but equality is not.
B. equality is improved, but efficiency is not.
C. both efficiency and equality are improved.
D. neither efficiency nor equality are improved.

5. Melody decides to spend three hours working overtime rather than going to the park with her
friends. She earns $20 per hour for overtime work. Her opportunity cost of working is
A. the $60 she earns working.
B. the $60 minus the enjoyment she would have received from going to the park.
C. the enjoyment she would have received had she gone to the park.
D. nothing, since she would have received less than $60 worth of enjoyment from going to the park.

6. A rational decision maker takes an action only if the
A. marginal benefit is less than the marginal cost.
B. marginal benefit is greater than the marginal cost.
C. average benefit is greater than the average cost.
D. marginal benefit is greater than both the average cost and the marginal cost.

7. After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events would prompt you to reverse this decision?
A. The marginal benefit of going to Spain increases.
B. The marginal cost of going to Spain increases.
C. The marginal benefit of going to Ireland increases.
D. The marginal cost of going to Ireland decreases.

8. If the United States decides to trade with Yemen, we know that
A. Yemen will benefit, but trade with a less developed country could not benefit the United States.
B. it will not benefit Yemen because workers in the United States are more productive.
C. Yemen and the United States can both benefit.
D. it will not benefit either country because their cultural differences are too vast.

9. The “invisible hand” refers to
A. how central planners made economic decisions.
B. how the decisions of households and firms lead to desirable market outcomes.
C. the control that large firms have over the economy.
D. government regulations without which the economy would be less efficient.

10. Assume for the United States that the opportunity cost of each airplane is 50 cars. Which of
these pairs of points could be on the United States’ production possibilities frontier?
A. (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars)
B. (300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars)
C. (300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars)
D. (200 airplanes, 12,500 cars) and (150 airplanes, 15,000 cars)

Answer 1

Answer 1. b. Economists study the management of scarce resources.

Reason- Economics is the management of scarce resources. Economy doesn't mean rational thinker. Economists also study how people interact.

Answer 2. A. Resources are scarce.

Reason- Resources are limited and wants are unlimited. That is why the the resources are scarce. Households need to make decisions because of resources are scarce.

Answer 3. d. Dani must decide between going to Florida or Brazil for spring break.

Reason- There is no such thing as a free resource because every decision has an opportunity cost. A person cannot take two decisions at the same time. If Dani goes to Florida, he cannot go to Brazil and vice versa.

Answer 4. B. Equality is improved but efficiency is not.

Reason- Equality improves because of equal income distribution but efficiency is not improved.

Note-According to Chegg's Answering policy first four questions are answered.