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PRACTICE TEST 1 (Bassam AbuAlFoul) Chapter 1 Thinking Like an Economist Part I.

Multiple Choice: Choose the best answer for the following questions.
1. Economics is the study of our ______wants running up against the ______ resources available to satisfy them. a. finite, finite c. infinite, finite b. finite, infinite d. infinite, infinite

2. Walt Disney wasn't much of an artist. In fact, he could barely draw. But he had a genius for organizing and directing armies of creative talent. Economists term people like Disney a. laborers. b. capitalists. c. entrepreneurs. d. utilitarians.

3. This summer, Ahmed will either take classes or work a summer job that pays $7,000. Is the job relevant to whether or not he takes the classes? a. No, because the potential loss of $7,000 lies in the future. b. No, because there is no benefit to summer classes that is measurable in dollars as the job is. c. Yes, because economists allow anything to be relevant to a personal decision. d. Yes, because $7,000 is one of the costs of taking summer classes. 4. The term ceteris paribus means a. "association is not causation." c. "all other things held constant." b. "true for one is true for all." d. "proved by the evidence."

5. A mixed economy is one in which a. factors of production are privately owned but all prices are set by the government. b. factors of production are state owned but all prices are set in competitive markets. c. elements of capitalist and socialist economic systems coexist. d. exporting and importing are restricted somewhat, but are not totally banned.

6. The study of how a typical family makes decisions is explicitly part of a. macroeconomics. b. microeconomics. c. positive economics. d. normative economics. 7. Studying the determinants of the total demand for the economy's goods and services is part of a. macroeconomics. b. microeconomics. c. positive economics. d. normative economics.

Part II: Internet: You are also encouraged to visit the web site for this book which is rich in learning resources and materials related to each chapter. In addition, you can test your knowledge with the online quizzes. The internet address was provided in the course syllabus. Here it is again:

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ANSWERS (For Part I): 1. c Economics is about scarcity, where our resources are insufficient to meet all our wants. 2. c Entrepreneurs are those who organize the use of the other resources, like labor, land, and capital. 3. d The $7,000 is the best forgone alternative, or "opportunity cost," that economists assume is part of Ahmed's decision making. 4. c Theorists add "ceteris paribus" to their statements to warn of their abstractions from detail. 5. c This is the definition of a mixed economy. 6. b Microeconomics is the study of relatively small economic units, such as the family. 7. a Macroeconomics is the study of the entire economy.

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