sMICROECONOMICS - CHAPTER 1

MULTIPLE CHOICES
Date: ………………...............
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1. Which of the following involve a trade-off?
a. Taking a nap
b. All of these answers involve trade-offs.
c. Watching a football game on Saturday afternoon
d. Going to university
e. Buying a new car
2. Trade-offs are required because wants are unlimited and resources are
a. economical.
b. unlimited.
c. efficient.
d. marginal.
e. scarce.
3. Economics is the study of
a. how society manages its unlimited resources.
b. how to reduce our wants until we are satisfied.
c. how society manages its scarce resources.
d. how to fully satisfy our unlimited wants.
e. how to avoid having to make trade-offs
 4. Suppose you find €20. If you choose to use the €20 to go to a football match, your
opportunity cost of going to the game is
a. nothing, because you found the money.
b. €20 (because you could have used the €20 to buy other things) plus the value
of your time spent at the game.
c. €20 (because you could have used the €20 to buy other things) plus the value of
your time spent at the game, plus the cost of the dinner you purchased at the game.
d. €20 (because you could have used the €20 to buy other things).
e. none of these answers
 5. An increase in the price of beef provides information which
a. provides no information because prices in a market system are managed by
planning boards.
b. tells consumers to buy less pork.
c. tells producers to produce more beef. (law of supply)
d. tells consumers to buy more beef.
6.  Which of the following is not part of the opportunity cost of going on holiday?
a. the money you spent on a theatre show
b. the money you could have made if you had stayed at home and worked
c. the money you spent on airline tickets
d. the money you spent on food
7. Which of the following statements regarding the circular-flow diagram is true?
a. If Susan works for BAe Systems and receives a salary payment, the transaction takes
place in the market for goods and services.
b. If BAe Systems sells a military aircraft, the transaction takes place in the market for
 factors of production.
c. None of these answers.
d. The factors of production are owned by households.
e. The factors of production are owned by firms
*Notes: Market for factors of production: Provider is household, the buyer/renter is
Firms
Market of Products: The supplier is Firm; the buyer is Household
8. Economic models are
a. usually made of wood and plastic.
b. built with assumptions.
c. useless if they are simple.
d. created to duplicate reality
9. Which of the following is not a factor of production?
a. Labour
b. Land
c. Money
d. Capital
e. All of these answers are factors of production.
10. Points on the production possibilities frontier are
a. inefficient.
b. normative.
c. unattainable.
d. efficient.
e. none of these answers.
12. Economic growth is depicted by
a. a shift in the production possibilities frontier outward.
b. a movement from inside the curve toward the curve.
c. a shift in the production possibilities frontier inward.
d. a movement along a production possibilities frontier toward capital goods

13. Refer to Exhibit 6. If the economy is operating at point C, the opportunity cost of
producing an additional 15 units of bacon is

a. 40 units of eggs.
b. 10 units of eggs.
c. 20 units of eggs.
d. 30 units of eggs.
e. 50 units of eggs.
14. Refer to Exhibit 6. If the economy were operating at point E,

a. the opportunity cost of 20 additional units of eggs is 10 units of bacon.

b. the opportunity cost of 20 additional units of eggs is 20 units of bacon.
c. the opportunity cost of 20 additional units of eggs is 30 units of bacon.
d. 20 additional units of eggs can be produced with no impact on bacon production
15. Refer to Exhibit 6. Point F represents

a. none of these answers.

b. a combination of production that can be reached if we reduce the production of eggs
by 20 units.
c. a combination of production that can be reached if there is a sufficient advance
in technology.
d. a combination of production that is inefficient because there are unemployed
resources
16. Which of the following issues is related to microeconomics?
a. the impact of oil prices on car production
b. the impact of money on inflation
c. the impact of technology on economic growth
d. the impact of the deficit on saving
17. Which of the following statements about microeconomics and macroeconomics is not
true?
a. The study of very large industries is a topic within macroeconomics.
b. Macroeconomics is concerned with economy-wide phenomena.
c. Microeconomics is a building block for macroeconomics.
d. Microeconomics and macroeconomics cannot be entirely separated.
 18. Which of the following statements is normative?
a. Large government deficits cause an economy to grow more slowly.
b. People work harder if the wage is higher.
c. The unemployment rate should be lower.
d. Printing too much money causes inflation
19. Positive statements are
a. macroeconomic.
b. microeconomic.
c. statements of description that can be tested.
d. statements of prescription that involve value judgments.
20. Suppose two economists are arguing about policies that deal with unemployment. One
economist says, "The government should fight unemployment because it is the greatest social
evil." The other economist responds, "Nonsense! Inflation is the greatest social evil." These
economists
a. really don't disagree at all. It just appears that they disagree.
b. disagree because they have different values.
c. none of these answers
d. disagree because they have different scientific judgments