Question Question 1.1. (TCO 1) What is the economic meaning of the expression that “There

Question 1.1. (TCO 1) What is the economic meaning of the expression that “There is no such thing as a free lunch?” (Points : 3)
a. It refers to “free-riders,” who do not pay for the cost of a product but who receive the benefit from it.
b. It means that economic freedom is limited by the amount of income available to the consumer.
c. It means that there is an opportunity cost when resources are used to provide “free” products.
d. It indicates that products only have value because people are willing to pay for them.
Question 2.2. (TCO 1) Henry wants to buy a book. The economic perspective suggests that Henry will buy the book if (Points : 3)
a. the book will give him utility.
b. his income is high.
c. the marginal cost of the book is greater than its marginal benefit.
d. the marginal benefit of the book is greater than its marginal cost.
Question 3.3. (TCO 1) Which situation would most likely cause a nation’s production possibilities curve to shift inward? (Points : 3)
a. The construction of more capital goods
b. An increase in discrimination based on race
c. An increase in the number of skilled immigrant workers
d. The destruction from bombing and warfare in a losing military conflict
Question 4.4. (TCO 1) Which expression is another way of saying “marginal cost”? (Points : 3)
a. Scarce resources
b. Additional cost
c. Opportunity cost
d. Unrecognized cost
Question 5.5. (TCO 1) Which is not a factor of production? (Points : 3)
a. Money
b. Land
c. Labor
d. Capital
Question 6.6. (TCO 1) Another term for capitalism is (Points : 3)
a. the command system.
b. the socialist economy.
c. the market system.
d. the system of inputs and outputs.
Question 7.7. (TCO 1) Markets in which firms sell their output of goods and services are called (Points :
a. resource markets.
b. product markets.
c. command markets.
d. mixed markets.
Question 8.8. (TCO 1) Consumers express self-interest when they (Points : 3)
seek the lowest price for a product.
reduce business losses.
collect economic profits.
search for jobs with the highest wages.
Question 9.9. (TCO 1) Which is not one of the five fundamental questions that an economy must deal with? (Points : 3)
How will the goods and services be produced?
Why should the goods and services be produced?
Who is to receive the goods and services produced in the economy?
In what ways will progress be promoted?
Question 10.10. (TCO 1) A characteristic of centrally planned economies is that (Points : 3)
the price is relatively unimportant in allocating resources.
output reflects the pattern of consumer spending.
income is fairly distributed among individuals.
there are many incentives for innovation and hard work.
Question 11.11. (TCO 2) The quantity demanded of a product increases as its price declines because the (Points : 3)
lower price shifts the demand curve rightward.
lower price shifts the demand curve leftward.
lower price results in an increase in supply.
demand curve is downsloping.
Question 12.12. (TCO 2) A surplus of a product will arise when price is (Points : 3)
a. above equilibrium with the result that quantity demanded exceeds quantity supplied.
b. above equilibrium with the result that quantity supplied exceeds quantity demanded.
c. below equilibrium with the result that quantity demanded exceeds quantity supplied.
d. below equilibrium with the result that quantity supplied exceeds quantity demanded.
Question 13.13. (TCO 2) Which of the following is a consequence of rent controls established to keep housing affordable for the poor? (Points : 3)
a. Less rental housing is available as prospective landlords find it unprofitable to rent at restricted prices.
b. The quality of rental housing declines as landlords lack the funds and incentive to maintain properties.
c. Apartment buildings are torn down in favor of office buildings, shopping malls, and other buildings where rents are not controlled.
d. All of the above are consequences of rent controls.
Question 14.14. (TCO 2) A headline reads “Lumber Prices Up Sharply.” In a competitive market, this situation would lead to a(n) (Points : 3)
increase in the price and quantity of new homes.
decrease in the price and quantity of new homes.
increase in the price of new homes and decrease in quantity.
decrease in the price of new homes and increase in quantity.
Question 15.15. (TCO 2) Two months ago, the Marbury Shirt company sold 200 shirts at $30 per shirt. Last month, the company raised its price to $35 per shirt and sold 300 shirts. Evidently the company experienced a(n) (Points : 3)
decrease in demand.
increase in demand.
decrease in supply.
increase in supply.
Question 16.16. (TCO 2) If the price-elasticity coefficient for a good is .75, the demand for that good is described as (Points : 3)
a. normal.
b. elastic.
c. inferior.
d. inelastic.
Question 17.17. (TCO 2) Total revenue falls as the price of a good is raised, if the demand for the good is (Points : 3)
elastic.
inelastic.
unitary elastic.
perfectly elastic.

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