Arnold Quiz: What Economics Is About

Quiz
What Economics Is About

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1. The academic discipline known as economics is best viewed as: a. the science of scarcity that focuses on inevitable choices people and societies have to make because wants exceed limited resources available to satisfy them.
b. microeconomics because it deals with human behavior and choices as they relate to relatively small units (such as individuals, firms, and single industries or markets) that have always been the focus of economists' interest.
c. macroeconomics because it deals with human behavior and choices as they relate to highly aggregated markets or the entire economy.
d. positive economics because it deals exclusively with (testable) cause-and-effect relationships; it studies what is in economic matters.
e. normative economics because it deals exclusively with (untestable) value judgments and opinions; it studies what should be in economic matters.

2. The basic economic problem of scarcity is: a. the condition in which human wants exceed limited resources to satisfy them.
b. nowadays limited to poor countries.
c. the inevitable result of people's selfishness.
d. the inevitable result of a less-than-full or inefficient use of available resources.
e. the inevitable result of the production of the wrong kinds of goods.

3. Customarily, economists classify resources into these major groups:: a. factors of production and money.
b. land, labor, capital, and entrepreneurship.
c. physical labor, mental labor, and financial capital.
d. human capital and financial capital.
e. inputs and outputs.

4. As economists use the term, capital resources include: a. electric power plants, iron ore deposits, and oil refineries.
b. airport control towers, factory buildings, and schools.
c. virgin land and wild animals living on it.
d. bonds, money, and stock certificates.
e. people who have been educated and highly trained in specific skills.

5. Which of the following would be classified as capital resources?: a. A piece of land that has been drained, fertilized, and fenced in.
b. A pile of coal sitting in the yard of a power plant.
c. Barrels of crude oil sitting in a refinery warehouse.
d. Cans of peas sitting on supermarket shelves.
e. All of the above.

6. Which of the following would be classified as natural resources or land?: a. A school of fish in Lake Superior.
b. A herd of domesticated cattle on a Kansas farm.
c. A pile of bauxite ore at an aluminum refinery.
d. The apple trees in an orchard.
e. All of the above.

7. The concept of opportunity cost refers to: a. the disutility associated with so-called bads, such as pollution.
b. the fact that the production process is continually interrupted by entrepreneurs who seek ever-new business opportunities and new ways of doing things.
c. the most highly valued alternative that is forgone in an act of choice.
d. the fact that scarcity implies competition for society's rationing device.
e. the fact that "bygones are bygones."

8. A society is able to produce, with a given set of resources, any one of the following: 1,000 miles of superhighways, 500 new high school buildings, enough food to feed the entire starving population of a foreign country for a year, a new space shuttle, 100 new hospitals. If people unanimously ranked these projects such that hospitals came first, followed by schools, then highways, then space shuttle, and, lastly, foreign aid, what would be the opportunity cost of building the hospitals?: a. The foreign aid.
b. The space shuttle.
c. The high schools.
d. The superhighways.
e. All of the other items.

9. Here are three things you could do right now instead of studying economics: go to sleep (you value this at $10), work at Pizza Hut (you could earn $15), create a web site for a friend of a friend (you could earn $50). The opportunity cost of studying economics right now is: a. $10 because this is the only hypothetical dollar figure.
b. $15 because this is the lowest dollar figure someone would actually pay you.
c. $50 because this is the highest valued alternative forgone.
d. $25 because this is the average of the three missed opportunities.
e. $75 because this is the sum of the forgone opportunities.

10. "If I had not gone to the movies, I could have played squash, surfed the Internet, or earned $50 working at the Computer Center tonight." It follows that the speaker's opportunity cost of going to the movies: a. cannot be determined from the information given here.
b. was a squash game forgone.
c. was the forgone pleasure of surfing the Internet.
d. was $50.
e. was greater than $50.

11. How are changes in opportunity cost predicted to change behavior?: a. The lower the opportunity cost of doing X, the more likely are people to do X.
b. The higher the opportunity cost of doing X, the more likely are people to do X.
c. The lower the opportunity cost of doing X, the less likely are people to do X.
d. The higher the opportunity cost of doing X, the less likely are people to do X.
e. Both (a) and (d) are correct.

12. If the tuition, room and board, and similar charges at your college come to $5,000 per year, then your opportunity cost of going to college may well: a. equal less than $5,000 if your parents paid the bill.
b. equal less than $5,000 if a scholarship paid the bill.
c. equal minus $10,000 if you gave up a $15,000 a year job to go to college.
d. be different from your roommate's.
e. be correctly described by (c) and (d).

13. Proper decision-making at the margin is characterized by which of the following?: a. A comparison of the total benefit of a choice with the total cost of this choice.
b. Making a choice such that total benefit exceeds total cost.
c. Making all-or-nothing decisions.
d. Weighing the marginal benefit against the marginal cost of a change.
e. Ignoring all unintended effects of one's choice.

14. An economic theory or model is correctly described by which of the following?: a. It is an abstract representation of the real world and, therefore, rarely able to explain and predict real-world events. Yet it sharpens our minds.
b. It is an abstract representation of the real world, designed to help us understand that world better.
c. It cannot possibly explain and predict events because it focuses on a limited number variables, while omitting all kinds of other variables.
d. It cannot possibly explain and predict events because it is inevitably based on a large number of "simplifying" and, thus, unrealistic assumptions.
e. It helps us understand the world better because it is not published until proven correct by evidence.

15. All of the following are steps involved in the building of an economic theory, except: a. deciding what is to be explained or predicted.
b. identifying variables that are critically important for the explanation.
c. making sure that all assumptions have been proven to be objective facts.
d. stating a hypothesis that shows how the critical variables are related.
e. testing the theory by comparing its predictions against real-world events (and, depending on the outcome, maintaining or amending the theory).

16. The ceteris paribus clause that is encountered in many economic models: a. warns us of one major obstacle to scientific thinking: association does not mean causation.
b. warns us of one major obstacle to scientific thinking: what is true for an individual is not necessarily true for a group.
c. helps us avoid value judgments when formulating economic theories.
d. helps us clearly state the true relationship between two variables by assuring us that all other things are being held constant.
e. helps us reject theories that are based on unrealistic assumptions.

17. Which of the following statements is unlikely to be found in positive economics?: a. It is time we taxed the rich to help the poor.
b. We should restrict the import of Ukrainian coats in order to save the jobs of garment workers in Maine.
c. We ought to raise the minimum wage to help the poor.
d. We ought to enact a tax credit to help parents send their children to college.
e. Each one of the above.

18. Which of the following statements is unlikely to be found in normative economics?: a. Ceteris paribus, an increase in the minimum wage raises teenage unemployment.
b. Ceteris paribus, the imposition of a sales tax raises the price of gasoline paid by consumers.
c. Ceteris paribus, the imposition of a sales tax lowers the price of gasoline received by owners of gas stations.
d. Ceteris paribus, a general income tax cut raises consumer expenditures.
e. Each one of the above.

19. Which of the following is likely to involve microeconomics?: a. A study of the effect on the general price level of an increase in the nation's money supply.
b. A study of the effect on consumer buying of a decrease in the price of milk.
c. A study of the effect on overall unemployment of a change in the federal income tax rate.
d. A study of the effect on aggregate consumer spending of higher exports.
e. A study of the effect on labor productivity of stricter anti-pollution laws.

20. Which of the following is likely to involve macroeconomics?: a. A study of the effect of a sales tax on clothing sales.
b. A study of the effect of a tariff on the import of automobiles.
c. A study of the effect of an import quota on domestic sugar production.
d. A study of the effect of a larger money supply on interest rates.
e. A study of the effect of a strike on employment in the auto industry.