1. Economics is best defined as the study of:
A) Financial decision-making.
B) Choices made by people faced with scarcity.
C) How consumers make purchasing decisions.
D) Inflation, unemployment, and economic growth.
2. Scarcity can best be defined as a situation in which:
A) There is more than enough money to satisfy consumer’s wants.
B) There are not enough goods to satisfy all of the buyer’s demands.
C) Resources are limited in quantity and can be used in different ways.
D) There are no buyers willing to purchase what sellers have produced.
3. Which of the following is NOT a factor of production?
A) Money
B) Labour
C) Human capital
D) Physical capital
4. Printing presses, forklifts and assembly plants are examples of which factor of production?
A) Labour
B) Human capital
C) Physical capital
D) Entrepreneurship
5. Ceteris paribus is the Latin expression meaning:
A) Let buyer beware.
B) Think at the margin.
C) Other variables are held fixed.
D) For every action there is an equal and opposite reaction.
6. When Bob has to give up lunch in order to have a fancy dinner, the economic principle that is highlighted by his situation is the:
A) Marginal principle.
B) Reality principle.
C) Spill over principle.
D) Principle of opportunity cost.
7. The additional cost resulting from a small increase in some activity is called the:
A) Marginal cost.
B) Marginal benefit.
C) Opportunity cost.
D) Diminishing returns of the activity.
8. The principle that individuals and firms pick the activity level where the incremental benefit of that activity equals the incremental cost of that activity is known as the:
A) Marginal principle.
B) Spill over principle.
C) Principle of opportunity cost.
D) Principle of diminishing returns.
9. If a consumer can buy four DVDs for $44 and five DVDs for $50, then the marginal cost of the fifth DVD is:
A) $10
B) $50
C) $11
D) $6
10. If a consumer can buy four pizzas for $24 and five pizzas for $25, then the marginal cost of the fifth pizza is:
A) $25
B) $5
C) $6
D) $1
12. Adamsonia and Smithsonia are two countries that both produce tea and coffee. The two countries have similar resource bases. Adamsonia can either produce 3000 tea or 6000 coffee. Smithsonia can either produce 2000 tea or 5000 coffee. In the state of autarky, Smithsonia consumed 1000 tea. Assuming Smithsonia used all her resources available through the state of autarky, how much coffee was she able to consume?
A) 2000
B) 1000
C) 5000
D) 2500
13. Adamsonia and Smithsonia are two countries that both produce tea and coffee. The two countries have similar resource bases. Adamsonia can either produce 3000 tea or 6000 coffee. Smithsonia can either produce 2000 tea or 5000 coffee. In the state of autarky, Adamsonia was producing 2000 tea and in the state of autarky Smithsonia was producing 2500 coffee. If the two countries begin to trade based on the theory of comparative advantage, (using a price of 2.25 coffee per tea), and if Adamsonia wishes to remain at 2000 tea, how many bags of coffee would Smithsonia consume after trade?
A) 2250
B) 5000
C) 2750
D) 2500
14. Adamsonia and Smithsonia are two countries that both produce tea and coffee. The two countries have similar resource bases. Adamsonia can either produce 3000 tea or 6000 coffee. Smithsonia can either produce 2000 tea or 5000 coffee. In the state of autarky, Adamsonia was producing 2000 tea and in the state of autarky Smithsonia was producing 2500 coffee. If the two countries begin to trade based on the theory of comparative advantage, (using a price of 2.25 coffee per tea), and if Adamsonia wishes to remain at 2000 tea, how many bags of coffee would Adamsonia consume after trade?
A) 2250
B) 2750
C) 5000
D) 2500