1. Which of the following is a reason to study economics?

a. Economic analysis explains daily events.
b. It helps us understand why people, firms and government behave in a certain way.
c. We need to understand relevant economic applications and policy issues.
d. It provides useful logic for solving complex problems.
e. All of these

2. According to the text, why are some countries rich and others very poor?

a. Some countries have no oil.
b. People have no property rights.
c. Access to education is very limited.
d. High tariffs prevent international trade.
e. All of these.

3.The primary reason to explain why some nations are rich and others poor is

a. A democratic government
b. A strong judicial system
c. Access to education
d. Private ownership
e. A stable currency

5.Private property rights are important because

a. they create incentives for people to improve their standard of living.
b. the Constitution says so.
c. they allow students to choose their major field of study in college.
d. an economy cannot grow without them.
e. all of these

6.Overfishing, and in some cases extinction of species result from:

a scarcity
b. greedy fishermen who cheat and take more than their fair share
c. no one has an incentive to take care of it
d. lack of laws to control the amount of fish taken
e. all of these

7.Sonia works at a restaurant where tips are pooled and divided equally. Anna works at a different restaurant where she keeps the tips her customers leave for her. Which of the following is true?

a. Both work equally hard because their hourly wage from the employer is low, and they can make up for this with tips
b. Sonia works harder, because she receives the same amount of tips as other workers.
c. Anna works harder, because she works at an expensive restaurant.
d. Anna works harder because her tips are her private property.e. It's impossible to say without more information.

8.The main reason villagers in Xiaogang produced more rice than those in surrounding villages was

a. they had better farmland.
b. they were giv n better seeds.
c. they were able to keep the output they produced individually.
d. they made each family responsible for a certain, higher quota

9.Economic freedom is

a. the right to own property.
b. not having to pay taxes.
c. exists only in some countries.
d. affects only poor people.
e. the ability to engage in voluntary trade.

10.Scarcity

a. ensures people become satisfied with less than they want.
b. exists only during a recession.
c. exists only in some countries.
d. affects only poor people.
e. requires people to make choices.

Markets and the Market Process

1.____ is an example of an allocation mechanism.

a. Market
b. First-come, first-served
c. Government dictate
d. Random
e. All of these are examples of allocation mechanisms.

2.Which of the following mechanisms is unfair?

a. Market.
b. First-come, first-served.
c. Government
d. Random
e. All of these are unfair in a sense; it depends on the incentives each creates.

3.What incentives are created under a first come, first served allocation mechanism?

a. Fairnessb. Equality for all
c. To be first
d. To produce the most
e. To acquire purchasing ability (to obtain income and wealth)

4. What incentive s are created under a government allocation scheme?

a. Fairness
b. Equality for all
c. To be first
d. To be in favor with or match up with government's rules
e. To acquire purchasing ability (to obtain income and wealth)

5. What incentives are created under a random allocation scheme?

a. Fairness
b. Equal results for all
c. To be first
d. To be in favor with or match up with government's rules
e. No incentives are created

Applications of Demand and Supply

1. A change in consumer tastes for low-carb food and a decrease in their preferences for low-fat meals does not lead to which of the following?

a. An inward shift of the demand curve for low-fat meals
b. An outward shift of the demand curve for low-carb food
c. An increase in the amount of resources used to produce low-carb food
d. A decrease in the amount of resources used to produce low-fat meals
e. A reduction in the value of resources used in low-carb foodFigure 3.1

2.According to Figure 3.1, as represented by the shift from D1 to D2,

a. the demand for low-fat food has risen.
b. the quantity of low-fat food supplied has declined.
c. eating low-fat food may have become popular.
d. consumer tastes for low-fat food may have risen.
e. consumer tastes for high-fat food may have fallen.

3.In a market system, resources flow from lower-valued uses to higher-valued uses because of

a. the dictates of the government.
b. the desires of business to make a profit.
c. first come, first served.
d. the consumer is always right.
e. comparative advantage.

4.In a market system, ____ decide what will be produced.

a. producers
b. consumers
c. politicians
d. government authorities
e. central planning agencies

5."Efficiency" means

a. a producer is using the very best production techniques
b. everyone pays his fair share
c. those who cannot pay will not get any
d. the consumer is always right
e. All of these.

6.Which of the following influence the level of wages?

a. Training and Education
b. Amount of time required to be away from home
c. Risk of the occupation

7.According to Figure 3.1, as represented by the shift from D1 to D2,

a. the demand for low-fat food has risen.
b. the quantity of low-fat food supplied has declined.
c. eating low-fat food may have become popular.
d. consumer tastes for low-fat food may have risen.
e. consumer tastes for high-fat food may have fallen.

8.In a market system, resources flow from lower-valued uses to higher -valued uses because of a. the dictates of the government.

b. the desires of business to make a profit.
c. first come, first served.
d. the consumer is always right.
e. comparative advantage.

9.In a market system, ____ decide what will be produced.

a. producers
b. consumers
c. politicians
d. government authorities

Central planning agencies

1."Efficiency" means

a. a producer is using the very best production techniques
b. everyone pays his fair share
c. those who cannot pay will not get any
d. the consumer is always right
e. All of these.

2.Which of the following influence the level of wages?

a. Training and Education
b. Amount of time required to be away from home
c. Risk of the occupation d. Experience
e. All of these

3.Which of the following is not correct?

a. A person may be paid a wage higher than he or she is worth, if he or she works in a risky profession.
b. A person in a risky profession will likely be paid more than a person of equal skills in another profession.
c. It is possible that a person will turn down a higher-paying job because his or her current job provides many nonmonetary benefits.
d. By increasing his or her human capital, a worker can expect to receive a higher wage.
e. If there were no compensating wage differential, there would be a shortage of workers in risky profession 25. In Figure 3.4, the

4.reason for the wage differential could be the fact that

a. market A is the market for a risky occupation.
b. market B consists of unskilled labor.
c. market A consists of workers with more human capital.
d. market B consists of workers with less human capital.
e. all of these are true.

The Firm and the Consumer

1. Total revenue is the

a. price at which a product is sold multiplied by the cost of producing the product.
b. price at which a product is sold multiplied by the number of units of the product that is sold.
c. price at which a product is sold multiplied by the number of units of the product that is produced.
d. average price of a product divided by the number of units of the product that is sold.
e. none of these.

2. Average revenue is

a. the price at which a product is sold multiplied by the cost of producing the product.
b. the price at which a product is sold divided by the number of units of the product sold.
c. total revenue divided by the number of units of the product sold.
d. the number of units of the product sold divided by the price at which the product is sold.
e. total revenue divided by the average price.

3. Marginal revenue is

a. the price at which a product is sold multiplied by the cost of producing the product.
b. the price at which a product is sold divided by the number of units of the product sold.
c. the change in total revenue divided by the change in quantity sold.
d. the change in quantity sold divided by the change in total revenue.

4. In Figure 3.4, the reason for the wage differential could be the fact that

a. market A is the market for a risky occupation.
b. market B consists of unskilled labor.
c. market A consists of workers with more human capital.
d. market B consists of workers with less human capital.
e. all of these are true.