ECO 365T Wk 1 - Practice Knowledge Check

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ECO 365T Wk 1 - Practice Knowledge Check

In deciding whether to study for an economics quiz or go to a concert, one is confronted by the idea(s) of

Multiple Choice

•      scarcity and opportunity costs.
•      money and real capital.
•      complementary economic goals.
•      full production.

Which of the following does not foster innovation and technological advance?

Multiple Choice

•      competition in markets
•      freedom of choice and enterprise
•      self-interest and personal rewards
•      fear and avoidance of risk

The distinction between microeconomics and macroeconomics is

Multiple Choice

•      that microeconomics examines the beach, while macroeconomics looks at the sand, individual rocks, and shells, so to speak.
•      so clear-cut that every topic can be readily labeled as either macro or micro.
•      that microeconomics studies the behavior of individual consumers, workers, and firms, while macroeconomics studies the economy as a whole.
•      that microeconomics seeks to obtain an overview, while macroeconomics observes the details of individual components.

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.

ResourcePrice Per Unit of resource     Techniques (# of Units of Each Resource Required)

              A     B     C     D

Labor      $ 2   3     2     1     2

Land       1     2     1     3     1

Capital    4     1     2     2     3

Entrepreneurship    3     1     2     1     1

If the price of labor increases from $2 to $3, then the results of using Technique C will change from an economic

Multiple Choice

•      loss of $2 to a loss of $1.
•      profit of $2 to a profit of $1.
•      profit of $1 to a profit of $2.
•      loss of $1 to a loss of $2.

Microeconomics is concerned with

Multiple Choice

•      the aggregate or total levels of income, employment, and output.
•      a detailed examination of specific economic units that make up the economic system.
•      positive economics, but not normative economics.
•      establishing an overall view of the operation of the economic system.

Assume the price of product Y (the quantity of which is on the vertical axis) is $15 and the price of product X (the quantity of which is on the horizontal axis) is $3. Also assume that money income is $60. The absolute value of the slope of the resulting budget line is

Multiple Choice

•      5.
•      1/5.
•      4.
•      20.

Explanation

The slope of the budget line is found by dividing the price of the good shown on the horizontal axis ($3) by the price of the good shown on the vertical axis ($15).

The simple circular flow model shows that workers and capital owners offer their services to firms through the

Multiple Choice

•      product markets.
•      resource markets.
•      money markets.
•      financial markets.

The slope of the typical production possibilities curve

Multiple Choice

•      is positive.
•      becomes steeper as one moves southeast along the curve.
•      is constant as one moves down the curve.
•      becomes flatter as one moves southeast along the curve.

The simple circular flow model shows that

Multiple Choice

•      households are on the buying side of both product and resource markets.
•      businesses are on the selling side of both product and resource markets.
•      households are on the selling side of the resource market and on the buying side of the product market.
•      businesses are on the buying side of the product market and on the selling side of the resource market.

A well-tested economic theory is often called

Multiple Choice

•      a hypothesis.
•      a prototype.
•      a principle.
•      an anomaly.

The economic function of profits and losses is to

Multiple Choice

•      bring about a more equal distribution of income.
•      signal that resources should be reallocated.
•      eliminate small firms and reduce competition.
•      tell government which industries need to be subsidized.