Problem 1: Opportunity cost is best defined as
A) the amount given up when choosing one activity over the next best alternative.
B) the opportunity to earn a profit that is greater than the one currently being made.
C) the amount that is given up when choosing an activity that is not as good as the next best alternative.
D) the amount given up when choosing one activity over all other alternatives.
Problem 2: In a market economy, which of the following is the most important factor affecting scarcity?
A) the needs and wants of consumers
B) the price of the product
C) the degree to which the government is involved in the allocation of resources.
D) All of the above are equally important.
Problem 3: Which of the following is not considered by economists to be a basic resource or factor of production?
A) money
B) machinery and equipment
C) technology
D) unskilled labor
Problem 4: Select the group that best represents the basic factors of production.
A) land, labor, capital, entrepreneurship
B) land, labor, money, management skills
C) land, natural resources, labor, capital
D) land, labor, capital, technology
Problem 5: The best definition of economics is
A) how choices are made under conditions of scarcity.
B) how money is used.
C) how goods and services are produced.
D) how businesses maximize profits.
Problem 6: Complete the statement with "supply" or "demand": A maximum price below the equilibrium price causes excess ________, while a minimum price above the equilibrium price causes excess ._________.
a. Supply , Demand
b. Demand, Supply
c. Demand, Demand
c. Supply, Supply
Problem 7: Complete the statement with "right" or "left": An increase in the price of cassette tapes will shift the demand curve for CDs to the a. __________; an increase in the price of CD players will shift the demand curve for CDs to the b. ____________.
a. left, right
b. right, right
c. right, left
d. left, left
e. none of the above
Problem 8. Which of the following items go together?
A. Change in quantity supplied D. Shifting the supply curve
B. Change in production cost E. Change in price
C. Change in supply F. Movement along the supply curve
a. A,C,F; B,E,D.
b. A,C,D; BEF
c. A,E,F; B,C,D
d. A,D,C; BEF
e. D,E,F; A,C,D
Problem 9. Complete the statement with "supply" or "demand": If the price and quantity change in the same direction, __________ is changing; if the price and quantity change in opposite directions, __________ is changing.
a. Supply , Demand
b. Demand, Supply
c. Supply, Supply
d. Demand, Demand
e. None of the above
Problem 10: Consider the market for personal computers. Suppose that the demand is stable: the demand curve doesn't change. Predict the effects of the following changes on the equilibrium price of computers. The cost of memory chips (one component of a computer) decreases.
a. Supply increases, so price falls and quantity rises.
b. quantity falls.
c. Supply decreases, so price rises and quantity falls.
d. Nothing would happen because demand is stable and so supply would be stable
e. Not enough information to predict what would happen