Question 1. According to Colander, the best definition of economics is:
a. the study of how limited resources are allocated among competing needs.
b. the study of scarcity and how people deal with the problem of scarcity.
c. the study of how choices are made.
d. the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of that society.
Question 2. The three central coordination problems any economic system must solve are:
a. what to produce, why to produce, how to produce.
b. what to produce, why to produce, for whom to produce.
c. what to produce, how to produce, for whom to produce.
d. what to produce, where to produce, how to produce.
Question 3. Rational decision making means that:
a. marginal benefits and marginal costs of a decision are always easy to measure.
b. if the marginal benefit of the last unit of an activity exceeds its marginal cost, then more of that activity should be undertaken.
c. one should keep doing an activity until the total benefits are maximized.
d. one should keep doing an activity until the marginal costs are minimized.
Question 4. An opportunity cost is:
a. easily measured in dollar terms.
b. the highest valued alternative that must be forgone whenever something is undertaken or acquired.
c. only incurred when important and costly decisions are to be made.
d. not implicit in every decision we make.
Question 5. Economic models, insights, or theories:
a. are always correct in their predictions.
b. once established as "true," are always "true."
c. are generalizations about the workings of an abstract theory.
d. always include as much detail as possible.