Fundamentals of Economics Multiple Choice Questions

Fundamentals of Economics Chapters 1,2,3 Multiple Choice Questions 1.

Which economy is efficient? a. one that makes fewer goods because workers are laid off b. one that uses fewer resources than are available c. one that makes the most goods and services possible d. one that wastes fuel when making goods

2.

A nation’s leaders must decide whether to spend money on the military or on helping farmers. What do economists call this type of choice? a. a guns or butter issue b. a decision at the margin c. underutilization of resources d. the law of increasing costs

3.

You bought two CDs with your last $30. What is the opportunity cost? a. the cost to make the CDs and the price you paid b. the $30 that you gave the clerk for the CDs c. the movie with your friends that you now cannot afford d. the joy of knowing you are the first to have these CD

4.

A factory bottles apple juice and cranberry juice. If it wants to bottle more apple juice, what is the trade-off? a. a smaller factory b. less cranberry juice c. a bigger factory d. more cranberry juice

5.

Which would a company do to increase its human capital? a. build a company cafeteria b. provide training c. hire more part-time workers d. lease cars for employees

6. a. b. c. d. 7.

Which statement best describes the role of government in a free enterprise system? It controls all decisions about business activities, including profit levels. It forms companies and then allows individual managers to run them. It regulates businesses when the public interest is involved. It follows a strict policy of laissez-faire.

Something is generally considered to be a public good if a. The private sector could provide the service more efficiently.

b. The benefits of the good are greater for government than for society. c. The total benefits to society are greater than the total financial costs. d. Taxpayers demand that the government provide the service

Use the diagram below to answer questions 8, 9 and 10.

8. Which is the product market? a. income is received for supplying land, labor, and capital b. governments collect taxes from firms and consumers c. firms purchase the factors of production from households d. households purchase the goods and services that firms produce

9. Which of the following would be part of the factor market from the household sector? a. supplying the labor force b. firms providing goods to consumers c. firms paying income to their employees d. taxes paid to the government for ownership of land 10. What do firms provide to the household? a. the factors of production b. goods and services c. taxes d. Consumerism