Part 1—True or False

Directions: Place a T for True or an F for False in the Answers column to show whether each of the
following statements is true or false.
Answers
1. Labor is a type of human resource. 1. T
2. Goods and services are scarce. 2. T
3. A good is free if it involves no apparent cost to you. 3. F
4. Tutoring is an example of a service, not a good. 4. T
5. A bus station is an example of a capital good. 5. T
6. An exhaustible resource can be drawn upon indefinitely, as long as it is used wisely. 6. F
7. Productive resources are defined as the inputs used to produce the goods and services that 7. T
people want.
8. Because productive resources are scarce, goods and services are scarce, too. 8. T
9. A productive resource is scarce if it is not freely available. 9. T
1 10. Depending on the situation, an entrepreneur does not always need to assume the risk of 10. F
success or failure in a business venture.

Part 2—Multiple Choice

Directions: In the Answers column, write the letter that represents the word, or group of words, that
correctly completes the statement or answers the question.
Answers
11. Which of the following accurately defines economics? 11. D
(a) The study of how people make money.
(b) The study of seeking profits and increasing resources.
(c) The study of the entrepreneur and his or her tactics.
(d) The study of how people use scarce resources to satisfy unlimited wants.
12. Which of the following statements does not define the term entrepreneur? 12. D
(a) a person who tries to earn a profit
(b) a person who develops a new product
(c) a person who improves an existing product
(d) a person not willing to accept the risk of losing money
13. Which of the following type of goods is not a subject of economics? 13. C
(a) the unemployment rate
(b) the stock market
(c) anything that is free
(d) the shoe industry
14. Which of the following is a good? 14. B
(a) dry cleaning
(b) deli meat
(c) a taxi ride
(d) advertising
15. Which of the following is a service? 15. A
(a) writing
 (b) pens
(c) paper
(d) computer
16. Which of the following is a renewable resource, if handled properly? 16. A
(a) wildlife (b) oil (c) copper ore (d) coal
17. Which of the following is not considered a productive resource? 17. B
(a) human resources
(b) goods and services
(c) natural resources
(d) capital resources
18. ___?___ is a natural resource. 18. C
(a) Labor (b) Factories (c) Water (d) A truck
19. Which is an example of a capital good? 19. B
(a) rainwater (b) a bulldozer (c) coal (d) a cow
20. Which of the following statements best describes the economic problem? 20. C
2
(a) Too many countries are still poor and need more productive resources.
0
. (b) We have not discovered how to utilize all the productive resources available to us.
(c) The productive resources needed to satisfy our unlimited wants are too scarce to do so.
(d) The productive resources are unlimited so all wants and needs can be satisfied.
21. Who among the following is NOT an economist:
(a) Adam Scherbatsky
(b) Adam Smith
( c) Robert Thomas Malthus
(d) John Maynard Keynes

1. 22.
1 A rational decision maker will change the status quo when the following condition 23. 124. B
1 occurs: (a) The expected marginal cost from the change exceeds the expected marginal 1
. benefit. (b) The expected marginal benefit from the change exceeds the expected .
marginal cost. (c) The expected marginal benefit from the change equals the
expected marginal cost. (d) There is no marginal cost or marginal benefit
involved with the economic decision.
25. 23.
1 Which of the following is a positive economic statement? (a) The economy should 24. 125. B
2 experience a recession by next year. (b) The United States experienced its sharpest 2
. decrease in unemployment last year. (c) More jobs should be created as a result of the .
current administration’s plans. (d) The recession must be over by the end of this year.
26. 24.
1 Which of the following would be a concern for a microeconomist? (a) how the 25. 126. D
3 recession affected the unemployment rate (b) how the stock market behaved during the 3
. last quarter (c) how many people were hired throughout the country last year (d) how .
a baby boom affected the number of diapers sold during the past year
27. 25.
1 Which of the following is a normative economic statement? (a) Interest rates were 26. 127. C
8 raised twice last year. (b) Cookies in the Jar, a fairly new baking company, nearly 8
. doubled its sales this year as compared to last year. (c) The largest grocery store chains .
should begin hiring more workers because the economy has improved. (d) The price of
gasoline increased by 3 cents since yesterday afternoon.
28. 26.
1 Which of the following plays the leading role in the economy? (a) firms (b) government 27. 128. C
9 (c) households (d) product markets 9
. .
29. 227. Which of the following is necessary in developing an economic theory? (a) simplify the 30. 231. A
0 problem (b) never assume that people make rational choices concerning their self- 0
. interests (c) assume that all factors are variables and change constantly (d) create the .
most detailed theory possible

32. 633. T
.
34. 735. T
.
36. 128. In deciding if you want to attend college, which of the following would not involve an 29. 130. D
1 opportunity cost? (a) value of goods and services that could be purchased with money 1
. spent on books (b) value of goods and services that may be purchased with tuition .
money (c) value of goods and services that may be purchased with money spent on
boarding (d) the cost of room and board
31. 29.
1 If you must stay at home and study for an upcoming economics test, the opportunity 30. 131. D
2 cost of studying would most likely be highest at which of the following times? (a) 2
. Monday evening (b) Wednesday morning (c) Thursday afternoon (d) Friday evening .
32. 30.
1 Which of the following statements is true of opportunity costs? (a) It is the value of all 31. 132. B
3 alternatives you pass up when you make a choice. (b) It is the value of the best 3
. alternative you give up when you make a choice. (c) It can only be measured in dollar .
terms. (d) It is the same for all individuals.
33. 132. According to economists, which of these leads the average person to choose the most 33. 134. A
4 valued alternative among a number of possibilities? (a) rational self-interest (b) 4
. scarcity (c) sunk cost (d) opportunity cost .
35. 33.
1 of the following would lead to a sunk cost? (a) buying a new CD at an outlet store (b) 34. 135. B
5 putting a non-refundable deposit at one college and then attending another (c) deciding 5
. to study on a Friday night instead of going to a party (d) paying the landscaper to cut .
your lawn

36. 34.
1 If you decided to attend a concert instead of babysitting, which of the following did 35. 136. A
6 you need to consider? (a) opportunity cost (b) sunk cost (c) scarcity (d) economic 6
. theory .
37. 135. Which of the following is an example of a sunk cost? (a) exchanging one brand of 36. 137. C
7 tomato sauce for another one at the grocery store (b) ordering dessert at a restaurant 7
. even though you’re full (c) throwing away the newspaper before you’ve read it .
because your cat tore it to pieces (d) buying a new tire
38. 36.
2 Which of these is the ultimate limiting factor in making choices? (a) wealth (b) 37. 238. C
0 knowledge (c) time (d) location 0
. .
37.
1 In which of these economies would some firms have a profit incentive to monopolize 39. 140. A
1 markets? (a) pure market economy (b) pure command economy (c) traditional 1
. economy (d) transitional economy .
41. 38.
1 Pure market economies do not involve (a) households (b) government (c) firms (d) 39. 140. B
2 factories. 2
. .
41. 39.
1 ___?___ enjoy(s) the most control in a pure command economy. (a) The government 38. 139. A
3 (b) The wealthy (c) Independently owned businesses (d) No one entity 3
. .
40. 40.
1 The United States is considered to be a ___?___. (a) pure market economy (b) market 41. 142. B
4 economy (c) command economy (d) transitional economy 4
. .
43. B