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What is the definition of goods in economics? A) Intangible activities that provide satisfaction. B) Tangible items that can be seen or touched. C) Services that are provided to consumers. D) Resources that are limited and scarce. E) Financial assets used for production.
B) Tangible items that can be seen or touched. Explanation: Goods are defined as tangible items that can be physically perceived, contrasting with services, which are intangible activities.
What characterizes a mixed economy? A) Complete government control B) Absence of competition C) Elements of traditional, command, and free market economies D) Solely private ownership of production E) No economic regulation
C) Elements of traditional, command, and free market economies Explanation: A mixed economy incorporates elements from traditional, command, and free market systems, allowing both private and public institutions to exercise economic control.
1/85
p.7
Needs and Wants

What is the definition of goods in economics?
A) Intangible activities that provide satisfaction.
B) Tangible items that can be seen or touched.
C) Services that are provided to consumers.
D) Resources that are limited and scarce.
E) Financial assets used for production.

B) Tangible items that can be seen or touched.
Explanation: Goods are defined as tangible items that can be physically perceived, contrasting with services, which are intangible activities.

p.14
Economic Systems and Their Characteristics

What characterizes a mixed economy?
A) Complete government control
B) Absence of competition
C) Elements of traditional, command, and free market economies
D) Solely private ownership of production
E) No economic regulation

C) Elements of traditional, command, and free market economies
Explanation: A mixed economy incorporates elements from traditional, command, and free market systems, allowing both private and public institutions to exercise economic control.

p.6
Health Economics

What limits the actions of society regarding health care?
A) Unlimited resources
B) Technology and efficiency of the system
C) The total supply of resources
D) Government regulations
E) Consumer preferences

C) The total supply of resources
Explanation: The total supply of resources that society has imposes limits on what can be achieved in health care, given the existing technology and efficiency of the system.

p.14
Factors Determining Economic Growth

What does the Law of Scarcity state?
A) Resources are unlimited
B) Goods are abundant
C) Goods are scarce due to limited resources
D) Production is always efficient
E) Consumption is unnecessary

C) Goods are scarce due to limited resources
Explanation: The Law of Scarcity indicates that goods are limited because there are not enough resources to produce everything people want, highlighting the fundamental economic problem.

p.5
Development of Economic Thought

What does the concept of Rational Expectations imply?
A) People make decisions based solely on past experiences
B) Individuals ignore available information when making economic decisions
C) People understand how the economy works and use all available information
D) Economic decisions are made randomly
E) Individuals rely on government policies for economic decisions

C) People understand how the economy works and use all available information
Explanation: Rational Expectations, conceptualized by Robert Lucas and Thomas Sargent, suggests that individuals use all available information to make informed economic decisions, reflecting a sophisticated understanding of economic dynamics.

p.5
Health Economics

Why is it important to consider economics in health care?
A) Health resources are unlimited
B) Health care is a luxury
C) Health resources are finite and choices must be made
D) Health care costs are irrelevant
E) Economic principles do not apply to health care

C) Health resources are finite and choices must be made
Explanation: The finite nature of health resources necessitates economic analysis to determine how to allocate them effectively, emphasizing the importance of opportunity cost in health care decisions.

p.7
Factors Determining Economic Growth

What role does entrepreneurship play in the economy?
A) It is solely responsible for producing goods.
B) It is a form of physical capital.
C) It combines land, labor, and capital to create new goods and services.
D) It is not considered a factor of production.
E) It only focuses on improving existing products.

C) It combines land, labor, and capital to create new goods and services.
Explanation: Entrepreneurship is viewed as a special form of human capital that is essential for improving existing products and creating new goods and services by bringing together various resources.

p.13
Definition and Etymology of Economics

What is the origin of the word 'entrepreneur'?
A) Latin word meaning 'to create'
B) French word 'entrependre' meaning 'to undertake'
C) Greek word meaning 'business owner'
D) Spanish word meaning 'to manage'
E) Italian word meaning 'to innovate'

B) French word 'entrependre' meaning 'to undertake'
Explanation: The term 'entrepreneur' comes from the French word 'entrependre', which translates to 'to undertake', reflecting the essence of taking initiative in business.

p.5
Economic Systems and Their Characteristics

What is a characteristic of a Competitive Market?
A) One supplier dominates the market
B) A single purchaser controls prices
C) Many buyers and sellers with no influence over market price
D) Few firms dominate the market
E) Prices are fixed by the government

C) Many buyers and sellers with no influence over market price
Explanation: A Competitive Market is characterized by a large number of buyers and sellers, ensuring that no individual buyer or seller can influence the market price, promoting fair competition.

p.7
Economic Systems and Their Characteristics

Why are goods and services considered scarce?
A) Because they are always in surplus.
B) Because they utilize unlimited resources.
C) Because demand exceeds supply.
D) Because they are intangible.
E) Because they are produced without any resources.

C) Because demand exceeds supply.
Explanation: Scarcity occurs when the demand for a good or service is greater than its supply, leading consumers to make choices about which goods and services to prioritize.

p.2
Factors Determining Economic Growth

What does economic growth signify?
A) Decrease in production capacity
B) Increase in production capacity outpacing population growth
C) Stagnation of goods and services
D) Equal growth of population and production
E) Reduction in available resources

B) Increase in production capacity outpacing population growth
Explanation: Economic growth refers to the increasing capacity to produce goods and services at a rate that surpasses population growth, indicating a healthier economy.

p.14
Economic Systems and Their Characteristics

What is another term for a market economy?
A) Command economy
B) Traditional economy
C) Laissez-faire or free enterprise
D) Mixed economy
E) Regulated economy

C) Laissez-faire or free enterprise
Explanation: A market economy is often referred to as laissez-faire or free enterprise, indicating minimal government intervention in economic decisions.

p.13
Major Branches of Economics

Which characteristic is NOT typically associated with entrepreneurs?
A) Competent organizers
B) Risk takers
C) Adept decision makers
D) Passive observers
E) Innovators

D) Passive observers
Explanation: Entrepreneurs are characterized by their active roles as competent organizers, risk takers, adept decision makers, and innovators, rather than being passive observers.

p.6
Needs and Wants

What is the primary distinction between wants and needs in economic terms?
A) Wants are always necessary
B) Needs are unlimited
C) Wants are often what individuals do not need
D) Needs can be satisfied without resources
E) Wants are more important than needs

C) Wants are often what individuals do not need
Explanation: In economic terms, individuals have unlimited wants, but resources are scarce, leading to confusion between wants and needs, where wants often exceed actual needs.

p.1
Health Economics

What does health economics primarily deal with?
A) Management of household resources
B) Care of sickness and health improvement
C) Production of luxury goods
D) Allocation of public wants
E) Distribution of wealth

B) Care of sickness and health improvement
Explanation: Health economics is a branch of economics that focuses on the care of sickness, as well as the promotion, maintenance, and improvement of health.

p.13
Major Branches of Economics

What does entrepreneurship primarily involve?
A) Selling products without production
B) Combining the three factors of production
C) Solely managing a business
D) Focusing on traditional practices
E) Avoiding risks in business

B) Combining the three factors of production
Explanation: Entrepreneurship is defined as the process of combining land, labor, and capital to create products or services for sale, highlighting the role of entrepreneurs in economic activity.

p.5
Factors Determining Economic Growth

What does the Law of Diminishing Returns state?
A) Increased input always leads to increased output
B) At some point, additional input will result in declining marginal productivity
C) All inputs are equally productive
D) Output can be increased indefinitely with more input
E) There is no relationship between input and output

B) At some point, additional input will result in declining marginal productivity
Explanation: The Law of Diminishing Returns indicates that after a certain point, adding more of a variable input will lead to a decrease in the additional output produced, highlighting the limits of resource utilization.

p.13
Economic Systems and Their Characteristics

What defines a traditional economy?
A) Decisions are made by the government
B) Economic decisions are influenced by past practices
C) Market forces dictate production
D) High levels of technological advancement
E) Individual ownership of resources

B) Economic decisions are influenced by past practices
Explanation: A traditional economy is characterized by economic decisions that are heavily influenced by historical practices and customs, often relying on methods used by previous generations.

p.7
Economic Systems and Their Characteristics

What is opportunity cost in economic decision-making?
A) The cost of producing goods.
B) The benefits of the next best alternative foregone.
C) The total cost of all resources used.
D) The price of goods in the market.
E) The cost of labor in production.

B) The benefits of the next best alternative foregone.
Explanation: Opportunity cost refers to the value of the next best alternative that is not chosen when making an economic decision, highlighting the trade-offs involved in resource allocation.

p.6
Economic Systems and Their Characteristics

What does 'land' refer to in economic terms?
A) Only the physical ground
B) Only natural resources
C) The ground and the resources that come from it
D) Urban areas only
E) Agricultural land only

C) The ground and the resources that come from it
Explanation: In economics, 'land' encompasses not only the physical ground but also the natural resources derived from it, such as trees, minerals, and agricultural products.

p.5
Health Economics

What is the primary focus of Health Economics?
A) The study of financial markets
B) The allocation of scarce resources for health care
C) The analysis of consumer behavior in retail
D) The impact of technology on manufacturing
E) The regulation of international trade

B) The allocation of scarce resources for health care
Explanation: Health Economics specifically studies how scarce resources are allocated among alternative uses for the care of sickness and the promotion of health, making it crucial for understanding health care systems.

p.6
Health Economics

What dual role does health care play in the economy?
A) It is only a consumption good
B) It is only an investment good
C) It is both a consumption good and an investment good
D) It is a luxury good
E) It is a public good

C) It is both a consumption good and an investment good
Explanation: Health care serves as both a consumption good, enhancing enjoyment of life, and as an investment good, increasing labor productivity and human capital.

p.14
Economic Systems and Their Characteristics

In a mixed economy, who decides on economic activities?
A) The government exclusively
B) Private corporations only
C) The people
D) Foreign investors
E) Non-governmental organizations

C) The people
Explanation: In a mixed economy, the people play a significant role in deciding on economic activities, reflecting a combination of market mechanisms and governmental regulations.

p.12
Needs and Wants

What are non-economic wants?
A) Wants that involve cost
B) Wants that do not involve cost
C) Wants that are created by advertising
D) Wants that are necessary for survival
E) Wants that are always expensive

B) Wants that do not involve cost
Explanation: Non-economic wants refer to human needs that do not incur any cost, such as air and free water in mountains, distinguishing them from economic wants that require resources.

p.3
Methodologies of Economics

What is the primary concern of normative economics?
A) Analyzing past economic events
B) Making recommendations for economic policy
C) Understanding economic behavior
D) Gathering data from observations
E) Predicting future economic trends

B) Making recommendations for economic policy
Explanation: Normative economics deals with what should be, focusing on making value-based recommendations regarding economic policies.

p.7
Major Branches of Economics

What is the primary distinction between human capital and physical capital?
A) Human capital is tangible, while physical capital is intangible.
B) Human capital includes knowledge and skills, while physical capital includes buildings and machinery.
C) Human capital is used for production, while physical capital is not.
D) Human capital is only related to labor, while physical capital is related to land.
E) Human capital is a type of service, while physical capital is a type of good.

B) Human capital includes knowledge and skills, while physical capital includes buildings and machinery.
Explanation: Human capital refers to the knowledge, skills, and attitudes that individuals possess, while physical capital encompasses tangible items like buildings and machinery used in production.

p.14
Economic Systems and Their Characteristics

What is the primary function of the price system in a market structure?
A) To regulate government spending
B) To determine how much will be paid for certain commodities or services
C) To control the production of goods
D) To eliminate competition
E) To manage public institutions

B) To determine how much will be paid for certain commodities or services
Explanation: The price system in a market structure is essential for determining the prices of goods and services based on supply and demand, facilitating transactions in the economy.

p.13
Economic Systems and Their Characteristics

In a command economy, who primarily makes economic decisions?
A) Individual consumers
B) Private businesses
C) The government
D) Local communities
E) Foreign investors

C) The government
Explanation: In a command economy, the government owns and manages the factors of production and makes all significant economic decisions, limiting individual economic freedom.

p.3
Methodologies of Economics

What does positive economics focus on?
A) What should be done
B) What the problem is
C) How to improve economic policy
D) Future economic predictions
E) Historical economic events

B) What the problem is
Explanation: Positive economics is concerned with understanding what happens in the economy, explaining the current state and functioning of economic systems, rather than making recommendations.

p.2
Factors Determining Economic Growth

Which of the following is NOT a factor that determines economic growth?
A) Expansion of resources
B) Improved skills and technology
C) Decrease in labor force
D) Managerial and entrepreneurial skills
E) Larger capital stock

C) Decrease in labor force
Explanation: A decrease in the labor force would negatively impact economic growth, while the other options contribute positively to the capacity for production.

p.1
Definition and Etymology of Economics

What is the definition of economics?
A) Study of luxury goods
B) Study of household management
C) Study of resource allocation for maximum satisfaction
D) Study of public wants
E) Study of government policies

C) Study of resource allocation for maximum satisfaction
Explanation: Economics is defined as the study of the proper allocation and efficient use of scarce resources to produce commodities for the maximum satisfaction of unlimited human needs and wants.

p.6
Factors Determining Economic Growth

What type of labor is involved in the production of goods and services?
A) Only physical labor
B) Only mental labor
C) Both physical and mental labor
D) Only skilled labor
E) Only unskilled labor

C) Both physical and mental labor
Explanation: Labor in the production of goods and services includes both physical labor, such as harvesting and drilling, and mental labor, which involves planning and decision-making.

p.8
Factors Determining Economic Growth

What does production efficiency refer to?
A) Producing at the highest cost
B) Producing with the least amount of expense, effort, and waste
C) Producing as much as possible without regard to cost
D) Producing only for profit
E) Producing goods without any waste

B) Producing with the least amount of expense, effort, and waste
Explanation: Production efficiency is about maximizing output while minimizing costs and waste, ensuring resources are used effectively.

p.6
Factors Determining Economic Growth

What are the four general categories of economic resources?
A) Land, labor, capital, and technology
B) Land, labor, capital, and entrepreneurship
C) Land, labor, capital, and government
D) Land, labor, capital, and services
E) Land, labor, capital, and education

B) Land, labor, capital, and entrepreneurship
Explanation: Economic resources, also known as factors of production, are categorized into land, labor, capital, and entrepreneurship, which are essential for the production of goods and services.

p.14
Production Responsibilities

What does the Production Possibilities Frontier (PPF) illustrate?
A) The efficiency of government spending
B) The relationship between supply and demand
C) Scarcity, choice, and opportunity cost
D) The monopoly of industries
E) The distribution of wealth

C) Scarcity, choice, and opportunity cost
Explanation: The PPF illustrates the concepts of scarcity, choice, and opportunity cost by showing the maximum efficient production combinations of two goods using available resources.

p.12
Needs and Wants

What are created wants?
A) Wants that are essential for survival
B) Wants that provide luxury, comfort, or status
C) Wants that are free of cost
D) Wants that are universally desired
E) Wants that are harmful

B) Wants that provide luxury, comfort, or status
Explanation: Created wants are not necessary for basic existence and are often associated with luxury, comfort, or improvements over what we normally use.

p.3
Methodologies of Economics

Which reasoning method involves moving from specific observations to general conclusions?
A) Deductive reasoning
B) Inductive reasoning
C) Empirical reasoning
D) Analytical reasoning
E) Normative reasoning

B) Inductive reasoning
Explanation: Inductive reasoning is the process of reasoning from particular instances to general principles, which is a key aspect of drawing conclusions in economics.

p.8
Economic Systems and Their Characteristics

According to the law of demand, what happens to the quantity demanded when the price of a product increases?
A) It remains constant
B) It increases
C) It decreases
D) It fluctuates
E) It becomes irrelevant

C) It decreases
Explanation: The law of demand states that there is an inverse relationship between price and quantity demanded; as the price increases, the quantity demanded decreases.

p.2
Major Branches of Economics

What is the focus of Macroeconomics?
A) Individual consumer behavior
B) The economy as a whole
C) Historical economic events
D) Social interactions
E) Biological aspects of human life

B) The economy as a whole
Explanation: Macroeconomics examines the overall behavior of the economy, including interactions between economic aggregates, rather than individual components.

p.10
Development of Economic Thought

What was the primary focus of the Physiocrats in contrast to earlier economic schools like mercantilism?
A) Accumulation of gold
B) Ruler's wealth
C) Productive work as the source of national wealth
D) Balance of trade
E) Urban development

C) Productive work as the source of national wealth
Explanation: The Physiocrats emphasized productive work as the foundation of national wealth, contrasting with mercantilism's focus on the ruler's wealth and gold accumulation.

p.10
Development of Economic Thought

What concept did Adam Smith introduce to describe the self-regulating market?
A) Invisible hand
B) Market equilibrium
C) Economic balance
D) Supply and demand
E) Price mechanism

A) Invisible hand
Explanation: Adam Smith described the market mechanism as an 'invisible hand' that automatically satisfies the economic needs of the populace, highlighting the self-regulating nature of markets.

p.11
Major Branches of Economics

What does the Keynesian school emphasize during economic recessions?
A) Supply-side policies
B) Aggregate demand
C) Labor-saving machinery
D) Classical economic theories
E) Market equilibrium

B) Aggregate demand
Explanation: The Keynesian school posits that economic output is significantly influenced by aggregate demand, especially during recessions, which can behave erratically and affect production and employment.

p.14
Production vs. Consumption

What is the difference between production and consumption?
A) Production is the act of using goods; consumption is making goods
B) Production is making goods; consumption is using goods
C) Production is only for services; consumption is for goods
D) Production occurs in a market; consumption occurs in a command economy
E) There is no difference; they are the same

B) Production is making goods; consumption is using goods
Explanation: Production refers to the creation of goods and services, while consumption is the act of using those goods and services to satisfy human wants.

p.12
Needs and Wants

Which of the following is an example of a basic want?
A) Music
B) Luxury cars
C) Food
D) Designer clothes
E) Travel

C) Food
Explanation: A basic want is something essential for survival, and food is a primary example, as it is necessary for life, unlike music or luxury items.

p.3
Methodologies of Economics

What is the first step in the scientific method of economics?
A) Economic Analysis
B) Data Gathering
C) Economic Conclusions
D) Reasoning
E) Empirical Method

B) Data Gathering
Explanation: The scientific method of economics begins with data gathering, which involves observing economic events and collecting information through various means.

p.4
Development of Economic Thought

What concept did Thomas Malthus use to explain low living standards?
A) Supply and demand
B) Diminishing returns
C) Market equilibrium
D) Free trade
E) Labor theory of value

B) Diminishing returns
Explanation: Malthus utilized the idea of diminishing returns to explain why living standards remained low, emphasizing the imbalance between population growth and food production.

p.2
Major Branches of Economics

What does Microeconomics primarily deal with?
A) National economic policies
B) Behavior of individual components like households and firms
C) Global economic trends
D) Economic aggregates
E) Historical economic events

B) Behavior of individual components like households and firms
Explanation: Microeconomics focuses on the behavior of individual economic units, such as households and firms, rather than the economy as a whole.

p.1
Goals of Economics

What is one of the goals of economics?
A) To increase government control
B) To promote economic efficiency
C) To limit consumer choice
D) To reduce production
E) To eliminate competition

B) To promote economic efficiency
Explanation: One of the primary goals of economics is to promote economic efficiency, which involves producing more output with fewer resources.

p.1
Goals of Economics

What does economic stability aim to achieve?
A) Frequent market fluctuations
B) Consistent growth in a changing world
C) Elimination of all economic risks
D) Increased government intervention
E) Higher levels of unemployment

B) Consistent growth in a changing world
Explanation: Economic stability aims to ensure that there are no violent ups and downs in the economy, promoting consistent growth.

p.11
Major Branches of Economics

What did Karl Marx believe about capitalism?
A) It would lead to greater wealth for all
B) It would ultimately destroy itself
C) It would create a fair distribution of resources
D) It would stabilize the economy
E) It would eliminate unemployment

B) It would ultimately destroy itself
Explanation: Karl Marx argued that capitalism would eventually collapse and be replaced by a system without private property, highlighting his critical view of capitalist structures.

p.11
Major Branches of Economics

What is the primary focus of the Institutionalists school of thought?
A) The role of money supply
B) The evolutionary process and institutions
C) The labor theory of value
D) The impact of government regulations
E) The behavior of individual consumers

B) The evolutionary process and institutions
Explanation: The Institutionalists school focuses on understanding how the evolutionary process and various institutions shape economic behavior, emphasizing a broader study of these interactions.

p.11
Needs and Wants

What are economic wants?
A) Desires that cannot be satisfied
B) Desires satisfied by consuming goods and services
C) Wants that are always fulfilled
D) Non-monetary desires
E) Wants that are not influenced by market conditions

B) Desires satisfied by consuming goods and services
Explanation: Economic wants refer to desires that can be satisfied through the consumption of goods, services, or leisure activities, reflecting the diverse needs of individuals in an economy.

p.8
Needs and Wants

What is opportunity cost?
A) The cost of production
B) The benefit forgone from the best alternative not selected
C) The total expenses incurred
D) The price of a good or service
E) The amount of goods produced

B) The benefit forgone from the best alternative not selected
Explanation: Opportunity cost refers to the benefits that are lost when choosing one alternative over another, highlighting the trade-offs involved in decision-making.

p.13
Economic Systems and Their Characteristics

What is a key feature of a market economy?
A) Central planning by the government
B) Private ownership of production means
C) Strict adherence to traditional practices
D) No competition among businesses
E) Government control over prices

B) Private ownership of production means
Explanation: A market economy is characterized by private ownership and management of the means of production, where individual consumers and businesses interact to solve economic problems.

p.4
Development of Economic Thought

What was David Ricardo primarily focused on in his economic theories?
A) The role of government in the economy
B) The distribution of income among landowners, workers, and capitalists
C) The impact of inflation on prices
D) The effects of trade tariffs
E) The relationship between supply and demand

B) The distribution of income among landowners, workers, and capitalists
Explanation: David Ricardo's work concentrated on how income is distributed among different classes in society, particularly landowners, workers, and capitalists, which is a key aspect of classical economics.

p.3
Development of Economic Thought

Who is considered the father of modern economics?
A) St. Thomas Aquinas
B) David Ricardo
C) Adam Smith
D) Jean-Baptiste Say
E) Thomas Malthus

C) Adam Smith
Explanation: Adam Smith is recognized as the father of modern economics for his influential work 'An Inquiry into the Nature and Causes of the Wealth of Nations', which laid the foundation for classical economics.

p.12
Factors Determining Economic Growth

What is capital formation?
A) The process of spending money
B) The process of creating a capital good
C) The process of investing in stocks
D) The process of saving money
E) The process of acquiring human capital

B) The process of creating a capital good
Explanation: Capital formation is specifically the process of creating capital goods, which are essential for improving future production capabilities.

p.1
Factors Determining Economic Growth

Which factor contributes to economic efficiency?
A) Increased government regulation
B) Modern technology
C) Higher taxes
D) Decreased consumer demand
E) Limited resources

B) Modern technology
Explanation: Modern technology, including new tools and machines, is a key factor that contributes to economic efficiency by enabling more output with fewer resources.

p.11
Development of Economic Thought

What significant transformation occurred in economics during the late nineteenth century?
A) The rise of classical economics
B) The marginalist revolution
C) The establishment of Keynesian economics
D) The development of Marxist theory
E) The introduction of supply-side economics

B) The marginalist revolution
Explanation: The marginalist revolution transformed economics in the late nineteenth century and continues to influence contemporary microeconomics, establishing a foundational framework for the discipline.

p.10
Development of Economic Thought

What principle did the Marginalists introduce regarding prices?
A) Prices are solely determined by production costs
B) Prices depend on consumer satisfaction
C) Prices are fixed by government regulation
D) Prices are determined by historical trends
E) Prices are based on the availability of resources

B) Prices depend on consumer satisfaction
Explanation: Marginalists emphasized that prices are influenced not only by production costs but also by the level of consumer satisfaction provided by goods and services.

p.11
Major Branches of Economics

What is the main idea behind Supply-Side Economics?
A) Increasing taxes for wealth redistribution
B) Reducing government spending
C) Tax cuts for investors to stimulate the economy
D) Regulation of the money supply
E) Promoting labor rights

C) Tax cuts for investors to stimulate the economy
Explanation: Supply-Side Economics, often associated with 'Reaganomics,' advocates for tax cuts for investors and entrepreneurs, arguing that this will incentivize saving and investment, ultimately benefiting the overall economy.

p.2
Factors Determining Economic Growth

What is one of the government responsibilities in promoting economic growth?
A) Reducing taxes for all citizens
B) Providing law and order
C) Limiting public services
D) Increasing tariffs on imports
E) Encouraging monopolies

B) Providing law and order
Explanation: The government plays a crucial role in creating a conducive investment climate by providing law and order, which includes enforcing contracts and preserving the environment.

p.1
Needs and Wants

What does the term 'needs' refer to?
A) Desires for luxury items
B) Essential requirements for survival
C) Preferences for specific goods
D) Government purchases
E) Economic theories

B) Essential requirements for survival
Explanation: Needs are essential for human survival, including food, clothing, and shelter, and their absence can lead to serious consequences.

p.1
Needs and Wants

Which of the following is NOT a type of need?
A) Basic Needs
B) Essential Needs for decent living
C) Needs for Luxury
D) Wants for pleasure
E) None of the above

D) Wants for pleasure
Explanation: Wants are distinct from needs; they refer to goods that provide satisfaction and make life more pleasant, while needs are essential for survival.

p.8
Economic Systems and Their Characteristics

What does the law of supply state?
A) The higher the price, the lower the supply
B) The lower the price, the higher the supply
C) The greater the demand, the more that will be supplied
D) Supply is independent of demand
E) Supply is always constant

C) The greater the demand, the more that will be supplied
Explanation: The law of supply indicates that an increase in demand leads to an increase in supply, as producers respond to market conditions.

p.4
Major Branches of Economics

Which theory was advanced by Leon Walras in 1874?
A) Quantity Theory of Money
B) General Equilibrium Theory
C) Labor Theory of Value
D) Consumption Theory
E) Keynesian Theory

B) General Equilibrium Theory
Explanation: Leon Walras advanced the General Equilibrium Theory, which explains the interrelations of goods and prices in an economy, marking a significant development in classical economics.

p.1
Economic Systems and Their Characteristics

What is meant by 'economize' in the context of consumers?
A) To spend more money
B) To get the greatest satisfaction from consumption
C) To avoid purchasing goods
D) To focus solely on luxury items
E) To rely on government assistance

B) To get the greatest satisfaction from consumption
Explanation: To economize means for consumers to maximize their satisfaction from the consumption of goods and services they possess.

p.11
Major Branches of Economics

According to Marx, who produces all value within society?
A) Capitalists
B) Consumers
C) Labor
D) Government
E) Investors

C) Labor
Explanation: Marx advocated a labor theory of value, asserting that all production belongs to labor, as workers are the ones who create value in society.

p.8
Needs and Wants

In the example of the student studying for an exam, what is the opportunity cost?
A) The exam score
B) The time spent studying
C) The fun with friends
D) The knowledge gained
E) The effort put into studying

C) The fun with friends
Explanation: The opportunity cost for the student is the enjoyment and social interaction they forgo by choosing to study instead of going out with friends.

p.2
Social Sciences Related to Economics

What is the primary concern of Political Science in relation to economics?
A) Study of historical events
B) Distribution of power
C) Individual behavior
D) Social interactions
E) Economic aggregates

B) Distribution of power
Explanation: Political Science focuses on the mechanics of power distribution, which is crucial for understanding economic systems and governance.

p.1
Needs and Wants

What are public wants?
A) Goods desired by individuals
B) Goods that come from the private sector
C) Goods that the government seeks to purchase
D) Goods that are always free
E) Goods that are produced for luxury

C) Goods that the government seeks to purchase
Explanation: Public wants arise from the public sector and are related to the goods and services that the government aims to acquire.

p.8
Economic Systems and Their Characteristics

What is a key consideration for producers when supplying goods and services?
A) The demand alone
B) The price of the good or service
C) The location of production
D) The number of competitors
E) The time of year

B) The price of the good or service
Explanation: Producers consider the price of goods and services as a crucial factor in their willingness and capacity to supply, alongside demand.

p.4
Major Branches of Economics

What is the main focus of Keynesian economics?
A) The importance of free trade
B) The role of aggregate demand and aggregate supply
C) The impact of government intervention on inflation
D) The relationship between money supply and interest rates
E) The effects of diminishing returns on production

B) The role of aggregate demand and aggregate supply
Explanation: Keynesian economics centers on the concepts of aggregate demand and aggregate supply, explaining how they interact to determine overall economic performance, particularly during periods of unemployment.

p.10
Development of Economic Thought

What did David Ricardo focus on in his economic theories?
A) The role of government in the economy
B) Distribution of income among landowners, workers, and capitalists
C) The importance of agriculture
D) The impact of trade on wealth
E) The benefits of urbanization

B) Distribution of income among landowners, workers, and capitalists
Explanation: David Ricardo concentrated on how income is distributed among different economic classes, positing that population growth and capital pressure affect rents, wages, and profits.

p.11
Major Branches of Economics

What does the Quantity Theory of Money state?
A) More money always leads to more economic output
B) There is a direct relationship between money supply and inflation
C) Money supply has no impact on inflation
D) Inflation is solely caused by government spending
E) Economic output is independent of money supply

B) There is a direct relationship between money supply and inflation
Explanation: The Quantity Theory of Money posits that an increase in the money supply leads to a proportional increase in inflation, highlighting the relationship between these two economic factors.

p.2
Social Sciences Related to Economics

Which social science studies the biological, psychological, social, and cultural aspects of human life?
A) Political Science
B) Sociology
C) Anthropology
D) Psychology
E) History

C) Anthropology
Explanation: Anthropology is the branch of science that examines the various aspects of human life, making it essential for understanding social needs in economics.

p.12
Economic Systems and Their Characteristics

What are the three basic economic problems every society faces?
A) What to eat, where to live, how to travel
B) What goods and services to produce, how to produce them, and for whom
C) How to save money, how to invest, and how to spend
D) What to wear, where to shop, how to socialize
E) How to educate, how to work, and how to play

B) What goods and services to produce, how to produce them, and for whom
Explanation: These three fundamental economic problems arise from the need to allocate limited resources to satisfy unlimited human wants and needs.

p.3
Development of Economic Thought

What was the main belief of the Physiocrats?
A) Government should control all economic activities
B) Agriculture is the source of wealth
C) Trade should be regulated by the state
D) Capitalism is the best economic system
E) Wealth is derived from industrial production

B) Agriculture is the source of wealth
Explanation: The Physiocrats emphasized that agriculture was the primary source of wealth in the economy, advocating for minimal government intervention and promoting individualism.

p.4
Major Branches of Economics

What is the main idea of classical economics as summarized by Adam Smith?
A) Government intervention is necessary for economic stability
B) Selfish behavior by individuals leads to an outcome that benefits everyone in society
C) The economy should be centrally planned
D) Trade barriers are essential for national growth
E) Inflation is the primary concern of economics

B) Selfish behavior by individuals leads to an outcome that benefits everyone in society
Explanation: This statement encapsulates the foundational principle of classical economics, suggesting that individual self-interest can lead to collective benefits.

p.10
Development of Economic Thought

What did the Physiocrats believe about cities?
A) They were essential for economic growth
B) They were praised for their artificiality
C) They were detrimental and artificial
D) They were the source of national wealth
E) They should be expanded

C) They were detrimental and artificial
Explanation: The Physiocrats criticized cities for their artificiality and instead praised more natural styles of living, emphasizing the importance of agriculture and farmers.

p.12
Factors Determining Economic Growth

What does 'capital' refer to in economics?
A) Money only
B) Any form of wealth
C) Tangible, physical goods created for future production
D) Human resources
E) Natural resources

C) Tangible, physical goods created for future production
Explanation: Capital refers to physical goods that are created with the expectation that their use will improve or increase future production, distinguishing it from other forms of wealth.

p.3
Development of Economic Thought

Which classical economist is known for scrutinizing the distribution of goods and services?
A) Adam Smith
B) John Stuart Mill
C) François Quesnay
D) David Ricardo
E) Anne-Robert-Jacques Turgot

B) John Stuart Mill
Explanation: John Stuart Mill, along with other classical economists, analyzed how capitalists and labor classes created and distributed goods and services, contributing to the understanding of economic dynamics.

p.4
Major Branches of Economics

What does the Quantity Theory of Money primarily focus on?
A) The relationship between inflation and unemployment
B) Money prices as opposed to real quantities and relative prices
C) The distribution of income among different classes
D) The role of government in regulating the economy
E) The impact of tariffs on trade

B) Money prices as opposed to real quantities and relative prices
Explanation: The Quantity Theory of Money, developed by David Hume, emphasizes the significance of money prices in economic analysis, particularly in relation to inflation and earnings.

p.4
Major Branches of Economics

What is the key tenet of monetarism?
A) Government intervention is essential for economic growth
B) Money matters, and it matters a lot
C) Trade deficits are harmful to the economy
D) Inflation is primarily caused by supply shocks
E) Labor is the primary factor of production

B) Money matters, and it matters a lot
Explanation: Monetarism emphasizes the critical role of money supply in determining economic performance, asserting that fluctuations in money supply can lead to inflation and business cycles.

p.10
Development of Economic Thought

What paradox did Adam Smith struggle with regarding value?
A) Value of labor vs. value of capital
B) Value in use vs. value in exchange
C) Value of goods vs. value of services
D) Value of agriculture vs. value of industry
E) Value of trade vs. value of production

B) Value in use vs. value in exchange
Explanation: Adam Smith grappled with the paradox of 'value in use' (e.g., water) versus 'value in exchange' (e.g., diamonds), which he later failed to distinguish between total and marginal utility.

Study Smarter, Not Harder
Study Smarter, Not Harder