Practice Test-1 on Elasticity and its Application: Solutions
Question 1: Economics deals mainly with the concept of...............
Question 2: The adage, "There is no such thing as a free lunch," is used to illustrate the principle that ................
- goods are scarce.
- households face many decisions
- income must be earned
- people face tradeoffs.
Question 3: The opportunity cost of going to college is ........
- zero, since a college education will allow a student to earn a larger income after graduation.
- the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses.
- the value of the best opportunity a student gives up to attend college.
- zero for students who are fortunate enough to have all of their college expenses paid by someone else.
Question 4: A rational decision maker .................
- ignores marginal changes and focuses instead on "the big picture."
- takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.
- ignores the likely effects of government policies when he or she makes choices.
- takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.
Question 5: To say that "people respond to incentives" is to say that...............
- changes in costs (but not changes in benefits) influence people's decisions and their behavior.
- changes in benefits (but not changes in costs) influence people's decisions and their behavior.
- changes in benefits or changes in costs influence people's decisions and their behavior.
- tradeoffs can be eliminated by rational people who think at the margin.
Question 6: Which is the most accurate statement about trade?
- Trade makes some nations better off and others worse off.
- Trade can make every nation better off.
- Trading for a good can make a nation better off only if the nation cannot produce that good itself.
- Trade helps rich nations and hurts poor nations.
Question 7: In a market economy, economic activity is guided by ................
- self-interest and prices.
- central planners.
Question 8: The basic principles of economics suggest that .................
- markets are rare, if ever, a good way to organize economic activity.
- government should become involved in markets when those markets fail to produce efficient or equitable outcomes.
- government should become involved in markets when trade between countries is involved.
- All of the above are correct.
Question 9: The income of a typical worker in a country is most closely linked to which of the following?
- market invlovment
- government policies
Question 10: An increase in the overall level of prices in an economy is referred to as .............
- sellers and buyers
- economic growth.
- the price effect.
- the demand effect.
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Date of last modification: 2019