Indicate the answer choice that best completes the statement or answers the question.

Ch01: The Art and Science of Economic Analysis

Powered by Cognero Page 1

Indicate the answer choice that best completes the statement or answers the question.

• The fact that people have unlimited wants means that _____
• they always want more of at least one good.
• people always purchase the goods that cost the least.
• there is always an excess supply of necessary goods in the market.
• selfish people are not concerned about others.
• people do not behave rationally while making a choice.

• The problem of scarce resources _____
• can be solved in a market economy, but not in a command economy.
• can be solved if all resources are jointly owned by the public and private sectors.
• implies that the resources are not freely available.
• arises because all natural resources are owned by the government in every country.
• can be solved by lowering taxes in an economy.

• Which of the following sentences is the best example of scarcity of time?
• Peter buys a hamburger.
• John-Michael wants to spend his money on a new hoverboard.
• Alexander is doing homework instead of going to the movies with his friends.
• Amanda, a geography teacher, is retired and spends her time gardening.
• Bill is unemployed.

• Scarcity _____
• applies to a brain surgeon but not to a cab driver.
• is not a problem for politicians.
• exists only in rich countries.
• exists only in poor countries.
• exists to a greater or lesser extent for everybody.

• Because resources are scarce and wants are unlimited, _____
• only the rich get everything they want.
• we must choose from among our many wants.
• there will be more services produced than goods.
• people search for spiritual fulfillment rather than material fulfillment.
• poor people never get anything they want.

• Which of the following statements regarding the basic economic problem of scarcity is correct?
• The problem will exist only in countries that are not highly industrialized.
• The problem will disappear as production increases.
• The problem will disappear as technology improves.
• The problem will exist as long as resources are available in limited amounts.
• The problem will disappear as a person's income falls.

(ECON MICRO, 6e William McEachern) (Test Bank, Answer at the end of each Chapter) 1 / 4

Name:

Class:

Date:

Ch01: The Art and Science of Economic Analysis

Powered by Cognero Page 2

• Economics is best defined as the study of how _____
• people make decisions in a world of scarcity.
• governments can influence the social structure.
• to separate the executive from the legislature and the judiciary.
• individuals can participate in electing their representatives to the government.
• to change the class structure of an economy.

• Which of the following is the best definition of economics?
• An investigation of the evolutionary process of mankind
• A study of society as a system of interconnected parts
• A study of how people deal with the problem of scarcity
• An examination of the structure and the role of the government in an economy
• A study of how to conduct free and fair elections in a country

• Economics is best described as the _____
• study of choice when scarcity exists.
• study of the development of human society.
• study of the composition and structure of matter.
• branch of science that uses the principles of sociology.
• branch of science that is based on value judgments.

10. Economics:

• studies human behavior when scarcity exists and choices must be made.
• does not provide a reasonable explanation of how people make decisions.
• does not accurately explain any human behavior since it is based on the assumption of rationality.
• is better at showing the way things ought to be than other social sciences.
• is the only social science that can explain the existence and behavior of public institutions.

• Alan is a retired economist who enjoys building toy trains for his grandkids. He uses a workbench and tools from his

garage, lumber he bought from the lumber store for $10, and varnish and paint he had left over from another project last year. Since a retired economist is always an economist, which of the following statements is he likely to make about building toy trains?

• I’m not paying for any resources, so the toy trains I’m building are a good example of free goods.
• I only paid $10 for the lumber, so the toy trains I’m building are a good example of free goods.
• I’m using scarce resources to build the toy trains.
• The resources I’m using to build the toy trains are not scarce.
• If I had used lumber that I cut from the tree in my backyard instead of buying it from the store, then the toy

trains I’m building would be a good example of free goods.

• Michigan has an abundant supply of fresh water. However, an economist would consider it a scarce resource because

_____

• water is necessary for human survival.
• pollution will eventually destroy all life in the Great Lakes.
• water is limited in supply relative to people's unlimited wants.
• water commands a very high price. 2 / 4

Name:

Class:

Date:

Ch01: The Art and Science of Economic Analysis

Powered by Cognero Page 3

• the cost of supplying water is prohibitively high.

• Natural resources are _____
• not considered scarce because no one pays for them.
• not used in producing luxury goods.
• renewable and exhaustible.
• available in unlimited quantities.
• not considered scarce because they are not produced by society.

• Which of the following fundamental resources is the basis of labor?
• Capital
• Natural resources
• Time
• Profit
• Entrepreneurial ability

• A resource is something that _____
• is used to produce goods and services.
• is provided by nature, and not produced by society.
• exists in unlimited quantities in developed countries.
• must be produced by a firm.
• is always available free of cost.

• In economics, capital is defined as _____
• natural resources, such as water, oil, and iron ore.
• the number of people in the labor force.
• all human creations used to produce goods and services.
• the money exchanged in the underground economy.
• the willingness of business owners to take risks.

• Which of the following would an economist classify as physical capital?
• 100 shares of Microsoft
• a $50 bill
• a credit card
• a lawyer's laptop
• a bauxite mine in Jamaica

• Which of the following is not classified as physical capital by economists?
• a $20 bill in a firm's petty cash drawer
• the building where an economics class meets
• a plumber's wrench
• a railroad car
• A factory

• / 4

Name:

Class:

Date:

Ch01: The Art and Science of Economic Analysis

Powered by Cognero Page 4

• When economists refer to human capital, they refer to _____
• income earned by capitalists.
• skills used in production.
• dividends earned by investors.
• bonds held by the public.
• bank loans given to the public.

• Which of the following is an example of physical capital?
• the owner of a pizza shop
• bulldozers
• a college education
• carpentry skills
• money

• An entrepreneur _____
• always makes a profit.
• is appointed by the board of directors to manage the operations of a firm.
• is a profit-seeking decision maker.
• is a parasite that benefits by not paying other resources for their services.
• is the manager who runs an enterprise and keeps the customers happy.

• The payment in return for the use of capital is _____
• profit.
• wages.
• rent.
• dividends.
• interest.

• The payment in return for the use of natural resources is _____
• profit.
• wages.
• rent.
• dividends.
• interest.

• Entrepreneurial ability is rewarded by _____
• profit.
• wages.
• rent.
• dividends.
• interest.

• Resources can be divided into _____
• people, money, and machines.
• / 4