Multiple Choice Questions
1. Economics is best defined as the study of
a. How society manages its scarce resources.
b. How to run a business most profitably.
c. How to predict inflation, unemployment, and stock prices.
d. How the government can stop the harm from unchecked self-interest.
2. Your opportunity cost of going to a movie is
a. The price of the ticket.
b. The price of the ticket plus the cost of any soda and popcorn you buy at the theater.
c. The total cash expenditure needed to go to the movie plus the value of your time.
d. Zero, as long as you enjoy the movie and consider it
a worthwhile use of time and money.
3. A marginal change is one that
a. Is not important for public policy.
b. Incrementally alters an existing plan.
c. Makes an outcome inefficient.
d. Does not influence incentives.
4. Adam Smith's "invisible hand" refers to
a. The subtle and often hidden methods that businesses use to profit at consumers' expense.
b. The ability of free markets to reach desirable outcomes, despite the self-interest of market participants.
c. The ability of government regulation to benefit consumers, even if the consumers are unaware of the regulations.
d. The way in which producers or consumers in unregulated markets impose costs on innocent bystanders.
5. Governments may intervene in a market economy in order to
a. Protect property rights.
b. Correct a market failure due to externalities.
c. Achieve a more equal distribution of income.
d. All of the above.
6. If a nation has high and persistent inflation, the most likely explanation is
a. The central bank creating excessive amounts of money.
b. Unions bargaining for excessively high wages.
c. The government imposing excessive levels of taxation.
d. Firms using their monopoly power to enforce excessive price hikes.