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| 1.
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The dramatic rise in average income for those living in the United States over the last 100 years has had the following effect on life expectancy: |
| | A) | It has caused life expectancy to fall since the pressure of the faster pace has damaged health. |
| | B) | It has caused life expectancy to increase since the benefits of higher income on life expectancy outweigh the detrimental effects. |
| | C) | It has caused life expectancy to fall since economic growth has led to devastating health-damaging problems. |
| | D) | It has had no effect because life expectancy does not depend on income. |
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| 2.
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Which of the following would not be studied in macroeconomics? |
| | A) | National unemployment rate |
| | B) | Inflation |
| | C) | Economic growth |
| | D) | Market for new cars |
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| 3.
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Which of the following statements regarding scarcity are true? |
| | A) | Scarcity occurs because our available resources are incapable of producing enough goods and services to satisfy everyone's wants. |
| | B) | Even if our average per-capita income were to increase to $1,000,000 per year, scarcity still would not be eliminated. |
| | C) | Both (a) and (b) above are true. |
| | D) | None of the above statements are true. |
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| 4.
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If a nation were to save more, consume less, and produce more capital goods, then: |
| | A) | Current consumption would rise but future production would fall. |
| | B) | Current consumption would fall but future production would rise. |
| | C) | There would be no change in either current consumption or future production. |
| | D) | Both current consumption and future production would fall. |
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| 5.
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The three basic economic questions are: |
| | A) | What, how, and for whom. |
| | B) | Why, how, and where. |
| | C) | What, when, and why. |
| | D) | When, where, and what. |
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| 6.
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You can visit the exhibits at the Smithsonian Institution for no charge. Which of the following statements is true? |
| | A) | There is still an opportunity cost because the resources could have been used to produce other valuable goods and services. |
| | B) | There is no opportunity cost since the goods are free. |
| | C) | Those who visit the exhibits have no opportunity cost since it is an extremely rewarding experience. |
| | D) | The Smithsonian Institution is not a for-profit organization; as a result, economic theory is totally irrelevant to this question. |
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| 7.
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Welfare programs: |
| | A) | are funded from import tariffs, and therefore involve no opportunity cost. |
| | B) | increase the incentive for recipients to leave welfare programs and accept entry-level jobs. |
| | C) | can reduce incentives to work, causing the economic pie to shrink. |
| | D) | only affect the distribution of the economic pie and have no effect on its size. |
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| 8.
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Market failure occurs when: |
| | A) | government intervention does not improve economic outcomes. |
| | B) | the cost of gasoline is too high |
| | C) | teachers are paid less than athletes. |
| | D) | the market does not produce the goods and services society desires. |
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| 9.
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In the United States, trust in government: |
| | A) | has been declining since the mid-1960s. |
| | B) | has been increasing steadily since the end of World War II. |
| | C) | should be 100%, since there are many market failures but no government failures. |
| | D) | None of the above is true. |
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| 10.
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What is economics? |
| | A) | The study of money. |
| | B) | The study of how to allocate scarce resources among alternative uses. |
| | C) | The study of stocks and bonds. |
| | D) | None of the above is true. |
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| 11.
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Which of the following is a basic economic question? |
| | A) | What to produce |
| | B) | How to produce |
| | C) | For whom to produce |
| | D) | All of the above are true. |
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| 12.
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The best value of whatever you've given up in order to do something else is called: |
| | A) | scarcity. |
| | B) | production-possibilities. |
| | C) | opportunity cost. |
| | D) | None of the above is true. |
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| 13.
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When was the share of total output devoted to national defense the highest in U.S. history? |
| | A) | World War II |
| | B) | Korean War |
| | C) | Vietnam War |
| | D) | Reagan buildup |
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| 14.
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Which country has the highest percentage of its resources used for military purposes? |
| | A) | U.S. |
| | B) | China |
| | C) | Japan |
| | D) | North Korea |
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| 15.
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Which of the three basic economic questions deals with how the national pie will be distributed? |
| | A) | What to produce |
| | B) | How to produce |
| | C) | For whom to produce |
| | D) | None of the above is true. |
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| 16.
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Which of the following terms means "leave it alone" or no government intervention? |
| | A) | Ceteris paribus |
| | B) | Laissez faire |
| | C) | Caveat emptor |
| | D) | None of the above is true. |
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| 17.
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What is the study of the economy as a whole? |
| | A) | Economics |
| | B) | Macroeconomics |
| | C) | Microeconomics |
| | D) | None of the above is true. |
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| 18.
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The production-possibilities curve: |
| | A) | shows the combinations of goods that could be produced with available resources and technology. |
| | B) | illustrates economic trade-offs. |
| | C) | deals with scarcity and the need to make choices. |
| | D) | All of the above are true. |
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| 19.
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Which term means "other things being equal"? |
| | A) | Ceteris paribus |
| | B) | Laissez faire |
| | C) | Caveat emptor |
| | D) | None of the above is true. |
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| 20.
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Government failure may occur when: |
| | A) | government intervention doesn't improve economic outcomes. |
| | B) | the economy moves away from the optimal mix of output. |
| | C) | policy shifts the economy to the left of (inside) the production-possibilities curve. |
| | D) | All of the above are true. |
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| 21.
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Which basic economic question answers the "guns or butter" dilemma? |
| | A) | What to produce |
| | B) | How to produce |
| | C) | For whom to produce |
| | D) | None of the above is true. |
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| 22.
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Which of the following is not a factor of production? |
| | A) | Land |
| | B) | Labor |
| | C) | Capital |
| | D) | Money |
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| 23.
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Which of the following would be a topic discussed in macroeconomics (rather than microeconomics)? |
| | A) | The price of steel |
| | B) | The national unemployment rate |
| | C) | The airline industry |
| | D) | None of the above is true. |
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| 24.
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According to polls, nearly one in three Americans expect their children to have _____ goods and services than they do now. |
| | A) | more |
| | B) | fewer |
| | C) | double the amount of |
| | D) | None of the above is true. |
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| 25.
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Since the Korean War the share of U.S. output allocated to the military has _____. |
| | A) | decreased |
| | B) | increased |
| | C) | doubled |
| | D) | stayed the same |
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