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Chapter 1

ECON 101- Chapter 1 Practice questions.doc

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ECON 101
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ECONOMICS 101 PROBLEM SET #1 I Multiple choices 1. __________ Which of the following involve a tradeoff? a. Buying a new car. b. Going to University. c. Watching a football game on Saturday afternoon. d. Taking a nap. e. All of the above. 2. __________ Economics is the study of a. How to fully satisfy our unlimited wants. b. How society manages its scarce resources. c. How to reduce our wants until we are satisfied. d. How to avoid having to make tradeoffs. e. How society manages its unlimited resources. 3. __________ A rational person does not act unless a. The action makes money for the person . b. The action is ethical. c. The action produces marginal costs that exceed marginal benefits. d. The action produces marginal benefits that exceed marginal costs. e. None of the above. 4. __________ Since people respond to incentives, we would expect that, if the average salary of accountants increases more than the average salary of teachers, a. Students will shift majors from education to accounting. b. Students will shift majors from accounting to education. c. Fewer students will attend university. d. None of the above. 5. _________ Which of the following is not part of the opportunity cost of going on vacation? a. The money you could have made if you had stayed home and worked. b. The money you spent on food. c. The money you spent on airplane tickets. d. The money you spent on a Broadway show. e. None of the above. 6. _________ Economic theory assumes that a. Individuals choose those actions from among the options available that they think will yield them the largest net advantage. b. People are selfish. c. Everyone is more interested in money than in other goods. d. There’s no difference between rational and irrational behaviour. e. None of the above. 7. _________ the choices and trade-offs that people in any economy must make are called “opportunity costs” because a. Opportunity only knocks once. b. People generally take anything they get the opportunity to take, regardless of the costs. c. Choosing one option means that one must forego other options or opportunities. d. The opportunity to trade things with other people involves costs. e. None of the above. 8. _______ The concept of scarcity in economics usually refers to a. a condition where society is
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