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Sample Final Spring

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Multiple Choice
Identify the choice that best completes the statement or answers the question.

____ 1. The adage, "There is no such thing as a free lunch," is used to illustrate the principle that
a.|goods are scarce.|
b.|people face tradeoffs.|
c.|income must be earned.|
d.|households face many decisions.|

____ 2. Moira decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is
a.|the value of the knowledge she would have received had she attended class.|
b.|the $30 she could have earned if she had worked at her job for those two hours.|
c.|the value of her nap less the value of attending class.|
d.|nothing, since she would valued sleep more than attendance at class.|

____ 3. An increase in the overall level of prices in an economy is referred to as
a.|the income effect.|
b.|inflation.|
c.|deflation.|
d.|the substitution effect.|

____ 4. An economic outcome is said to be efficient if the economy is
a.|using all of the scarce resources it has available.|
b.|conserving on resources, rather than using all available resources.|
c.|getting all it can get from the scarce resources it has available.|
d.|able to produce more than what is currently being produced without additional resources.|

____ 5. When an economy is operating at a point on its production possibilities frontier, then
a.|consumers are content with the mix of goods and services that is being produced.|
b.|there is no way to produce more of one good without producing less of the other.|
c.|equal amounts of the two goods are being produced.|
d.|All of the above are correct.|

Figure 2-8

|Panel (a)||Panel (b)|
||

____ 6. Refer to Figure 2-8, Panel (a). The opportunity cost of moving from point J to point L is
a.|2 donuts.|
b.|2 donuts and 2 cups of coffee.|
c.|2 cups of coffee.|
d.|6 cups of coffee.|

____ 7. If an

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