OpenStax Economics 2e Supplemental Test ItemsChapter 02: Choice in a World of Scarcity

Supplemental Test Items to accompany OpenStax Economics. Note that not all chapters of OpenStax Economics have accompanying test items. Building on the community-oriented nature of OpenStax resources, we invite you to submit items to be considered for future inclusion.

Chapter 02: Choice in a World of Scarcity

1. Adam Smith suggested that demand and supply adjusted to each other due to what? (Outcome 7) (DOK 1)

A. unknown forcesB. government intervention.C. an invisible hand*

2. A major assumption of economic analysis is that consumers make rational choice. This assumption is (Outcome #3) (DOK 2)

A. valid because most consumers are rational.B. invalid because most consumers always buy the lowest price.C. invalid because most consumers act in their self-interest.*

3. Sarah drives a Porsche, while Alan drives a Ford. Which of the following best explains the difference in economic terms? (Outcome #3) (DOK2)

A. vanity B. conspicuous consumptionC. self-interest*

4. An economic model offers which of the following? (Outcome #8) (DOK2)A. a perfect representative of an economy.B. a best estimate of the future.*C. a complete and accurate description.

5. In economics, prices are a method of advising consumers about scarcity. In these cases, consumers typically respond in which way? (Outcome #1) (DOK3)

A. demanding lower pricesB. shopping elsewhereC. adjusting their consumption*

6. Constraints define the opportunity set and which of the following? (Outcome #4) (DOK1)A. limit choices*B. reduce productionC. creating rationing

7. Economists define a group of goods available for consumption as which of the following? (Outcome #4) (DOK1)

A. resourcesB. an economic modelC. an opportunity set*

Review the table below. Beers CDs

6 04 12 2

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OpenStax Economics 2e Supplemental Test ItemsChapter 02: Choice in a World of Scarcity

0 38. Given John’s income he can buy this combination of beers or CDs. This table is an example

of John’s (Outcome #3) (DOK3)A. budgetB. opportunity set*C. preferences

Review the following tableBeers CDs

6 04 12 20 3

9. In Economic terms what is John doing when he decides to buy four beers and one CD instead of six beers and zero CDs? (Outcome #3) (DOK3)

A. making a rational decisionB. responding to the marketC. trading off*

10. Christmas is approaching and UPS is hiring more workers. One side of the table shows the number of workers at a single facility and the other the number of package they can handle in an hour. (Outcome #4) (DOK3)

Workers Packages per hour50 5,000

100 10,000150 15,000200 12,000

This table is an example ofA. people getting each other’s way.B. inefficiency.C. diminishing returns.*

11. The following graph is an economy’s choices between the production of guns or butter. It means an economy (Outcome #4) (DOK3)

A. will be most efficient at point A.B. will be most efficient at point B.C. neither A or B.*

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OpenStax Economics 2e Supplemental Test ItemsChapter 02: Choice in a World of Scarcity

12. “The application of theoretical & factual tools of economics analysis to explaining economic development or solving economics problems” is known as what? (Outcome #4) (DOK2)

A. free willB. economic reasoning*C. scientific method

13. Economics use the scientific method. In this method “explanations” are referred to as which of the following? (Outcome #5) (DOK1)

A. predictionsB. estimatesC. hypothesis*

14. Economically challenged countries consume their forests to produce firewood to cook food. They do this for what reason? (Outcome #6) (DOK2)

A. They are unaware of the environmental consequences.B. It is a profitable operation.C. Lack of substitutes.*

15. Which of the following is one of the factors of production in economic terms? (Outcome #4)(DOK1)

A. housesB. riversC. land*

16. In economic terms, entrepreneurs use ____to purchase ___. (Outcome #4) (DOK3)A. capital; factors of production*B. capital; resourcesC. credit; land

17. America is one of the world’s highest users of energy and, in economic terms, our usage of energy is direct correlation of our production of what? (Outcome #2)(DOK2)

A. automobilesB. coal fired generating plants

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OpenStax Economics 2e Supplemental Test ItemsChapter 02: Choice in a World of Scarcity

C. goods & services*18. A farmer has 20 acres of land. He decides he will raise corn on part of it and hogs on the

other part. He debates how much to allocate to each product. His choice of two products is which of the following? (Outcome #2)(DOK3)

A. an allocation of resourcesB. a decision making processC. a trade off*

19. A nation can produce guns or butter. Each mix of the two products is a what? (Outcome #1)(DOK2)

A. an allocation of resources.B. a decision making process.C. a trade off.*

The above two charts both show the relationship of an economy producing guns & butter.20. Line A-B and C-D both show which of the following? (Outcome #1)(DOK3)

A. allocation of resourcesB. production possibility frontier*C. maximization of resources

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OpenStax Economics 2e Supplemental Test ItemsChapter 02: Choice in a World of Scarcity

21. The above two charts both show the relationship of an economy producing guns & butter. Line A-B is straight while Line C-D curves. What economic term explains what causes the curve? (Outcome #1)(DOK3)

A. reduction of resourcesB. increasing costs*C. economic system

22. No society can produce everything it wants due to which of the following reasons? (Outcome #1)(DOK2)

A. inefficient productionB. scarcity*C. cost

23. The real economic cost of a good or service produced when measured by the value of the sacrificed alternative is the what? (Outcome #1)(DOK2)

A. opportunity cost*B. real costC. avoided cost

24. The maximum combinations of two outputs that could be produced with available resources is represented on a graph by which of the following? (Outcome #1)(DOK3)

A. opportunity costB. maximization of resourcesC. production possibility frontier*

25. A producer who can produce goods or services with fewer inputs than a competitor is said to have which of the following? (Outcome #7) (DOK2)

A. a comparative advantageB. a total advantageC. an absolute advantage*

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OpenStax Economics 2e Supplemental Test ItemsChapter 02: Choice in a World of Scarcity

26. Which of the following statements is false? (Outcome #10) (DOK 3)A. The economy is an orderly pattern of behavior.* B. The economy is highly individualistic. C. The economy reflects disorderly behavior.

27. In the graph above, what does the area contained between the dotted lines and arcs AB, BC, and CA represent? (Outcome #10) (DOK 3)

A. The economical proportions of investmentsB. The efficiency proportionsC. The production possibility surface*

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OpenStax Economics 2e Supplemental Test ItemsChapter 02: Choice in a World of Scarcity

28. In the graph above, what do the points contained in the space between the arcs AB, BC, and CA and the dotted lines represent? (Outcome #10) (DOK 3) (Paired item 1)

A. inefficient use of resources*B. government failure to investC. trade offs

29. In the graph above, what do the arcs AB, BC, and CA represent? (Outcome #10) (DOK 3) (Paired item 2)

A. the law of increasing cost*B. changing resourcesC. trade offs

30. What does it mean for prices to perform an “allocatory function”? (Outcome #10) (DOK 3)A. The invisible hand is at work.B. Prices are set to benefit the poor at the expense of the rich.C. Prices are set to ration goods.*

31. “Economics is a science that has sent men to the barricades.” This quote dramatizes which of the following economic realities? (Outcome 1) (DOK 2)

A. Economic illiteracy is widespread.B. Scarcity and competition are widespread.C. Dissatisfaction with the status quo is widespread.*

32. What enables a baker to obtain new shoes from a cobbler who doesn’t need any baked goods? (Outcome 5) (DOK 2)

A. barteringB. tradeC. currency*

33. Whose ideas were affirmed during the expansion of industry in Scotland in which the rich got richer and the poor got poorer? (Outcome 8) (DOK 1)

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OpenStax Economics 2e Supplemental Test ItemsChapter 02: Choice in a World of Scarcity

A. Smith*B. RicardoC. Malthus

34. Whose ideas were affirmed as The Irish Potato Famine caused a massive migration of the Irish from Ireland? (Outcome 8) (DOK 1) (Paired item 1)

A. SmithB. RicardoC. Malthus*

35. According to Adam Smith how would a person normally behave? (Outcome 8) (DOK 1A. according to the lawB. according to his religious beliefsC. according to his self-interest*

36. Which of the follow statements concerning The Law of Diminishing Returns, in economic terminology, is most correct? (Outlook 8) (DOK 2)

A. continuous investment does not mean continuous returns*B. the next unit of investment will not produce anythingC. only exist in farming

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