Multiple Choice Answers

1. Debt that is owed to foreigners is called:
internal debt.
external debt.
national debt.
international debt.
2. Scarcity will always exist because:
individuals can’t solve the three central coordination problems.
governments can’t solve the three central coordination problems.
the supply of goods is always less than the demand.
incentives that encourage work and reduce human desires cannot keep new wants from developing.
3. The opportunity cost for a student of attending college for a year is best measured by the:
benefit received by the student.
tuition paid for the year.
value of the next-best activity forgone by attending college.
total money outlays associated with attending college.
4. Which two systems require the least amount of government intervention?
Mercantilism and capitalism.
Feudalism and socialism.
Capitalism and feudalism.
Mercantilism and socialism.
5. Businesses do all of the following except:
pay taxes to the government.
demand labor services from households in the factor market.
demand goods and services from households in the goods market.
supply goods and services to the government in the goods market.
6. Opportunity cost is the same as marginal cost.
7. An economic force given relatively free reign by society to work through the market is:
a market force.
an economic force.
a price mechanism.
a political force.
8. Debt is measured relative to GDP because:
the ability to pay off a country’s debt depends on its productive capacity.
the ability to produce output depends on the size of the nation’s debt.
GDP is always used as a reference point in economics.
as long as this ratio remains high, the government will have no trouble repaying the debt.
9. A government runs a budget deficit when:
tax revenues exceed government expenditures.
government expenditures exceed tax revenues.
accumulated deficits exceed accumulated surpluses.
accumulated surpluses exceed accumulated deficits.
10. Households supply factors of production to business and are paid by business for doing so. The market where this interaction takes place is called the factor market.