Question 1

Who would probably argue that you need to study the forest before you can understand the trees?

Accepted Answer

A) A microeconomist 
B) A macroeconomist 
C) A normative economist 
D) A classical economist 
A) A microeconomist 
B) A macroeconomist 
C) A normative economist 
D) A classical economist B

Question 2

Countries such as Brazil, India, and Moldova-well-known sources of organ donors-have banned buying and selling organs. This legal action comes at the risk of driving the trade underground. What idea from Chapter 1 of the text does this story best illustrate?

Accepted Answer

A) Legal and social forces can eliminate economic forces. 
B) Marginal revenue should equal marginal cost. 
C) Economic forces always operate despite legal forces. 
D) The invisible hand is not always invisible. 
A) Legal and social forces can eliminate economic forces. 
B) Marginal revenue should equal marginal cost. 
C) Economic forces always operate despite legal forces. 
D) The invisible hand is not always invisible. C

Question 3

Suppose you paid $300 to take this economics course, which meets 30 times for one hour a class during the course of the semester. Instead of attending class you could have either flipped hamburgers for $10 an hour or waited tables for $8 an hour. Given this information, the opportunity cost of attending each class session is:

Accepted Answer

A) $30. 
B) $10. 
C) $8. 
D) $13. 
A) $30. 
B) $10. 
C) $8. 
D) $13. B

Question 4

What is opportunity cost? Give an example.

Accepted Answer

Opportunity cost is the benefit foregone

Question 5

People can reasonably expect that an economic system will decide all of the following except:

Accepted Answer

A) what goods to produce. 
B) how to produce the goods. 
C) how to assign initial property rights. 
D) for whom to produce the goods. 
A) what goods to produce. 
B) how to produce the goods. 
C) how to assign initial property rights. 
D) for whom to produce the goods.

Question 6

Mary buys cell-phone services from a company that charges $30 per month. For that $30 she is allowed 600 minutes of free calls and then pays 10 cents per minute for any calls above 600 minutes. Mary has used 600 minutes this month so far. What is her marginal cost per minute of making additional calls?

Accepted Answer

A) 25 cents 
B) 10 cents 
C) 5 cents 
D) $0 
A) 25 cents 
B) 10 cents 
C) 5 cents 
D) $0

Question 7

Alan is sitting in a bar drinking beers that cost $4 each. According to the economic decision rule, Alan will stop drinking when the marginal:

Accepted Answer

A) benefit to him of an additional beer is less than $4. 
B) cost to him of an additional beer is less than the marginal benefit. 
C) cost remains at $4. 
D) benefit to him of an additional beer is greater than $4. 
A) benefit to him of an additional beer is less than $4. 
B) cost to him of an additional beer is less than the marginal benefit. 
C) cost remains at $4. 
D) benefit to him of an additional beer is greater than $4.

Question 8

Deciding what the distribution of income should be is an example of normative economics.

Accepted Answer

A) True 
 B)False

Question 9

The marginal benefit of another T-shirt this month to Mary is $15. If the $10 price of a T-shirt reflects its marginal cost to Mary and Mary uses economic reasoning, she:

Accepted Answer

A) will sell the T-shirts she has to others who are willing to pay $10. 
B) will not gain anything by buying another T-shirt. 
C) will buy another T-shirt this month. 
D) will not buy a T-shirt this month. 
A) will sell the T-shirts she has to others who are willing to pay $10. 
B) will not gain anything by buying another T-shirt. 
C) will buy another T-shirt this month. 
D) will not buy a T-shirt this month.

Question 10

The price mechanism that guides people's actions is called the:

Accepted Answer

A) invisible market force. 
B) invisible hand. 
C) invisible handshake. 
D) invisible foot. 
A) invisible market force. 
B) invisible hand. 
C) invisible handshake. 
D) invisible foot.

Question 11

More than 10,000 visitors waited up to two hours in line to see the rare flower titan arum at the Cambridge Botanical Gardens. What does this situation illustrate to an economist about rationing?

Accepted Answer

A) Goods don't have to be rationed by lottery or first-come, first-served. Goods can be rationed by price. 
B) When goods are not fully rationed by monetary price, other rationing mechanisms such as waiting arise. 
C) When goods are not rationed by monetary price, other rationing mechanisms such as lottery must be introduced. 
D) There is no need for rationing if anyone who waits long enough can see the flower. 
A) Goods don't have to be rationed by lottery or first-come, first-served. Goods can be rationed by price. 
B) When goods are not fully rationed by monetary price, other rationing mechanisms such as waiting arise. 
C) When goods are not rationed by monetary price, other rationing mechanisms such as lottery must be introduced. 
D) There is no need for rationing if anyone who waits long enough can see the flower.

Question 12

An economic model:

Accepted Answer

A) applies economic theory to understand real-world events. 
B) is so abstract that it cannot be applied to real-world events. 
C) can be used only to understand free markets. 
D) is an action taken to influence the course of economic events. 
A) applies economic theory to understand real-world events. 
B) is so abstract that it cannot be applied to real-world events. 
C) can be used only to understand free markets. 
D) is an action taken to influence the course of economic events.

Question 13

You're deciding whether to install an $800 moonroof and a $400 security system in your car. Suppose the marginal benefit from the moonroof is $700 and the marginal benefit from the security system is $600. The economic decision rule dictates that you should:

Accepted Answer

A) purchase only the moonroof because that will provide you with the greatest marginal benefit. 
B) purchase only the security system because its marginal benefit exceeds its marginal cost. 
C) purchase both options because the combined cost of both is less than the combined benefit. 
D) not purchase either because the benefits of each do not exceed the costs. 
A) purchase only the moonroof because that will provide you with the greatest marginal benefit. 
B) purchase only the security system because its marginal benefit exceeds its marginal cost. 
C) purchase both options because the combined cost of both is less than the combined benefit. 
D) not purchase either because the benefits of each do not exceed the costs.

Question 14

A cultural norm is a(n):

Accepted Answer

A) economic force. 
B) social force. 
C) political force. 
D) market force. 
A) economic force. 
B) social force. 
C) political force. 
D) market force.

Question 15

For a given benefit, a rational person chooses the option that has:

Accepted Answer

A) the lowest opportunity cost. 
B) the highest opportunity cost. 
C) the average opportunity cost. 
D) no opportunity cost. 
A) the lowest opportunity cost. 
B) the highest opportunity cost. 
C) the average opportunity cost. 
D) no opportunity cost.

Question 16

Mary buys cell-phone services from a company that charges $30 per month. For that $30 she is allowed 600 minutes of free calls and then pays 25 cents per minute for any calls above 600 minutes. Mary has used 300 minutes this month so far. What is her marginal cost per minute of making two more calls lasting 10 minutes each?

Accepted Answer

A) $2.50 
B) 25 cents 
C) 4 cents 
D) $0 
A) $2.50 
B) 25 cents 
C) 4 cents 
D) $0

Question 17

Normative economics seeks to:

Accepted Answer

A) determine the most appropriate economic goals for a society. 
B) determine how government policies affect the economy. 
C) objectively explain how the economy functions. 
D) objectively explain economic problems such as inflation and unemployment. 
A) determine the most appropriate economic goals for a society. 
B) determine how government policies affect the economy. 
C) objectively explain how the economy functions. 
D) objectively explain economic problems such as inflation and unemployment.

Question 18

Scarcity exists because economies cannot produce enough to meet the perceived desires of all individuals.

Accepted Answer

A) True 
 B)False

Question 19

Macroeconomics is:

Accepted Answer

A) the study of individual choice and how that choice is influenced by economic forces. 
B) the study of the pricing policies of firms and the purchasing decisions of households. 
C) the study of aggregate economic relationships. 
D) an analysis of economic reality that proceeds from the parts to the whole. 
A) the study of individual choice and how that choice is influenced by economic forces. 
B) the study of the pricing policies of firms and the purchasing decisions of households. 
C) the study of aggregate economic relationships. 
D) an analysis of economic reality that proceeds from the parts to the whole.

Question 20

Experimental economics:

Accepted Answer

A) includes naturally occurring events that approximates a controlled experiment. 
B) is not possible given that economists study real-world events. 
C) creates its own data rather than using data from the real world. 
D) is what all economists do when they develop their models. 
A) includes naturally occurring events that approximates a controlled experiment. 
B) is not possible given that economists study real-world events. 
C) creates its own data rather than using data from the real world. 
D) is what all economists do when they develop their models.

Exam 1: Economics and Economic Reasoning

Who would probably argue that you need to study the forest before you can understand the trees?

Countries such as Brazil, India, and Moldova-well-known sources of organ donors-have banned buying and selling organs. This legal action comes at the risk of driving the trade underground. What idea from Chapter 1 of the text does this story best illustrate?

What is opportunity cost? Give an example.

People can reasonably expect that an economic system will decide all of the following except:

Alan is sitting in a bar drinking beers that cost $4 each. According to the economic decision rule, Alan will stop drinking when the marginal:

Deciding what the distribution of income should be is an example of normative economics.

The marginal benefit of another T-shirt this month to Mary is $15. If the $10 price of a T-shirt reflects its marginal cost to Mary and Mary uses economic reasoning, she:

The price mechanism that guides people's actions is called the:

More than 10,000 visitors waited up to two hours in line to see the rare flower titan arum at the Cambridge Botanical Gardens. What does this situation illustrate to an economist about rationing?

An economic model:

You're deciding whether to install an $800 moonroof and a $400 security system in your car. Suppose the marginal benefit from the moonroof is $700 and the marginal benefit from the security system is $600. The economic decision rule dictates that you should:

A cultural norm is a(n):

For a given benefit, a rational person chooses the option that has:

Normative economics seeks to:

Scarcity exists because economies cannot produce enough to meet the perceived desires of all individuals.

Macroeconomics is:

Experimental economics:

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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