Question 1

A local restaurant offers an "all you can eat" buffet for $15. Mia eats four servings but leaves half of a fifth helping uneaten. Why?

Accepted Answer

A) Her marginal value of a serving of brunch has fallen below $15. 
B) Her marginal value of a serving has fallen below $3 ($15 divided by 5 servings). 
C) Her marginal value of food has fallen to zero. 
D) The total value she places on the buffet exactly equals $15. 
A) Her marginal value of a serving of brunch has fallen below $15. 
B) Her marginal value of a serving has fallen below $3 ($15 divided by 5 servings). 
C) Her marginal value of food has fallen to zero. 
D) The total value she places on the buffet exactly equals $15.

Question 2

In economics, secondary effects refer to the

Accepted Answer

A) best alternative that must be forgone as the result of a choice. 
B) unintended consequences of a change that are not immediately identifiable but are felt only with time. 
C) immediate and visible intended consequences of a change. 
D) impact of the scarcity of resources on the scarcity of the goods that are produced with those resources. 
A) best alternative that must be forgone as the result of a choice. 
B) unintended consequences of a change that are not immediately identifiable but are felt only with time. 
C) immediate and visible intended consequences of a change. 
D) impact of the scarcity of resources on the scarcity of the goods that are produced with those resources.

Question 3

If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that

Accepted Answer

A) cheating will be completely eliminated. 
B) fewer students will attempt to cheat. 
C) the amount of cheating will be unaffected. 
D) any of the above is possible because student behavior is unpredictable. 
A) cheating will be completely eliminated. 
B) fewer students will attempt to cheat. 
C) the amount of cheating will be unaffected. 
D) any of the above is possible because student behavior is unpredictable.

Question 4

The expression "There's no such thing as a free lunch" means

Accepted Answer

A) if one person gains, someone else must lose. 
B) each person must pay for exactly what he or she receives. 
C) the use of resources to produce a good has an opportunity cost because of scarcity. 
D) you cannot have a free lunch at the expense of someone else. 
A) if one person gains, someone else must lose. 
B) each person must pay for exactly what he or she receives. 
C) the use of resources to produce a good has an opportunity cost because of scarcity. 
D) you cannot have a free lunch at the expense of someone else.

Question 5

What is the best test of an economic theory?

Accepted Answer

A) the accuracy of the assumptions behind the theory 
B) the ability of the theory to predict real-world events 
C) the implications of the theory for current public policy 
D) how much mathematical detail is behind the theory 
A) the accuracy of the assumptions behind the theory 
B) the ability of the theory to predict real-world events 
C) the implications of the theory for current public policy 
D) how much mathematical detail is behind the theory

Question 6

Which of the following is true?

Accepted Answer

A) Changes in personal costs and benefits will exert a predictable impact on the choices of human decision makers. 
B) Only direct monetary costs matter in making decisions. 
C) If a good is provided free to an individual, its production will not consume valuable scarce resources. 
D) Secondary effects are seldom of importance in economics. 
A) Changes in personal costs and benefits will exert a predictable impact on the choices of human decision makers. 
B) Only direct monetary costs matter in making decisions. 
C) If a good is provided free to an individual, its production will not consume valuable scarce resources. 
D) Secondary effects are seldom of importance in economics.

Question 7

A fact based on observable phenomenon that is not influenced by differences in personal opinion is called

Accepted Answer

A) an objective concept. 
B) a subjective concept. 
C) an unintended consequence. 
D) ceteris paribus. 
A) an objective concept. 
B) a subjective concept. 
C) an unintended consequence. 
D) ceteris paribus.

Question 8

According to Adam Smith, individual self-interest

Accepted Answer

A) is a powerful force for economic progress when it is directed by competitive markets. 
B) is a powerful force for economic progress when individuals are wisely directed by a strong central government. 
C) is a major factor in retarding the economic progress of humankind. 
D) could be either a positive or negative force for economic progress, depending on the moral influences of political leaders. 
A) is a powerful force for economic progress when it is directed by competitive markets. 
B) is a powerful force for economic progress when individuals are wisely directed by a strong central government. 
C) is a major factor in retarding the economic progress of humankind. 
D) could be either a positive or negative force for economic progress, depending on the moral influences of political leaders.

Question 9

Jim enjoys the feeling of wind in his hair enough to ride his motorcycle without a helmet, even though he fully realizes the potential for injury it creates by not wearing one in the unlikely event he is in an accident. To an economist, Jim is

Accepted Answer

A) making an irrational choice. 
B) making a rational choice. 
C) not fully considering the personal costs and benefits of his decision. 
D) not responding to the incentives he faces. 
A) making an irrational choice. 
B) making a rational choice. 
C) not fully considering the personal costs and benefits of his decision. 
D) not responding to the incentives he faces.

Question 10

Homeowners can deduct interest payments on their mortgages from their federal income tax. If this deduction were removed, how would the housing market be affected?

Accepted Answer

The deductibility of these interest paym

Question 11

William observes that a car in 1925 sold for an average of $500 versus $20,000 for a 2005 model. He concludes that 2005 cars must be 40 times better than 1925 cars. What's wrong with this way of thinking?

Accepted Answer

Poor William has made several errors. Fi

Question 12

If a decision maker uses marginal analysis, then the relevant costs are the

Accepted Answer

A) full costs of a particular activity or product. 
B) fixed costs which do not vary with the extra activity or output. 
C) profits obtained on the activity or product. 
D) average costs for a particular activity or product. 
E) additional costs of a particular activity or product. 
A) full costs of a particular activity or product. 
B) fixed costs which do not vary with the extra activity or output. 
C) profits obtained on the activity or product. 
D) average costs for a particular activity or product. 
E) additional costs of a particular activity or product.

Question 13

A rational decision maker takes an action if and only if

Accepted Answer

A) the marginal benefit of the action exceeds the marginal cost of the action. 
B) the marginal cost of the action exceeds the marginal benefit of the action. 
C) the marginal cost of the action is zero. 
D) the opportunity cost of the action is zero. 
A) the marginal benefit of the action exceeds the marginal cost of the action. 
B) the marginal cost of the action exceeds the marginal benefit of the action. 
C) the marginal cost of the action is zero. 
D) the opportunity cost of the action is zero.

Question 14

Which of the following is most consistent with economizing behavior?

Accepted Answer

A) If you derive the same satisfaction from eating pizza and eating ice cream, it makes no difference which one of the two you choose. 
B) Before voting, you should invest the time and energy to become fully informed on all of the issues and candidates. 
C) It never makes sense to hire someone to do something for you that you could do yourself. 
D) If you get the same satisfaction from a chicken sandwich and a salad, you should purchase the one that costs the least. 
A) If you derive the same satisfaction from eating pizza and eating ice cream, it makes no difference which one of the two you choose. 
B) Before voting, you should invest the time and energy to become fully informed on all of the issues and candidates. 
C) It never makes sense to hire someone to do something for you that you could do yourself. 
D) If you get the same satisfaction from a chicken sandwich and a salad, you should purchase the one that costs the least.

Question 15

People are willing to pay more for a diamond than for a bottle of water because

Accepted Answer

A) the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. 
B) the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. 
C) producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. 
D) water prices are held artificially low by governments, since water is necessary for life. 
A) the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. 
B) the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. 
C) producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. 
D) water prices are held artificially low by governments, since water is necessary for life.

Question 16

Because information is costly to acquire,

Accepted Answer

A) people will rationally choose not to become fully informed when making decisions. 
B) people will generally choose to become as fully informed as possible when making decisions. 
C) people will generally choose to acquire no information that would be relevant to their decisions. 
D) none of the above are true. 
A) people will rationally choose not to become fully informed when making decisions. 
B) people will generally choose to become as fully informed as possible when making decisions. 
C) people will generally choose to acquire no information that would be relevant to their decisions. 
D) none of the above are true.

Question 17

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometime, you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

Accepted Answer

A) rational decisions are not always possible. 
B) you can allocate your resources to what gives you the highest value. 
C) you can create the supply to meet your own demand. 
D) you can maximize social welfare by making optimal decisions. 
A) rational decisions are not always possible. 
B) you can allocate your resources to what gives you the highest value. 
C) you can create the supply to meet your own demand. 
D) you can maximize social welfare by making optimal decisions.

Question 18

The highest valued alternative that must be given up in order to choose an option is called

Accepted Answer

A) opportunity cost. 
B) utility. 
C) scarcity. 
D) disutility. 
A) opportunity cost. 
B) utility. 
C) scarcity. 
D) disutility.

Question 19

Which of the following is most clearly consistent with the basic postulate of economics regarding the reaction of people to a change in incentives.

Accepted Answer

A) Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. 
B) People will buy more milk at a price of $2 per gallon than at $1 per gallon. 
C) People will buy less gas if the price of gas increases by $.20 per gallon. 
D) People will consume more beef if the price increases from $1 to $2 per pound. 
A) Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. 
B) People will buy more milk at a price of $2 per gallon than at $1 per gallon. 
C) People will buy less gas if the price of gas increases by $.20 per gallon. 
D) People will consume more beef if the price increases from $1 to $2 per pound.

Question 20

In economics the term utility refers to

Accepted Answer

A) the subjective benefit or satisfaction a person expects to receive from a choice or course of action. 
B) the number of possible uses for a resource. 
C) the fact that human desire for goods is unlimited while the resources available to meet those desires is limited. 
D) the highest valued alternative that must be sacrificed when a choice is made. 
A) the subjective benefit or satisfaction a person expects to receive from a choice or course of action. 
B) the number of possible uses for a resource. 
C) the fact that human desire for goods is unlimited while the resources available to meet those desires is limited. 
D) the highest valued alternative that must be sacrificed when a choice is made.

A local restaurant offers an "all you can eat" buffet for $15. Mia eats four servings but leaves half of a fifth helping uneaten. Why?

In economics, secondary effects refer to the

If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that

The expression "There's no such thing as a free lunch" means

What is the best test of an economic theory?

Which of the following is true?

A fact based on observable phenomenon that is not influenced by differences in personal opinion is called

According to Adam Smith, individual self-interest

Jim enjoys the feeling of wind in his hair enough to ride his motorcycle without a helmet, even though he fully realizes the potential for injury it creates by not wearing one in the unlikely event he is in an accident. To an economist, Jim is

Homeowners can deduct interest payments on their mortgages from their federal income tax. If this deduction were removed, how would the housing market be affected?

William observes that a car in 1925 sold for an average of $500 versus $20,000 for a 2005 model. He concludes that 2005 cars must be 40 times better than 1925 cars. What's wrong with this way of thinking?

If a decision maker uses marginal analysis, then the relevant costs are the

A rational decision maker takes an action if and only if

Which of the following is most consistent with economizing behavior?

People are willing to pay more for a diamond than for a bottle of water because

Because information is costly to acquire,

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometime, you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

The highest valued alternative that must be given up in order to choose an option is called

Which of the following is most clearly consistent with the basic postulate of economics regarding the reaction of people to a change in incentives.

In economics the term utility refers to

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 1: The Economic Approach

A local restaurant offers an "all you can eat" buffet for $15. Mia eats four servings but leaves half of a fifth helping uneaten. Why?

In economics, secondary effects refer to the

If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that

The expression "There's no such thing as a free lunch" means

What is the best test of an economic theory?

Which of the following is true?

A fact based on observable phenomenon that is not influenced by differences in personal opinion is called

According to Adam Smith, individual self-interest

Jim enjoys the feeling of wind in his hair enough to ride his motorcycle without a helmet, even though he fully realizes the potential for injury it creates by not wearing one in the unlikely event he is in an accident. To an economist, Jim is

Homeowners can deduct interest payments on their mortgages from their federal income tax. If this deduction were removed, how would the housing market be affected?

William observes that a car in 1925 sold for an average of $500 versus $20,000 for a 2005 model. He concludes that 2005 cars must be 40 times better than 1925 cars. What's wrong with this way of thinking?

If a decision maker uses marginal analysis, then the relevant costs are the

A rational decision maker takes an action if and only if

Which of the following is most consistent with economizing behavior?

People are willing to pay more for a diamond than for a bottle of water because

Because information is costly to acquire,

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometime, you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

The highest valued alternative that must be given up in order to choose an option is called

Which of the following is most clearly consistent with the basic postulate of economics regarding the reaction of people to a change in incentives.

In economics the term utility refers to

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters