Question 1

According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study

Accepted Answer

A)  is positive. 
B)  outweighs the extra cost. 
C)  exceeds the benefits of the previous hour of study. 
D)  will raise your exam score. 
A)  is positive. 
B)  outweighs the extra cost. 
C)  exceeds the benefits of the previous hour of study. 
D)  will raise your exam score.

Question 2

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has

Accepted Answer

A)  confused association and causation. 
B)  misunderstood the ceteris paribus assumption. 
C)  used normative economics to answer a positive question. 
D)  built an untestable model. 
A)  confused association and causation. 
B)  misunderstood the ceteris paribus assumption. 
C)  used normative economics to answer a positive question. 
D)  built an untestable model.

Question 3

A firm producing cans buys three tons of aluminum per day at $200 per ton. If it buys four tons per day, it receives a quantity discount on all units and pays only $175 per ton. The marginal cost of the fourth ton per day is

Accepted Answer

A)  $100. 
B)  $175. 
C)  $700. 
D)  $225. 
A)  $100. 
B)  $175. 
C)  $700. 
D)  $225.

Question 4

Which one of the following statements is correct?

Accepted Answer

A)  Policymakers have good intentions and therefore their proposals will create good outcomes. 
B)  Potential secondary effects do not need to be considered when deciding whether to implement a new government program. 
C)  A good outcome is guaranteed from a government program if it is created with good intentions. 
D)  Government programs can be implemented with good intentions but can lead to undesirable outcomes because of unintended consequences. 
A)  Policymakers have good intentions and therefore their proposals will create good outcomes. 
B)  Potential secondary effects do not need to be considered when deciding whether to implement a new government program. 
C)  A good outcome is guaranteed from a government program if it is created with good intentions. 
D)  Government programs can be implemented with good intentions but can lead to undesirable outcomes because of unintended consequences.

Question 5

The 18th century Scottish philosopher Alexander Tytler argued that democracy

Accepted Answer

A)  would survive indefinitely into the future once it was established. 
B)  was the only form of government that would be able to control excessive government spending financed by debt. 
C)  would tend to collapse from excessive debt once a majority of voters discovered they could vote themselves benefits at the expense of others. 
D)  would lead to persistent government surpluses because elected political officials would find the surpluses attractive relative to budget deficits. 
A)  would survive indefinitely into the future once it was established. 
B)  was the only form of government that would be able to control excessive government spending financed by debt. 
C)  would tend to collapse from excessive debt once a majority of voters discovered they could vote themselves benefits at the expense of others. 
D)  would lead to persistent government surpluses because elected political officials would find the surpluses attractive relative to budget deficits.

Question 6

Economic analysis assumes that

Accepted Answer

A)  people act only out of selfish motives. 
B)  people are motivated by a variety of forces; however, changes in personal benefits and costs affect behavior only when individuals are motivated by selfishness. 
C)  people are basically unselfish, and their actions are, therefore, difficult to predict. 
D)  changes in the personal benefits and costs associated with an activity will exert a predictable influence on the behavior of both those who are selfish and those who are unselfish. 
A)  people act only out of selfish motives. 
B)  people are motivated by a variety of forces; however, changes in personal benefits and costs affect behavior only when individuals are motivated by selfishness. 
C)  people are basically unselfish, and their actions are, therefore, difficult to predict. 
D)  changes in the personal benefits and costs associated with an activity will exert a predictable influence on the behavior of both those who are selfish and those who are unselfish.

Question 7

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 8

Who is more likely to drive carelessly, Camila in her 1980 Ford with bad brakes or Samantha, who has a 2005 BMW with all the most recent safety options?

Accepted Answer

On the surface, we might conclude that S

Question 9

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 10

Senator DuMonde favors a government program that he believes will help save endangered species. Economic analysis indicates that

Accepted Answer

A)  because Senator DuMonde has good intentions, his new program will have the desired results. 
B)  Senator DuMonde's new program could have unintended consequences that might result in an outcome different from what was intended. 
C)  regardless of any secondary effects, costs should not be considered when designing environmental legislation. 
D)  because Senator DuMonde's proposal is a government program, it will not have an opportunity cost. 
A)  because Senator DuMonde has good intentions, his new program will have the desired results. 
B)  Senator DuMonde's new program could have unintended consequences that might result in an outcome different from what was intended. 
C)  regardless of any secondary effects, costs should not be considered when designing environmental legislation. 
D)  because Senator DuMonde's proposal is a government program, it will not have an opportunity cost.

Question 11

Some individuals or families can become completely saturated with a service such as television. This suggests that

Accepted Answer

A)  wants are limited 
B)  desires for a single commodity can be satisfied but then the focus will switch to other goods and services 
C)  a highly productive economy may someday be able to satisfy all human desires 
D)  resources are not truly fixed in supply as we generally assume 
E)  scarcity does not exist 
A)  wants are limited 
B)  desires for a single commodity can be satisfied but then the focus will switch to other goods and services 
C)  a highly productive economy may someday be able to satisfy all human desires 
D)  resources are not truly fixed in supply as we generally assume 
E)  scarcity does not exist

Question 12

When economists use the term ceteris paribus, they are indicating that

Accepted Answer

A)  the relationship between two economic variables cannot be determined. 
B)  the analysis is true for the individual but not for the economy as a whole. 
C)  all other variables except the ones specified are assumed to be constant. 
D)  their conclusions are based on normative economics rather than positive economic analysis. 
A)  the relationship between two economic variables cannot be determined. 
B)  the analysis is true for the individual but not for the economy as a whole. 
C)  all other variables except the ones specified are assumed to be constant. 
D)  their conclusions are based on normative economics rather than positive economic analysis.

Question 13

Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines affected?

Accepted Answer

A)  They lose, because the standby passengers do not cover the full cost of the seats. 
B)  They gain, because the additional revenue covers the "fixed costs" of the flight. 
C)  They lose, because the gain of the passengers must necessarily come at the expense of the airline. 
D)  They benefit as long as the additional revenue from the passengers exceeds the marginal cost. 
A)  They lose, because the standby passengers do not cover the full cost of the seats. 
B)  They gain, because the additional revenue covers the "fixed costs" of the flight. 
C)  They lose, because the gain of the passengers must necessarily come at the expense of the airline. 
D)  They benefit as long as the additional revenue from the passengers exceeds the marginal cost.

Question 14

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 15

Which of the following is an example of a rational decision?

Accepted Answer

A)  DeShawn 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. 
B)  Jayla, a burglar who breaks into houses, decides to break into the house at 265 Elm Street, rather than the house next door because the house next door has a sign in the yard that says "home protected by a security system." 
C)  Nicolas, a drug user, chooses to buy his cocaine from Samuel, because Samuel's cocaine is as good as the cocaine from other dealers, but Samuel has lower prices. 
D)  All of the above are examples of rational choices. 
A)  DeShawn 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. 
B)  Jayla, a burglar who breaks into houses, decides to break into the house at 265 Elm Street, rather than the house next door because the house next door has a sign in the yard that says "home protected by a security system." 
C)  Nicolas, a drug user, chooses to buy his cocaine from Samuel, because Samuel's cocaine is as good as the cocaine from other dealers, but Samuel has lower prices. 
D)  All of the above are examples of rational choices.

Question 16

For a college student who wishes to calculate the true costs of going to college, the costs of room and board

Accepted Answer

A)  should be counted in full, regardless of the costs of eating and sleeping elsewhere. 
B)  should be counted only to the extent that they are more expensive at college than elsewhere. 
C)  usually exceed the opportunity cost of going to college. 
D)  plus the cost of tuition, equals the opportunity cost of going to college. 
A)  should be counted in full, regardless of the costs of eating and sleeping elsewhere. 
B)  should be counted only to the extent that they are more expensive at college than elsewhere. 
C)  usually exceed the opportunity cost of going to college. 
D)  plus the cost of tuition, equals the opportunity cost of going to college.

Question 17

A tax dollar collected from an individual or a business costs the private economy more than a dollar because

Accepted Answer

A)  the administration and enforcement of the tax system is costly. 
B)  record keeping and the other elements of compliance cost are sizable. 
C)  the taxes will eliminate some productive exchanges (and cause people to undertake some counterproductive activities). 
D)  All of the above are correct. 
A)  the administration and enforcement of the tax system is costly. 
B)  record keeping and the other elements of compliance cost are sizable. 
C)  the taxes will eliminate some productive exchanges (and cause people to undertake some counterproductive activities). 
D)  All of the above are correct.

Question 18

Criteria for rationing goods and resources must be established because of

Accepted Answer

A)  the law of comparative advantage. 
B)  the use of capitalism as a form of economic organization. 
C)  the inability of politicians to develop efficient forms of economic organization. 
D)  scarcity imposed by nature. 
A)  the law of comparative advantage. 
B)  the use of capitalism as a form of economic organization. 
C)  the inability of politicians to develop efficient forms of economic organization. 
D)  scarcity imposed by nature.

Question 19

When price is the rationing criterion, individuals have a strong incentive to

Accepted Answer

A)  ignore the wishes of others when making decisions about how to use their resources. 
B)  provide services to others in exchange for income. 
C)  avoid exchanges because in every exchange there will be one person who gains and another who loses. 
D)  substitute promises for the consistent delivery of a quality product. 
A)  ignore the wishes of others when making decisions about how to use their resources. 
B)  provide services to others in exchange for income. 
C)  avoid exchanges because in every exchange there will be one person who gains and another who loses. 
D)  substitute promises for the consistent delivery of a quality product.

Question 20

The basic ingredients in any economic decision are

Accepted Answer

A)  scarcity and choice. 
B)  surpluses and shortages. 
C)  market prices and the use of efficient production methods. 
D)  needs and wants. 
A)  scarcity and choice. 
B)  surpluses and shortages. 
C)  market prices and the use of efficient production methods. 
D)  needs and wants.

According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has

A firm producing cans buys three tons of aluminum per day at $200 per ton. If it buys four tons per day, it receives a quantity discount on all units and pays only $175 per ton. The marginal cost of the fourth ton per day is

Which one of the following statements is correct?

The 18^th century Scottish philosopher Alexander Tytler argued that democracy

Economic analysis assumes that

Which of the following is true?

Who is more likely to drive carelessly, Camila in her 1980 Ford with bad brakes or Samantha, who has a 2005 BMW with all the most recent safety options?

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

Senator DuMonde favors a government program that he believes will help save endangered species. Economic analysis indicates that

Some individuals or families can become completely saturated with a service such as television. This suggests that

When economists use the term ceteris paribus, they are indicating that

Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines affected?

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

Which of the following is an example of a rational decision?

For a college student who wishes to calculate the true costs of going to college, the costs of room and board

A tax dollar collected from an individual or a business costs the private economy more than a dollar because

Criteria for rationing goods and resources must be established because of

When price is the rationing criterion, individuals have a strong incentive to

The basic ingredients in any economic decision are

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

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 1: The Economic Approach

According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has

A firm producing cans buys three tons of aluminum per day at $200 per ton. If it buys four tons per day, it receives a quantity discount on all units and pays only $175 per ton. The marginal cost of the fourth ton per day is

Which one of the following statements is correct?

The 18th century Scottish philosopher Alexander Tytler argued that democracy

Economic analysis assumes that

Which of the following is true?

Who is more likely to drive carelessly, Camila in her 1980 Ford with bad brakes or Samantha, who has a 2005 BMW with all the most recent safety options?

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

Senator DuMonde favors a government program that he believes will help save endangered species. Economic analysis indicates that

Some individuals or families can become completely saturated with a service such as television. This suggests that

When economists use the term ceteris paribus, they are indicating that

Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines affected?

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

Which of the following is an example of a rational decision?

For a college student who wishes to calculate the true costs of going to college, the costs of room and board

A tax dollar collected from an individual or a business costs the private economy more than a dollar because

Criteria for rationing goods and resources must be established because of

When price is the rationing criterion, individuals have a strong incentive to

The basic ingredients in any economic decision are

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

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

The 18^th century Scottish philosopher Alexander Tytler argued that democracy