Question 1

The expression, "There's no such thing as a free lunch," implies that

Accepted Answer

A)  everyone has to pay for his own lunch. 
B)  the person consuming a good must always pay for it. 
C)  opportunity costs are incurred when resources are used to produce goods and services. 
D)  no one has time for a good lunch anymore. 
A)  everyone has to pay for his own lunch. 
B)  the person consuming a good must always pay for it. 
C)  opportunity costs are incurred when resources are used to produce goods and services. 
D)  no one has time for a good lunch anymore.

Question 2

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

Accepted Answer

A)  utility. 
B)  opportunity cost. 
C)  capital. 
D)  ceteris paribus 
A)  utility. 
B)  opportunity cost. 
C)  capital. 
D)  ceteris paribus

Question 3

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 4

While waiting in line to buy two tacos at 80 cents each and a medium drink for 90 cents, Jordan notices that the restaurant has a value meal containing three tacos and a medium drink all for $3. For Jordan, the marginal cost of the third taco would be

Accepted Answer

A)  zero. 
B)  50 cents. 
C)  80 cents. 
D)  $1. 
A)  zero. 
B)  50 cents. 
C)  80 cents. 
D)  $1.

Question 5

"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This statement

Accepted Answer

A)  confuses positive and normative analysis. 
B)  commits the fallacy of composition. 
C)  fails to recognize that association is not causation. 
D)  confuses macroeconomics with microeconomics. 
A)  confuses positive and normative analysis. 
B)  commits the fallacy of composition. 
C)  fails to recognize that association is not causation. 
D)  confuses macroeconomics with microeconomics.

Question 6

Economists use the term ceteris paribus to indicate that

Accepted Answer

A)  supply and demand are in balance. 
B)  other things are assumed to be constant. 
C)  the analysis is true for the individual but not for the economy as a whole. 
D)  their conclusions are based on normative economics rather than positive economic analysis. 
A)  supply and demand are in balance. 
B)  other things are assumed to be constant. 
C)  the analysis is true for the individual but not for the economy as a whole. 
D)  their conclusions are based on normative economics rather than positive economic analysis.

Question 7

Adam Smith believed that if people were free to pursue their own interests,

Accepted Answer

A)  public interest would be served quite well. 
B)  less would be produced than if altruism were the guiding principle. 
C)  they would generally apply their talents to unproductive activities that would generate little value to society. 
D)  they would have little incentive to undertake productive activities. 
A)  public interest would be served quite well. 
B)  less would be produced than if altruism were the guiding principle. 
C)  they would generally apply their talents to unproductive activities that would generate little value to society. 
D)  they would have little incentive to undertake productive activities.

Question 8

If an airline company has several empty seats on a flight and the full price of an air ticket is $500 and the marginal cost per passenger is $100, then it will be profitable for the airline to

Accepted Answer

A)  charge a stand-by passenger no less than the full fare of $500. 
B)  charge a stand-by passenger less than $100. 
C)  charge a stand-by passenger more than $500. 
D)  charge a stand-by passenger more than $100. 
E)  fill the seats at the last minute for any price. 
A)  charge a stand-by passenger no less than the full fare of $500. 
B)  charge a stand-by passenger less than $100. 
C)  charge a stand-by passenger more than $500. 
D)  charge a stand-by passenger more than $100. 
E)  fill the seats at the last minute for any price.

Question 9

A popular video program, used to teach primary school children about economics, defines scarcity as "when you don't have enough of something." Evaluate this definition based on your understanding of the scarcity concept.

Accepted Answer

This definition is a bit simplistic for

Question 10

"If income were redistributed in favor of the poor, we would eliminate scarcity." The preceding statement is

Accepted Answer

A)  essentially correct. 
B)  incorrect because scarcity has already been eliminated among the poor in wealthy countries such as the United States. 
C)  incorrect; it fails to recognize that poverty will be present as long as resources are scarce. 
D)  incorrect; it confuses the elimination of poverty with the elimination of the constraint imposed by scarcity. 
A)  essentially correct. 
B)  incorrect because scarcity has already been eliminated among the poor in wealthy countries such as the United States. 
C)  incorrect; it fails to recognize that poverty will be present as long as resources are scarce. 
D)  incorrect; it confuses the elimination of poverty with the elimination of the constraint imposed by scarcity.

Question 11

For the typical student, taking an introductory course in economics should

Accepted Answer

A)  turn the student into an economist. 
B)  teach the student solutions to most social problems. 
C)  teach the student how to answer complex social questions. 
D)  help the student learn to rationally analyze social problems. 
E)  All of the above are correct. 
A)  turn the student into an economist. 
B)  teach the student solutions to most social problems. 
C)  teach the student how to answer complex social questions. 
D)  help the student learn to rationally analyze social problems. 
E)  All of the above are correct.

Question 12

In Latavia, cultural pressures cause voluntary donations to orphanages to be very large; in Slobovia, people make smaller donations. If the governments of both countries suddenly grant a tax break to those donating money to orphanages, the basic postulate of economics predicts that donations

Accepted Answer

A)  in both nations will increase. 
B)  will increase in Latavia but not in Slobovia. 
C)  will increase only in Slobovia, where people care about taxes, but not in Latavia, where compassion is more important. 
D)  are unlikely to change in either nation, since voluntary donations are not an economic decision. 
A)  in both nations will increase. 
B)  will increase in Latavia but not in Slobovia. 
C)  will increase only in Slobovia, where people care about taxes, but not in Latavia, where compassion is more important. 
D)  are unlikely to change in either nation, since voluntary donations are not an economic decision.

Question 13

Rational choice requires that opportunity cost be

Accepted Answer

A)  ignored in making a decision. 
B)  considered for individual choices, but not for societal choices. 
C)  computed, but not actually used in making a decision. 
D)  considered as part of making a decision. 
E)  used as the sole decision criterion. 
A)  ignored in making a decision. 
B)  considered for individual choices, but not for societal choices. 
C)  computed, but not actually used in making a decision. 
D)  considered as part of making a decision. 
E)  used as the sole decision criterion.

Question 14

While waiting in line to buy one cheeseburger for $1.50 and a medium drink for $1.00, Sally notices that she could get a value meal that contains both the cheeseburger and medium drink and also a medium order of fries for $2.75. She thinks to herself, "Is it worth the extra 25 cents to get the medium fries?" To an economist, Sally's decision is an example of

Accepted Answer

A)  marginal decision making. 
B)  basing decisions on total, rather than marginal, value. 
C)  an unintended consequence. 
D)  the fallacy of composition. 
A)  marginal decision making. 
B)  basing decisions on total, rather than marginal, value. 
C)  an unintended consequence. 
D)  the fallacy of composition.

Question 15

Joe 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 Joe has made several errors. First,

Question 16

Economics is primarily the study of

Accepted Answer

A)  how to make money in the stock market. 
B)  how to operate a business successfully. 
C)  the allocation of scarce resources in an effort to satisfy wants that are virtually unlimited. 
D)  the methods business firms use to reduce their costs of production. 
A)  how to make money in the stock market. 
B)  how to operate a business successfully. 
C)  the allocation of scarce resources in an effort to satisfy wants that are virtually unlimited. 
D)  the methods business firms use to reduce their costs of production.

Question 17

Positive economics differs from normative economics in that

Accepted Answer

A)  positive economics deals with how people react to changes in benefits, and normative economics deals with how people react to changes in costs. 
B)  positive economic statements are testable, and normative statements are not. 
C)  positive economic statements tell us what we should be doing, and normative economics tells us what we should have done. 
D)  positive economic statements focus on the application of the theory, and normative economic statements are theoretical. 
A)  positive economics deals with how people react to changes in benefits, and normative economics deals with how people react to changes in costs. 
B)  positive economic statements are testable, and normative statements are not. 
C)  positive economic statements tell us what we should be doing, and normative economics tells us what we should have done. 
D)  positive economic statements focus on the application of the theory, and normative economic statements are theoretical.

Question 18

The economic way of thinking stresses that

Accepted Answer

A)  changes in personal costs and benefits generally do not influence human behavior. 
B)  incentives matter--when an option becomes less costly, people will be more likely to choose it. 
C)  if one individual gains from an economic activity, then someone else must lose. 
D)  goods provided by government do not consume valuable scarce resources since government activity is not part of the market economy. 
A)  changes in personal costs and benefits generally do not influence human behavior. 
B)  incentives matter--when an option becomes less costly, people will be more likely to choose it. 
C)  if one individual gains from an economic activity, then someone else must lose. 
D)  goods provided by government do not consume valuable scarce resources since government activity is not part of the market economy.

Question 19

The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary's statement is a(n) ____ economic statement, and the labor head's statement is a(n) ____ economic statement.

Accepted Answer

A)  normative; normative 
B)  normative; positive 
C)  positive; normative 
D)  positive; positive 
E)  proper; improper 
A)  normative; normative 
B)  normative; positive 
C)  positive; normative 
D)  positive; positive 
E)  proper; improper

Question 20

Economic analysis assumes that

Accepted Answer

A)  individuals act only out of selfish motives. 
B)  although individuals are at times selfish and at times unselfish, only their selfish actions may be predicted. 
C)  people are basically humanitarian, and their actions are, therefore, impossible to predict. 
D)  changes in the personal benefits and costs associated with a choice will exert a predictable influence on human behavior. 
A)  individuals act only out of selfish motives. 
B)  although individuals are at times selfish and at times unselfish, only their selfish actions may be predicted. 
C)  people are basically humanitarian, and their actions are, therefore, impossible to predict. 
D)  changes in the personal benefits and costs associated with a choice will exert a predictable influence on human behavior.

The expression, "There's no such thing as a free lunch," implies that

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

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

While waiting in line to buy two tacos at 80 cents each and a medium drink for 90 cents, Jordan notices that the restaurant has a value meal containing three tacos and a medium drink all for $3. For Jordan, the marginal cost of the third taco would be

"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This statement

Economists use the term ceteris paribus to indicate that

Adam Smith believed that if people were free to pursue their own interests,

If an airline company has several empty seats on a flight and the full price of an air ticket is $500 and the marginal cost per passenger is $100, then it will be profitable for the airline to

A popular video program, used to teach primary school children about economics, defines scarcity as "when you don't have enough of something." Evaluate this definition based on your understanding of the scarcity concept.

"If income were redistributed in favor of the poor, we would eliminate scarcity." The preceding statement is

For the typical student, taking an introductory course in economics should

In Latavia, cultural pressures cause voluntary donations to orphanages to be very large; in Slobovia, people make smaller donations. If the governments of both countries suddenly grant a tax break to those donating money to orphanages, the basic postulate of economics predicts that donations

Rational choice requires that opportunity cost be

Joe 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?

Economics is primarily the study of

Positive economics differs from normative economics in that

The economic way of thinking stresses that

The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary's statement is a(n) economic statement, and the labor head's statement is a(n) economic statement.

Economic analysis assumes that

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

Applying the Basics: Special Topics in Economics

Filters

Exam 1: The Economic Approach

The expression, "There's no such thing as a free lunch," implies that

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

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

While waiting in line to buy two tacos at 80 cents each and a medium drink for 90 cents, Jordan notices that the restaurant has a value meal containing three tacos and a medium drink all for $3. For Jordan, the marginal cost of the third taco would be

"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This statement

Economists use the term ceteris paribus to indicate that

Adam Smith believed that if people were free to pursue their own interests,

If an airline company has several empty seats on a flight and the full price of an air ticket is $500 and the marginal cost per passenger is $100, then it will be profitable for the airline to

A popular video program, used to teach primary school children about economics, defines scarcity as "when you don't have enough of something." Evaluate this definition based on your understanding of the scarcity concept.

"If income were redistributed in favor of the poor, we would eliminate scarcity." The preceding statement is

For the typical student, taking an introductory course in economics should

In Latavia, cultural pressures cause voluntary donations to orphanages to be very large; in Slobovia, people make smaller donations. If the governments of both countries suddenly grant a tax break to those donating money to orphanages, the basic postulate of economics predicts that donations

Rational choice requires that opportunity cost be

Joe 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?

Economics is primarily the study of

Positive economics differs from normative economics in that

The economic way of thinking stresses that

Economic analysis assumes that

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

Applying the Basics: Special Topics in Economics

Filters