Question 1

Which of the following is often referred to as the basic postulate of economics?

Accepted Answer

A)  Individuals act only out of selfish motives. 
B)  Incentives matter--individuals respond in predictable ways to changes in personal costs and benefits. 
C)  The accuracy of the assumptions is the best test of an economic theory. 
D)  The value of a good is objective; it is equal to the cost of producing the good. 
A)  Individuals act only out of selfish motives. 
B)  Incentives matter--individuals respond in predictable ways to changes in personal costs and benefits. 
C)  The accuracy of the assumptions is the best test of an economic theory. 
D)  The value of a good is objective; it is equal to the cost of producing the good.

Question 2

Competitive behavior

Accepted Answer

A)  occurs as a reaction to scarcity. 
B)  occurs only in a market system. 
C)  occurs only when the government allocates goods and services. 
D)  always generates waste. 
A)  occurs as a reaction to scarcity. 
B)  occurs only in a market system. 
C)  occurs only when the government allocates goods and services. 
D)  always generates waste.

Question 3

The economic way of thinking stresses that

Accepted Answer

A)  greed is the primary motivation for human action. 
B)  only material goods lead to happiness. 
C)  an objective value can be attached to physical goods. 
D)  as the cost of an option increases, people will be less likely to choose that option. 
A)  greed is the primary motivation for human action. 
B)  only material goods lead to happiness. 
C)  an objective value can be attached to physical goods. 
D)  as the cost of an option increases, people will be less likely to choose that option.

Question 4

If people are self-interested, why does anyone give money to public radio?

Accepted Answer

Since people can listen to public radio

Question 5

Economic choice and competitive behavior are the result of

Accepted Answer

A)  scarcity. 
B)  poverty. 
C)  public ownership of resources. 
D)  private ownership of resources. 
A)  scarcity. 
B)  poverty. 
C)  public ownership of resources. 
D)  private ownership of resources.

Question 6

Which of the following is part of the economic way of thinking?

Accepted Answer

A)  The accuracy of the assumptions is the best test of an economic theory. 
B)  When an option becomes more expensive, people will be less likely to choose it. 
C)  The value of a good can be determined objectively by measuring the amount of labor required for its production. 
D)  All of the above. 
A)  The accuracy of the assumptions is the best test of an economic theory. 
B)  When an option becomes more expensive, people will be less likely to choose it. 
C)  The value of a good can be determined objectively by measuring the amount of labor required for its production. 
D)  All of the above.

Question 7

If economics is correct in its assumption that people are rational, why then would anyone choose to smoke cigarettes?

Accepted Answer

Even though the harmful effects of cigar

Question 8

Ralph wants to buy some milk and a box of cereal. If Ralph buys 2 quarts of milk at $1 per quart, the box of cereal costs 75 cents. If he buys 3 quarts of milk at $1 per quart, the box of cereal is free. For Ralph, the marginal cost of the third quart of milk is

Accepted Answer

A)  zero. 
B)  25 cents. 
C)  75 cents. 
D)  $1. 
A)  zero. 
B)  25 cents. 
C)  75 cents. 
D)  $1.

Question 9

When economists say goods are scarce, they mean

Accepted Answer

A)  consumers are too poor to afford the goods and services available. 
B)  consumers are unwilling to buy goods unless they have very low prices. 
C)  goods are generally freely available from nature in most countries. 
D)  the desire for goods and services exceeds our ability to produce them with the limited resources available. 
A)  consumers are too poor to afford the goods and services available. 
B)  consumers are unwilling to buy goods unless they have very low prices. 
C)  goods are generally freely available from nature in most countries. 
D)  the desire for goods and services exceeds our ability to produce them with the limited resources available.

Question 10

"The resources now going into the War on Terrorism and into improved airport security would save more lives if they were invested in medical research." This statement most clearly reflects which of the following?

Accepted Answer

A)  The best test of an economic theory is its ability to predict. 
B)  There is no such thing as a free lunch--the use of scarce resources always has an opportunity cost. 
C)  selfishness; if people were not selfish, we could have more of everything. 
D)  The value of goods can be determined objectively. 
A)  The best test of an economic theory is its ability to predict. 
B)  There is no such thing as a free lunch--the use of scarce resources always has an opportunity cost. 
C)  selfishness; if people were not selfish, we could have more of everything. 
D)  The value of goods can be determined objectively.

Question 11

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 12

All but one of the following are elements of the economic way of thinking. Which one is not part of the economic way of thinking?

Accepted Answer

A)  Incentives matter. 
B)  The value of goods can be determined objectively. 
C)  Economic thinking is marginal thinking. 
D)  Information is scarce. 
A)  Incentives matter. 
B)  The value of goods can be determined objectively. 
C)  Economic thinking is marginal thinking. 
D)  Information is scarce.

Question 13

The economic way of thinking stresses that

Accepted Answer

A)  changes in personal costs and benefits generally fail to exert much impact on behavior. 
B)  incentives matter--individuals respond in predictable ways to changes in personal costs and benefits. 
C)  if one individual gains from an economic activity, then someone else must lose and in the same proportion. 
D)  if a good is provided by the government, its production will not consume valuable scarce resources. 
A)  changes in personal costs and benefits generally fail to exert much impact on behavior. 
B)  incentives matter--individuals respond in predictable ways to changes in personal costs and benefits. 
C)  if one individual gains from an economic activity, then someone else must lose and in the same proportion. 
D)  if a good is provided by the government, its production will not consume valuable scarce resources.

Question 14

"There is no such thing as a free lunch." This statement best reflects the fact that

Accepted Answer

A)  consumers are unwilling to pay for a good unless it provides them with value. 
B)  an opportunity cost is always present when scarce resources are used to produce a good. 
C)  it generally requires enormous effort to search out the best place to eat lunch. 
D)  the value of a good to consumers will decrease as they have more of it. 
A)  consumers are unwilling to pay for a good unless it provides them with value. 
B)  an opportunity cost is always present when scarce resources are used to produce a good. 
C)  it generally requires enormous effort to search out the best place to eat lunch. 
D)  the value of a good to consumers will decrease as they have more of it.

Question 15

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 16

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 17

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 18

To abstract from reality in an economic model means that

Accepted Answer

A)  we include only a few of the essential aspects of reality. 
B)  the economic study surveys only a very limited period of time. 
C)  we include only those elements which support our hypothesis. 
D)  the model includes every aspect of the real world. 
E)  the model examines the actions of the consumers in the absence of producers and the government. 
A)  we include only a few of the essential aspects of reality. 
B)  the economic study surveys only a very limited period of time. 
C)  we include only those elements which support our hypothesis. 
D)  the model includes every aspect of the real world. 
E)  the model examines the actions of the consumers in the absence of producers and the government.

Question 19

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 20

The Latin phrase "ceteris paribus" means

Accepted Answer

A)  that one event causes another. 
B)  that one event is associated with, but not caused by, another. 
C)  that other potential causes are assumed to remain constant. 
D)  the way things should be. 
A)  that one event causes another. 
B)  that one event is associated with, but not caused by, another. 
C)  that other potential causes are assumed to remain constant. 
D)  the way things should be.

Which of the following is often referred to as the basic postulate of economics?

Competitive behavior

The economic way of thinking stresses that

If people are self-interested, why does anyone give money to public radio?

Economic choice and competitive behavior are the result of

Which of the following is part of the economic way of thinking?

If economics is correct in its assumption that people are rational, why then would anyone choose to smoke cigarettes?

Ralph wants to buy some milk and a box of cereal. If Ralph buys 2 quarts of milk at $1 per quart, the box of cereal costs 75 cents. If he buys 3 quarts of milk at $1 per quart, the box of cereal is free. For Ralph, the marginal cost of the third quart of milk is

When economists say goods are scarce, they mean

"The resources now going into the War on Terrorism and into improved airport security would save more lives if they were invested in medical research." This statement most clearly reflects which of the following?

A rational decision maker takes an action if and only if

All but one of the following are elements of the economic way of thinking. Which one is not part of the economic way of thinking?

The economic way of thinking stresses that

"There is no such thing as a free lunch." This statement best reflects the fact that

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

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

Criteria for rationing goods and resources must be established because of

To abstract from reality in an economic model means that

Which of the following is true?

The Latin phrase "ceteris paribus" means

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

Which of the following is often referred to as the basic postulate of economics?

Competitive behavior

The economic way of thinking stresses that

If people are self-interested, why does anyone give money to public radio?

Economic choice and competitive behavior are the result of

Which of the following is part of the economic way of thinking?

If economics is correct in its assumption that people are rational, why then would anyone choose to smoke cigarettes?

Ralph wants to buy some milk and a box of cereal. If Ralph buys 2 quarts of milk at $1 per quart, the box of cereal costs 75 cents. If he buys 3 quarts of milk at $1 per quart, the box of cereal is free. For Ralph, the marginal cost of the third quart of milk is

When economists say goods are scarce, they mean

"The resources now going into the War on Terrorism and into improved airport security would save more lives if they were invested in medical research." This statement most clearly reflects which of the following?

A rational decision maker takes an action if and only if

All but one of the following are elements of the economic way of thinking. Which one is not part of the economic way of thinking?

The economic way of thinking stresses that

"There is no such thing as a free lunch." This statement best reflects the fact that

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

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

Criteria for rationing goods and resources must be established because of

To abstract from reality in an economic model means that

Which of the following is true?

The Latin phrase "ceteris paribus" means

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