Question 1

Which of the following is true of resources?

Accepted Answer

A)  Resources are inputs used to produce goods and services. 
B)  Human resources reflect the skills and productive knowledge of human beings. 
C)  With the passage of time, investment activities can increase the availability of resources. 
D)  All of the above are true. 
A)  Resources are inputs used to produce goods and services. 
B)  Human resources reflect the skills and productive knowledge of human beings. 
C)  With the passage of time, investment activities can increase the availability of resources. 
D)  All of the above are true.

Question 2

The fallacy of composition is the incorrect view that

Accepted Answer

A)  everything else is always held constant when a change occurs. 
B)  a small change in an economic variable will have unrecognizable but significant consequences on the economy. 
C)  when two events are associated, the one observed first must have caused the second. 
D)  if something is true for an individual, then it must also be true for the group. 
A)  everything else is always held constant when a change occurs. 
B)  a small change in an economic variable will have unrecognizable but significant consequences on the economy. 
C)  when two events are associated, the one observed first must have caused the second. 
D)  if something is true for an individual, then it must also be true for the group.

Question 3

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

Accepted Answer

A)  is correct only when the economy is in a recession 
B)  has mistakenly inferred causation from observed correlation 
C)  has ignored secondary effects 
D)  has committed the fallacy of composition 
E)  is correct only when the United States enjoys economic growth 
A)  is correct only when the economy is in a recession 
B)  has mistakenly inferred causation from observed correlation 
C)  has ignored secondary effects 
D)  has committed the fallacy of composition 
E)  is correct only when the United States enjoys economic growth

Question 4

"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 5

Every economy must ration goods in some way because of

Accepted Answer

A)  overpopulation. 
B)  poorly-performing markets. 
C)  the income gap between rich and poor. 
D)  scarcity. 
A)  overpopulation. 
B)  poorly-performing markets. 
C)  the income gap between rich and poor. 
D)  scarcity.

Question 6

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 7

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 8

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 9

While waiting in line to buy two tacos at 80 cents each and a medium drink for 90 cents, Kayla notices that the restaurant has a value meal containing three tacos and a medium drink all for $3. For Kayla, 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 10

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 11

The opportunity cost of going to college is

Accepted Answer

A)  the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses. 
B)  the value of the best opportunity a student gives up to attend college. 
C)  zero for students who are fortunate enough to have all of their college expenses paid by someone else. 
D)  zero, since a college education will allow a student to earn a larger income after graduation. 
A)  the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses. 
B)  the value of the best opportunity a student gives up to attend college. 
C)  zero for students who are fortunate enough to have all of their college expenses paid by someone else. 
D)  zero, since a college education will allow a student to earn a larger income after graduation.

Question 12

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

Accepted Answer

A)  is correct only when the economy is in a recession 
B)  has mistakenly inferred causation from observed correlation 
C)  has ignored secondary effects 
D)  has committed the fallacy of composition 
E)  is correct only when the United States enjoys economic growth 
A)  is correct only when the economy is in a recession 
B)  has mistakenly inferred causation from observed correlation 
C)  has ignored secondary effects 
D)  has committed the fallacy of composition 
E)  is correct only when the United States enjoys economic growth

Question 13

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 14

Which of the following could be considered to be a secondary effect caused by making drugs such as cocaine illegal?

Accepted Answer

A)  The higher prices that result from making them illegal results in more property theft by users to afford the drugs. 
B)  The usage of police and law enforcement resources to enforce drug laws leads to lower enforcement (and thus a higher amount) of other crimes. 
C)  Without the ability to use the legal system to enforce contracts, violence often results when one party to a drug deal does not live up to their end of the bargain, thus the amount of violence increases by making drugs illegal. 
D)  All of the above would be considered secondary effects of making drugs illegal. 
A)  The higher prices that result from making them illegal results in more property theft by users to afford the drugs. 
B)  The usage of police and law enforcement resources to enforce drug laws leads to lower enforcement (and thus a higher amount) of other crimes. 
C)  Without the ability to use the legal system to enforce contracts, violence often results when one party to a drug deal does not live up to their end of the bargain, thus the amount of violence increases by making drugs illegal. 
D)  All of the above would be considered secondary effects of making drugs illegal.

Question 15

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 16

Isabella wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Isabella, the marginal cost of the tenth gallon of gasoline is

Accepted Answer

A)  zero. 
B)  50 cents. 
C)  $1. 
D)  $1.50. 
A)  zero. 
B)  50 cents. 
C)  $1. 
D)  $1.50.

Question 17

During a war, governments will sometimes draft people, most of whom are presently employed, into the army. An economist, computing the real cost of the war, would be sure to include which of the following items?

Accepted Answer

A)  The value of the civilian goods no longer produced by the new soldiers. 
B)  The cost of feeding and clothing the new soldiers. 
C)  The dollar cost of the payroll. 
D)  The higher prices of civilian goods due to wartime shortages. 
E)  The cost of transporting the soldiers to combat. 
A)  The value of the civilian goods no longer produced by the new soldiers. 
B)  The cost of feeding and clothing the new soldiers. 
C)  The dollar cost of the payroll. 
D)  The higher prices of civilian goods due to wartime shortages. 
E)  The cost of transporting the soldiers to combat.

Question 18

The opportunity cost of an action is

Accepted Answer

A)  the monetary payment the action required. 
B)  the total time spent by all parties in carrying out the action. 
C)  the value of the best opportunity that must be sacrificed in order to take the action. 
D)  the cost of all alternative actions that could have been taken, added together. 
A)  the monetary payment the action required. 
B)  the total time spent by all parties in carrying out the action. 
C)  the value of the best opportunity that must be sacrificed in order to take the action. 
D)  the cost of all alternative actions that could have been taken, added together.

Question 19

The fallacy of composition is the fallacious view that

Accepted Answer

A)  economic activity will benefit everyone. 
B)  what is true for the individual will also be true for the group. 
C)  it is possible for the whole to be greater than the sum of the individual parts. 
D)  association does not necessarily indicate causation. 
A)  economic activity will benefit everyone. 
B)  what is true for the individual will also be true for the group. 
C)  it is possible for the whole to be greater than the sum of the individual parts. 
D)  association does not necessarily indicate causation.

Question 20

The fallacy of composition is the incorrect view that

Accepted Answer

A)  everything else is always held constant when a change occurs. 
B)  a small change in an economic variable will have unrecognizable but significant consequences on the economy. 
C)  when two events are associated, the one observed first must have caused the second. 
D)  if something is true for an individual, then it must also be true for the group. 
A)  everything else is always held constant when a change occurs. 
B)  a small change in an economic variable will have unrecognizable but significant consequences on the economy. 
C)  when two events are associated, the one observed first must have caused the second. 
D)  if something is true for an individual, then it must also be true for the group.

Which of the following is true of resources?

The fallacy of composition is the incorrect view that

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

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

Every economy must ration goods in some way because of

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

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

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

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

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

The opportunity cost of going to college is

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

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

Which of the following could be considered to be a secondary effect caused by making drugs such as cocaine illegal?

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

Isabella wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Isabella, the marginal cost of the tenth gallon of gasoline is

During a war, governments will sometimes draft people, most of whom are presently employed, into the army. An economist, computing the real cost of the war, would be sure to include which of the following items?

The opportunity cost of an action is

The fallacy of composition is the fallacious view that

The fallacy of composition is the incorrect view 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

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

Special Topics

Filters

Exam 1: The Economic Approach

Which of the following is true of resources?

The fallacy of composition is the incorrect view that

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

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

Every economy must ration goods in some way because of

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

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

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

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

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

The opportunity cost of going to college is

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

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

Which of the following could be considered to be a secondary effect caused by making drugs such as cocaine illegal?

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

Isabella wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Isabella, the marginal cost of the tenth gallon of gasoline is

During a war, governments will sometimes draft people, most of whom are presently employed, into the army. An economist, computing the real cost of the war, would be sure to include which of the following items?

The opportunity cost of an action is

The fallacy of composition is the fallacious view that

The fallacy of composition is the incorrect view 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

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

Special Topics

Filters