Question 1

Economic choice and competitive behavior are the result of

Accepted Answer

A) basic human greed. 
B) poverty. 
C) private ownership of resources. 
D) scarcity. 
A) basic human greed. 
B) poverty. 
C) private ownership of resources. 
D) scarcity.

Question 2

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

Accepted Answer

On the surface,we might conclude that Sa

Question 3

Which of the following is not consistent with the basic postulate of economics that incentives matter?

Accepted Answer

A) Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. 
B) A politician votes against a proposal because most of his constituents oppose it. 
C) People drive less because of higher gas prices. 
D) People buy more milk in response to a reduction in the price of milk. 
A) Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. 
B) A politician votes against a proposal because most of his constituents oppose it. 
C) People drive less because of higher gas prices. 
D) People buy more milk in response to a reduction in the price of milk.

Question 4

A student noted that the football team won by a larger margin when the third-string played more minutes.Therefore,he recommended that the third-stringers become the first team.His conclusion was probably erroneous because he

Accepted Answer

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

Question 5

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 6

The benefit (or satisfaction)that an individual expects to derive from an activity is called

Accepted Answer

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

Question 7

Which of the following is a normative economic statement?

Accepted Answer

A) If we doubled the size of welfare payments,we would reduce the number of homeless persons. 
B) Companies should be concerned with more than just their profits. 
C) An increase in spending on airport security will reduce the number of hijackings. 
D) If social security were to be privatized,workers would earn a higher rate of return on their retirement contributions. 
A) If we doubled the size of welfare payments,we would reduce the number of homeless persons. 
B) Companies should be concerned with more than just their profits. 
C) An increase in spending on airport security will reduce the number of hijackings. 
D) If social security were to be privatized,workers would earn a higher rate of return on their retirement contributions.

Question 8

Economic theory

Accepted Answer

A) is a set of definitions,postulates,and principles assembled in a manner that helps make cause-and-effect relationships clear in economics. 
B) is like a guidebook in that it points out what to look for. 
C) provides economists with a common language and way of thinking about how the world works. 
D) is all of the above. 
A) is a set of definitions,postulates,and principles assembled in a manner that helps make cause-and-effect relationships clear in economics. 
B) is like a guidebook in that it points out what to look for. 
C) provides economists with a common language and way of thinking about how the world works. 
D) is all of the above.

Question 9

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 10

Which of the following is true?

Accepted Answer

A) Human choice is generally not influenced by changes in incentives. 
B) What is true for the individual must be true for the group as a whole. 
C) Using scarce resources to meet one need reduces our ability to meet needs in other areas. 
D) The economic way of thinking stresses that good intentions usually lead to sound economic policy. 
A) Human choice is generally not influenced by changes in incentives. 
B) What is true for the individual must be true for the group as a whole. 
C) Using scarce resources to meet one need reduces our ability to meet needs in other areas. 
D) The economic way of thinking stresses that good intentions usually lead to sound economic policy.

Question 11

Your professor loves her work,teaching economics.She has been offered other positions in the corporate world that would increase her income by 25 percent,but she has decided to continue working as a professor.Her decision would not change unless

Accepted Answer

A) the marginal cost of teaching increased. 
B) the marginal benefit of teaching increased. 
C) the marginal cost of teaching decreased. 
D) the marginal benefit of a corporate job decreased. 
A) the marginal cost of teaching increased. 
B) the marginal benefit of teaching increased. 
C) the marginal cost of teaching decreased. 
D) the marginal benefit of a corporate job decreased.

Question 12

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

Accepted Answer

A) 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. 
B) Doris,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) Brandon,a drug user,chooses to buy his cocaine from Pablo,because Pablo's cocaine is as good as the cocaine from other dealers,but Pablo has lower prices. 
D) All of the above are examples of rational choices. 
A) 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. 
B) Doris,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) Brandon,a drug user,chooses to buy his cocaine from Pablo,because Pablo's cocaine is as good as the cocaine from other dealers,but Pablo has lower prices. 
D) All of the above are examples of rational choices.

Question 13

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 14

Joe and Ed go to a diner that sells hamburgers for $5 and hot dogs for $3.They agree to split the lunch bill evenly.Ed chooses a hot dog.The marginal cost to Joe then of ordering a hamburger instead of a hot dog is

Accepted Answer

A) $1. 
B) $2. 
C) $2.50. 
D) $3. 
A) $1. 
B) $2. 
C) $2.50. 
D) $3.

Question 15

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 16

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 17

Which of the following is an example of a normative economic statement?

Accepted Answer

A) The inflation rate in the United States decreased from 4 percent last year to 3 percent this year as a result of lower energy prices. 
B) The economy grew at an annual rate of 5 percent during the first quarter of this year. 
C) If two automobile companies merge,it is likely that the price of automobiles will rise. 
D) An increase in international trade benefits some workers but hurts others. 
E) The minimum wage should be increased so that low income workers can afford to keep up with the cost of living. 
A) The inflation rate in the United States decreased from 4 percent last year to 3 percent this year as a result of lower energy prices. 
B) The economy grew at an annual rate of 5 percent during the first quarter of this year. 
C) If two automobile companies merge,it is likely that the price of automobiles will rise. 
D) An increase in international trade benefits some workers but hurts others. 
E) The minimum wage should be increased so that low income workers can afford to keep up with the cost of living.

Question 18

Economic analysis is based on the premise that

Accepted Answer

A) people act only out of selfish motives. 
B) people are always fully informed when making choices. 
C) changes in the personal benefits or costs of an action influence behavior in a predictable way. 
D) most human behavior is unpredictable. 
A) people act only out of selfish motives. 
B) people are always fully informed when making choices. 
C) changes in the personal benefits or costs of an action influence behavior in a predictable way. 
D) most human behavior is unpredictable.

Question 19

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 20

Harold,a delivery man,washes and irons his own shirts.Sarah,his boss,sends her clothes to a laundry.Which is the most plausible economic explanation for this difference?

Accepted Answer

A) Harold must enjoy ironing more than Sarah does. 
B) Harold must be better at ironing than Sarah is. 
C) The opportunity cost of ironing is greater for Harold. 
D) Sarah has a higher opportunity cost of laundering her clothes than Harold does. 
A) Harold must enjoy ironing more than Sarah does. 
B) Harold must be better at ironing than Sarah is. 
C) The opportunity cost of ironing is greater for Harold. 
D) Sarah has a higher opportunity cost of laundering her clothes than Harold does.

Exam 1: The Economic Approach

Economic choice and competitive behavior are the result of

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

Which of the following is not consistent with the basic postulate of economics that incentives matter?

A student noted that the football team won by a larger margin when the third-string played more minutes.Therefore,he recommended that the third-stringers become the first team.His conclusion was probably erroneous because he

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

The benefit (or satisfaction)that an individual expects to derive from an activity is called

Which of the following is a normative economic statement?

Economic theory

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

Which of the following is true?

Your professor loves her work,teaching economics.She has been offered other positions in the corporate world that would increase her income by 25 percent,but she has decided to continue working as a professor.Her decision would not change unless

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

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

Joe and Ed go to a diner that sells hamburgers for $5 and hot dogs for $3.They agree to split the lunch bill evenly.Ed chooses a hot dog.The marginal cost to Joe then of ordering a hamburger instead of a hot dog is

Economics is primarily the study of

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

Which of the following is an example of a normative economic statement?

Economic analysis is based on the premise that

Criteria for rationing goods and resources must be established because of

Harold,a delivery man,washes and irons his own shirts.Sarah,his boss,sends her clothes to a laundry.Which is the most plausible economic explanation for this difference?

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

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

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney 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

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-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

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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