Question 1

Economists assume that individuals

Accepted Answer

A) behave in unpredictable ways. 
B) will never take actions to help others. 
C) prefer to live in a society that values fairness above all else. 
D) are rational and respond to incentives. 
A) behave in unpredictable ways. 
B) will never take actions to help others. 
C) prefer to live in a society that values fairness above all else. 
D) are rational and respond to incentives.

Question 2

The branch of economics which studies how households and firms interact in markets is called

Accepted Answer

A) macroeconomics. 
B) microeconomics. 
C) positive economics. 
D) normative economics. 
A) macroeconomics. 
B) microeconomics. 
C) positive economics. 
D) normative economics.

Question 3

________ increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production.

Accepted Answer

A) Competition 
B) Voluntary exchange 
C) Equity 
D) A centrally planned economy 
A) Competition 
B) Voluntary exchange 
C) Equity 
D) A centrally planned economy

Question 4

Political candidates often hold fundraisers by charging "per plate" for dinner.Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate.Does this transaction benefit both parties?

Accepted Answer

A) No, political candidates should never be allowed to overcharge for a fundraising dinner as that limits the number of people who can afford to attend. 
B) Yes, it was a voluntary exchange that benefited both parties. 
C) No, Wendy paid too much for four dinners. 
D) Yes, but only if the dinners served actually cost $1,000 each. 
A) No, political candidates should never be allowed to overcharge for a fundraising dinner as that limits the number of people who can afford to attend. 
B) Yes, it was a voluntary exchange that benefited both parties. 
C) No, Wendy paid too much for four dinners. 
D) Yes, but only if the dinners served actually cost $1,000 each.

Question 5

Allocative efficiency best explains ________, and productive efficiency best explains ________.

Accepted Answer

A) how something will be produced; when something will be produced 
B) when something will be produced; why something will be produced 
C) why something will be produced; what will be produced 
D) what will be produced; how something will be produced 
A) how something will be produced; when something will be produced 
B) when something will be produced; why something will be produced 
C) why something will be produced; what will be produced 
D) what will be produced; how something will be produced

Question 6

Jewelry manufacturers produce a range of products such as rings, necklaces, bracelets, and brooches.What fundamental economic question are they addressing by offering this range of items?

Accepted Answer

A) How to produce goods that consumers want? 
B) Why produce a variety of items? 
C) What to produce? 
D) Who to produce the items for? 
A) How to produce goods that consumers want? 
B) Why produce a variety of items? 
C) What to produce? 
D) Who to produce the items for?

Question 7

Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish?

Accepted Answer

A) Failure to do this could reduce the efficiency of the system by producing some goods and services that are not as highly valued as others. 
B) Failure to do this could lead to an inequitable allocation of goods and services produced. 
C) Failure to do this will lead to drastic shortages of all goods and services. 
D) Failure to do this could reduce efficiency and lead to an inequitable allocation of output. 
A) Failure to do this could reduce the efficiency of the system by producing some goods and services that are not as highly valued as others. 
B) Failure to do this could lead to an inequitable allocation of goods and services produced. 
C) Failure to do this will lead to drastic shortages of all goods and services. 
D) Failure to do this could reduce efficiency and lead to an inequitable allocation of output.

Question 8

Which of the following is a problem inherent in centrally planned economies?

Accepted Answer

A) Households and firms make poor decisions in choosing how resources are allocated. 
B) There is too little production of low-cost, high-quality goods and services. 
C) Production managers are more concerned with satisfying consumer wants than with satisfying government's orders. 
D) Exports tend to exceed imports. 
A) Households and firms make poor decisions in choosing how resources are allocated. 
B) There is too little production of low-cost, high-quality goods and services. 
C) Production managers are more concerned with satisfying consumer wants than with satisfying government's orders. 
D) Exports tend to exceed imports.

Question 9

Economists reason that the optimal decision is to continue any activity up to the point where the

Accepted Answer

A) marginal benefit is zero. 
B) marginal benefit is greater than the marginal cost. 
C) marginal cost is zero. 
D) marginal benefit equals the marginal cost. 
A) marginal benefit is zero. 
B) marginal benefit is greater than the marginal cost. 
C) marginal cost is zero. 
D) marginal benefit equals the marginal cost.

Question 10

What is a marginal cost?

Accepted Answer

Marginal cost is the

Question 11

List the four main factors of production.

Accepted Answer

The four main factors of produ

Question 12

Which of the following statements is false?

Accepted Answer

A) An inverse relationship has a negative slope value. 
B) A direct relationship has a positive slope value. 
C) A curved line has slope values that change at every point. 
D) A straight line has a slope of zero. 
A) An inverse relationship has a negative slope value. 
B) A direct relationship has a positive slope value. 
C) A curved line has slope values that change at every point. 
D) A straight line has a slope of zero.

Question 13

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum.What is the opportunity cost of his decision?

Accepted Answer

A) 0 since he will no longer be earning a salary 
B) depends on the "going rate" of museum employees 
C) at least $80,000 
D) the value he attributes to the joy of working at a museum 
A) 0 since he will no longer be earning a salary 
B) depends on the "going rate" of museum employees 
C) at least $80,000 
D) the value he attributes to the joy of working at a museum

Question 14

If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the percentage change in price?

Accepted Answer

A) 13 percent 
B) 30 percent 
C) 75 percent 
D) 77 percent 
A) 13 percent 
B) 30 percent 
C) 75 percent 
D) 77 percent

Question 15

Households ________ factors of production and ________ goods and services.

Accepted Answer

A) supply; demand 
B) supply; supply 
C) demand; supply 
D) demand; demand 
A) supply; demand 
B) supply; supply 
C) demand; supply 
D) demand; demand

Question 16

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that

Accepted Answer

A) people with health insurance are less likely to be overweight than people without health insurance. 
B) people with health insurance are more likely to be overweight than people without health insurance. 
C) people with health insurance are equally likely to be overweight as people without health insurance. 
D) there is no correlation between having health insurance and being overweight. 
A) people with health insurance are less likely to be overweight than people without health insurance. 
B) people with health insurance are more likely to be overweight than people without health insurance. 
C) people with health insurance are equally likely to be overweight as people without health insurance. 
D) there is no correlation between having health insurance and being overweight.

Question 17

Billie's Billiard Barn has seen its business slow down ever since Patti's Ping Pong Parlour opened up across the street.Since the opening of Patti's Ping Pong Parlour, the opportunity cost of shooting pool at Billie's Billiard Barn has ________ for Billie's customers who also like to play ping pong.

Accepted Answer

A) decreased 
B) increased 
C) fallen to zero 
D) not changed 
A) decreased 
B) increased 
C) fallen to zero 
D) not changed

Question 18

DeShawn's Detailing is a service that details cars at the customers' homes or places of work.DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service.For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package.Should DeShawn continue to offer the engine detailing service?

Accepted Answer

A) Yes, he still makes a profit by selling the engine detailing service with the basic detailing package. 
B) Yes, but only if he raises the price of the basic detailing package. 
C) No, his marginal benefit is less than his marginal cost. 
D) More information is needed for DeShawn to make this decision. 
A) Yes, he still makes a profit by selling the engine detailing service with the basic detailing package. 
B) Yes, but only if he raises the price of the basic detailing package. 
C) No, his marginal benefit is less than his marginal cost. 
D) More information is needed for DeShawn to make this decision.

Question 19

Which of the following statements about scarcity is true?

Accepted Answer

A) Scarcity refers to the situation in which unlimited wants exceed limited resources. 
B) Scarcity is not a problem for the wealthy. 
C) Scarcity is only a problem when a country has too large a population. 
D) Scarcity only arises when there is a wide disparity in income distribution. 
A) Scarcity refers to the situation in which unlimited wants exceed limited resources. 
B) Scarcity is not a problem for the wealthy. 
C) Scarcity is only a problem when a country has too large a population. 
D) Scarcity only arises when there is a wide disparity in income distribution.

Question 20

What is a firm? What other terms do economists use interchangeably with the term "firm"?

Accepted Answer

A firm is an organization that

Economists assume that individuals

The branch of economics which studies how households and firms interact in markets is called

________ increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production.

Political candidates often hold fundraisers by charging "per plate" for dinner.Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate.Does this transaction benefit both parties?

Allocative efficiency best explains , and productive efficiency best explains .

Jewelry manufacturers produce a range of products such as rings, necklaces, bracelets, and brooches.What fundamental economic question are they addressing by offering this range of items?

Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish?

Which of the following is a problem inherent in centrally planned economies?

Economists reason that the optimal decision is to continue any activity up to the point where the

What is a marginal cost?

List the four main factors of production.

Which of the following statements is false?

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum.What is the opportunity cost of his decision?

If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the percentage change in price?

Households factors of production and goods and services.

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that

Billie's Billiard Barn has seen its business slow down ever since Patti's Ping Pong Parlour opened up across the street.Since the opening of Patti's Ping Pong Parlour, the opportunity cost of shooting pool at Billie's Billiard Barn has ________ for Billie's customers who also like to play ping pong.

Which of the following statements about scarcity is true?

What is a firm? What other terms do economists use interchangeably with the term "firm"?

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 1: Economics: Foundations and Models

Economists assume that individuals

The branch of economics which studies how households and firms interact in markets is called

________ increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production.

Political candidates often hold fundraisers by charging "per plate" for dinner.Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate.Does this transaction benefit both parties?

Allocative efficiency best explains ________, and productive efficiency best explains ________.

Jewelry manufacturers produce a range of products such as rings, necklaces, bracelets, and brooches.What fundamental economic question are they addressing by offering this range of items?

Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish?

Which of the following is a problem inherent in centrally planned economies?

Economists reason that the optimal decision is to continue any activity up to the point where the

What is a marginal cost?

List the four main factors of production.

Which of the following statements is false?

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum.What is the opportunity cost of his decision?

If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the percentage change in price?

Households ________ factors of production and ________ goods and services.

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that

Which of the following statements about scarcity is true?

What is a firm? What other terms do economists use interchangeably with the term "firm"?

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Allocative efficiency best explains , and productive efficiency best explains .

Households factors of production and goods and services.