Question 1

Refer to the accompanying table below. The marginal cost of the 4ᵗʰ unit of activity is:

Accepted Answer

A) $5 
B) $6 
C) $8 
D) $10 
A) $5 
B) $6 
C) $8 
D) $10

Question 2

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:

Accepted Answer

A) not an economic problem because neither activity costs money. 
B) not an economic problem because it's an hour that Chris has no matter what he does. 
C) an economic problem because the tuition Chris pays covers the cost of both the gym and the library. 
D) an economic problem because Chris has only one hour, and engaging in one activity means giving up the other. 
A) not an economic problem because neither activity costs money. 
B) not an economic problem because it's an hour that Chris has no matter what he does. 
C) an economic problem because the tuition Chris pays covers the cost of both the gym and the library. 
D) an economic problem because Chris has only one hour, and engaging in one activity means giving up the other.

Question 3

Economics is best defined as the study of:

Accepted Answer

A) the financial concerns of businesses and individuals. 
B) the role of government in limiting the choices people make. 
C) choice in the face of limited resources. 
D) whether we will have enough resources in the future. 
A) the financial concerns of businesses and individuals. 
B) the role of government in limiting the choices people make. 
C) choice in the face of limited resources. 
D) whether we will have enough resources in the future.

Question 4

The extra benefit that results from carrying out one additional unit of an activity is the ________ of the activity.

Accepted Answer

A) marginal benefit 
B) total benefit 
C) average benefit 
D) economic benefit 
A) marginal benefit 
B) total benefit 
C) average benefit 
D) economic benefit

Question 5

Economics is best defined as the study of:

Accepted Answer

A) inflation, interest rates and the stock market. 
B) supply and demand. 
C) how people make choices in the face of scarcity and the implications of those choices for society as a whole. 
D) the financial concerns of businesses and individuals. 
A) inflation, interest rates and the stock market. 
B) supply and demand. 
C) how people make choices in the face of scarcity and the implications of those choices for society as a whole. 
D) the financial concerns of businesses and individuals.

Question 6

A study that deals with the salaries of university professors would be considered:

Accepted Answer

A) macroeconomics 
B) microeconomics 
C) economic naturalism 
D) real economics 
A) macroeconomics 
B) microeconomics 
C) economic naturalism 
D) real economics

Question 7

Normative economic principles are concerned with how people ________ make decisions while positive economic principles are concerned with how people ________ make decisions.

Accepted Answer

A) do; should 
B) should; do 
C) in power; in ordinary life 
D) in ordinary life; in power 
A) do; should 
B) should; do 
C) in power; in ordinary life 
D) in ordinary life; in power

Question 8

You paid $35 for a ticket (which is non-refundable)to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. Should you go to the concert instead of working Saturday?

Accepted Answer

A) Yes, the benefit of going to the concert is more than the cost. 
B) No, the benefit of going to the concert is less than the cost. 
C) Yes, the benefit of going to the concert is equal to the cost. 
D) No, because there are no benefits of going to the concert. 
A) Yes, the benefit of going to the concert is more than the cost. 
B) No, the benefit of going to the concert is less than the cost. 
C) Yes, the benefit of going to the concert is equal to the cost. 
D) No, because there are no benefits of going to the concert.

Question 9

You want to buy a TV that regularly costs $250. You can either buy the TV from a nearby store or from a store that's downtown. Relative to going to the nearby store, driving downtown involves additional time and gas. The downtown store, however, has a 10 percent off sale this week. Last week you drove downtown to save $20 on some concert tickets, a 15 percent savings. Should you drive downtown to buy the TV?

Accepted Answer

A) Yes, because you will save 10 percent, which is better than nothing. 
B) No, because you will save more than $20. 
C) Yes, because you will save more than $20. 
D) No, because you will only save 10 percent, which is less than 15 percent. 
A) Yes, because you will save 10 percent, which is better than nothing. 
B) No, because you will save more than $20. 
C) Yes, because you will save more than $20. 
D) No, because you will only save 10 percent, which is less than 15 percent.

Question 10

The Cost-Benefit Principle indicates that an action should be taken if:

Accepted Answer

A) its total benefits exceed its total costs. 
B) its average benefits exceed its average costs. 
C) its net benefit (benefit minus cost)is zero. 
D) its extra benefit is greater than or equal to its extra cost. 
A) its total benefits exceed its total costs. 
B) its average benefits exceed its average costs. 
C) its net benefit (benefit minus cost)is zero. 
D) its extra benefit is greater than or equal to its extra cost.

Question 11

The cost-benefit model used by economists is:

Accepted Answer

A) unrealistic because it is too detailed and specific to apply to most situations. 
B) unrealistic because everyone can think of times when he or she violated the principle. 
C) useful because everyone follows it all of the time. 
D) useful because most people follow it most of the time. 
A) unrealistic because it is too detailed and specific to apply to most situations. 
B) unrealistic because everyone can think of times when he or she violated the principle. 
C) useful because everyone follows it all of the time. 
D) useful because most people follow it most of the time.

Question 12

If a person takes an action if, and only if, the extra benefits from taking that action are at least as great as the extra costs, then that person is:

Accepted Answer

A) not following the Cost-Benefit Principle. 
B) following the Scarcity Principle. 
C) following the Cost-Benefit Principle. 
D) not rational. 
A) not following the Cost-Benefit Principle. 
B) following the Scarcity Principle. 
C) following the Cost-Benefit Principle. 
D) not rational.

Question 13

A firm pays Pam $40 per hour to assemble personal computers. Each day, Pam can assemble 4 computers if she works 1 hour, 7 computers if she works 2 hours, 9 computers if she works 3 hours, and 10 computers if she works 4 hours. Pam cannot work more than 4 hours day. Each computer consists of a motherboard, a hard drive, a case, a monitor, a keyboard, and a mouse. The total cost of these parts is $600 per computer. What is the marginal cost of producing the computers that Pam can assemble during her 2ⁿᵈ hour of work?

Accepted Answer

A) $1,800 
B) $1,840 
C) $4,200 
D) $4,280 
A) $1,800 
B) $1,840 
C) $4,200 
D) $4,280

Question 14

Which of the following would not be studied in microeconomics?

Accepted Answer

A) How individual firms decide how much to produce. 
B) Whether to study or watch TV tonight. 
C) How an early freeze in California will affect the price of fruit. 
D) Whether the federal budget should be balanced. 
A) How individual firms decide how much to produce. 
B) Whether to study or watch TV tonight. 
C) How an early freeze in California will affect the price of fruit. 
D) Whether the federal budget should be balanced.

Question 15

Dean should play golf instead of preparing for tomorrow's exam in economics if:

Accepted Answer

A) he is irrational. 
B) the benefit of golfing is greater than the benefit of studying. 
C) the economic surplus from playing golf is greater than the economic surplus from studying. 
D) Dean can play golf for free. 
A) he is irrational. 
B) the benefit of golfing is greater than the benefit of studying. 
C) the economic surplus from playing golf is greater than the economic surplus from studying. 
D) Dean can play golf for free.

Question 16

According to the Cost-Benefit Principle, you should go see the latest Star Wars movie with your friends this weekend if:

Accepted Answer

A) the extra benefits of seeing the movie are greater than the extra costs of seeing the movie. 
B) you really like Star Wars. 
C) you can afford to go to the movies. 
D) the average benefit you get from going to the movies is greater than the average cost of a ticket. 
A) the extra benefits of seeing the movie are greater than the extra costs of seeing the movie. 
B) you really like Star Wars. 
C) you can afford to go to the movies. 
D) the average benefit you get from going to the movies is greater than the average cost of a ticket.

Question 17

Economists use abstract models because:

Accepted Answer

A) every economic situation is unique, so it is impossible to make generalizations. 
B) every economic situation is essentially the same, so specific details are unnecessary. 
C) they are useful for describing general patterns of behavior. 
D) computers have allowed economists to develop abstract models. 
A) every economic situation is unique, so it is impossible to make generalizations. 
B) every economic situation is essentially the same, so specific details are unnecessary. 
C) they are useful for describing general patterns of behavior. 
D) computers have allowed economists to develop abstract models.

Question 18

You paid $35 for a ticket (which is non-refundable)to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. What is your opportunity cost of going to work on Saturday?

Accepted Answer

A) $0 
B) $9 
C) $35 
D) $36 
A) $0 
B) $9 
C) $35 
D) $36

Question 19

By convention, there are two major divisions of economics, called:

Accepted Answer

A) marginal benefit and marginal cost. 
B) reservation price and opportunity cost. 
C) microeconomics and macroeconomics. 
D) rational economics and irrational economics. 
A) marginal benefit and marginal cost. 
B) reservation price and opportunity cost. 
C) microeconomics and macroeconomics. 
D) rational economics and irrational economics.

Question 20

You have two options for how to spend the afternoon. You can either go see a movie with your roommate or work as a tutor for the Math Department. From experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. If you spend the afternoon working as a math tutor, you will get paid $45. On a typical day, you wouldn't be willing to spend the afternoon working as a math tutor for less than $35. Should you go see a movie or work as a math tutor?

Accepted Answer

A) You should work as a math tutor. 
B) You should go to the movies. 
C) You should do neither. 
D) Both options are equally good. 
A) You should work as a math tutor. 
B) You should go to the movies. 
C) You should do neither. 
D) Both options are equally good.

Exam 1: Thinking Like an Economist

Refer to the accompanying table below. The marginal cost of the 4ᵗʰ unit of activity is:

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:

Economics is best defined as the study of:

The extra benefit that results from carrying out one additional unit of an activity is the ________ of the activity.

Economics is best defined as the study of:

A study that deals with the salaries of university professors would be considered:

Normative economic principles are concerned with how people ________ make decisions while positive economic principles are concerned with how people ________ make decisions.

The Cost-Benefit Principle indicates that an action should be taken if:

The cost-benefit model used by economists is:

If a person takes an action if, and only if, the extra benefits from taking that action are at least as great as the extra costs, then that person is:

Which of the following would not be studied in microeconomics?

Dean should play golf instead of preparing for tomorrow's exam in economics if:

According to the Cost-Benefit Principle, you should go see the latest Star Wars movie with your friends this weekend if:

Economists use abstract models because:

By convention, there are two major divisions of economics, called:

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

Normative economic principles are concerned with how people make decisions while positive economic principles are concerned with how people make decisions.