Question 1

In a market system,which of the following is a symptom of market failure?

Accepted Answer

A)  competition 
B)  falling prices 
C)  scarcity of resources 
D)  air pollution 
A)  competition 
B)  falling prices 
C)  scarcity of resources 
D)  air pollution

Question 2

An airline decides to sell 5 unoccupied seats on a flight from California to Chicago at $300 each,which is less than its average cost per ticket of $450 each.Which of the following might have prompted this decision to sell tickets below cost?

Accepted Answer

A)  total costs 
B)  average costs 
C)  marginal costs 
D)  traceable costs 
A)  total costs 
B)  average costs 
C)  marginal costs 
D)  traceable costs

Question 3

The opportunity cost of an item is:

Accepted Answer

A)  greater during periods of inflation and lower during periods of deflation. 
B)  the highest valued alternative you give up to get that item. 
C)  the value of all available alternatives you sacrifice to get that item. 
D)  always equal to the dollar value of the item. 
A)  greater during periods of inflation and lower during periods of deflation. 
B)  the highest valued alternative you give up to get that item. 
C)  the value of all available alternatives you sacrifice to get that item. 
D)  always equal to the dollar value of the item.

Question 4

Economic resources are also known as:

Accepted Answer

A)  elements. 
B)  financial capital. 
C)  factors of production. 
D)  building blocks. 
A)  elements. 
B)  financial capital. 
C)  factors of production. 
D)  building blocks.

Question 5

Marginal analysis involves:

Accepted Answer

A)  comparing the total benefits of all actions to the total costs incurred as a result of those actions. 
B)  abstract thinking, which is never actually utilized by consumers when making purchasing decisions. 
C)  holding all other variables constant when isolating the relationship between two variables. 
D)  comparing the additional benefit from an action to the additional cost. 
A)  comparing the total benefits of all actions to the total costs incurred as a result of those actions. 
B)  abstract thinking, which is never actually utilized by consumers when making purchasing decisions. 
C)  holding all other variables constant when isolating the relationship between two variables. 
D)  comparing the additional benefit from an action to the additional cost.

Question 6

Which of the following is not a resource?

Accepted Answer

A)  capital 
B)  entrepreneurship 
C)  legal institutions 
D)  labor 
A)  capital 
B)  entrepreneurship 
C)  legal institutions 
D)  labor

Question 7

Scarcity implies that:

Accepted Answer

A)  consumers are too poor to afford the goods and services available. 
B)  at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce. 
C)  it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. 
D)  consumers would be willing to purchase the same quantity of a good at a higher price. 
A)  consumers are too poor to afford the goods and services available. 
B)  at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce. 
C)  it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. 
D)  consumers would be willing to purchase the same quantity of a good at a higher price.

Question 8

Airlines that restrict the use of frequent flyer miles during holiday periods likely do so because:

Accepted Answer

A)  the opportunity cost to airlines of filling seats with frequent flyers is lower at these times. 
B)  the opportunity cost to airlines of filling seats with frequent flyers is higher at these times. 
C)  passengers have more transportation alternatives available to them at these times. 
D)  airlines want to protect their most loyal customers from the discomfort of overcrowded airplanes. 
A)  the opportunity cost to airlines of filling seats with frequent flyers is lower at these times. 
B)  the opportunity cost to airlines of filling seats with frequent flyers is higher at these times. 
C)  passengers have more transportation alternatives available to them at these times. 
D)  airlines want to protect their most loyal customers from the discomfort of overcrowded airplanes.

Question 9

Mike is able to complete a tax return in two hours earning a fee of $100.As an alternative,he could pitch in at a volunteer car wash washing four cars in one hour.His roommate Joe would take four hours to complete a tax return earning a $100 fee and also can wash four cars in one hour.Both individuals could benefit if

Accepted Answer

A)  Mike worked on tax returns for eight hours and paid Joe $5 for each car he washed 
B)  Mike worked on tax returns for eight hours and paid Joe $10 for each car he washed. 
C)  Mike worked on tax returns for eight hours and paid Joe $15 for each car he washed 
D)  Joe worked on tax returns for eight hours and paid Mike $10 for each car he washed 
A)  Mike worked on tax returns for eight hours and paid Joe $5 for each car he washed 
B)  Mike worked on tax returns for eight hours and paid Joe $10 for each car he washed. 
C)  Mike worked on tax returns for eight hours and paid Joe $15 for each car he washed 
D)  Joe worked on tax returns for eight hours and paid Mike $10 for each car he washed

Question 10

The opportunity cost of an action includes:

Accepted Answer

A)  the monetary expenses incurred as a result of the action. 
B)  the highest valued alternative use of the time spent on the action. 
C)  the benefits received as a result of the action. 
D)  only a. and b. 
A)  the monetary expenses incurred as a result of the action. 
B)  the highest valued alternative use of the time spent on the action. 
C)  the benefits received as a result of the action. 
D)  only a. and b.

Question 11

Which of the following is true?

Accepted Answer

A)  Voluntary trades give both parties more in value than what they give up. 
B)  Without the ability to trade, people would not tend to specialize in those areas where they had a comparative advantage. 
C)  People can gain by specializing in the production of the good in which they have a comparative advantage. 
D)  All of the above are true. 
A)  Voluntary trades give both parties more in value than what they give up. 
B)  Without the ability to trade, people would not tend to specialize in those areas where they had a comparative advantage. 
C)  People can gain by specializing in the production of the good in which they have a comparative advantage. 
D)  All of the above are true.

Question 12

The ability to produce at a lower opportunity cost than someone else is referred to as:

Accepted Answer

A)  absolute advantage. 
B)  comparative advantage. 
C)  absolute superiority. 
D)  competitive disadvantage. 
A)  absolute advantage. 
B)  comparative advantage. 
C)  absolute superiority. 
D)  competitive disadvantage.

Question 13

Economists would predict that if salaries increased for engineers and decreased for MBAs that fewer people would go to graduate school in business and more would go in engineering,ceteris paribus.

Accepted Answer

A) True 
 B)False

Question 14

Scarcity applies to our needs but does not apply to our wants.

Accepted Answer

A) True 
 B)False

Question 15

Opportunity costs:

Accepted Answer

A)  only include explicit costs paid out-of-pocket. 
B)  never involve costs paid out-of-pocket. 
C)  may or may not involve costs paid out-of-pocket. 
D)  are always measured in time units. 
A)  only include explicit costs paid out-of-pocket. 
B)  never involve costs paid out-of-pocket. 
C)  may or may not involve costs paid out-of-pocket. 
D)  are always measured in time units.

Question 16

"If I didn't have class tonight,I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

Accepted Answer

A)  $4. 
B)  $40. 
C)  $44. 
D)  $0. 
A)  $4. 
B)  $40. 
C)  $44. 
D)  $0.

Question 17

Marginal cost is the additional cost incurred as a result of an economic decision.

Accepted Answer

A) True 
 B)False

Exam 2: Economics: Eight Powerful Ideas

In a market system,which of the following is a symptom of market failure?

An airline decides to sell 5 unoccupied seats on a flight from California to Chicago at $300 each,which is less than its average cost per ticket of $450 each.Which of the following might have prompted this decision to sell tickets below cost?

The opportunity cost of an item is:

Economic resources are also known as:

Marginal analysis involves:

Which of the following is not a resource?

Scarcity implies that:

Airlines that restrict the use of frequent flyer miles during holiday periods likely do so because:

The opportunity cost of an action includes:

Which of the following is true?

The ability to produce at a lower opportunity cost than someone else is referred to as:

Economists would predict that if salaries increased for engineers and decreased for MBAs that fewer people would go to graduate school in business and more would go in engineering,ceteris paribus.

Scarcity applies to our needs but does not apply to our wants.

Opportunity costs:

"If I didn't have class tonight,I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

Marginal cost is the additional cost incurred as a result of an economic decision.

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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