Question 1

What you give up to obtain an item is called your:

Accepted Answer

A)  opportunity cost. 
B)  explicit cost. 
C)  true cost. 
D)  direct cost. 
A)  opportunity cost. 
B)  explicit cost. 
C)  true cost. 
D)  direct cost.

Question 2

Central banking in the United States refers to:

Accepted Answer

A)  the operation of the Federal Reserve in its attempts to affect the economy. 
B)  how commercial banks interact with one another to earn more profits. 
C)  the federal government's control of the United States banking system. 
D)  how banking decisions are centralized in New York City. 
A)  the operation of the Federal Reserve in its attempts to affect the economy. 
B)  how commercial banks interact with one another to earn more profits. 
C)  the federal government's control of the United States banking system. 
D)  how banking decisions are centralized in New York City.

Question 3

High inflation in Zimbabwe in 2009 was a result of the Zimbabwean government's printing too much money.

Accepted Answer

A) True 
 B)False

Question 4

The opportunity cost of winning a free ticket to the Super Bowl worth $950 and choosing to attend the game is:

Accepted Answer

A)  zero, since the ticket was free. 
B)  priceless, if the person really loves football. 
C)  at least $950, the lost market value of selling the ticket, and the time to go. 
D)  zero, if the person would rather go to the game than do anything else. 
A)  zero, since the ticket was free. 
B)  priceless, if the person really loves football. 
C)  at least $950, the lost market value of selling the ticket, and the time to go. 
D)  zero, if the person would rather go to the game than do anything else.

Question 5

Which of the following explains why economic booms and busts cannot be avoided?

Accepted Answer

A)  The effects of fiscal and monetary policies will never be completely understood. 
B)  The time lags of both fiscal and monetary policies make eliminating boom/bust cycles impossible. 
C)  Economic booms/busts could be avoided, if politicians would put good economics ahead of good politics. 
D)  The economy is always being struck by unavoidable shocks. 
A)  The effects of fiscal and monetary policies will never be completely understood. 
B)  The time lags of both fiscal and monetary policies make eliminating boom/bust cycles impossible. 
C)  Economic booms/busts could be avoided, if politicians would put good economics ahead of good politics. 
D)  The economy is always being struck by unavoidable shocks.

Question 6

Why is it less costly to attend college during a recession?

Accepted Answer

A)  Tuition is much lower during a recession. 
B)  The opportunity cost is higher during a recession because there are more labor market opportunities. 
C)  The opportunity cost is lower during a recession because there are fewer labor market opportunities. 
D)  Colleges give out better grades during recessions, so the opportunity cost is lower. 
A)  Tuition is much lower during a recession. 
B)  The opportunity cost is higher during a recession because there are more labor market opportunities. 
C)  The opportunity cost is lower during a recession because there are fewer labor market opportunities. 
D)  Colleges give out better grades during recessions, so the opportunity cost is lower.

Question 7

When the government decreases the supply of money, there is an increase in the general level of prices.

Accepted Answer

A) True 
 B)False

Question 8

Suppose your teacher finishes class 30 minutes early on the day before an exam. She indicates that you may leave, or you may stay on for an optional study period that will last for the remaining 30 minutes of the scheduled class time. You should:

Accepted Answer

A)  always choose to stay for the study period, since you have already paid for the class time. 
B)  only choose to stay if you like the instructor, since the value obtained is higher than if you disliked the instructor. 
C)  only choose to stay if the benefits gained from the extra study session exceed the cost of another 30 minutes in class. 
D)  only choose to stay for the study session if you do not plan to study on your own for the exam. 
A)  always choose to stay for the study period, since you have already paid for the class time. 
B)  only choose to stay if you like the instructor, since the value obtained is higher than if you disliked the instructor. 
C)  only choose to stay if the benefits gained from the extra study session exceed the cost of another 30 minutes in class. 
D)  only choose to stay for the study session if you do not plan to study on your own for the exam.

Question 9

Why do you think researchers sometimes find a positive relationship between the unemployment rate and college enrollment rates?

Accepted Answer

A)  The opportunity cost of attending college rises during economic booms, leading to higher college enrollment rates. 
B)  The opportunity cost of attending college rises during recessions, leading to higher college enrollment rates. 
C)  The opportunity cost of attending college falls during recessions, leading to higher college enrollment rates. 
D)  The opportunity cost of attending college falls during economic booms, leading to higher college enrollment rates. 
A)  The opportunity cost of attending college rises during economic booms, leading to higher college enrollment rates. 
B)  The opportunity cost of attending college rises during recessions, leading to higher college enrollment rates. 
C)  The opportunity cost of attending college falls during recessions, leading to higher college enrollment rates. 
D)  The opportunity cost of attending college falls during economic booms, leading to higher college enrollment rates.

Question 10

Most people do not buy the safest car they can find. Why not?

Accepted Answer

A)  Other factors matter besides safety, such as comfort, cost, and fuel economy. 
B)  People do not take the time to understand the safety features of cars. 
C)  Consumers are unaware of the risks of different cars. 
D)  The statement is false. People do buy the safest car they can find. 
A)  Other factors matter besides safety, such as comfort, cost, and fuel economy. 
B)  People do not take the time to understand the safety features of cars. 
C)  Consumers are unaware of the risks of different cars. 
D)  The statement is false. People do buy the safest car they can find.

Question 11

Understanding economic growth is one of the most important tasks of economics.

Accepted Answer

A) True 
 B)False

Question 12

If the central bank creates too much money, _____ is the result. If the central bank doesn't create enough money, an economic _____ is the result.

Accepted Answer

A)  deflation; boom 
B)  inflation; boom 
C)  deflation; slowdown 
D)  inflation; slowdown 
A)  deflation; boom 
B)  inflation; boom 
C)  deflation; slowdown 
D)  inflation; slowdown

Question 13

The Federal Reserve has a dual mandate to promote maximum employment and stable prices. This can be hard because attempts to reduce unemployment can cause more inflation.

Accepted Answer

A) True 
 B)False

Question 14

Trade increases production partly by taking advantage of:

Accepted Answer

A)  economies of scale. 
B)  economies of scope. 
C)  realism. 
D)  pluralism. 
A)  economies of scale. 
B)  economies of scope. 
C)  realism. 
D)  pluralism.

Question 15

In a large class, each student's opportunity cost of taking an exam is likely to be the same.

Accepted Answer

A) True 
 B)False

Question 16

Economic booms and busts:

Accepted Answer

A)  can be moderated but cannot be avoided. 
B)  can be avoided by employing growth-encouraging institutions. 
C)  do not occur, since the economy always grows at a constant pace. 
D)  occur only when countries have bad institutions. 
A)  can be moderated but cannot be avoided. 
B)  can be avoided by employing growth-encouraging institutions. 
C)  do not occur, since the economy always grows at a constant pace. 
D)  occur only when countries have bad institutions.

Question 17

Inflation is primarily caused by:

Accepted Answer

A)  businesses raising their prices in response to increasing energy prices. 
B)  the government printing too much money. 
C)  misguided fiscal policy. 
D)  economic downturns in GDP. 
A)  businesses raising their prices in response to increasing energy prices. 
B)  the government printing too much money. 
C)  misguided fiscal policy. 
D)  economic downturns in GDP.

Question 18

Suppose you have ordered a value meal at a local fast-food restaurant. The cashier asks if you would like to "super-size" your meal. In order to make an efficient decision, you should compare:

Accepted Answer

A)  the total cost of the larger, "super-sized" meal versus the total benefits received. 
B)  the additional cost of the larger meal versus the additional benefits received. 
C)  the total cost of the larger meal versus the additional cost to the restaurant. 
D)  the benefits of the smaller meal versus the additional benefits obtained from consuming the "super-sized" meal. 
A)  the total cost of the larger, "super-sized" meal versus the total benefits received. 
B)  the additional cost of the larger meal versus the additional benefits received. 
C)  the total cost of the larger meal versus the additional cost to the restaurant. 
D)  the benefits of the smaller meal versus the additional benefits obtained from consuming the "super-sized" meal.

Question 19

What is the "invisible hand"?

Accepted Answer

A)  The idea that government economic planning tends to benefit not only the individual but also all of society. 
B)  The principle that most people avoid economic transactions with so-called "outsiders." 
C)  The idea that people pursuing their own self-interest actually benefit the public at large. 
D)  The notion that the pursuit of profit leads to the exploitation of consumers. 
A)  The idea that government economic planning tends to benefit not only the individual but also all of society. 
B)  The principle that most people avoid economic transactions with so-called "outsiders." 
C)  The idea that people pursuing their own self-interest actually benefit the public at large. 
D)  The notion that the pursuit of profit leads to the exploitation of consumers.

Question 20

The Federal Reserve's attempts to combat a recession and high unemployment could result in faster inflation.

Accepted Answer

A) True 
 B)False

Exam 1: The Big Ideas

What you give up to obtain an item is called your:

Central banking in the United States refers to:

High inflation in Zimbabwe in 2009 was a result of the Zimbabwean government's printing too much money.

The opportunity cost of winning a free ticket to the Super Bowl worth $950 and choosing to attend the game is:

Which of the following explains why economic booms and busts cannot be avoided?

Why is it less costly to attend college during a recession?

When the government decreases the supply of money, there is an increase in the general level of prices.

Suppose your teacher finishes class 30 minutes early on the day before an exam. She indicates that you may leave, or you may stay on for an optional study period that will last for the remaining 30 minutes of the scheduled class time. You should:

Why do you think researchers sometimes find a positive relationship between the unemployment rate and college enrollment rates?

Most people do not buy the safest car they can find. Why not?

Understanding economic growth is one of the most important tasks of economics.

If the central bank creates too much money, _____ is the result. If the central bank doesn't create enough money, an economic _____ is the result.

The Federal Reserve has a dual mandate to promote maximum employment and stable prices. This can be hard because attempts to reduce unemployment can cause more inflation.

Trade increases production partly by taking advantage of:

In a large class, each student's opportunity cost of taking an exam is likely to be the same.

Economic booms and busts:

Inflation is primarily caused by:

Suppose you have ordered a value meal at a local fast-food restaurant. The cashier asks if you would like to "super-size" your meal. In order to make an efficient decision, you should compare:

What is the "invisible hand"?

The Federal Reserve's attempts to combat a recession and high unemployment could result in faster inflation.

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

If the central bank creates too much money, _ is the result. If the central bank doesn't create enough money, an economic _ is the result.