Question 1

Which of the following is an example of self-interest that attempts to promote the public interest?

Accepted Answer

A)  A mother prevents her children from becoming vaccinated against measles, mumps, and rubella because of fears of autism. 
B)  The President of the United States restricts American consumers from buying foreign-made products. 
C)  The New York Yankees beat the Boston Red Sox. 
D)  An entrepreneur risks his life savings to open up a grocery store in an underserved area. 
A)  A mother prevents her children from becoming vaccinated against measles, mumps, and rubella because of fears of autism. 
B)  The President of the United States restricts American consumers from buying foreign-made products. 
C)  The New York Yankees beat the Boston Red Sox. 
D)  An entrepreneur risks his life savings to open up a grocery store in an underserved area.

Question 2

Which of the following would be the most likely to cause inflation?

Accepted Answer

A)  massive increases in government spending 
B)  sustained increases in the money supply 
C)  increases in interest rates 
D)  a decline in the purchasing power of the dollar 
A)  massive increases in government spending 
B)  sustained increases in the money supply 
C)  increases in interest rates 
D)  a decline in the purchasing power of the dollar

Question 3

As the FDA uses ______ time and resources to ensure the safety of new drugs, _________.

Accepted Answer

A)  more; more people will die from taking unsafe drugs 
B)  less; fewer people will die waiting for access to life-saving medicine 
C)  more; fewer people will die waiting for access to life-saving medicine 
D)  less; fewer people will die from taking unsafe drugs 
A)  more; more people will die from taking unsafe drugs 
B)  less; fewer people will die waiting for access to life-saving medicine 
C)  more; fewer people will die waiting for access to life-saving medicine 
D)  less; fewer people will die from taking unsafe drugs

Question 4

Manuel insists he places an infinite value on his life. Stefan is suspicious of this claim and points out to Manuel that he sometimes eats ice cream when broccoli would be much better for him. What Big Idea is Stefan using?

Accepted Answer

A)  The Power of Trade: Manuel could not make his own ice cream, though he could grow his own broccoli; Manuel must be trading for ice cream. 
B)  Incentives: No one is paying Manuel to be healthy. 
C)  Thinking on the Margin: "Infinite value" is too much to be on the margin. 
D)  Trade-offs: Gaining some enjoyment is worth giving up some safety. 
A)  The Power of Trade: Manuel could not make his own ice cream, though he could grow his own broccoli; Manuel must be trading for ice cream. 
B)  Incentives: No one is paying Manuel to be healthy. 
C)  Thinking on the Margin: "Infinite value" is too much to be on the margin. 
D)  Trade-offs: Gaining some enjoyment is worth giving up some safety.

Question 5

According to economists, when the Food and Drug Administration raises the approval requirements for new drugs:

Accepted Answer

A)  everyone will benefit and be better off. 
B)  society potentially loses a new drug approval. 
C)  everyone but the drug makers will lose. 
D)  people will only demand more drug testing. 
A)  everyone will benefit and be better off. 
B)  society potentially loses a new drug approval. 
C)  everyone but the drug makers will lose. 
D)  people will only demand more drug testing.

Question 6

What should happen to crime rates when the unemployment rate rises?

Accepted Answer

A)  Crime rates should fall because the economic gains to property crime will be lower when incomes are lower. 
B)  Crime rates should rise because the opportunity cost of crime (i.e., getting a legitimate job) has fallen. 
C)  Crime rates should fall because the opportunity cost of crime (i.e., getting a legitimate job) has risen. 
D)  Crime rates should rise because the trade-offs have been eliminated. 
A)  Crime rates should fall because the economic gains to property crime will be lower when incomes are lower. 
B)  Crime rates should rise because the opportunity cost of crime (i.e., getting a legitimate job) has fallen. 
C)  Crime rates should fall because the opportunity cost of crime (i.e., getting a legitimate job) has risen. 
D)  Crime rates should rise because the trade-offs have been eliminated.

Question 7

The central bank of the United States is:

Accepted Answer

A)  the Senate. 
B)  the Department of Treasury. 
C)  the Federal Reserve. 
D)  Wall Street. 
A)  the Senate. 
B)  the Department of Treasury. 
C)  the Federal Reserve. 
D)  Wall Street.

Question 8

Monetary and fiscal policies:

Accepted Answer

A)  can reduce the severity of economic busts. 
B)  have been proven to be ineffective and are no longer used during recessions. 
C)  only work during times of rapid inflation. 
D)  are tools used during economic booms but not economic busts. 
A)  can reduce the severity of economic busts. 
B)  have been proven to be ineffective and are no longer used during recessions. 
C)  only work during times of rapid inflation. 
D)  are tools used during economic booms but not economic busts.

Question 9

In addition to monetary incentives, economists also believe people respond to incentives like fame, power, reputation, and love.

Accepted Answer

A) True 
 B)False

Question 10

Among other things, an understanding of economics can help you better manage your finances.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that you study hard, master the principles of economics, and earn a good grade in your economics class. This is an example of a good institution because:

Accepted Answer

A)  your school is selective; not everyone can get in. 
B)  your self-interest in getting good grades aligns with the social interest of having people who understand economics. 
C)  everybody gets good grades. 
D)  sometimes the invisible hand is absent, not just invisible. 
A)  your school is selective; not everyone can get in. 
B)  your self-interest in getting good grades aligns with the social interest of having people who understand economics. 
C)  everybody gets good grades. 
D)  sometimes the invisible hand is absent, not just invisible.

Question 12

Monetary and fiscal policies have the potential to make a recession worse.

Accepted Answer

A) True 
 B)False

Question 13

What is a plausible economic explanation as to why Braille "dots" are commonly found on drive-up automatic teller machines although blind customers likely will not use a drive-up automatic teller machine?

Accepted Answer

A)  Blind people must be able use such machines due to government regulations requiring such dots on the keys under the Americans with Disabilities Act. 
B)  The marginal cost of making two different types of keypads is substantial, and the benefit of providing keypads without the Braille dots is a mere inconvenience to ATM users. 
C)  The marginal cost of making the keys with the Braille dots is less than making the keys without the Braille dots. 
D)  There is no economic concept that explains why the keypads have Braille dots. 
A)  Blind people must be able use such machines due to government regulations requiring such dots on the keys under the Americans with Disabilities Act. 
B)  The marginal cost of making two different types of keypads is substantial, and the benefit of providing keypads without the Braille dots is a mere inconvenience to ATM users. 
C)  The marginal cost of making the keys with the Braille dots is less than making the keys without the Braille dots. 
D)  There is no economic concept that explains why the keypads have Braille dots.

Question 14

Wealthy countries tend to have ______ physical capital per worker and _______ human capital per worker.

Accepted Answer

A)  little; a lot of 
B)  a lot of; little 
C)  a lot of; a lot of 
D)  no; a lot of 
A)  little; a lot of 
B)  a lot of; little 
C)  a lot of; a lot of 
D)  no; a lot of

Question 15

Joe runs a landscape business. He knows that providing landscaping services costs him $100 per hour on average, while the cost of providing such services is $150 per hour after 5 PM (due to overtime pay, reduced productivity, and the added wear and tear on his equipment). A potential client offers Joe $130 per hour to provide services but needs him to provide the services after 5 PM due to circumstances at the property.

Accepted Answer

A)  Joe should take the job, since $130 exceeds his average cost of production. 
B)  Joe should take the job, since he is making a $30 profit per hour. 
C)  Joe should decline the job, since he would lose $150 per hour worked on the job. 
D)  Joe should decline the job, since he would lose $20 per hour worked. 
A)  Joe should take the job, since $130 exceeds his average cost of production. 
B)  Joe should take the job, since he is making a $30 profit per hour. 
C)  Joe should decline the job, since he would lose $150 per hour worked on the job. 
D)  Joe should decline the job, since he would lose $20 per hour worked.

Question 16

Which of the following best explains economists' concern over their understanding the determinants of economic wealth?

Accepted Answer

A)  Economists, like everyone else, are self-interested. 
B)  As overall wealth increases, distribution of wealth tends to equalize as well. 
C)  Higher levels of wealth tend to generate better health and human rights' outcomes across countries. 
D)  The determinants of economic wealth are easier to study than the determinants of economic growth. 
A)  Economists, like everyone else, are self-interested. 
B)  As overall wealth increases, distribution of wealth tends to equalize as well. 
C)  Higher levels of wealth tend to generate better health and human rights' outcomes across countries. 
D)  The determinants of economic wealth are easier to study than the determinants of economic growth.

Question 17

An example of a marginal decision is deciding whether to:

Accepted Answer

A)  invest half your savings in Google or Microsoft. 
B)  buy one more apple or one more banana. 
C)  commit your life to economics or biology. 
D)  study for 5 hours or for 10 hours. 
A)  invest half your savings in Google or Microsoft. 
B)  buy one more apple or one more banana. 
C)  commit your life to economics or biology. 
D)  study for 5 hours or for 10 hours.

Question 18

Deciding whether to study an additional hour for an exam by comparing the additional benefits to the additional costs of an extra hour of study is an example of:

Accepted Answer

A)  the social interest. 
B)  the invisible hand. 
C)  marginal thinking. 
D)  the power of trade. 
A)  the social interest. 
B)  the invisible hand. 
C)  marginal thinking. 
D)  the power of trade.

Question 19

Because people instinctively act in the social interest, markets will produce outcomes in line with the social interest.

Accepted Answer

A) True 
 B)False

Question 20

Dropping out of college to devote time to a promising business start-up is most directly an application of the principle of:

Accepted Answer

A)  gains from trade. 
B)  returns from specialization. 
C)  marginal thinking. 
D)  opportunity cost. 
A)  gains from trade. 
B)  returns from specialization. 
C)  marginal thinking. 
D)  opportunity cost.

Exam 1: The Big Ideas

Which of the following is an example of self-interest that attempts to promote the public interest?

Which of the following would be the most likely to cause inflation?

As the FDA uses ______ time and resources to ensure the safety of new drugs, _________.

Manuel insists he places an infinite value on his life. Stefan is suspicious of this claim and points out to Manuel that he sometimes eats ice cream when broccoli would be much better for him. What Big Idea is Stefan using?

According to economists, when the Food and Drug Administration raises the approval requirements for new drugs:

What should happen to crime rates when the unemployment rate rises?

The central bank of the United States is:

Monetary and fiscal policies:

In addition to monetary incentives, economists also believe people respond to incentives like fame, power, reputation, and love.

Among other things, an understanding of economics can help you better manage your finances.

Suppose that you study hard, master the principles of economics, and earn a good grade in your economics class. This is an example of a good institution because:

Monetary and fiscal policies have the potential to make a recession worse.

What is a plausible economic explanation as to why Braille "dots" are commonly found on drive-up automatic teller machines although blind customers likely will not use a drive-up automatic teller machine?

Wealthy countries tend to have ______ physical capital per worker and _______ human capital per worker.

Which of the following best explains economists' concern over their understanding the determinants of economic wealth?

An example of a marginal decision is deciding whether to:

Deciding whether to study an additional hour for an exam by comparing the additional benefits to the additional costs of an extra hour of study is an example of:

Because people instinctively act in the social interest, markets will produce outcomes in line with the social interest.

Dropping out of college to devote time to a promising business start-up is most directly an application of the principle of:

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

As the FDA uses time and resources to ensure the safety of new drugs, ___.

Wealthy countries tend to have physical capital per worker and _ human capital per worker.