Question 1

The expression, "There's no such thing as a free lunch" implies that:

Accepted Answer

A) ​everyone has to pay for his/her own lunch. 
B) ​the person consuming a good must always pay for it. 
C) ​costs must be incurred when resources are used to produce goods and services. 
D) ​no one has time for a good lunch anymore. 
A) ​everyone has to pay for his/her own lunch. 
B) ​the person consuming a good must always pay for it. 
C) ​costs must be incurred when resources are used to produce goods and services. 
D) ​no one has time for a good lunch anymore.

Question 2

Which of the following would be an example of market failure?​

Accepted Answer

A) ​Harmful second hand cigarette smoke 
B) ​lack of funding for private education 
C) ​underproduction of a good by a monopoly 
D) ​all of the above 
A) ​Harmful second hand cigarette smoke 
B) ​lack of funding for private education 
C) ​underproduction of a good by a monopoly 
D) ​all of the above

Question 3

Tom is a castaway who washes up on a remote island. He can kill eight birds per hour or catch ten fish per day. The natives on the island can kill ten birds per day or catch twenty fish per day. Tom has a comparative advantage in:

Accepted Answer

A) ​hunting birds. 
B) ​fishing. 
C) ​both hunting birds and fishing 
D) ​neither hunting birds or fishing. 
A) ​hunting birds. 
B) ​fishing. 
C) ​both hunting birds and fishing 
D) ​neither hunting birds or fishing.

Question 4

Which of the following statements is true?

Accepted Answer

A) ​The opportunity cost of a decision is equal to the explicit cost in monetary terms. 
B) ​The opportunity cost of a decision is the value of the best foregone alternative. 
C) ​Some economic decisions have zero opportunity cost. 
D) ​The opportunity cost of attending college is the same for all students at the same university but may differ among students at different universities. 
A) ​The opportunity cost of a decision is equal to the explicit cost in monetary terms. 
B) ​The opportunity cost of a decision is the value of the best foregone alternative. 
C) ​Some economic decisions have zero opportunity cost. 
D) ​The opportunity cost of attending college is the same for all students at the same university but may differ among students at different universities.

Question 5

Scarcity:​

Accepted Answer

A) ​is only a problem in communist countries. 
B) ​is a problem in both communist and socialist countries, but not in market economies. 
C) ​does not exist in wealthy countries. 
D) ​will never be eradicated because humans develop new wants as productive capabilities improve. 
A) ​is only a problem in communist countries. 
B) ​is a problem in both communist and socialist countries, but not in market economies. 
C) ​does not exist in wealthy countries. 
D) ​will never be eradicated because humans develop new wants as productive capabilities improve.

Question 6

Which of the following is not an example of a resource?

Accepted Answer

A) ​an office building 
B) ​a product's price 
C) ​the land plowed by a farmer in order to grow corn 
D) ​the chief executive officer of a large corporation 
A) ​an office building 
B) ​a product's price 
C) ​the land plowed by a farmer in order to grow corn 
D) ​the chief executive officer of a large corporation

Question 7

If a university begins a policy of permanently expelling any student caught cheating in any way, you would expect that:​

Accepted Answer

A) ​no students would cheat. 
B) ​fewer students would cheat. 
C) ​there would be no difference in the amount of cheating. 
D) ​minor cases of cheating would become a larger fraction of all cases of cheating attempted. 
A) ​no students would cheat. 
B) ​fewer students would cheat. 
C) ​there would be no difference in the amount of cheating. 
D) ​minor cases of cheating would become a larger fraction of all cases of cheating attempted.

Question 8

Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n):

Accepted Answer

A) ​disincentive to trade with others. 
B) ​higher opportunity cost. 
C) ​absolute advantage in production. 
D) ​comparative advantage in production. 
A) ​disincentive to trade with others. 
B) ​higher opportunity cost. 
C) ​absolute advantage in production. 
D) ​comparative advantage in production.

Question 9

The opportunity cost of going to college includes:

Accepted Answer

A) ​both tuition and the value of the student's time. 
B) ​tuition, but not the value of the student's time, which is a non-monetary cost. 
C) ​neither tuition nor the value of the student's time, since obtaining a college degree makes one's income higher in the future. 
D) ​neither tuition nor the value of the student's time, at least at state-supported universities and colleges. 
A) ​both tuition and the value of the student's time. 
B) ​tuition, but not the value of the student's time, which is a non-monetary cost. 
C) ​neither tuition nor the value of the student's time, since obtaining a college degree makes one's income higher in the future. 
D) ​neither tuition nor the value of the student's time, at least at state-supported universities and colleges.

Question 10

If you can figure out what people's__________ are, there is a good chance you can predict their behavior.

Accepted Answer

A) ​birthdays 
B) ​incentives 
C) ​total costs 
D) ​marginal costs 
A) ​birthdays 
B) ​incentives 
C) ​total costs 
D) ​marginal costs

Question 11

An airline decides to sell 5 seats that would otherwise remain unoccupied on a flight from California to Chicago for $300 each, instead of the regular price per ticket of $450 each. We can probably conclude that:

Accepted Answer

A) ​The marginal cost of providing each added seat on the flight was less than $300. 
B) ​The average cost of providing each seat on the flight was less than $300. 
C) ​The marginal cost of providing each seat on the flight was less than $450 but more than $300. 
D) ​The average cost of providing each seat on the flight was $450. 
A) ​The marginal cost of providing each added seat on the flight was less than $300. 
B) ​The average cost of providing each seat on the flight was less than $300. 
C) ​The marginal cost of providing each seat on the flight was less than $450 but more than $300. 
D) ​The average cost of providing each seat on the flight was $450.

Question 12

Which of the following is false?

Accepted Answer

A) ​Once a country has a comparative advantage in producing a good, that comparative advantage will always continue. 
B) ​If you can mow the lawn at home faster than your younger brother, you have a comparative advantage over him in mowing the lawn. 
C) ​Restrictions on trade will reduce people's degree of specialization according to comparative advantage. 
D) ​As practice at producing what you have a comparative advantage in makes you better at it, your comparative advantage would tend to increase. 
A) ​Once a country has a comparative advantage in producing a good, that comparative advantage will always continue. 
B) ​If you can mow the lawn at home faster than your younger brother, you have a comparative advantage over him in mowing the lawn. 
C) ​Restrictions on trade will reduce people's degree of specialization according to comparative advantage. 
D) ​As practice at producing what you have a comparative advantage in makes you better at it, your comparative advantage would tend to increase.

Question 13

Economic goods are:

Accepted Answer

A) ​only those commodities priced in monetary terms. 
B) ​scarce products that are created from scarce resources. 
C) ​the opposite of normative economic goods. 
D) ​not subject to scarcity. 
A) ​only those commodities priced in monetary terms. 
B) ​scarce products that are created from scarce resources. 
C) ​the opposite of normative economic goods. 
D) ​not subject to scarcity.

Question 14

Which of the following is false?

Accepted Answer

A) ​Property rights provide the rules of the economic game. 
B) ​Well defined property rights give individuals the incentive to use their property efficiently. 
C) ​Owners with property rights have an incentive to conserve their property. 
D) ​Owners have no incentive to care what values others place on what they own. 
A) ​Property rights provide the rules of the economic game. 
B) ​Well defined property rights give individuals the incentive to use their property efficiently. 
C) ​Owners with property rights have an incentive to conserve their property. 
D) ​Owners have no incentive to care what values others place on what they own.

Question 15

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 16

Opportunity cost includes

Accepted Answer

A) ​monetary costs only. 
B) ​non-monetary costs only. 
C) ​both monetary and non-monetary costs. 
D) ​neither monetary nor non-monetary costs. 
A) ​monetary costs only. 
B) ​non-monetary costs only. 
C) ​both monetary and non-monetary costs. 
D) ​neither monetary nor non-monetary costs.

Question 17

According to the Global Watch, a recent study on Chilean bus drivers revealed that drivers who are paid by the number of passengers rather than by the hour were far more productive because:

Accepted Answer

A) ​bus drivers do not like to work that hard. 
B) ​bus drivers are responding to average costs. 
C) ​bus drivers don't like to work on the clock-getting paid by the hour. 
D) bus drivers, like most of us, respond to incentives. 
A) ​bus drivers do not like to work that hard. 
B) ​bus drivers are responding to average costs. 
C) ​bus drivers don't like to work on the clock-getting paid by the hour. 
D) bus drivers, like most of us, respond to incentives.

Question 18

The United States can benefit from voluntary trade​

Accepted Answer

A) ​only with nations that can produce goods the United States cannot produce. 
B) ​only with developing nations. 
C) ​only with nations in Europe. 
D) ​with any nation. 
A) ​only with nations that can produce goods the United States cannot produce. 
B) ​only with developing nations. 
C) ​only with nations in Europe. 
D) ​with any nation.

Question 19

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 20

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 as much 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 as much 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.

Exam 2: Eight Powerful Ideas

The expression, "There's no such thing as a free lunch" implies that:

Which of the following would be an example of market failure?​

Tom is a castaway who washes up on a remote island. He can kill eight birds per hour or catch ten fish per day. The natives on the island can kill ten birds per day or catch twenty fish per day. Tom has a comparative advantage in:

Which of the following statements is true?

Scarcity:​

Which of the following is not an example of a resource?

If a university begins a policy of permanently expelling any student caught cheating in any way, you would expect that:​

Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n):

The opportunity cost of going to college includes:

If you can figure out what people's__________ are, there is a good chance you can predict their behavior.

An airline decides to sell 5 seats that would otherwise remain unoccupied on a flight from California to Chicago for $300 each, instead of the regular price per ticket of $450 each. We can probably conclude that:

Which of the following is false?

Economic goods are:

Which of the following is false?

The opportunity cost of an item is:

Opportunity cost includes

According to the Global Watch, a recent study on Chilean bus drivers revealed that drivers who are paid by the number of passengers rather than by the hour were far more productive because:

The United States can benefit from voluntary trade​

Marginal analysis involves:

Which of the following is true?

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market 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

Filters

Which of the following would be an example of market failure?

Scarcity:

If a university begins a policy of permanently expelling any student caught cheating in any way, you would expect that:

The United States can benefit from voluntary trade