Question 1

Maggie is a potter and she likes to dig her own clay for producing pots, cups, and other ceramic items. She is aware of two places where she can obtain the right clay for her work. The first field is quite close, just at the edge of town. The second field is 15 miles away and (since there are no access roads) requires a half-day of travel just to get there. Compare the opportunity cost of producing pots using clay from each of these fields.

Accepted Answer

The answer of Maggie is a potter and she likes...

Question 2

Many people have heard that the US stock market rises when a team from the National Football Conference (NFC) wins the Super Bowl, and falls when a team from the American Football Conference (AFC) is victorious. If you conclude that there is a causal relationship between the outcome of the Super Bowl and stock prices, you probably are making what mistake?

Accepted Answer

A)  You are committing the fallacy of composition. 
B)  You are violating the ceteris paribus assumption. 
C)  You are confusing correlation with causation. 
D)  You are confusing the direction of causality; stock prices determine which team wins the Super Bowl.

Question 3

Why is money NOT considered to be an economic resource?

Accepted Answer

A)  Money is produced by the Bank of Canada. 
B)  Money loses its value too easily due to inflation. 
C)  Money is an intangible good. 
D)  Money is not directly used to produce goods and services.

Question 4

Which of the following statements best describes opportunity costs?

Accepted Answer

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

Question 5

Why does the problem of scarcity exist?

Accepted Answer

A)  because resources are limited relative to wants 
B)  because governments fail to intervene in the market place 
C)  because resources are unlimited relative to wants 
D)  because the world has many poor people

Question 6

Why is there scarcity?

Accepted Answer

A)  because average costs may exceed average benefits 
B)  because human wants are limited 
C)  because theory dictates it 
D)  because our unlimited wants exceed our limited resources

Question 7

What is the opportunity cost of attending a university for a year?

Accepted Answer

A)  the size of the student loans the student becomes responsible for 
B)  the tuition fees incurred 
C)  the value of the best opportunity or opportunities forgone in order to enrol for the year 
D)  the sum of all expenditures on rent, food, books, and tuition incurred during the school year

Question 8

Economists believe that the stiff penalties for drug trafficking in Singapore do not affect the decision making of those who traffic in drugs.

Accepted Answer

A) True 
 B)False

Question 9

What is the term for the additional benefit received as a result of undertaking an action?

Accepted Answer

A)  the marginal benefit 
B)  the marginal cost 
C)  the average benefit 
D)  the opportunity cost

Question 10

Which of the following statements about criminal behaviour describes what economists believe?

Accepted Answer

A)  Economics can shed very little light on the subject. 
B)  Those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs. 
C)  Individuals are irrational and don't respond to incentives. 
D)  People engage in criminal activity because they are genetically predisposed to do so.

Question 11

What two main branches of study can economics be divided into?

Accepted Answer

A)  capitalism and communism 
B)  microeconomics and macroeconomics 
C)  demand and supply 
D)  capitalism and socialism

Question 12

The opportunity cost of attending college is likely higher for a high school graduate who leaves a job grilling hamburgers than it is for a high school dropout who leaves a job working as a computer network administrator.

Accepted Answer

A) True 
 B)False

Question 13

What area of economic study is most concerned with the determination of prices in the market for automobiles?

Accepted Answer

A)  microeconomics 
B)  normative economics 
C)  macroeconomics 
D)  positive economics

Question 14

Which of the following best illustrates the fallacy of composition?

Accepted Answer

A)  If I talk loudly at a party, I have a better chance of being heard by my listeners. If everyone at the party talks loudly, everyone can be heard more clearly. 
B)  Resources are scarce; therefore, there is no such thing as a free lunch. 
C)  If the price of a product rises, the quantity supplied will decline. 
D)  The average wage rate tends to increase at approximately the same rate as inflation; hence, wage increases must cause inflation.

Question 15

According to most economists, what is the fundamental economic problem?

Accepted Answer

A)  unemployment 
B)  government intervention into markets 
C)  poverty 
D)  scarcity

Question 16

When economists disagree, it is often over what type of issues?

Accepted Answer

The answer of When economists disagree, it is often over...

Question 17

Tractors, shovels, copy machines, and computer programming expertise are all examples of scarce resources.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements about scarcity is the most accurate?

Accepted Answer

A)  It is a problem that solely exits in the developing world. 
B)  It is only a problem in centrally planned economies. 
C)  It is a problem that necessitates making choices and trade-offs. 
D)  It is only a problem in modern industrialized economies.

Question 19

Which of the following statements about entrepreneurship is the most accurate?

Accepted Answer

A)  It is another word for physical capital that is used to produce goods and services. 
B)  It is human capital. 
C)  It is another word for the financial capital that can be used to start a business. 
D)  It is the resource that organizes the other factors of production in order to produce goods and/or services.

Question 20

What is the term for the additional cost incurred as a result of undertaking an action?

Accepted Answer

A)  the total cost 
B)  the gross cost 
C)  the marginal cost 
D)  the marginal benefit

Exam 1: The Role and Method of Economics

Why is money NOT considered to be an economic resource?

Which of the following statements best describes opportunity costs?

Why does the problem of scarcity exist?

Why is there scarcity?

What is the opportunity cost of attending a university for a year?

Economists believe that the stiff penalties for drug trafficking in Singapore do not affect the decision making of those who traffic in drugs.

What is the term for the additional benefit received as a result of undertaking an action?

Which of the following statements about criminal behaviour describes what economists believe?

What two main branches of study can economics be divided into?

The opportunity cost of attending college is likely higher for a high school graduate who leaves a job grilling hamburgers than it is for a high school dropout who leaves a job working as a computer network administrator.

What area of economic study is most concerned with the determination of prices in the market for automobiles?

Which of the following best illustrates the fallacy of composition?

According to most economists, what is the fundamental economic problem?

When economists disagree, it is often over what type of issues?

Tractors, shovels, copy machines, and computer programming expertise are all examples of scarce resources.

Which of the following statements about scarcity is the most accurate?

Which of the following statements about entrepreneurship is the most accurate?

What is the term for the additional cost incurred as a result of undertaking an action?