Question 1

For countries to be wealthy, they need lots of physical and human capital per worker, which, in turn, depends on a system of private property rights, political stability, a just legal system, honest government, and competitive and open markets.

Accepted Answer

A) True 
 B)False

Question 2

Patterns of specialization and trade are explained by:

Accepted Answer

A)  the principle of comparative advantage. 
B)  the principle of absolute advantage. 
C)  people's productivity. 
D)  government control and regulation.

Question 3

The average starting salary of economics majors is just behind that of:

Accepted Answer

A)  political science majors. 
B)  marketing majors. 
C)  chemical and nuclear engineering majors. 
D)  education majors.

Question 4

In the market for pharmaceuticals, the issue of "drug lag" illustrates which of the following ideas?

Accepted Answer

A)  The longer a drug is tested for safety, the lower the opportunity cost in terms of lives lost. 
B)  If a drug is not tested for safety, it might kill more people. 
C)  Because of the higher the cost of testing a drug, it takes longer to make it, and more lives are lost. 
D)  Lives are being lost because safe drugs that are still in the testing stage have not yet been approved.

Question 5

You are given a ticket to a Bob Dylan concert with a face value of $50. You only value the ticket at $40, sell it to a friend for $40, and attend a U2 concert priced at $60. The opportunity cost of attending the U2 concert is:

Accepted Answer

A)  $20 worth of alternative goods and services. 
B)  $40 worth of alternative goods and services. 
C)  $50 worth of alternative goods and services. 
D)  $60 worth of alternative goods and services.

Question 6

Economists believe that people will not respond to nonmonetary incentives, like love or status.

Accepted Answer

A) True 
 B)False

Question 7

Monetary and fiscal policies are among a government's tools for mitigating economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 8

Economists argue that self-interested people only respond to monetary incentives.

Accepted Answer

A) True 
 B)False

Question 9

A person has a comparative advantage in activity X when that person's:

Accepted Answer

A)  opportunity cost of performing that activity is very high. 
B)  ability to perform that activity exceeds that of all other people. 
C)  government negotiates a favorable trade agreement. 
D)  opportunity cost is lower for him than for other trading partners.

Question 10

Each of the following ideas is central to economics, EXCEPT:

Accepted Answer

A)  "good institutions can eliminate economic trade-offs." 
B)  "people react to incentives." 
C)  "specialization and trade benefit everyone." 
D)  "prices rise when the government prints too much money."

Question 11

With careful planning, we can usually get something that we like without having to give up something else that we like.

Accepted Answer

A) True 
 B)False

Question 12

Why do airlines sometimes advertise last-minute airline ticket sales at low prices? What economic principle are they applying?

Accepted Answer

The answer of Why do airlines sometimes advertise last-minute airline...

Question 13

What causes countries to become wealthier over time?

Accepted Answer

A)  government central planning 
B)  economic growth 
C)  price controls on key natural resources 
D)  restrictions on imported goods

Question 14

A cell phone plan costs $50 per month for 1,000 minutes, and $0.30 per minute for each additional minute after 1,000. What is the marginal fee for the 1,001st minute used?

Accepted Answer

A)  $0.25 
B)  $0.30 
C)  $0.35 
D)  $0.40

Question 15

Adam Smith wrote, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest." He meant that:

Accepted Answer

A)  most of us no longer get our dinner directly from the butcher, the brewer, and the baker. 
B)  butchers, brewers, and bakers are not productive members of society. 
C)  high-interest payments mean that no one has to work anymore. 
D)  people work for the benefit of others because it benefits them to do so.

Question 16

If there was no ______, the "invisible hand" would not function as Adam Smith describes.

Accepted Answer

A)  money 
B)  self-interest 
C)  trade 
D)  inflation

Question 17

Suppose a customer at a restaurant is deciding whether or not to order dessert. Marginal thinking means that the customer should compare:

Accepted Answer

A)  the total benefit from the entire meal and dessert with the additional cost of the dessert. 
B)  the total benefit from the entire meal and dessert with the total cost of the meal and dessert. 
C)  the additional benefit from the dessert with the additional cost of the dessert. 
D)  the marginal benefit from the meal with the marginal cost of the dessert.

Question 18

Economists Jevons, Menger, and Walras are credited with:

Accepted Answer

A)  explaining the limitations of monetary policy. 
B)  formulating the theory of comparative advantage. 
C)  developing the concept of opportunity cost. 
D)  starting the "marginal revolution."

Question 19

Milton Friedman argued that:

Accepted Answer

A)  prices need to be regulated and set by the government to prevent inflation. 
B)  general price level increases result from the government printing too much money. 
C)  inflation is a phenomenon of capitalist economies. 
D)  appropriate antitrust policy can prevent businesses from causing inflation.

Question 20

Which of the following helped the most to bring an end to malaria in the United States?

Accepted Answer

A)  government aid to the poor 
B)  climate change 
C)  economic growth 
D)  spending on health care

Exam 1: The Big Ideas

For countries to be wealthy, they need lots of physical and human capital per worker, which, in turn, depends on a system of private property rights, political stability, a just legal system, honest government, and competitive and open markets.

Patterns of specialization and trade are explained by:

The average starting salary of economics majors is just behind that of:

In the market for pharmaceuticals, the issue of "drug lag" illustrates which of the following ideas?

You are given a ticket to a Bob Dylan concert with a face value of $50. You only value the ticket at $40, sell it to a friend for $40, and attend a U2 concert priced at $60. The opportunity cost of attending the U2 concert is:

Economists believe that people will not respond to nonmonetary incentives, like love or status.

Monetary and fiscal policies are among a government's tools for mitigating economic fluctuations.

Economists argue that self-interested people only respond to monetary incentives.

A person has a comparative advantage in activity X when that person's:

Each of the following ideas is central to economics, EXCEPT:

With careful planning, we can usually get something that we like without having to give up something else that we like.

Why do airlines sometimes advertise last-minute airline ticket sales at low prices? What economic principle are they applying?

What causes countries to become wealthier over time?

A cell phone plan costs $50 per month for 1,000 minutes, and $0.30 per minute for each additional minute after 1,000. What is the marginal fee for the 1,001st minute used?

Adam Smith wrote, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest." He meant that:

If there was no ______, the "invisible hand" would not function as Adam Smith describes.

Suppose a customer at a restaurant is deciding whether or not to order dessert. Marginal thinking means that the customer should compare:

Economists Jevons, Menger, and Walras are credited with:

Milton Friedman argued that:

Which of the following helped the most to bring an end to malaria in the United States?