Question 1

The marginal benefit Kyra gets from eating a second sandwich is

Accepted Answer

A) the total benefit Kyra gets from eating two sandwiches minus the total benefit she gets from eating one sandwich. 
B) the same as the total benefit she gets from eating two sandwiches. 
C) less than the marginal cost of eating the second sandwich since she chose to eat the second sandwich. 
D) the total benefit Kyra gets from eating three sandwiches minus the total benefit she gets from eating two sandwiches.

Question 2

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Accepted Answer

A) enhance equality. 
B) reduce efficiency. 
C) reduce the reward for working hard. 
D) All of the above are correct.

Question 3

Consider Mandy's decision to go to college.If she goes to college,she will spend $20,000 on tuition,$10,000 on room and board,and $2,000 on books.If she does not go to college,she will earn $18,000 working in a store and spend $8,000 on room and board.Mandy's cost of going to college is

Accepted Answer

A) $32,000. 
B) $42,000. 
C) $50,000. 
D) $58,000.

Question 4

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out.Both the amplifier and the mp3 player cost $120,so she can only buy one.This illustrates the basic concept that

Accepted Answer

A) trade can make everyone better off. 
B) people face trade-offs. 
C) rational people think at the margin. 
D) decisions made at the margin are not particularly important.

Question 5

The property of society getting the most it can from its scarce resources is called

Accepted Answer

A) efficiency. 
B) equality. 
C) externality. 
D) productivity.

Question 6

Which of the following phrases best captures the notion of efficiency?

Accepted Answer

A) absolute fairness 
B) equal distribution 
C) minimum waste 
D) equitable outcome

Question 7

Which of the following words and phrases best captures the notion of equality?

Accepted Answer

A) minimum waste 
B) maximum benefit 
C) sameness 
D) efficiency

Question 8

Which of the following is correct concerning opportunity cost?

Accepted Answer

A) Except to the extent that you pay more for them,opportunity costs should not include the cost of things you would have purchased anyway. 
B) To compute opportunity costs,you should subtract benefits from costs. 
C) Opportunity costs and the idea of trade-offs are not closely related. 
D) Rational people should compare various options without considering opportunity costs.

Question 9

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight.The marginal cost per room per night

Accepted Answer

A) is $40. 
B) is $80. 
C) is $120. 
D) cannot be determined from the information given.

Question 10

Based on the available evidence,which of the following groups benefits most from mandatory seat belt laws?

Accepted Answer

A) automakers 
B) pedestrians 
C) drivers 
D) owners of collision-repair shops

Question 11

Barb's aunt gave her $100 for her birthday with the condition that Barb buy herself something.In deciding how to spend the money,Barb narrows her options down to four choices: Option A,Option B,Option C,and Option D.Each option costs $100.Finally she decides on Option B.The opportunity cost of this decision is

Accepted Answer

A) the value to Barb of the option she would have chosen had Option B not been available. 
B) the value to Barb of Options A,C and D combined. 
C) the average of the values to Barb of Options A,C,and D. 
D) $100.

Question 12

When calculating the cost of college,which of the following should you probably not include?

Accepted Answer

A) The cost of tuition 
B) The cost of books required for college classes 
C) The income you would have earned had you not gone to college 
D) The cost of rent for your off-campus apartment.

Question 13

People are likely to respond to a policy change

Accepted Answer

A) only if they think the policy is a good one. 
B) only if the policy change changes the costs of their behavior. 
C) only if the policy change changes the benefits of their behavior. 
D) if the policy changes either the costs or benefits of their behavior.

Question 14

For which of the following individuals would the opportunity cost of going to college be highest?

Accepted Answer

A) a promising young mathematician who will command a high salary once she earns her college degree 
B) a student with average grades who has never held a job 
C) a famous,highly-paid actor who wants to take time away from show business to finish college and earn a degree 
D) a student who is the best player on his college basketball team,but who lacks the skills necessary to play professional basketball

Question 15

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight.If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night,the hotel manager should

Accepted Answer

A) rent the room because the marginal benefit exceeds the marginal cost. 
B) rent the room because the marginal benefit exceeds the average cost. 
C) not rent the room because the marginal benefit is less than the marginal cost. 
D) not rent the room because the marginal benefit is less than the average cost.

Question 16

Government policies designed to equalize the distribution of economic well-being include
(i)The welfare system
(ii)Unemployment insurance
(iii)Progressive income tax

Accepted Answer

A) (i)only 
B) (ii)only 
C) (i)and (ii)only 
D) (i), (ii),and (iii)

Question 17

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor.This redistribution of wealth

Accepted Answer

A) is more efficient and more equal for society. 
B) is more efficient but less equal for society. 
C) is more equal but less efficient for society. 
D) is less equal and less efficient for society.

Question 18

Government policies can change the costs and benefits that people face.Those policies have the potential to

Accepted Answer

A) alter people's behavior. 
B) alter people's decisions at the margin. 
C) produce results that policymakers did not intend. 
D) All of the above are correct.

Question 19

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor.Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off.An economist would say that

Accepted Answer

A) we should agree with Senator Brown. 
B) we should agree with Senator Johnson. 
C) a good decision requires that we recognize both viewpoints. 
D) there are no tradeoffs between equity and efficiency.

Question 20

You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn't known about,but would really like to see.In computing the opportunity cost of visiting this attraction you had not planned to visit,you should include

Accepted Answer

A) both the cost of driving the first 800 miles and the next 15 miles. 
B) the cost of driving the first 800 miles,but not the cost of driving the next 15 miles. 
C) the cost of driving the next 15 miles,but not the cost of driving the first 800 miles. 
D) neither the cost of driving the first 800 miles nor the cost of driving the next 15 miles.

Exam 1: Ten Principles of Economics: How People Make Decisions