Question 1

The fact that individuals in a market economy act so as to make themselves better off is a major reason a market equilibrium is usually efficient.

Accepted Answer

A) True 
 B)False  True

Question 2

Because one person's spending is another person's income,if one group in the economy spends more,they increase their share of income and decrease the incomes of other groups.

Accepted Answer

A) True 
 B)False  False

Question 3

Which method of discouraging speeding is likely to be MOST effective given that people usually exploit opportunities to make themselves better off?

Accepted Answer

A) increasing the number of signs stating the speed limit 
B) increasing the fine associated with speeding tickets 
C) public service announcements reminding drivers of the dangers of speeding 
D) asking drivers to reduce speed 
A) increasing the number of signs stating the speed limit 
B) increasing the fine associated with speeding tickets 
C) public service announcements reminding drivers of the dangers of speeding 
D) asking drivers to reduce speed B

Question 4

Marginal analysis studies how individuals decide:

Accepted Answer

A) whether to live on the margin of society. 
B) whether to do a bit more of an activity versus a bit less of it. 
C) whether to go to college. 
D) how much down payment to make when buying stocks. 
A) whether to live on the margin of society. 
B) whether to do a bit more of an activity versus a bit less of it. 
C) whether to go to college. 
D) how much down payment to make when buying stocks.

Question 5

Zoe's grandparents are excited about finally paying off their mortgage because,as they say,"Our cost of housing is now zero." Zoe should explain to them the economic concept of:

Accepted Answer

A) marginal analysis: if the additional cost of housing is zero,then their additional benefit is also zero. 
B) opportunity cost: by living in the house,they are giving up the opportunity to sell the house,buy a smaller one,and pocket the difference. 
C) efficiency: If their cost of housing is now zero,they should let Zoe move in without charging her any rent.Zoe is better off,and her grandparents aren't hurt. 
D) equity: it is unfair that some people are still paying off their mortgage. 
A) marginal analysis: if the additional cost of housing is zero,then their additional benefit is also zero. 
B) opportunity cost: by living in the house,they are giving up the opportunity to sell the house,buy a smaller one,and pocket the difference. 
C) efficiency: If their cost of housing is now zero,they should let Zoe move in without charging her any rent.Zoe is better off,and her grandparents aren't hurt. 
D) equity: it is unfair that some people are still paying off their mortgage.

Question 6

The BEST measure of the opportunity cost of any choice is:

Accepted Answer

A) the monetary cost of that choice. 
B) whatever you have given up to make that choice,even if no monetary costs are involved. 
C) the cost associated with not taking full advantage of the opportunity offered by that choice. 
D) your hourly wage. 
A) the monetary cost of that choice. 
B) whatever you have given up to make that choice,even if no monetary costs are involved. 
C) the cost associated with not taking full advantage of the opportunity offered by that choice. 
D) your hourly wage.

Question 7

A trade-off between equity and efficiency may NOT exist because of the fact that:

Accepted Answer

A) allocating resources fairly may increase efficiency. 
B) the efficient allocation of resources may lead to an outcome that most people consider unfair. 
C) policies that promote equity often come at a cost of decreased efficiency. 
D) allocating resources fairly may cause inefficiency. 
A) allocating resources fairly may increase efficiency. 
B) the efficient allocation of resources may lead to an outcome that most people consider unfair. 
C) policies that promote equity often come at a cost of decreased efficiency. 
D) allocating resources fairly may cause inefficiency.

Question 8

Marginal analysis:

Accepted Answer

A) refers to decisions about whether or not to engage in a particular activity. 
B) is primarily used when making an either-or choice. 
C) is used primarily when deciding how much of an activity should be done. 
D) does not help when making a "how much" choice. 
A) refers to decisions about whether or not to engage in a particular activity. 
B) is primarily used when making an either-or choice. 
C) is used primarily when deciding how much of an activity should be done. 
D) does not help when making a "how much" choice.

Question 9

According to economic models of trade,when the United States and Mexico trade:

Accepted Answer

A) the United States will be worse off because wages in Mexico are so low. 
B) Mexico will be worse off because the United States is a stronger economic power. 
C) both Mexico and the United States will be better off. 
D) both Mexico and the United States will be worse off. 
A) the United States will be worse off because wages in Mexico are so low. 
B) Mexico will be worse off because the United States is a stronger economic power. 
C) both Mexico and the United States will be better off. 
D) both Mexico and the United States will be worse off.

Question 10

If an economy's resources are used efficiently,then it is guaranteed that the economy will also achieve equity.

Accepted Answer

A) True 
 B)False

Question 11

Which statement demonstrates one of the three principles of economy-wide interactions?

Accepted Answer

A) A student chooses to rent a movie with friends,rather than study for an economics quiz. 
B) Your roommate offers to pay for the movie tickets if you drive to the theater. 
C) A city builds a new public park on the grounds of an abandoned warehouse. 
D) In 2008,fearing a recession,Congress approved a White House proposal to rebate some taxes for 2007. 
A) A student chooses to rent a movie with friends,rather than study for an economics quiz. 
B) Your roommate offers to pay for the movie tickets if you drive to the theater. 
C) A city builds a new public park on the grounds of an abandoned warehouse. 
D) In 2008,fearing a recession,Congress approved a White House proposal to rebate some taxes for 2007.

Question 12

If an economy has NOT achieved efficiency,there must be ways to:

Accepted Answer

A) increase opportunity costs. 
B) eliminate inequity. 
C) make some people better off without making others worse off. 
D) increase the incentives for its citizens to follow their own self-interest. 
A) increase opportunity costs. 
B) eliminate inequity. 
C) make some people better off without making others worse off. 
D) increase the incentives for its citizens to follow their own self-interest.

Question 13

Mr.Freezee operates a fleet of ice cream trucks that drive around neighborhoods selling ice cream.He is trying to decide whether he should buy another ice cream truck to add to his fleet.He determines that one more truck will add $750 to his revenue but that the truck will also increase his costs by $1,000.Based on marginal analysis,Mr.Freezee decides:

Accepted Answer

A) that he should not purchase the truck since the costs outweigh the benefits. 
B) that he should purchase the truck since the benefits outweigh the costs. 
C) that he should purchase the truck since his profits will rise by $250. 
D) to purchase several trucks with the same costs and benefits. 
A) that he should not purchase the truck since the costs outweigh the benefits. 
B) that he should purchase the truck since the benefits outweigh the costs. 
C) that he should purchase the truck since his profits will rise by $250. 
D) to purchase several trucks with the same costs and benefits.

Question 14

When people in Brazil engage in trade with people in Germany,all citizens in both nations are necessarily made better off.

Accepted Answer

A) True 
 B)False

Question 15

Which statement demonstrates how people respond to incentives to make themselves better off?

Accepted Answer

A) More students major in economics when they hear that salaries for economists are rising. 
B) Students are assigned dorm rooms through a lottery system. 
C) Students are encouraged to donate blood because it is the right thing to do. 
D) Students and faculty are encouraged to wear college apparel to support the college athletic teams. 
A) More students major in economics when they hear that salaries for economists are rising. 
B) Students are assigned dorm rooms through a lottery system. 
C) Students are encouraged to donate blood because it is the right thing to do. 
D) Students and faculty are encouraged to wear college apparel to support the college athletic teams.

Question 16

I know when I shop at the local grocery store,I am helping my community.Which economic principle does this statement BEST represent?

Accepted Answer

A) People usually respond to incentives,exploiting opportunities to make themselves better off. 
B) There are gains from trade. 
C) One person's spending is another person's income. 
D) Overall spending sometimes gets out of line with the economy's productive capacity. 
A) People usually respond to incentives,exploiting opportunities to make themselves better off. 
B) There are gains from trade. 
C) One person's spending is another person's income. 
D) Overall spending sometimes gets out of line with the economy's productive capacity.

Question 17

Which statement is NOT true?

Accepted Answer

A) Resource scarcity is a major economic concern in the rich countries of the world. 
B) Most opportunity costs are zero. 
C) An economic situation is in equilibrium when no individual would be better off taking a different action. 
D) Very talented individuals,who can do most things better than most people,may still benefit greatly from specializing in doing one thing. 
A) Resource scarcity is a major economic concern in the rich countries of the world. 
B) Most opportunity costs are zero. 
C) An economic situation is in equilibrium when no individual would be better off taking a different action. 
D) Very talented individuals,who can do most things better than most people,may still benefit greatly from specializing in doing one thing.

Question 18

A trade-off involves weighing costs and benefits.

Accepted Answer

A) True 
 B)False

Question 19

A choice made _____ is a choice whether to do a little more or a little less of an activity.

Accepted Answer

A) at the fringe 
B) in the beginning 
C) at the margin 
D) after the fact 
A) at the fringe 
B) in the beginning 
C) at the margin 
D) after the fact

Question 20

Whenever a choice is made:

Accepted Answer

A) the cost of that choice is the opportunity cost. 
B) the cost is easy to measure in dollar terms. 
C) efficiency is improved. 
D) scarcity is not a problem. 
A) the cost of that choice is the opportunity cost. 
B) the cost is easy to measure in dollar terms. 
C) efficiency is improved. 
D) scarcity is not a problem.

Exam 1: First Principles

The fact that individuals in a market economy act so as to make themselves better off is a major reason a market equilibrium is usually efficient.

Because one person's spending is another person's income,if one group in the economy spends more,they increase their share of income and decrease the incomes of other groups.

Which method of discouraging speeding is likely to be MOST effective given that people usually exploit opportunities to make themselves better off?

Marginal analysis studies how individuals decide:

Zoe's grandparents are excited about finally paying off their mortgage because,as they say,"Our cost of housing is now zero." Zoe should explain to them the economic concept of:

The BEST measure of the opportunity cost of any choice is:

A trade-off between equity and efficiency may NOT exist because of the fact that:

Marginal analysis:

According to economic models of trade,when the United States and Mexico trade:

If an economy's resources are used efficiently,then it is guaranteed that the economy will also achieve equity.

Which statement demonstrates one of the three principles of economy-wide interactions?

If an economy has NOT achieved efficiency,there must be ways to:

When people in Brazil engage in trade with people in Germany,all citizens in both nations are necessarily made better off.

Which statement demonstrates how people respond to incentives to make themselves better off?

I know when I shop at the local grocery store,I am helping my community.Which economic principle does this statement BEST represent?

Which statement is NOT true?

A trade-off involves weighing costs and benefits.

A choice made _____ is a choice whether to do a little more or a little less of an activity.

Whenever a choice is made:

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters