Question 1

If the value of beach-front property in Beach City decreases,the people of Beach City will likely spend _____,causing incomes in Beach City to _____.

Accepted Answer

A) more;increase 
B) more;decrease 
C) less;increase 
D) less;decrease 
A) more;increase 
B) more;decrease 
C) less;increase 
D) less;decrease

Question 2

Which statement is CORRECT?

Accepted Answer

A) Resource scarcity is not a major 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) Some very talented,skilled individuals who can do everything better than most people should not specialize in doing any one thing. 
A) Resource scarcity is not a major 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) Some very talented,skilled individuals who can do everything better than most people should not specialize in doing any one thing.

Question 3

Individuals gain from trade because:

Accepted Answer

A) of specialization in production. 
B) they can sell at a lower price than they can buy at. 
C) self-sufficiency is efficient. 
D) of the principle of absolute advantage. 
A) of specialization in production. 
B) they can sell at a lower price than they can buy at. 
C) self-sufficiency is efficient. 
D) of the principle of absolute advantage.

Question 4

Which statement is NOT true according to standard economic theory?

Accepted Answer

A) Resources are scarce when they can satisfy everyone's wants. 
B) The true cost of a choice is what you must give up to enjoy that choice. 
C) People typically make choices that will make them better off. 
D) Rational people use marginal analysis when making "how much" decisions. 
A) Resources are scarce when they can satisfy everyone's wants. 
B) The true cost of a choice is what you must give up to enjoy that choice. 
C) People typically make choices that will make them better off. 
D) Rational people use marginal analysis when making "how much" decisions.

Question 5

Opportunity cost is:

Accepted Answer

A) about half of the monetary cost of a product. 
B) the dollar payment for a product. 
C) the benefit derived from a product. 
D) the value of the best alternative forgone in making any choice. 
A) about half of the monetary cost of a product. 
B) the dollar payment for a product. 
C) the benefit derived from a product. 
D) the value of the best alternative forgone in making any choice.

Question 6

The study of economics arises because of the necessity of choice,and the necessity of choice arises because of the fundamental problem of scarcity of resources.

Accepted Answer

A) True 
 B)False

Question 7

One parent picks up the child from day care while the other parent goes to the grocery store and begins to make dinner.This is an example of the principle that:

Accepted Answer

A) markets move toward equilibrium. 
B) government policies can change spending. 
C) there are gains from trade. 
D) markets usually lead to efficiency. 
A) markets move toward equilibrium. 
B) government policies can change spending. 
C) there are gains from trade. 
D) markets usually lead to efficiency.

Question 8

Which statement is NOT one of the four principles that underlie individual choice?

Accepted Answer

A) Choices are necessary because resources are scarce. 
B) Overall spending sometimes gets out of line with the economy's productive capacity. 
C) "How much" is a decision at the margin. 
D) People usually respond to incentives,exploiting opportunities to make themselves better off. 
A) Choices are necessary because resources are scarce. 
B) Overall spending sometimes gets out of line with the economy's productive capacity. 
C) "How much" is a decision at the margin. 
D) People usually respond to incentives,exploiting opportunities to make themselves better off.

Question 9

Which of the following questions would NOT involve marginal analysis:

Accepted Answer

A) How many minutes should I exercise?. 
B) How many workers should I hire?. 
C) What is an acceptable rate of negative side effects from a new medicine?. 
D) Should I attend college? 
A) How many minutes should I exercise?. 
B) How many workers should I hire?. 
C) What is an acceptable rate of negative side effects from a new medicine?. 
D) Should I attend college?

Question 10

As long as individuals know that they can find the goods and services they want in the market,they are willing to forgo being self-sufficient and are willing to specialize.

Accepted Answer

A) True 
 B)False

Question 11

A friend comes up to you and offers you a free ticket to a professional baseball game that night.You decide to attend the game.The game takes five hours and costs you $15 for transportation.If you had not attended the game,you would have worked at your part-time job for $8 an hour.What is the cost to you of attending the game?

Accepted Answer

A) The cost is zero-the ticket is free. 
B) $65 
C) $40 
D) $55 
A) The cost is zero-the ticket is free. 
B) $65 
C) $40 
D) $55

Question 12

Which question is an example of marginal analysis?

Accepted Answer

A) What additional output does a family business produce when it hires one more worker? 
B) How do tax cuts change the growth rate of median income? 
C) What is the impact of a trade embargo on labor cost? 
D) Should a commuter take the bus to work instead of driving. 
A) What additional output does a family business produce when it hires one more worker? 
B) How do tax cuts change the growth rate of median income? 
C) What is the impact of a trade embargo on labor cost? 
D) Should a commuter take the bus to work instead of driving.

Question 13

A grocery store benefits when a new furniture factory moves to town and hires workers because the:

Accepted Answer

A) new jobs at the factory will increase local incomes,some of which will be spent at the grocery store. 
B) new factory will eliminate scarcity in the area. 
C) presence of a new factory will guarantee that resources are used efficiently. 
D) local circular flow will be smaller with a new factory in town. 
A) new jobs at the factory will increase local incomes,some of which will be spent at the grocery store. 
B) new factory will eliminate scarcity in the area. 
C) presence of a new factory will guarantee that resources are used efficiently. 
D) local circular flow will be smaller with a new factory in town.

Question 14

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

Accepted Answer

A) True 
 B)False

Question 15

The university recently inherited a large mansion from a wealthy alumnus.The university plans to use the mansion for faculty parties and to house distinguished guests.The opportunity cost of the mansion to the university is:

Accepted Answer

A) zero because it was a gift. 
B) the original cost of building the mansion. 
C) the amount the university would receive if it sold the mansion. 
D) the cost of catering the parties at the mansion. 
A) zero because it was a gift. 
B) the original cost of building the mansion. 
C) the amount the university would receive if it sold the mansion. 
D) the cost of catering the parties at the mansion.

Question 16

Equilibrium exists when:

Accepted Answer

A) output is distributed equitably. 
B) scarcity is eliminated. 
C) an individual would be better off taking a different action. 
D) no individual has an incentive to change his or her behavior. 
A) output is distributed equitably. 
B) scarcity is eliminated. 
C) an individual would be better off taking a different action. 
D) no individual has an incentive to change his or her behavior.

Question 17

Scarcity in economics means that:

Accepted Answer

A) we often do not have sufficient resources to achieve our objectives. 
B) the wants of people are limited. 
C) there must be poor people in rich countries. 
D) shortages exist in nearly all markets. 
A) we often do not have sufficient resources to achieve our objectives. 
B) the wants of people are limited. 
C) there must be poor people in rich countries. 
D) shortages exist in nearly all markets.

Question 18

You notice that when a new yoga class is offered at the student recreation center at a highly desirable time,some students from the other yoga classes go to the new class instead.Which economic principle does this statement BEST represent?

Accepted Answer

A) Choices are necessary because resources are scarce. 
B) The true cost of something is its opportunity cost. 
C) People usually respond to incentives,exploiting opportunities to make themselves better off. 
D) "How Much" is a decision a the margin. 
A) Choices are necessary because resources are scarce. 
B) The true cost of something is its opportunity cost. 
C) People usually respond to incentives,exploiting opportunities to make themselves better off. 
D) "How Much" is a decision a the margin.

Question 19

You like to read Vogue and Sports Illustrated.You have only $5 to spend,so you buy only Sports Illustrated.Which economic concept does this statement BEST represent?

Accepted Answer

A) Scarcity 
B) Equilibrium 
C) Marginal Analysis 
D) Specialization 
A) Scarcity 
B) Equilibrium 
C) Marginal Analysis 
D) Specialization

Question 20

An economy is efficient if it is:

Accepted Answer

A) possible to produce more of all goods and services. 
B) possible to produce more of one good without producing less of another. 
C) not possible to produce more of one good without producing less of another good. 
D) producing a combination of goods. 
A) possible to produce more of all goods and services. 
B) possible to produce more of one good without producing less of another. 
C) not possible to produce more of one good without producing less of another good. 
D) producing a combination of goods.

Exam 1: First Principles

If the value of beach-front property in Beach City decreases,the people of Beach City will likely spend _____,causing incomes in Beach City to _____.

Which statement is CORRECT?

Individuals gain from trade because:

Which statement is NOT true according to standard economic theory?

Opportunity cost is:

The study of economics arises because of the necessity of choice,and the necessity of choice arises because of the fundamental problem of scarcity of resources.

One parent picks up the child from day care while the other parent goes to the grocery store and begins to make dinner.This is an example of the principle that:

Which statement is NOT one of the four principles that underlie individual choice?

Which of the following questions would NOT involve marginal analysis:

As long as individuals know that they can find the goods and services they want in the market,they are willing to forgo being self-sufficient and are willing to specialize.

Which question is an example of marginal analysis?

A grocery store benefits when a new furniture factory moves to town and hires workers because the:

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

The university recently inherited a large mansion from a wealthy alumnus.The university plans to use the mansion for faculty parties and to house distinguished guests.The opportunity cost of the mansion to the university is:

Equilibrium exists when:

Scarcity in economics means that:

You notice that when a new yoga class is offered at the student recreation center at a highly desirable time,some students from the other yoga classes go to the new class instead.Which economic principle does this statement BEST represent?

You like to read Vogue and Sports Illustrated.You have only $5 to spend,so you buy only Sports Illustrated.Which economic concept does this statement BEST represent?

An economy is efficient if it is:

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

If the value of beach-front property in Beach City decreases,the people of Beach City will likely spend _,causing incomes in Beach City to _.