Question 1

Using any of the five foundations of economic thought,explain why farms are not located in major metropolitan areas.

Accepted Answer

In terms of incentives,major metropolitan areas often restrict the types of activities one can do,and farmers would face a negative incentive to locate in a congested area because their neighbors would heavily scrutinize the smells,runoff,and machinery.In a congested area,space is scarce and city planners would likely prefer to have retail and housing rather than farming.City planners would know that there is a trade-off between these activities but would realize that the opportunity cost to farming in the city is too high.Thus,for each acre of land in the city,city planners consider the marginal benefit to having food grown closer to where it is consumed versus the marginal cost to having less housing and fewer retail establishments.In almost all cases,the marginal benefit to having farms closer to the population is less than the marginal cost of having less housing.

Question 2

________ involves individuals trading goods they already have or providing services in exchange for something they want.

Accepted Answer

A)  Circular flow model 
B)  Circular flow model with money 
C)  Optimization 
D)  Barter 
E)  Cash exchange 
A)  Circular flow model 
B)  Circular flow model with money 
C)  Optimization 
D)  Barter 
E)  Cash exchange D

Question 3

Instead of deciding to finish high school,Cecily could have decided to work full-time.How would an economist explain her decision to receive her high school degree?

Accepted Answer

A)  The cost of going to high school was greater than the benefit of working full-time. 
B)  The benefit of working full-time was greater than the benefit of going to high school. 
C)  The benefit of going to high school was greater than the benefit of working full-time. 
D)  The cost of working full-time was greater than the benefit of going to high school. 
E)  The benefit of working full-time was greater than the cost of going to high school. 
A)  The cost of going to high school was greater than the benefit of working full-time. 
B)  The benefit of working full-time was greater than the benefit of going to high school. 
C)  The benefit of going to high school was greater than the benefit of working full-time. 
D)  The cost of working full-time was greater than the benefit of going to high school. 
E)  The benefit of working full-time was greater than the cost of going to high school. C

Question 4

If the government wanted to give people a negative direct incentive not to save money,what would be the appropriate policy?

Accepted Answer

A)  providing individuals a subsidy to save their money 
B)  providing funding for an advertising campaign encouraging people to spend more money 
C)  informing individuals that saving money causes people not to spend money,which will cause them to lose their jobs 
D)  imposing a tax on individuals for saving their money 
E)  informing consumers about all that they could buy with their money with the hope that they spend more 
A)  providing individuals a subsidy to save their money 
B)  providing funding for an advertising campaign encouraging people to spend more money 
C)  informing individuals that saving money causes people not to spend money,which will cause them to lose their jobs 
D)  imposing a tax on individuals for saving their money 
E)  informing consumers about all that they could buy with their money with the hope that they spend more

Question 5

The term ________ means "additional."

Accepted Answer

A)  marginal 
B)  comparative 
C)  incentive 
D)  opportunity cost 
E)  trade-off 
A)  marginal 
B)  comparative 
C)  incentive 
D)  opportunity cost 
E)  trade-off

Question 6

Some parents discourage their college student children from taking economics,saying it is not a useful discipline.Why are they incorrect?

Accepted Answer

Since we live in a world where there are

Question 7

What are opportunity costs,and why do economists spend so much time talking about them?

Accepted Answer

The opportunity cost is the highest-valu

Question 8

Which of the following is NOT a type of incentive?

Accepted Answer

A)  positive 
B)  negative 
C)  complementary 
D)  indirect 
E)  direct 
A)  positive 
B)  negative 
C)  complementary 
D)  indirect 
E)  direct

Question 9

The United States is able to experience economic growth to the extent that

Accepted Answer

A)  specialization and trade are encouraged. 
B)  the government involves itself in the economy. 
C)  trade is restricted. 
D)  jobs are protected from outsourcing. 
E)  consumers are encouraged to buy domestically produced goods. 
A)  specialization and trade are encouraged. 
B)  the government involves itself in the economy. 
C)  trade is restricted. 
D)  jobs are protected from outsourcing. 
E)  consumers are encouraged to buy domestically produced goods.

Question 10

When an individual chooses to act,he or she is said to be motivated by

Accepted Answer

A)  scarcity. 
B)  incentives. 
C)  disincentives. 
D)  indifference. 
E)  ambivalence. 
A)  scarcity. 
B)  incentives. 
C)  disincentives. 
D)  indifference. 
E)  ambivalence.

Question 11

More oranges are grown in Florida than North Dakota because Florida's warm climate gives it a ________ advantage in growing oranges.

Accepted Answer

A)  comparative 
B)  public 
C)  revenue 
D)  producer 
E)  planning 
A)  comparative 
B)  public 
C)  revenue 
D)  producer 
E)  planning

Question 12

A camera takes pictures of drivers who do not stop at a red light,and this practice is used to issue traffic tickets.These red light cameras can be understood as serving a(n)

Accepted Answer

A)  positive incentive to encourage individuals to stop at a red light. 
B)  negative incentive to discourage individuals from driving through a red light. 
C)  indirect incentive to encourage individuals to stop at a red light. 
D)  direct incentive to encourage individuals to stop at a red light. 
E)  negative incentive to encourage individuals to drive through a red light. 
A)  positive incentive to encourage individuals to stop at a red light. 
B)  negative incentive to discourage individuals from driving through a red light. 
C)  indirect incentive to encourage individuals to stop at a red light. 
D)  direct incentive to encourage individuals to stop at a red light. 
E)  negative incentive to encourage individuals to drive through a red light.

Question 13

Dexter decides to buy a new smartphone and offset the cost by selling his old phone to one of his friends.His friend has no money and wants to barter for the old phone.Dexter's preference for the items offered is in this order: laser printer,television,headphones,and bicycle.If Dexter accepts the laser printer as payment,what is his opportunity cost of this exchange?

Accepted Answer

A)  the total value of the television,headphones,and bicycle 
B)  the difference between the value of the old phone and that of the new smartphone 
C)  There is no opportunity cost in a consensual trade. 
D)  the value of the laser printer 
E)  the value of the television 
A)  the total value of the television,headphones,and bicycle 
B)  the difference between the value of the old phone and that of the new smartphone 
C)  There is no opportunity cost in a consensual trade. 
D)  the value of the laser printer 
E)  the value of the television

Question 14

People often clean cabinet doors,but do not regularly clean inside the cabinet.The insides of cabinets aren't visible and require the removal of contents in order to clean.This is an example of ________ thinking.

Accepted Answer

A)  conscientious 
B)  deferential 
C)  dismal 
D)  incentive 
E)  marginal 
A)  conscientious 
B)  deferential 
C)  dismal 
D)  incentive 
E)  marginal

Question 15

One way to promote a new business is to offer free items.If Jayleen were to open a restaurant and offer free food,she likely would have a line out the door.How would an economist understand the behavior of those standing in line?

Accepted Answer

A)  Those waiting in line place a high value on the use of their time. 
B)  Those waiting in line believe that the marginal cost of waiting in line exceeds the marginal benefit of waiting in line. 
C)  Those waiting in line place a low value on the use of their time. 
D)  Those waiting in line believe that the marginal cost of waiting in line is zero. 
E)  Those waiting in line believe that the marginal benefit of waiting in line is zero. 
A)  Those waiting in line place a high value on the use of their time. 
B)  Those waiting in line believe that the marginal cost of waiting in line exceeds the marginal benefit of waiting in line. 
C)  Those waiting in line place a low value on the use of their time. 
D)  Those waiting in line believe that the marginal cost of waiting in line is zero. 
E)  Those waiting in line believe that the marginal benefit of waiting in line is zero.

Question 16

A recession has crippled the national economy,producing a high rate of unemployment.Which of the following would be a microeconomic decision?

Accepted Answer

A)  Congress decides to institute a tax cut and encourage consumer spending. 
B)  The United States negotiates a new trade agreement with Japan,hoping to bolster exports. 
C)  The federal government extends the duration of unemployment benefits. 
D)  A Congresswoman decides to delay the purchase of a new car. 
E)  The Federal Reserve lowers interest rates in an effort to stimulate business activity. 
A)  Congress decides to institute a tax cut and encourage consumer spending. 
B)  The United States negotiates a new trade agreement with Japan,hoping to bolster exports. 
C)  The federal government extends the duration of unemployment benefits. 
D)  A Congresswoman decides to delay the purchase of a new car. 
E)  The Federal Reserve lowers interest rates in an effort to stimulate business activity.

Question 17

Hassan enjoys lifting weights in his spare time,but his gain in strength has come to a plateau.He is considering giving up weight lifting altogether,unless he experiences significant gains in the near future.Hassan is seeking a ________ incentive.

Accepted Answer

A)  power 
B)  reasonable 
C)  negative 
D)  positive 
E)  neutral 
A)  power 
B)  reasonable 
C)  negative 
D)  positive 
E)  neutral

Question 18

Saudi Arabia has a comparative advantage in producing oil because it

Accepted Answer

A)  has specialized in the production of oil given its natural resources. 
B)  has forced other countries not to sell their oil. 
C)  has specialized in the production of all goods. 
D)  forces the use of oil for the production of all electricity. 
E)  benefits from the heavy use of oil for transportation. 
A)  has specialized in the production of oil given its natural resources. 
B)  has forced other countries not to sell their oil. 
C)  has specialized in the production of all goods. 
D)  forces the use of oil for the production of all electricity. 
E)  benefits from the heavy use of oil for transportation.

Question 19

Many professors have a policy that punishes individuals if they don't come to class.Instead of punishing students who don't attend class,what could the professor do to provide a positive incentive to come to class?

Accepted Answer

A)  Those who come to class are given extra points. 
B)  Those who do not come to class have their grades reduced. 
C)  Those who come to class will be asked questions,and if they answer them incorrectly,their grades will be lowered. 
D)  Those who come to class will be ridiculed. 
E)  Those who do not come to class might be dropped from the course. 
A)  Those who come to class are given extra points. 
B)  Those who do not come to class have their grades reduced. 
C)  Those who come to class will be asked questions,and if they answer them incorrectly,their grades will be lowered. 
D)  Those who come to class will be ridiculed. 
E)  Those who do not come to class might be dropped from the course.

Question 20

An example of a direct negative incentive is

Accepted Answer

A)  providing a commission for sales. 
B)  awarding a promotion for hard work. 
C)  threatening to fire those who do not perform well. 
D)  providing an orientation for new employees. 
E)  providing generous benefits and pay for employees. 
A)  providing a commission for sales. 
B)  awarding a promotion for hard work. 
C)  threatening to fire those who do not perform well. 
D)  providing an orientation for new employees. 
E)  providing generous benefits and pay for employees.

Exam 1: Five Foundations of Economics

Using any of the five foundations of economic thought,explain why farms are not located in major metropolitan areas.

________ involves individuals trading goods they already have or providing services in exchange for something they want.

Instead of deciding to finish high school,Cecily could have decided to work full-time.How would an economist explain her decision to receive her high school degree?

If the government wanted to give people a negative direct incentive not to save money,what would be the appropriate policy?

The term ________ means "additional."

Some parents discourage their college student children from taking economics,saying it is not a useful discipline.Why are they incorrect?

What are opportunity costs,and why do economists spend so much time talking about them?

Which of the following is NOT a type of incentive?

The United States is able to experience economic growth to the extent that

When an individual chooses to act,he or she is said to be motivated by

More oranges are grown in Florida than North Dakota because Florida's warm climate gives it a ________ advantage in growing oranges.

A camera takes pictures of drivers who do not stop at a red light,and this practice is used to issue traffic tickets.These red light cameras can be understood as serving a(n)

People often clean cabinet doors,but do not regularly clean inside the cabinet.The insides of cabinets aren't visible and require the removal of contents in order to clean.This is an example of ________ thinking.

One way to promote a new business is to offer free items.If Jayleen were to open a restaurant and offer free food,she likely would have a line out the door.How would an economist understand the behavior of those standing in line?

A recession has crippled the national economy,producing a high rate of unemployment.Which of the following would be a microeconomic decision?

Hassan enjoys lifting weights in his spare time,but his gain in strength has come to a plateau.He is considering giving up weight lifting altogether,unless he experiences significant gains in the near future.Hassan is seeking a ________ incentive.

Saudi Arabia has a comparative advantage in producing oil because it

Many professors have a policy that punishes individuals if they don't come to class.Instead of punishing students who don't attend class,what could the professor do to provide a positive incentive to come to class?

An example of a direct negative incentive is

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Elasticity

Market Outcomes and Tax Incidence

Price Controls

Market Inefficiencies: Externalities and Public Goods

Business Costs and Production

Firms in a Competitive Market

Understanding Monopoly

Price Discrimination

Monopolistic Competition and Advertising

Oligopoly and Strategic Behavior

The Demand and Supply of Resources

Income,inequality,and Poverty

Consumer Choice

Behavioral Economics and Risk Taking

Health Insurance and Health Care

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings,interest Rates,and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

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