Question 1

Macroeconomics is the study of

Accepted Answer

A)  the economic motives of voters and elected officials. 
B)  individual decision-making units such as households and businesses. 
C)  how government purchases affect specific markets. 
D)  the operation of the economy as a whole. 
E)  the interaction between the government and businesses. 
A)  the economic motives of voters and elected officials. 
B)  individual decision-making units such as households and businesses. 
C)  how government purchases affect specific markets. 
D)  the operation of the economy as a whole. 
E)  the interaction between the government and businesses.

Question 2

The opportunity cost of a purchase is

Accepted Answer

A)  zero if the item is what someone wants most. 
B)  always equal to the selling price of what someone purchased. 
C)  always greater for people who are out of work than for people who are working. 
D)  the alternative good or service that one sacrifices because a different good was purchased. 
E)  the lowest possible price. 
A)  zero if the item is what someone wants most. 
B)  always equal to the selling price of what someone purchased. 
C)  always greater for people who are out of work than for people who are working. 
D)  the alternative good or service that one sacrifices because a different good was purchased. 
E)  the lowest possible price.

Question 3

An opportunity cost

Accepted Answer

A)  can be measured only when the decision involves expenditures of money. 
B)  can be measured only when the decision involves spending time on one thing and not on another. 
C)  is impossible to measure. 
D)  is equal to the value of what is given up to make a purchase or take an action. 
E)  exists for every decision made by individuals and businesses,but not by the government. 
A)  can be measured only when the decision involves expenditures of money. 
B)  can be measured only when the decision involves spending time on one thing and not on another. 
C)  is impossible to measure. 
D)  is equal to the value of what is given up to make a purchase or take an action. 
E)  exists for every decision made by individuals and businesses,but not by the government.

Question 4

Nicole asked her neighbor to rake the leaves on his lawn because they were blowing into her yard.It takes an hour to rake the yard,regardless of who performs the task.He responded that it wouldn't be rational for him to do so,but he would be willing to hire someone else to rake.Why would this be the case?

Accepted Answer

A)  Her neighbor lacks the equipment to rake leaves and thinks it would take too long to do the job. 
B)  Her neighbor is a busy person and doesn't have time to rake leaves. 
C)  Her neighbor is getting revenge on her because Nicole didn't rake the leaves on her lawn last year. 
D)  Her neighbor is a lawyer who values his time at $200 an hour and knows that he can hire a high school kid to rake leaves for $20 an hour. 
E)  Her neighbor is a high school teacher and values his time at $15 an hour,and he knows that he can hire one of his students to rake leaves for $20 an hour. 
A)  Her neighbor lacks the equipment to rake leaves and thinks it would take too long to do the job. 
B)  Her neighbor is a busy person and doesn't have time to rake leaves. 
C)  Her neighbor is getting revenge on her because Nicole didn't rake the leaves on her lawn last year. 
D)  Her neighbor is a lawyer who values his time at $200 an hour and knows that he can hire a high school kid to rake leaves for $20 an hour. 
E)  Her neighbor is a high school teacher and values his time at $15 an hour,and he knows that he can hire one of his students to rake leaves for $20 an hour.

Question 5

Which is NOT a benefit of trade?

Accepted Answer

A)  reaping the rewards of specialization 
B)  creation of value for all parties involved 
C)  equivalent gains for all parties involved 
D)  improved allocation of resources 
E)  More wants are satisfied. 
A)  reaping the rewards of specialization 
B)  creation of value for all parties involved 
C)  equivalent gains for all parties involved 
D)  improved allocation of resources 
E)  More wants are satisfied.

Question 6

Many stores are open 24 hours a day.When store managers make the decision to stay open 24 hours,it must be the case that

Accepted Answer

A)  the marginal benefit of staying open all day and the marginal cost to remaining open all day are at least equal. 
B)  the marginal benefit of staying open all day must always be greater than the marginal cost to remaining open all day. 
C)  the marginal cost of staying open all day must always be greater than the marginal benefit to remaining open all day. 
D)  the calculation of marginal benefits or marginal costs of remaining open all day plays no role. 
E)  the marginal benefit of remaining open all day is zero. 
A)  the marginal benefit of staying open all day and the marginal cost to remaining open all day are at least equal. 
B)  the marginal benefit of staying open all day must always be greater than the marginal cost to remaining open all day. 
C)  the marginal cost of staying open all day must always be greater than the marginal benefit to remaining open all day. 
D)  the calculation of marginal benefits or marginal costs of remaining open all day plays no role. 
E)  the marginal benefit of remaining open all day is zero.

Question 7

As a new firm in the apple-picking business,Nicolette has considered adding an economist to her management team.This economist would be unable to help her managerial team determine

Accepted Answer

A)  the lowest cost way of picking apples. 
B)  how many apples consumers will purchase at different prices. 
C)  why people eat apples. 
D)  the effect government regulations would have on the price of apples. 
E)  the lowest cost way of distributing apples. 
A)  the lowest cost way of picking apples. 
B)  how many apples consumers will purchase at different prices. 
C)  why people eat apples. 
D)  the effect government regulations would have on the price of apples. 
E)  the lowest cost way of distributing apples.

Question 8

Clarice must choose between reading the next chapter in her economics textbook or streaming the next episode of her favorite show.In her experience,she does well on exams,but even better when she reads the textbook.If she chooses to watch the show,what can be said of incentives?

Accepted Answer

A)  Adding a negative incentive (e.g.,her parents block access to streaming services)would more likely result in Clarice choosing to read the textbook. 
B)  Positive incentives are always more effective than negative incentives. 
C)  Negative incentives are always more effective than positive incentives. 
D)  Only marginal incentives play a role in this example. 
E)  Clarice is motivated by the stronger of two negative incentives. 
A)  Adding a negative incentive (e.g.,her parents block access to streaming services)would more likely result in Clarice choosing to read the textbook. 
B)  Positive incentives are always more effective than negative incentives. 
C)  Negative incentives are always more effective than positive incentives. 
D)  Only marginal incentives play a role in this example. 
E)  Clarice is motivated by the stronger of two negative incentives.

Question 9

What is the indirect incentive in the unemployment insurance program?

Accepted Answer

A)  Workers get paid when they are laid off. 
B)  Workers face an incentive to find a new job as quickly as possible. 
C)  Workers have a reduced incentive to find a new job until the insurance runs out. 
D)  Workers are paid all of their wages by the unemployment insurance program. 
E)  Workers on unemployment insurance are given training opportunities. 
A)  Workers get paid when they are laid off. 
B)  Workers face an incentive to find a new job as quickly as possible. 
C)  Workers have a reduced incentive to find a new job until the insurance runs out. 
D)  Workers are paid all of their wages by the unemployment insurance program. 
E)  Workers on unemployment insurance are given training opportunities.

Question 10

The government controls for some indirect incentives in safety net social programs by

Accepted Answer

A)  limiting payment to a specified time period. 
B)  providing only a partial payment. 
C)  allowing individuals to apply to only a certain number of safety net social programs. 
D)  requiring individuals to repay the benefits they received. 
E)  establishing income limits for those who apply for safety net social programs. 
A)  limiting payment to a specified time period. 
B)  providing only a partial payment. 
C)  allowing individuals to apply to only a certain number of safety net social programs. 
D)  requiring individuals to repay the benefits they received. 
E)  establishing income limits for those who apply for safety net social programs.

Question 11

Restaurants,bars,and convenience stores are often located near college campuses.These businesses frequently charge higher than normal prices.They are taking advantage of the fact that students

Accepted Answer

A)  are able to pay higher prices than the rest of the population,so the businesses can charge higher prices than they otherwise would have been able to charge. 
B)  are unable to pay higher prices than the rest of the population,but they are able to succeed because they can sell to a large number of people. 
C)  place a high value on their scarce time and are willing to pay higher prices than they would at locations farther from campus. 
D)  place a low value on their scarce time and are willing to pay higher prices than they would at locations farther from campus. 
E)  place a high value on their scarce time and are unwilling to pay higher prices. 
A)  are able to pay higher prices than the rest of the population,so the businesses can charge higher prices than they otherwise would have been able to charge. 
B)  are unable to pay higher prices than the rest of the population,but they are able to succeed because they can sell to a large number of people. 
C)  place a high value on their scarce time and are willing to pay higher prices than they would at locations farther from campus. 
D)  place a low value on their scarce time and are willing to pay higher prices than they would at locations farther from campus. 
E)  place a high value on their scarce time and are unwilling to pay higher prices.

Question 12

A new tax on gasoline causes a reduction in the purchase of new vehicles with poor fuel economy.This is an example of what type of incentive?

Accepted Answer

A)  negative direct 
B)  positive direct 
C)  negative indirect 
D)  positive indirect 
E)  The tax does not provide an incentive. 
A)  negative direct 
B)  positive direct 
C)  negative indirect 
D)  positive indirect 
E)  The tax does not provide an incentive.

Question 13

If opportunity cost is the value of the best alternative not chosen,why is a rejected option important?

Accepted Answer

Alternatives are still valuable measurin

Question 14

The government has been considering doing away with minting pennies because they are rarely used for purchases (with most people collecting them or throwing them away).How would an economist best explain this consumer behavior?

Accepted Answer

A)  More people are using credit and debit cards,so they are not in the habit of using monetary change. 
B)  Prices have increased over time,and it would take far too many pennies to buy anything of value. 
C)  Prices have increased over time,and the opportunity cost of carrying around large quantities of pennies has become too large. 
D)  Prices have increased over time,and the opportunity cost of carrying around pennies has fallen. 
E)  People who use pennies probably aren't spending enough money; removing the penny will force people to spend more. 
A)  More people are using credit and debit cards,so they are not in the habit of using monetary change. 
B)  Prices have increased over time,and it would take far too many pennies to buy anything of value. 
C)  Prices have increased over time,and the opportunity cost of carrying around large quantities of pennies has become too large. 
D)  Prices have increased over time,and the opportunity cost of carrying around pennies has fallen. 
E)  People who use pennies probably aren't spending enough money; removing the penny will force people to spend more.

Question 15

One of the first major decisions that one faces after graduation is getting an apartment.Describe how someone might employ the concepts of trade-offs,opportunity costs,and making decisions at the margin in deciding which apartment to rent.

Accepted Answer

Apartments have varying sizes,prices,and

Question 16

The opportunity cost of going to school rather than working is the cost of

Accepted Answer

A)  food. 
B)  housing. 
C)  clothing. 
D)  health care. 
E)  potential wages. 
A)  food. 
B)  housing. 
C)  clothing. 
D)  health care. 
E)  potential wages.

Question 17

Without scarcity,the study of ________ would be unnecessary.

Accepted Answer

A)  positive incentives 
B)  negative incentives 
C)  resource allocation 
D)  economics 
E)  productivity 
A)  positive incentives 
B)  negative incentives 
C)  resource allocation 
D)  economics 
E)  productivity

Question 18

The two highest paid midcareer jobs with only a bachelor's degree are

Accepted Answer

A)  business management and accounting. 
B)  criminal justice and psychology. 
C)  civil engineering and math. 
D)  economics and computer engineering. 
E)  economics and business management. 
A)  business management and accounting. 
B)  criminal justice and psychology. 
C)  civil engineering and math. 
D)  economics and computer engineering. 
E)  economics and business management.

Question 19

A parent that pays a child an allowance for doing chores is providing a(n)________ incentive.

Accepted Answer

A)  positive 
B)  negative 
C)  neutral 
D)  complementary 
E)  unintended 
A)  positive 
B)  negative 
C)  neutral 
D)  complementary 
E)  unintended

Question 20

The concept of ________ explains that making one choice means an individual will not have the time,resources,or energy to do something else.

Accepted Answer

A)  scarcity 
B)  negative incentives 
C)  trade-offs 
D)  opportunity cost 
E)  marginal benefit 
A)  scarcity 
B)  negative incentives 
C)  trade-offs 
D)  opportunity cost 
E)  marginal benefit

Exam 1: Five Foundations of Economics

Macroeconomics is the study of

The opportunity cost of a purchase is

An opportunity cost

Which is NOT a benefit of trade?

Many stores are open 24 hours a day.When store managers make the decision to stay open 24 hours,it must be the case that

As a new firm in the apple-picking business,Nicolette has considered adding an economist to her management team.This economist would be unable to help her managerial team determine

Clarice must choose between reading the next chapter in her economics textbook or streaming the next episode of her favorite show.In her experience,she does well on exams,but even better when she reads the textbook.If she chooses to watch the show,what can be said of incentives?

What is the indirect incentive in the unemployment insurance program?

The government controls for some indirect incentives in safety net social programs by

Restaurants,bars,and convenience stores are often located near college campuses.These businesses frequently charge higher than normal prices.They are taking advantage of the fact that students

A new tax on gasoline causes a reduction in the purchase of new vehicles with poor fuel economy.This is an example of what type of incentive?

If opportunity cost is the value of the best alternative not chosen,why is a rejected option important?

The government has been considering doing away with minting pennies because they are rarely used for purchases (with most people collecting them or throwing them away).How would an economist best explain this consumer behavior?

One of the first major decisions that one faces after graduation is getting an apartment.Describe how someone might employ the concepts of trade-offs,opportunity costs,and making decisions at the margin in deciding which apartment to rent.

The opportunity cost of going to school rather than working is the cost of

Without scarcity,the study of ________ would be unnecessary.

The two highest paid midcareer jobs with only a bachelor's degree are

A parent that pays a child an allowance for doing chores is providing a(n)________ incentive.

The concept of ________ explains that making one choice means an individual will not have the time,resources,or energy to do something else.

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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