Question 1

Bea bakes pastries well,and Lucian raises great herbs.If Lucian trades parsley with Bea in exchange for cupcakes,then

Accepted Answer

A)  both Bea and Lucian are made better off by trade. 
B)  neither Bea nor Lucian are made better off by trade. 
C)  only Bea is made better off by trade. 
D)  only Lucian is made better off by trade. 
E)  either Bea or Lucian is made better off by trade,but not both. 
A)  both Bea and Lucian are made better off by trade. 
B)  neither Bea nor Lucian are made better off by trade. 
C)  only Bea is made better off by trade. 
D)  only Lucian is made better off by trade. 
E)  either Bea or Lucian is made better off by trade,but not both.

Question 2

Kelly is an architect,and she is trying to decide whether to hire Lawrence,a draftsman,to assist with her work.Kelly could hire Lawrence at $20 per hour,but it would take him three times as long to complete a task as it takes Kelly.Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle.Which of the following is true?

Accepted Answer

A)  Kelly should not hire Lawrence because it would be faster for her to do the work herself. 
B)  Kelly should do the drafting work herself because she has the lower opportunity cost. 
C)  Lawrence should be hired at the $20 per hour wage rate. 
D)  Lawrence should be hired,but only if he is paid more than $30 per hour. 
E)  Kelly should hire someone who earns minimum wage instead of Lawrence. 
A)  Kelly should not hire Lawrence because it would be faster for her to do the work herself. 
B)  Kelly should do the drafting work herself because she has the lower opportunity cost. 
C)  Lawrence should be hired at the $20 per hour wage rate. 
D)  Lawrence should be hired,but only if he is paid more than $30 per hour. 
E)  Kelly should hire someone who earns minimum wage instead of Lawrence.

Question 3

Benefits from trade would NOT include

Accepted Answer

A)  lower prices. 
B)  less competition. 
C)  more variety of goods and services in the market. 
D)  the ability of producers to specialize. 
E)  more employment for the country. 
A)  lower prices. 
B)  less competition. 
C)  more variety of goods and services in the market. 
D)  the ability of producers to specialize. 
E)  more employment for the country.

Question 4

Google has started a project to scan all books and make those that are not copyrighted available to people free of charge.Why is it important that only books without a copyright are available?

Accepted Answer

A)  If all books were scanned and available free of charge,copyright holders would face a positive incentive to continue writing and publishing books. 
B)  If all books were scanned and available free of charge,copyright holders would face a negative incentive to continue writing and publishing books. 
C)  If only copyrighted texts were scanned and available free of charge,copyright holders would face an indirect incentive to continue writing and publishing books. 
D)  If only non-copyrighted books were scanned and available free of charge,copyright holders would face a negative incentive to continue writing and publishing books. 
E)  If only non-copyrighted books were scanned and available free of charge,copyright holders would face an indirect incentive to continue writing and publishing books. 
A)  If all books were scanned and available free of charge,copyright holders would face a positive incentive to continue writing and publishing books. 
B)  If all books were scanned and available free of charge,copyright holders would face a negative incentive to continue writing and publishing books. 
C)  If only copyrighted texts were scanned and available free of charge,copyright holders would face an indirect incentive to continue writing and publishing books. 
D)  If only non-copyrighted books were scanned and available free of charge,copyright holders would face a negative incentive to continue writing and publishing books. 
E)  If only non-copyrighted books were scanned and available free of charge,copyright holders would face an indirect incentive to continue writing and publishing books.

Question 5

Low prices for water in the developed world may lead individuals to believe it is NOT a ________ resource.

Accepted Answer

A)  desired 
B)  scarce 
C)  plentiful 
D)  controlled 
E)  economic 
A)  desired 
B)  scarce 
C)  plentiful 
D)  controlled 
E)  economic

Question 6

When Lucy chose a major,she likely thought about her skills.Let's say Lucy doesn't enjoy dealing with numbers.How could she explain to her parents,using logic from economics,why she chose to major in English instead of mathematics?

Accepted Answer

A)  The opportunity cost of learning mathematics is too high. 
B)  The opportunity cost of learning to appreciate literature is too high. 
C)  The expected value of a major in English after graduation is low. 
D)  The expected value of a major in mathematics after graduation is high. 
E)  The opportunity cost of going to college is too low. 
A)  The opportunity cost of learning mathematics is too high. 
B)  The opportunity cost of learning to appreciate literature is too high. 
C)  The expected value of a major in English after graduation is low. 
D)  The expected value of a major in mathematics after graduation is high. 
E)  The opportunity cost of going to college is too low.

Question 7

Some environmentalists want to eliminate all pollution.Use economics to respond to this statement.

Accepted Answer

Even before humanity evolved with its in

Question 8

Economics is divided into two subfields: microeconomics and macroeconomics.Why is this separation necessary?

Accepted Answer

In general,the field of economics is so

Question 9

When most economists wake up in the morning,their first decision is whether to hit the snooze bar on the alarm clock.What statement best represents their thought process as rational decision makers?

Accepted Answer

A)  Sal had a really late night grading exams,and he deserves 10 more minutes of sleep. 
B)  The total amount of work Sal has to do today is rather small,so the total benefit to going to work for a full eight hours is also small. 
C)  The total amount of work Sal has to do today is rather small,so the marginal cost of going to work 10 minutes late is small. 
D)  The total amount of work Sal has to do today is rather small,so the marginal benefit of sleeping 10 more minutes is rather large. 
E)  The marginal benefit of sleeping 10 more minutes is greater than the marginal benefit of 10 more minutes of work. 
A)  Sal had a really late night grading exams,and he deserves 10 more minutes of sleep. 
B)  The total amount of work Sal has to do today is rather small,so the total benefit to going to work for a full eight hours is also small. 
C)  The total amount of work Sal has to do today is rather small,so the marginal cost of going to work 10 minutes late is small. 
D)  The total amount of work Sal has to do today is rather small,so the marginal benefit of sleeping 10 more minutes is rather large. 
E)  The marginal benefit of sleeping 10 more minutes is greater than the marginal benefit of 10 more minutes of work.

Question 10

The cost of a trade-off is known as the ________ cost of that decision.

Accepted Answer

A)  marginal 
B)  net 
C)  opportunity 
D)  comparative 
E)  explicit 
A)  marginal 
B)  net 
C)  opportunity 
D)  comparative 
E)  explicit

Question 11

List and briefly explain each of the five foundations of economic thought.

Accepted Answer

The five foundations of economic thought

Question 12

The opportunity cost to free trade is

Accepted Answer

A)  economic growth. 
B)  government involvement. 
C)  domestic jobs. 
D)  lower prices. 
E)  greater efficiency. 
A)  economic growth. 
B)  government involvement. 
C)  domestic jobs. 
D)  lower prices. 
E)  greater efficiency.

Question 13

An example of a direct positive incentive is

Accepted Answer

A)  a prison sentence for committing a crime. 
B)  unemployment insurance for those who are laid off. 
C)  providing a workplace safety program. 
D)  providing a commission for sales. 
E)  threatening to fire those who do not perform well. 
A)  a prison sentence for committing a crime. 
B)  unemployment insurance for those who are laid off. 
C)  providing a workplace safety program. 
D)  providing a commission for sales. 
E)  threatening to fire those who do not perform well.

Question 14

Entrepreneurs are willing to take risks because

Accepted Answer

A)  technology provides a way to sidestep the patent and copyright system. 
B)  the patent and copyright system provides an exclusive right to sell the product for a period of time. 
C)  the patent and copyright system guarantees a certain level of profit. 
D)  technology always increases costs and prevents competitors from entering the market. 
E)  the patent and copyright system guarantees that the risks taken will be rewarded. 
A)  technology provides a way to sidestep the patent and copyright system. 
B)  the patent and copyright system provides an exclusive right to sell the product for a period of time. 
C)  the patent and copyright system guarantees a certain level of profit. 
D)  technology always increases costs and prevents competitors from entering the market. 
E)  the patent and copyright system guarantees that the risks taken will be rewarded.

Question 15

Marginal decisions are said to be made on the ________ unit(s)under consideration.

Accepted Answer

A)  total 
B)  additional 
C)  average of 
D)  sum of 
E)  previous 
A)  total 
B)  additional 
C)  average of 
D)  sum of 
E)  previous

Question 16

Which is NOT one of the five foundations of economics?

Accepted Answer

A)  innovation 
B)  incentives 
C)  trade-offs 
D)  opportunity cost 
E)  marginal thinking 
A)  innovation 
B)  incentives 
C)  trade-offs 
D)  opportunity cost 
E)  marginal thinking

Question 17

Although generous disability insurance can help those who have been permanently injured,it can also increase the likelihood that individuals will falsely claim to be disabled.This likelihood is a(n)

Accepted Answer

A)  direct incentive. 
B)  indirect incentive. 
C)  positive incentive. 
D)  innovation. 
E)  marginal cost. 
A)  direct incentive. 
B)  indirect incentive. 
C)  positive incentive. 
D)  innovation. 
E)  marginal cost.

Question 18

Who benefits from voluntary trade?

Accepted Answer

A)  buyers 
B)  sellers 
C)  the government 
D)  buyers and sellers 
E)  buyers and the government 
A)  buyers 
B)  sellers 
C)  the government 
D)  buyers and sellers 
E)  buyers and the government

Question 19

Health insurance companies have the goal of reducing payments to doctors and hospitals.One way they have done this is by requiring individuals to pay a deductible.For example,a $1,000 deductible means that individuals are responsible for the first $1,000 in health care expenses over the course of a year.In terms of incentives,explain how the presence of a deductible reduces expenses for the health insurance company.

Accepted Answer

Deductibles act as a positive and direct

Question 20

What is the strongest argument for why we need more economists today than ever before?

Accepted Answer

A)  We have a need for more wealth given the higher standard of living that individuals demand. 
B)  Economists are needed to address the allocation of scarce resources as a result of the world's growing population. 
C)  Economists are needed to make sure that firms continue to make profits. 
D)  Economists are needed to make sure that consumers are well informed about their possible purchase options and that they budget their finances appropriately. 
E)  Economists are needed to make sure that the government doesn't involve itself too much in the economy. 
A)  We have a need for more wealth given the higher standard of living that individuals demand. 
B)  Economists are needed to address the allocation of scarce resources as a result of the world's growing population. 
C)  Economists are needed to make sure that firms continue to make profits. 
D)  Economists are needed to make sure that consumers are well informed about their possible purchase options and that they budget their finances appropriately. 
E)  Economists are needed to make sure that the government doesn't involve itself too much in the economy.

Exam 1: Five Foundations of Economics

Bea bakes pastries well,and Lucian raises great herbs.If Lucian trades parsley with Bea in exchange for cupcakes,then

Benefits from trade would NOT include

Google has started a project to scan all books and make those that are not copyrighted available to people free of charge.Why is it important that only books without a copyright are available?

Low prices for water in the developed world may lead individuals to believe it is NOT a ________ resource.

When Lucy chose a major,she likely thought about her skills.Let's say Lucy doesn't enjoy dealing with numbers.How could she explain to her parents,using logic from economics,why she chose to major in English instead of mathematics?

Some environmentalists want to eliminate all pollution.Use economics to respond to this statement.

Economics is divided into two subfields: microeconomics and macroeconomics.Why is this separation necessary?

When most economists wake up in the morning,their first decision is whether to hit the snooze bar on the alarm clock.What statement best represents their thought process as rational decision makers?

The cost of a trade-off is known as the ________ cost of that decision.

List and briefly explain each of the five foundations of economic thought.

The opportunity cost to free trade is

An example of a direct positive incentive is

Entrepreneurs are willing to take risks because

Marginal decisions are said to be made on the ________ unit(s)under consideration.

Which is NOT one of the five foundations of economics?

Although generous disability insurance can help those who have been permanently injured,it can also increase the likelihood that individuals will falsely claim to be disabled.This likelihood is a(n)

Who benefits from voluntary trade?

What is the strongest argument for why we need more economists today than ever before?

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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