Question 1

As a discipline,economics is best described by which of the following?

Accepted Answer

A)  the study of how to control the effects of government actions 
B)  the study of how to control the preferences of consumers so that there will be enough resources to produce all the goods and services that consumers want 
C)  the study of how to use scarce resources to satisfy unlimited wants and needs 
D)  the study of how to dispose of excess goods and services that nobody wants 
E)  the study of how to maximize profits for firms 
A)  the study of how to control the effects of government actions 
B)  the study of how to control the preferences of consumers so that there will be enough resources to produce all the goods and services that consumers want 
C)  the study of how to use scarce resources to satisfy unlimited wants and needs 
D)  the study of how to dispose of excess goods and services that nobody wants 
E)  the study of how to maximize profits for firms

Question 2

Comparative advantage emerges because of the presence of

Accepted Answer

A)  trade. 
B)  differing opportunity costs. 
C)  marginal benefits that equal marginal costs. 
D)  scarcity. 
E)  incentives. 
A)  trade. 
B)  differing opportunity costs. 
C)  marginal benefits that equal marginal costs. 
D)  scarcity. 
E)  incentives.

Question 3

________ is value added by making additional effort.

Accepted Answer

A)  Income 
B)  Money 
C)  Marginal benefit 
D)  Optimization 
E)  Opportunity benefit 
A)  Income 
B)  Money 
C)  Marginal benefit 
D)  Optimization 
E)  Opportunity benefit

Question 4

Public buildings in the United States are required to be accessible to the disabled and,as a result,almost all have an elevator.What would be an example of a positive direct incentive for those who can to use stairs?

Accepted Answer

A)  Using the stairs will make it seem that they care about their health and that they aren't lazy. 
B)  Using the stairs will increase the risk of tripping and falling. 
C)  Using the stairs will take more time than taking the elevator and will increase the risk of missing an important meeting. 
D)  Using the stairs will give them some exercise and make them healthier. 
E)  Using the stairs will put elevator repair professionals out of work. 
A)  Using the stairs will make it seem that they care about their health and that they aren't lazy. 
B)  Using the stairs will increase the risk of tripping and falling. 
C)  Using the stairs will take more time than taking the elevator and will increase the risk of missing an important meeting. 
D)  Using the stairs will give them some exercise and make them healthier. 
E)  Using the stairs will put elevator repair professionals out of work.

Question 5

William can create 30 meals in one hour,or wash 90 dishes in the same time.Jeremy can create 25 meals in one hour,or wash 50 dishes in one hour.Using opportunity cost,who should specialize in what task?

Accepted Answer

A)  William is more productive and therefore should make meals and wash dishes. 
B)  Since creating meals is harder,William should create meals and wash dishes. 
C)  Since washing dishes is easier,Jeremy should wash dishes and create meals. 
D)  Jeremy can wash twice as many dishes per meal,so Jeremy should wash dishes. 
E)  Jeremy gives up fewer dish washings per meal creation,so Jeremy should create meals. 
A)  William is more productive and therefore should make meals and wash dishes. 
B)  Since creating meals is harder,William should create meals and wash dishes. 
C)  Since washing dishes is easier,Jeremy should wash dishes and create meals. 
D)  Jeremy can wash twice as many dishes per meal,so Jeremy should wash dishes. 
E)  Jeremy gives up fewer dish washings per meal creation,so Jeremy should create meals.

Question 6

A nation will engage in voluntary trade if

Accepted Answer

A)  the terms are mutually beneficial for both parties. 
B)  the trade is approved by the World Trade Center. 
C)  there are no domestic costs associated with trade. 
D)  it allows a trade partner to specialize. 
E)  it lacks a comparative advantage in the production of every good. 
A)  the terms are mutually beneficial for both parties. 
B)  the trade is approved by the World Trade Center. 
C)  there are no domestic costs associated with trade. 
D)  it allows a trade partner to specialize. 
E)  it lacks a comparative advantage in the production of every good.

Question 7

When trade is voluntary,who benefits?

Accepted Answer

A)  the seller 
B)  the buyer 
C)  No one benefits. 
D)  both the buyer and the seller 
E)  Trade is never voluntary. 
A)  the seller 
B)  the buyer 
C)  No one benefits. 
D)  both the buyer and the seller 
E)  Trade is never voluntary.

Question 8

Economists believe that individuals compare the benefits and costs of various options when making decisions and in so doing act

Accepted Answer

A)  fairly. 
B)  selfishly. 
C)  collectively. 
D)  unpredictably. 
E)  rationally. 
A)  fairly. 
B)  selfishly. 
C)  collectively. 
D)  unpredictably. 
E)  rationally.

Question 9

The government has been trying to encourage the use of fuel-efficient cars.One way it has been doing this has been by allowing fuel-efficient cars to use a separate highway lane.This encourages people to use fuel-efficient cars because

Accepted Answer

A)  those who place a high value on their scarce time may be encouraged to buy a fuel-efficient car to take advantage of the separate highway lane. 
B)  those who place a low value on their scarce time may be encouraged to buy a fuel-efficient car to take advantage of the separate highway lane. 
C)  those who are more concerned about the environment are also those who happen to place a high value on their time. 
D)  those who purchase a fuel-efficient car are forced to pay more for a new car,and the use of the separate highway lane compensates them for this. 
E)  those who purchase a fuel-efficient car are likely to be unhappy because it is less powerful or more cramped inside; use of the separate highway lane compensates them for this. 
A)  those who place a high value on their scarce time may be encouraged to buy a fuel-efficient car to take advantage of the separate highway lane. 
B)  those who place a low value on their scarce time may be encouraged to buy a fuel-efficient car to take advantage of the separate highway lane. 
C)  those who are more concerned about the environment are also those who happen to place a high value on their time. 
D)  those who purchase a fuel-efficient car are forced to pay more for a new car,and the use of the separate highway lane compensates them for this. 
E)  those who purchase a fuel-efficient car are likely to be unhappy because it is less powerful or more cramped inside; use of the separate highway lane compensates them for this.

Question 10

An economist is an individual who would be LEAST able to answer which research question?

Accepted Answer

A)  how much of a product is purchased at a specific price 
B)  how the tastes and preferences of consumers are determined 
C)  what firms decide to produce 
D)  how goods and services are distributed to the population 
E)  how firms decide to produce a good or service 
A)  how much of a product is purchased at a specific price 
B)  how the tastes and preferences of consumers are determined 
C)  what firms decide to produce 
D)  how goods and services are distributed to the population 
E)  how firms decide to produce a good or service

Question 11

________ show(s)how resources and final goods and services flow through the economy.

Accepted Answer

A)  Money 
B)  Government 
C)  Allocation 
D)  Trade-offs 
E)  Circular flow 
A)  Money 
B)  Government 
C)  Allocation 
D)  Trade-offs 
E)  Circular flow

Question 12

Explain how a market might develop naturally without planning by government.

Accepted Answer

When individuals attempt to produce mult

Question 13

Which statement represents a rational application of opportunity cost?

Accepted Answer

A)  The value of the choice must be greater than or equal to the cost of the next-best alternative. 
B)  The value of the next-best alternative must be greater than or equal to the cost of the choice. 
C)  Opportunity cost is useful for evaluating a decision after the fact,but not during the decision-making process. 
D)  The value of the choice must be greater than the sum of all available alternatives. 
E)  The value of the next-best alternative is irrelevant since the alternative was not selected. 
A)  The value of the choice must be greater than or equal to the cost of the next-best alternative. 
B)  The value of the next-best alternative must be greater than or equal to the cost of the choice. 
C)  Opportunity cost is useful for evaluating a decision after the fact,but not during the decision-making process. 
D)  The value of the choice must be greater than the sum of all available alternatives. 
E)  The value of the next-best alternative is irrelevant since the alternative was not selected.

Question 14

Choosing to trade ________ specialization,________ opportunity costs.

Accepted Answer

A)  reduces; reducing 
B)  reduces; increasing 
C)  increases; decreasing 
D)  increases; increasing 
E)  increases; but doesn't change 
A)  reduces; reducing 
B)  reduces; increasing 
C)  increases; decreasing 
D)  increases; increasing 
E)  increases; but doesn't change

Question 15

Which scenario describes studying for an economics course without applying the scarcity principle?

Accepted Answer

A)  Mary studies two hours for every one hour she is in the classroom. 
B)  Jonah studies three afternoons a week until he understands the material or until dinner,whichever comes first. 
C)  Lucy studies with her roommate who is also taking the course,and they discuss economic concepts during any free time they can find. 
D)  Chloe studies for this course and does nothing else. 
E)  Rafael talks to an economist whenever he has a chance to do so. 
A)  Mary studies two hours for every one hour she is in the classroom. 
B)  Jonah studies three afternoons a week until he understands the material or until dinner,whichever comes first. 
C)  Lucy studies with her roommate who is also taking the course,and they discuss economic concepts during any free time they can find. 
D)  Chloe studies for this course and does nothing else. 
E)  Rafael talks to an economist whenever he has a chance to do so.

Question 16

Shoppers at supermarkets often abandon their empty shopping carts at various locations in the parking lot,despite the risk of damage to vehicles or the additional labor cost of retrieving those carts.How might an economist explain this behavior?

Accepted Answer

A)  People go to the supermarket when they have the energy to shop only,without considering the cost of returning their carts. 
B)  The perceived potential benefit of going to a cart return location is less than the time and energy cost to the shopper. 
C)  People are generally lazy and gravitate toward any decision with the lowest cost. 
D)  Once a shopper leaves the parking lot,the abandoned cart becomes someone else's problem. 
E)  Because food prices are always subsidized by the government,shoppers are ignorant of additional costs. 
A)  People go to the supermarket when they have the energy to shop only,without considering the cost of returning their carts. 
B)  The perceived potential benefit of going to a cart return location is less than the time and energy cost to the shopper. 
C)  People are generally lazy and gravitate toward any decision with the lowest cost. 
D)  Once a shopper leaves the parking lot,the abandoned cart becomes someone else's problem. 
E)  Because food prices are always subsidized by the government,shoppers are ignorant of additional costs.

Question 17

If Alexander doesn't like changing the oil in his car and pays his father to do it for him,he has provided his father with a(n)________ incentive.

Accepted Answer

A)  direct 
B)  indirect 
C)  neutral 
D)  complementary 
E)  unintended 
A)  direct 
B)  indirect 
C)  neutral 
D)  complementary 
E)  unintended

Question 18

The allocation of limited resources within an environment of almost unlimited wants is the focus of

Accepted Answer

A)  capitalism. 
B)  fiscal policy. 
C)  economics. 
D)  scarcity. 
E)  altruism. 
A)  capitalism. 
B)  fiscal policy. 
C)  economics. 
D)  scarcity. 
E)  altruism.

Question 19

The presence of scarcity means that no choices come without

Accepted Answer

A)  shortages. 
B)  trade-offs. 
C)  regret. 
D)  incentives. 
E)  consumption. 
A)  shortages. 
B)  trade-offs. 
C)  regret. 
D)  incentives. 
E)  consumption.

Question 20

A mother takes her daughter on an outing and promises her ice cream if she behaves.In addition,she warns her that if she misbehaves,she won't be allowed to play with her toys at home.The latter is an example of a(n)________ incentive and reinforces the efficacy of the ice cream,a(n)________ incentive.

Accepted Answer

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

Exam 1: Five Foundations of Economics

As a discipline,economics is best described by which of the following?

Comparative advantage emerges because of the presence of

________ is value added by making additional effort.

Public buildings in the United States are required to be accessible to the disabled and,as a result,almost all have an elevator.What would be an example of a positive direct incentive for those who can to use stairs?

William can create 30 meals in one hour,or wash 90 dishes in the same time.Jeremy can create 25 meals in one hour,or wash 50 dishes in one hour.Using opportunity cost,who should specialize in what task?

A nation will engage in voluntary trade if

When trade is voluntary,who benefits?

Economists believe that individuals compare the benefits and costs of various options when making decisions and in so doing act

The government has been trying to encourage the use of fuel-efficient cars.One way it has been doing this has been by allowing fuel-efficient cars to use a separate highway lane.This encourages people to use fuel-efficient cars because

An economist is an individual who would be LEAST able to answer which research question?

________ show(s)how resources and final goods and services flow through the economy.

Explain how a market might develop naturally without planning by government.

Which statement represents a rational application of opportunity cost?

Choosing to trade ________ specialization,________ opportunity costs.

Which scenario describes studying for an economics course without applying the scarcity principle?

Shoppers at supermarkets often abandon their empty shopping carts at various locations in the parking lot,despite the risk of damage to vehicles or the additional labor cost of retrieving those carts.How might an economist explain this behavior?

If Alexander doesn't like changing the oil in his car and pays his father to do it for him,he has provided his father with a(n)________ incentive.

The allocation of limited resources within an environment of almost unlimited wants is the focus of

The presence of scarcity means that no choices come without

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

Filters

Choosing to trade specialization, opportunity costs.