Question 1

An economist would argue that the true cost of a college education exceeds the cost of tuition,housing,and books because of

Accepted Answer

A)  opportunity cost. 
B)  invisible costs. 
C)  inflation. 
D)  tax credits. 
E)  scholarships. 
A)  opportunity cost. 
B)  invisible costs. 
C)  inflation. 
D)  tax credits. 
E)  scholarships.

Question 2

In the area of many college campuses,parking spaces are often scarce.If these parking spaces have parking meters,which population described below would pay for parking?

Accepted Answer

A)  those that are willing to take risks and believe that they will not be caught if they don't place change in the meter 
B)  those that place a high opportunity cost on making sure they have change and placing change in the meter 
C)  those that are willing to take risks,believe that they will not be caught if they don't place change in the meter,and disregard any possible $5 ticket for parking illegally 
D)  those that are unwilling to take risks and believe there is a high chance that they will not be caught if they don't pay for parking 
E)  those that are unwilling to take risks,believe there is a high chance that they will be caught if they don't pay for parking,and place a high value on doing the "right" thing 
A)  those that are willing to take risks and believe that they will not be caught if they don't place change in the meter 
B)  those that place a high opportunity cost on making sure they have change and placing change in the meter 
C)  those that are willing to take risks,believe that they will not be caught if they don't place change in the meter,and disregard any possible $5 ticket for parking illegally 
D)  those that are unwilling to take risks and believe there is a high chance that they will not be caught if they don't pay for parking 
E)  those that are unwilling to take risks,believe there is a high chance that they will be caught if they don't pay for parking,and place a high value on doing the "right" thing

Question 3

Many car insurance companies offer discounts for safe drivers.The promise is lower premiums or a reduction in deductibles for customers that remain accident-free for a specified period of time.The discounts are not without a cost,however.Policyholders must pay an additional premium (periodic fee paid for insurance coverage)in order to participate in the program.Understanding opportunity cost,explain how safe-driver programs might be beneficial for some customers but not others.

Accepted Answer

For poor drivers,a safe-driver program i

Question 4

At any quantity,when the marginal benefit equals the marginal cost,that quantity is said to be

Accepted Answer

A)  excessive. 
B)  inadequate. 
C)  optimal. 
D)  equivalent. 
E)  allocated. 
A)  excessive. 
B)  inadequate. 
C)  optimal. 
D)  equivalent. 
E)  allocated.

Question 5

According to marginal thinking,an individual will continue to consume until after the benefit of additional consumption ________ its cost.

Accepted Answer

A)  is equal to 
B)  totals 
C)  is greater than 
D)  is less than 
E)  marginalizes 
A)  is equal to 
B)  totals 
C)  is greater than 
D)  is less than 
E)  marginalizes

Question 6

Rodrigo operates a dry-cleaning service and charges customers $5 per article of clothing.Based on his knowledge of operations,the 1,000 th piece of clothing costs him $4.95 to dry-clean.If he takes additional business,however,the 1,001st piece will cost $5 for the service.Does he take the additional business?

Accepted Answer

A)  No,he has hidden costs that far exceed his estimate of $5,so he loses money. 
B)  No,taking on additional business doesn't earn him any money. 
C)  Yes,if he turns away business,his service will be forced to close. 
D)  Maybe.If a competitor is accepting that many customers,he must at least equal that amount. 
E)  Yes.At a $5 cost,he breaks even and is indifferent.He necessarily turns away business when the cost of the additional unit exceeds the income. 
A)  No,he has hidden costs that far exceed his estimate of $5,so he loses money. 
B)  No,taking on additional business doesn't earn him any money. 
C)  Yes,if he turns away business,his service will be forced to close. 
D)  Maybe.If a competitor is accepting that many customers,he must at least equal that amount. 
E)  Yes.At a $5 cost,he breaks even and is indifferent.He necessarily turns away business when the cost of the additional unit exceeds the income.

Question 7

Which of the following is an example of an unintended consequence?

Accepted Answer

A)  Competition between two businesses causes each to lower prices. 
B)  A tax rebate on electric cars results in increased household electricity consumption. 
C)  A tax cut leads to a spike in consumer spending. 
D)  Low interest rates encourage businesses to borrow money from banks. 
E)  A welfare program causes individuals to purchase necessities and seek employment. 
A)  Competition between two businesses causes each to lower prices. 
B)  A tax rebate on electric cars results in increased household electricity consumption. 
C)  A tax cut leads to a spike in consumer spending. 
D)  Low interest rates encourage businesses to borrow money from banks. 
E)  A welfare program causes individuals to purchase necessities and seek employment.

Question 8

The discipline of economics is largely based on encouraging individuals to engage in certain activities and discouraging them from engaging in others.Why is encouraging or discouraging individuals through incentives so important?

Accepted Answer

Economics as a discipline focuses on how

Question 9

Microeconomics is the branch of economics that focuses on the

Accepted Answer

A)  entire economy. 
B)  production side of the economy. 
C)  consumption side of the economy. 
D)  involvement of the government in the entire economy. 
E)  choices and decision making of individuals and firms. 
A)  entire economy. 
B)  production side of the economy. 
C)  consumption side of the economy. 
D)  involvement of the government in the entire economy. 
E)  choices and decision making of individuals and firms.

Question 10

Economic growth in developed countries has been altered by the increased popularity of the Internet.How has the Internet,in terms of both negative and positive incentives,promoted but also discouraged economic growth?

Accepted Answer

The Internet has certainly done a great

Question 11

The ________ system encourages innovation by creating a powerful financial reward for creativity.

Accepted Answer

A)  direct incentive 
B)  indirect incentive 
C)  patent 
D)  trade-off 
E)  tax credit 
A)  direct incentive 
B)  indirect incentive 
C)  patent 
D)  trade-off 
E)  tax credit

Question 12

Rational decision making under conditions of scarcity requires individuals to

Accepted Answer

A)  place a monetary value on everything. 
B)  know the prices of all goods they might buy. 
C)  be alert to price reductions on desired products. 
D)  understand that trade-offs are necessary. 
E)  earn as much income as possible. 
A)  place a monetary value on everything. 
B)  know the prices of all goods they might buy. 
C)  be alert to price reductions on desired products. 
D)  understand that trade-offs are necessary. 
E)  earn as much income as possible.

Question 13

Opportunity cost is the ________ alternative forfeited when a choice is made.

Accepted Answer

A)  least-valued 
B)  highest-valued 
C)  most recently considered 
D)  most convenient 
E)  first 
A)  least-valued 
B)  highest-valued 
C)  most recently considered 
D)  most convenient 
E)  first

Question 14

When consumers discard their gasoline-powered automobiles for electric-powered ones,this partially reflects the ________ of gasoline.

Accepted Answer

A)  scarcity 
B)  luxury 
C)  necessity 
D)  specialization 
E)  incentive 
A)  scarcity 
B)  luxury 
C)  necessity 
D)  specialization 
E)  incentive

Question 15

Isaac has four potential jobs to consider,each with different salary offers.From highest to lowest,the salaries are: $47,500,$46,000,$45,000,and $42,000.Based on the information provided,if Isaac accepts the highest-paying position,what is his opportunity cost of this position?

Accepted Answer

A)  $46,000 
B)  $42,000 
C)  $47,500 
D)  $133,000 
E)  $1,500 
A)  $46,000 
B)  $42,000 
C)  $47,500 
D)  $133,000 
E)  $1,500

Question 16

Why would economists find it surprising if the CEO of a large company does his or her own housework?

Accepted Answer

A)  The opportunity cost of a CEO's time is quite high because they have an abundance of time to spend on housework. 
B)  The opportunity cost of a CEO's time is quite low because they have a scarcity of time to spend on housework. 
C)  The opportunity cost of a CEO's time is quite low because they have an abundance of time to spend on housework. 
D)  The opportunity cost of a CEO's time is quite high because they have a scarcity of time to spend on housework. 
E)  The opportunity cost of a CEO's time is equal to that of everyone else that works at the same company. 
A)  The opportunity cost of a CEO's time is quite high because they have an abundance of time to spend on housework. 
B)  The opportunity cost of a CEO's time is quite low because they have a scarcity of time to spend on housework. 
C)  The opportunity cost of a CEO's time is quite low because they have an abundance of time to spend on housework. 
D)  The opportunity cost of a CEO's time is quite high because they have a scarcity of time to spend on housework. 
E)  The opportunity cost of a CEO's time is equal to that of everyone else that works at the same company.

Question 17

What is the opportunity cost of purchasing a college textbook?

Accepted Answer

A)  the price paid at the university bookstore 
B)  the cost savings from not purchasing a book 
C)  the prospect of failing homework assignments and quizzes 
D)  the trade-in value at the end of the semester 
E)  the cost of the course minus the cost of the textbook 
A)  the price paid at the university bookstore 
B)  the cost savings from not purchasing a book 
C)  the prospect of failing homework assignments and quizzes 
D)  the trade-in value at the end of the semester 
E)  the cost of the course minus the cost of the textbook

Question 18

Laura leaves her job as an accountant,where she earns $80,000 per year,to start her own business.After the first year,her business earns a profit of $60,000.How would an economist describe the profitability of Laura's career change?

Accepted Answer

A)  Laura had a profit of $140,000. 
B)  Laura had a loss of $20,000. 
C)  Laura had a profit of $20,000. 
D)  Laura had a profit of $60,000. 
E)  Laura had a loss of $80,000. 
A)  Laura had a profit of $140,000. 
B)  Laura had a loss of $20,000. 
C)  Laura had a profit of $20,000. 
D)  Laura had a profit of $60,000. 
E)  Laura had a loss of $80,000.

Question 19

An economist is most capable of determining

Accepted Answer

A)  how worker productivity affects the output of an economy. 
B)  psychological factors that contribute to worker productivity. 
C)  interior paint colors that boost business revenue. 
D)  which individuals are allowed to make decisions. 
E)  why some consumers prefer emeralds over diamonds. 
A)  how worker productivity affects the output of an economy. 
B)  psychological factors that contribute to worker productivity. 
C)  interior paint colors that boost business revenue. 
D)  which individuals are allowed to make decisions. 
E)  why some consumers prefer emeralds over diamonds.

Question 20

It is crucial to recognize that ________ and ________ are separate evaluations made at the margin.

Accepted Answer

A)  costs; benefits 
B)  buying; selling 
C)  incentives; trade-offs 
D)  economics; accounting 
E)  trade-offs; opportunity costs 
A)  costs; benefits 
B)  buying; selling 
C)  incentives; trade-offs 
D)  economics; accounting 
E)  trade-offs; opportunity costs

Exam 1: Five Foundations of Economics

An economist would argue that the true cost of a college education exceeds the cost of tuition,housing,and books because of

In the area of many college campuses,parking spaces are often scarce.If these parking spaces have parking meters,which population described below would pay for parking?

At any quantity,when the marginal benefit equals the marginal cost,that quantity is said to be

According to marginal thinking,an individual will continue to consume until after the benefit of additional consumption ________ its cost.

Which of the following is an example of an unintended consequence?

The discipline of economics is largely based on encouraging individuals to engage in certain activities and discouraging them from engaging in others.Why is encouraging or discouraging individuals through incentives so important?

Microeconomics is the branch of economics that focuses on the

Economic growth in developed countries has been altered by the increased popularity of the Internet.How has the Internet,in terms of both negative and positive incentives,promoted but also discouraged economic growth?

The ________ system encourages innovation by creating a powerful financial reward for creativity.

Rational decision making under conditions of scarcity requires individuals to

Opportunity cost is the ________ alternative forfeited when a choice is made.

When consumers discard their gasoline-powered automobiles for electric-powered ones,this partially reflects the ________ of gasoline.

Isaac has four potential jobs to consider,each with different salary offers.From highest to lowest,the salaries are: $47,500,$46,000,$45,000,and $42,000.Based on the information provided,if Isaac accepts the highest-paying position,what is his opportunity cost of this position?

Why would economists find it surprising if the CEO of a large company does his or her own housework?

What is the opportunity cost of purchasing a college textbook?

Laura leaves her job as an accountant,where she earns $80,000 per year,to start her own business.After the first year,her business earns a profit of $60,000.How would an economist describe the profitability of Laura's career change?

An economist is most capable of determining

It is crucial to recognize that ________ and ________ are separate evaluations made at the margin.

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

It is crucial to recognize that and are separate evaluations made at the margin.