Question 1

A car insurance company is willing to offer accident-free drivers a discount.This is an example of

Accepted Answer

A)  a positive incentive. 
B)  a negative incentive. 
C)  an opportunity cost. 
D)  a comparative advantage. 
E)  scarcity. 
A)  a positive incentive. 
B)  a negative incentive. 
C)  an opportunity cost. 
D)  a comparative advantage. 
E)  scarcity.

Question 2

Disparities in opportunity cost among competitors are the cause of

Accepted Answer

A)  optimization. 
B)  comparative advantage. 
C)  trade-offs. 
D)  command economies. 
E)  marginal benefits. 
A)  optimization. 
B)  comparative advantage. 
C)  trade-offs. 
D)  command economies. 
E)  marginal benefits.

Question 3

Economists believe that optimal decisions are made up to the point where

Accepted Answer

A)  marginal benefit is zero. 
B)  marginal cost is zero. 
C)  marginal benefits are greater than marginal costs. 
D)  marginal costs are greater than marginal benefits. 
E)  marginal benefits are equal to marginal costs. 
A)  marginal benefit is zero. 
B)  marginal cost is zero. 
C)  marginal benefits are greater than marginal costs. 
D)  marginal costs are greater than marginal benefits. 
E)  marginal benefits are equal to marginal costs.

Question 4

The proliferation of BitTorrent and other file sharing media have threatened the copyright system.Based on an understanding of incentives and opportunity cost,how are the decisions of musicians likely impacted?

Accepted Answer

A)  They will spend more time in court,reducing the amount of music they produce. 
B)  They will illegally download the music of other artists to balance the impact across the industry. 
C)  Since music theft cannot be stopped,musicians will stop trying to sell their music. 
D)  Most musicians will be forced to take a second job in order to support themselves. 
E)  If more money can be made in alternative professions,individuals will choose not to pursue music. 
A)  They will spend more time in court,reducing the amount of music they produce. 
B)  They will illegally download the music of other artists to balance the impact across the industry. 
C)  Since music theft cannot be stopped,musicians will stop trying to sell their music. 
D)  Most musicians will be forced to take a second job in order to support themselves. 
E)  If more money can be made in alternative professions,individuals will choose not to pursue music.

Question 5

The trade-offs that are made because of scarcity

Accepted Answer

A)  are important in developing economies,but they do not apply to developed economies. 
B)  are important in developed economies,but they do not apply to developing economies. 
C)  are different when they involve the wants of people,but they are similar when they involve the needs of people. 
D)  can be accurately made to the extent that they can be quantified. 
E)  depend on the decision maker's value judgments about the relative importance of the alternatives. 
A)  are important in developing economies,but they do not apply to developed economies. 
B)  are important in developed economies,but they do not apply to developing economies. 
C)  are different when they involve the wants of people,but they are similar when they involve the needs of people. 
D)  can be accurately made to the extent that they can be quantified. 
E)  depend on the decision maker's value judgments about the relative importance of the alternatives.

Question 6

During a job search,individuals will sometimes accept the lower of two competing salary offers.What would best explain this decision?

Accepted Answer

A)  Individuals never accept a salary that exceeds their personal values. 
B)  A person may accept a lower starting salary in order to receive greater future pay increases. 
C)  The total benefits of the higher paying job are greater than the total benefits of the lower paying job. 
D)  The total benefits of the lower paying job are greater than the total benefits of the higher paying job. 
E)  The lower salary is still better than the salary earned at the previous job. 
A)  Individuals never accept a salary that exceeds their personal values. 
B)  A person may accept a lower starting salary in order to receive greater future pay increases. 
C)  The total benefits of the higher paying job are greater than the total benefits of the lower paying job. 
D)  The total benefits of the lower paying job are greater than the total benefits of the higher paying job. 
E)  The lower salary is still better than the salary earned at the previous job.

Question 7

Instead of taking an economics course,Adam could have taken a history course that meets at the exact same time.The total cost of taking the economics course would be

Accepted Answer

A)  the tuition cost for the economics course. 
B)  the fact that Adam could not take the history course at the same time. 
C)  the tuition cost for the economics course plus the price of the textbook and a notebook for the economics course. 
D)  the tuition cost,the cost of the textbook and notebook,and the fact that Adam could not take the history course at the same time. 
E)  the price of the textbook and a notebook for the economics course. 
A)  the tuition cost for the economics course. 
B)  the fact that Adam could not take the history course at the same time. 
C)  the tuition cost for the economics course plus the price of the textbook and a notebook for the economics course. 
D)  the tuition cost,the cost of the textbook and notebook,and the fact that Adam could not take the history course at the same time. 
E)  the price of the textbook and a notebook for the economics course.

Question 8

Some public transit systems use an "honor system" whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer.With what population would such a system be successful?

Accepted Answer

A)  a population that is willing to take risks and whose people believe that they will not be caught if they don't pay their fare 
B)  a population that places a high opportunity cost on taking time to purchase a ticket 
C)  a population whose people are willing to take risks,believe that they will not be caught if they don't pay their fare,and treat fines for not paying a fare as a nuisance 
D)  a population that is unwilling to take risks and whose people believe there is a high chance that they will be caught if they don't pay their fare 
E)  a population whose people are unwilling to take risks,believe there is a high chance that they will not be caught if they don't pay their fare,and place a low value on doing the right thing 
A)  a population that is willing to take risks and whose people believe that they will not be caught if they don't pay their fare 
B)  a population that places a high opportunity cost on taking time to purchase a ticket 
C)  a population whose people are willing to take risks,believe that they will not be caught if they don't pay their fare,and treat fines for not paying a fare as a nuisance 
D)  a population that is unwilling to take risks and whose people believe there is a high chance that they will be caught if they don't pay their fare 
E)  a population whose people are unwilling to take risks,believe there is a high chance that they will not be caught if they don't pay their fare,and place a low value on doing the right thing

Question 9

Economics is the study of

Accepted Answer

A)  how to make money. 
B)  how to allocate resources to satisfy wants and needs. 
C)  capitalism. 
D)  how to make workers more productive and firms more profitable. 
E)  markets. 
A)  how to make money. 
B)  how to allocate resources to satisfy wants and needs. 
C)  capitalism. 
D)  how to make workers more productive and firms more profitable. 
E)  markets.

Question 10

Corporate leadership sometimes waits until after presidential elections in order to make major business decisions.An economist would maintain that this is in anticipation of future

Accepted Answer

A)  forecasting. 
B)  fear. 
C)  scarcity. 
D)  incentives. 
E)  taxes. 
A)  forecasting. 
B)  fear. 
C)  scarcity. 
D)  incentives. 
E)  taxes.

Question 11

Explain why economics is not such a "dismal science."

Accepted Answer

The study of economics isn't concerned p

Question 12

A possible opportunity cost of NOT engaging in free trade is

Accepted Answer

A)  a loss of domestic jobs. 
B)  a smaller variety of goods and services. 
C)  higher prices. 
D)  economic growth. 
E)  import tariffs. 
A)  a loss of domestic jobs. 
B)  a smaller variety of goods and services. 
C)  higher prices. 
D)  economic growth. 
E)  import tariffs.

Question 13

Economics is concerned with the trade-offs that emerge because of scarcity.The term "trade-offs" refers to

Accepted Answer

A)  the decision about whether households or businesses should bear the entire burden of the scarcity problem. 
B)  the buying and selling that occur as unwanted goods are exchanged for goods that are desired. 
C)  the alternatives given up when making choices. 
D)  recycling and transforming old goods into new goods to reduce scarcity problems. 
E)  forcing businesses to produce some goods and services and not others. 
A)  the decision about whether households or businesses should bear the entire burden of the scarcity problem. 
B)  the buying and selling that occur as unwanted goods are exchanged for goods that are desired. 
C)  the alternatives given up when making choices. 
D)  recycling and transforming old goods into new goods to reduce scarcity problems. 
E)  forcing businesses to produce some goods and services and not others.

Question 14

The U.S.federal government offers homeowners a tax deduction for their home loan interest payments.This reduction in taxes may have encouraged too many people to own homes.If the tax deduction caused people who otherwise would have rented to own,the tax deduction serves as 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

Exam 1: Five Foundations of Economics

A car insurance company is willing to offer accident-free drivers a discount.This is an example of

Disparities in opportunity cost among competitors are the cause of

Economists believe that optimal decisions are made up to the point where

The proliferation of BitTorrent and other file sharing media have threatened the copyright system.Based on an understanding of incentives and opportunity cost,how are the decisions of musicians likely impacted?

The trade-offs that are made because of scarcity

During a job search,individuals will sometimes accept the lower of two competing salary offers.What would best explain this decision?

Instead of taking an economics course,Adam could have taken a history course that meets at the exact same time.The total cost of taking the economics course would be

Some public transit systems use an "honor system" whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer.With what population would such a system be successful?

Economics is the study of

Corporate leadership sometimes waits until after presidential elections in order to make major business decisions.An economist would maintain that this is in anticipation of future

Explain why economics is not such a "dismal science."

A possible opportunity cost of NOT engaging in free trade is

Economics is concerned with the trade-offs that emerge because of scarcity.The term "trade-offs" refers to

The U.S.federal government offers homeowners a tax deduction for their home loan interest payments.This reduction in taxes may have encouraged too many people to own homes.If the tax deduction caused people who otherwise would have rented to own,the tax deduction serves as a(n)________ incentive.

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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