Question 1

When applying the marginal principle, you should pick the level at which the activity's marginal benefit equals its marginal cost.

Accepted Answer

A) True 
 B)False

Question 2

A firm produces its product using both capital and labor. When it does not change its capital usage, but doubles its labor input, its output increases by less than 50 percent. Which of the following is the most likely explanation of this finding?

Accepted Answer

A)  the principle of opportunity cost 
B)  the principle of diminishing returns 
C)  the marginal principle 
D)  the spillover principle 
A)  the principle of opportunity cost 
B)  the principle of diminishing returns 
C)  the marginal principle 
D)  the spillover principle

Question 3

According to the principle of diminishing returns, if the number of workers is increased beyond the point of diminishing returns, then the additional worker

Accepted Answer

A)  increases total output by the same amount as previous workers. 
B)  increases total output by more than the amount of previous workers. 
C)  increases total output by less than the amount of previous workers. 
D)  decreases total output. 
A)  increases total output by the same amount as previous workers. 
B)  increases total output by more than the amount of previous workers. 
C)  increases total output by less than the amount of previous workers. 
D)  decreases total output.

Question 4

An unemployed individual decides to spend the day fishing. The opportunity cost of fishing is

Accepted Answer

A)  the cost of bait and any other monetary expenses. 
B)  zero, because the person doesn't have a job. 
C)  the cost of bait, any other monetary expenses, and the value of the individual's wages while he was working. 
D)  the cost of bait, any other monetary expenses, and the value of the best alternative use of the individual's time. 
A)  the cost of bait and any other monetary expenses. 
B)  zero, because the person doesn't have a job. 
C)  the cost of bait, any other monetary expenses, and the value of the individual's wages while he was working. 
D)  the cost of bait, any other monetary expenses, and the value of the best alternative use of the individual's time.

Question 5

The principle of diminishing returns implies that as one input increases while the other inputs are held fixed, output

Accepted Answer

A)  increases at an increasing rate. 
B)  increases at a decreasing rate. 
C)  decreases at a decreasing rate. 
D)  decreases at an increasing rate. 
A)  increases at an increasing rate. 
B)  increases at a decreasing rate. 
C)  decreases at a decreasing rate. 
D)  decreases at an increasing rate.

Question 6

Recall the Application about Jasper Johns and house painting to answer the following question(s). In this Application, it is assumed that Johns can earn $5,000 per day by painting works of art, and therefore should hire a house painter who charges $150 per day, and takes 10 days, to paint his house.
-At what point should Jasper Johns consider painting his own house?

Accepted Answer

A)  if the house painter charges $500 per day and takes 20 days to paint the house 
B)  if the house painter charged $2,500 per day, since that is excessive for painting a house 
C)  if his earnings dropped to $1,000 per day 
D)  if the house painter charged more for 10 days worth of work than Johns could earn each day 
A)  if the house painter charges $500 per day and takes 20 days to paint the house 
B)  if the house painter charged $2,500 per day, since that is excessive for painting a house 
C)  if his earnings dropped to $1,000 per day 
D)  if the house painter charged more for 10 days worth of work than Johns could earn each day

Question 7

Figure 2.1
  
-Refer to Figure 2.1. If you choose to produce only agricultural products, what is the maximum quantity you can produce per year?

Accepted Answer

A)  200 tons 
B)  400 tons 
C)  600 tons 
D)  > 600 tons 
A)  200 tons 
B)  400 tons 
C)  600 tons 
D)  > 600 tons

Question 8

Table 2.5
  
-Refer to the table above. The nominal value of the minimum wage in 2011 was

Accepted Answer

A)  $2.00 per hour. 
B)  $3.63 per hour. 
C)  $5.62 per hour. 
D)  $7.25 per hour. 
A)  $2.00 per hour. 
B)  $3.63 per hour. 
C)  $5.62 per hour. 
D)  $7.25 per hour.

Question 9

The extra benefit resulting from a small increase in an activity is called the

Accepted Answer

A)  opportunity cost. 
B)  marginal benefit. 
C)  marginal cost. 
D)  diminishing returns of the activity. 
A)  opportunity cost. 
B)  marginal benefit. 
C)  marginal cost. 
D)  diminishing returns of the activity.

Question 10

Economists argue that individuals should continue to consume until total benefit equals total cost.

Accepted Answer

A) True 
 B)False

Question 11

The real-nominal principle states that

Accepted Answer

A)  people respond more to explicit, or real, costs than to implicit costs. 
B)  people respond more to implicit costs than to explicit costs. 
C)  what matters to people is the face value of money or income. 
D)  what matters to people is the purchasing power of money or income. 
A)  people respond more to explicit, or real, costs than to implicit costs. 
B)  people respond more to implicit costs than to explicit costs. 
C)  what matters to people is the face value of money or income. 
D)  what matters to people is the purchasing power of money or income.

Question 12

Steven lives in a big city where there is a shortage of parking. He has a parking spot in his driveway where he parks his car. Which of the following statements is most correct?

Accepted Answer

A)  Steven has a lower opportunity cost of owning a car than his neighbor, who must rent a parking spot. 
B)  The opportunity cost of using the spot is zero, because Steven owns the house. 
C)  The opportunity cost of using the parking spot is the price he could charge someone else for using the spot. 
D)  The opportunity cost depends on how much Steven's mortgage payment is. 
A)  Steven has a lower opportunity cost of owning a car than his neighbor, who must rent a parking spot. 
B)  The opportunity cost of using the spot is zero, because Steven owns the house. 
C)  The opportunity cost of using the parking spot is the price he could charge someone else for using the spot. 
D)  The opportunity cost depends on how much Steven's mortgage payment is.

Question 13

What do economists mean when they say that there is no such thing as a free lunch?

Accepted Answer

Everything has a cost, even when you do

Question 14

The opportunity cost of going to college

Accepted Answer

A)  is zero if your parents pay your tuition. 
B)  is equal to the cost of tuition, room and board, and other expenses. 
C)  includes wages you lose by going to school instead of working. 
D)  is the same for all students at a particular school who pay full tuition. 
A)  is zero if your parents pay your tuition. 
B)  is equal to the cost of tuition, room and board, and other expenses. 
C)  includes wages you lose by going to school instead of working. 
D)  is the same for all students at a particular school who pay full tuition.

Question 15

The principle that "as one input increases while the other inputs are held fixed, output increases at a decreasing rate" is known as the

Accepted Answer

A)  marginal principle. 
B)  principle of opportunity cost. 
C)  principle of diminishing returns. 
D)  spillover principle. 
A)  marginal principle. 
B)  principle of opportunity cost. 
C)  principle of diminishing returns. 
D)  spillover principle.

Question 16

Recall the Application about the best speed at which to sail an ocean cargo ship to answer the following question(s).
-Weighing the benefits and costs of the different speeds at which to sail an ocean cargo ship addresses the economic concept known as

Accepted Answer

A)  the principle of opportunity cost. 
B)  the marginal principle. 
C)  the principle of voluntary exchange. 
D)  the principle of diminishing returns. 
A)  the principle of opportunity cost. 
B)  the marginal principle. 
C)  the principle of voluntary exchange. 
D)  the principle of diminishing returns.

Question 17

What is the opportunity cost of investing $10,000 of your own money in a business you wish to start?

Accepted Answer

The opportunity cost of your $

Question 18

Recall the Application about the impact inflation has on your potential future salary and the repayment of student loans to answer the following question(s).
-According to this Application, if you earn a salary of $80,000 in the first year and all prices decrease by half in the next 5 years, what will your nominal annual salary be in 5 years?

Accepted Answer

A)  $8,000 
B)  $10,000 
C)  $20,000 
D)  $40,000 
A)  $8,000 
B)  $10,000 
C)  $20,000 
D)  $40,000

Question 19

You have an hour between your economics and math classes. What is the opportunity cost of that time if you use it to complete your math homework instead of your economics homework?

Accepted Answer

A)  the economics homework you could have completed 
B)  the math homework you chose to complete 
C)  the cost of your calculator and math textbook 
D)  zero, because it doesn't cost any money to do your math homework 
A)  the economics homework you could have completed 
B)  the math homework you chose to complete 
C)  the cost of your calculator and math textbook 
D)  zero, because it doesn't cost any money to do your math homework

Question 20

The government uses the buying power of wages in reporting changes in "nominal wages" in the economy.

Accepted Answer

A) True 
 B)False

When applying the marginal principle, you should pick the level at which the activity's marginal benefit equals its marginal cost.

A firm produces its product using both capital and labor. When it does not change its capital usage, but doubles its labor input, its output increases by less than 50 percent. Which of the following is the most likely explanation of this finding?

According to the principle of diminishing returns, if the number of workers is increased beyond the point of diminishing returns, then the additional worker

An unemployed individual decides to spend the day fishing. The opportunity cost of fishing is

The principle of diminishing returns implies that as one input increases while the other inputs are held fixed, output

Figure 2.1 -Refer to Figure 2.1. If you choose to produce only agricultural products, what is the maximum quantity you can produce per year?

Table 2.5 -Refer to the table above. The nominal value of the minimum wage in 2011 was

The extra benefit resulting from a small increase in an activity is called the

Economists argue that individuals should continue to consume until total benefit equals total cost.

The real-nominal principle states that

Steven lives in a big city where there is a shortage of parking. He has a parking spot in his driveway where he parks his car. Which of the following statements is most correct?

What do economists mean when they say that there is no such thing as a free lunch?

The opportunity cost of going to college

The principle that "as one input increases while the other inputs are held fixed, output increases at a decreasing rate" is known as the

Recall the Application about the best speed at which to sail an ocean cargo ship to answer the following question(s). -Weighing the benefits and costs of the different speeds at which to sail an ocean cargo ship addresses the economic concept known as

What is the opportunity cost of investing $10,000 of your own money in a business you wish to start?

You have an hour between your economics and math classes. What is the opportunity cost of that time if you use it to complete your math homework instead of your economics homework?

The government uses the buying power of wages in reporting changes in "nominal wages" in the economy.

Introduction: What Is Economics?

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow?

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 2: The Key Principles of Economics

When applying the marginal principle, you should pick the level at which the activity's marginal benefit equals its marginal cost.

A firm produces its product using both capital and labor. When it does not change its capital usage, but doubles its labor input, its output increases by less than 50 percent. Which of the following is the most likely explanation of this finding?

According to the principle of diminishing returns, if the number of workers is increased beyond the point of diminishing returns, then the additional worker

An unemployed individual decides to spend the day fishing. The opportunity cost of fishing is

The principle of diminishing returns implies that as one input increases while the other inputs are held fixed, output

Figure 2.1 -Refer to Figure 2.1. If you choose to produce only agricultural products, what is the maximum quantity you can produce per year?

Table 2.5 -Refer to the table above. The nominal value of the minimum wage in 2011 was

The extra benefit resulting from a small increase in an activity is called the

Economists argue that individuals should continue to consume until total benefit equals total cost.

The real-nominal principle states that

Steven lives in a big city where there is a shortage of parking. He has a parking spot in his driveway where he parks his car. Which of the following statements is most correct?

What do economists mean when they say that there is no such thing as a free lunch?

The opportunity cost of going to college

The principle that "as one input increases while the other inputs are held fixed, output increases at a decreasing rate" is known as the

Recall the Application about the best speed at which to sail an ocean cargo ship to answer the following question(s). -Weighing the benefits and costs of the different speeds at which to sail an ocean cargo ship addresses the economic concept known as

What is the opportunity cost of investing $10,000 of your own money in a business you wish to start?

You have an hour between your economics and math classes. What is the opportunity cost of that time if you use it to complete your math homework instead of your economics homework?

The government uses the buying power of wages in reporting changes in "nominal wages" in the economy.

Introduction: What Is Economics?

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow?

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters