Question 1

The phrase gains from trade refers to the:

Accepted Answer

A)  profits obtained from sales of a good or service. 
B)  increase in total output that is realized when individuals specialize in particular tasks and trade with each other. 
C)  gains that one obtains by taking advantage of an uninformed buyer and selling at a higher than average price. 
D)  gains that one obtains by taking advantage of a temporary discount, or sale price. 
A)  profits obtained from sales of a good or service. 
B)  increase in total output that is realized when individuals specialize in particular tasks and trade with each other. 
C)  gains that one obtains by taking advantage of an uninformed buyer and selling at a higher than average price. 
D)  gains that one obtains by taking advantage of a temporary discount, or sale price.

Question 2

An economy is efficient when:

Accepted Answer

A)  the problem of scarcity is eliminated. 
B)  output is distributed equitably. 
C)  all opportunities to make some people better off without making other people worse off have been taken. 
D)  all opportunities to make some people worse off without making other people better off have been taken. 
A)  the problem of scarcity is eliminated. 
B)  output is distributed equitably. 
C)  all opportunities to make some people better off without making other people worse off have been taken. 
D)  all opportunities to make some people worse off without making other people better off have been taken.

Question 3

Which of the following is NOT one of the four principles of individual choice?

Accepted Answer

A)  Resources are scarce. 
B)  Unpaid volunteer work is irrational, since economic rationality dictates that individuals should only engage in work they are paid for. 
C)  The real cost of something is its opportunity cost. 
D)  People usually take advantage of opportunities to make themselves better off. 
A)  Resources are scarce. 
B)  Unpaid volunteer work is irrational, since economic rationality dictates that individuals should only engage in work they are paid for. 
C)  The real cost of something is its opportunity cost. 
D)  People usually take advantage of opportunities to make themselves better off.

Question 4

Which of the following is an example of marginal analysis?

Accepted Answer

A)  ordering a pizza rather than eating leftover meatloaf 
B)  deciding whether to eat one more slice of pizza 
C)  using a coupon to save $2 on a pizza 
D)  writing a check to pay for the pizza rather than using a credit card 
A)  ordering a pizza rather than eating leftover meatloaf 
B)  deciding whether to eat one more slice of pizza 
C)  using a coupon to save $2 on a pizza 
D)  writing a check to pay for the pizza rather than using a credit card

Question 5

When individuals act in their own self-interest:

Accepted Answer

A)  efficiency is always achieved. 
B)  equity is always achieved. 
C)  society may be worse off in some cases. 
D)  all opportunities have been taken to make some people better off without making other people worse off. 
A)  efficiency is always achieved. 
B)  equity is always achieved. 
C)  society may be worse off in some cases. 
D)  all opportunities have been taken to make some people better off without making other people worse off.

Question 6

Which of the following methods of discouraging speeding is likely to be MOST effective because people usually exploit opportunities to make themselves better off?

Accepted Answer

A)  increasing the number of signs stating the speed limit 
B)  increasing the fine associated with speeding tickets 
C)  public service announcements reminding drivers of the dangers of speeding 
D)  All three methods are equally effective. 
A)  increasing the number of signs stating the speed limit 
B)  increasing the fine associated with speeding tickets 
C)  public service announcements reminding drivers of the dangers of speeding 
D)  All three methods are equally effective.

Question 7

When hurricane Katrina devastated the Gulf coast, the businesses in the area, even those not physically damaged by the storm, had losses. Explain how this illustrates the principle that "one person's spending is another person's income."

Accepted Answer

After the hurricane, very few tourists v

Question 8

A choice made _____ is a choice whether to do a little more or a little less of something.

Accepted Answer

A)  at the front end 
B)  in the beginning 
C)  at the margin 
D)  ceteris paribus 
A)  at the front end 
B)  in the beginning 
C)  at the margin 
D)  ceteris paribus

Question 9

Suppose small business owners decide to spend less. How will this affect an economy?

Accepted Answer

A)  It will have no impact, since this group makes up a small portion of any economy. 
B)  It will decrease the level of income of other people, since one person's spending is someone else's income. 
C)  It will cause prices for many goods to increase. 
D)  It will increase the level of income in the economy, since other groups will spend more. 
A)  It will have no impact, since this group makes up a small portion of any economy. 
B)  It will decrease the level of income of other people, since one person's spending is someone else's income. 
C)  It will cause prices for many goods to increase. 
D)  It will increase the level of income in the economy, since other groups will spend more.

Question 10

We are forced to make choices because of:

Accepted Answer

A)  exploitation. 
B)  efficiency. 
C)  scarcity. 
D)  the margin. 
A)  exploitation. 
B)  efficiency. 
C)  scarcity. 
D)  the margin.

Question 11

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

Accepted Answer

A) True 
 B)False

Question 12

When someone says resources are scarce, this suggests that:

Accepted Answer

A)  lower-income individuals must be especially careful about the choices they make. 
B)  choices must be made to utilize resources in the best manner possible. 
C)  additional resources could be found if there were additional funds allocated to the effort. 
D)  we have enough resources to meet all of our needs and wants. 
A)  lower-income individuals must be especially careful about the choices they make. 
B)  choices must be made to utilize resources in the best manner possible. 
C)  additional resources could be found if there were additional funds allocated to the effort. 
D)  we have enough resources to meet all of our needs and wants.

Question 13

Increases in total output realized when individuals specialize in particular tasks and trade are known as:

Accepted Answer

A)  the gains from trade. 
B)  the profits obtained from sales of a good or service. 
C)  marginal analysis. 
D)  a trade-off. 
A)  the gains from trade. 
B)  the profits obtained from sales of a good or service. 
C)  marginal analysis. 
D)  a trade-off.

Question 14

Whenever a choice is made:

Accepted Answer

A)  the cost of that choice is opportunity cost. 
B)  the cost is easy to measure in dollar terms. 
C)  efficiency is improved. 
D)  scarcity is not the problem. 
A)  the cost of that choice is opportunity cost. 
B)  the cost is easy to measure in dollar terms. 
C)  efficiency is improved. 
D)  scarcity is not the problem.

Question 15

If the market for corn is in equilibrium:

Accepted Answer

A)  every buyer who wants to consume corn can acquire corn. 
B)  every producer who wants to sell corn can do so. 
C)  the price is set so that the quantity of corn produced is equal to the quantity of corn consumed. 
D)  all producers of corn earn the same amount of income from the sale of corn. 
A)  every buyer who wants to consume corn can acquire corn. 
B)  every producer who wants to sell corn can do so. 
C)  the price is set so that the quantity of corn produced is equal to the quantity of corn consumed. 
D)  all producers of corn earn the same amount of income from the sale of corn.

Question 16

Mr. Freezee operates a fleet of ice cream trucks that drive around neighborhoods selling ice cream. He is trying to decide whether he should buy another ice cream truck to add to his fleet. He determines that one more truck will add $750 to his revenue but that the truck will also increase his costs by $1,000. Based on marginal analysis, Mr. Freezee decides:

Accepted Answer

A)  that he should not purchase the truck, since the costs outweigh the benefits. 
B)  that he should purchase the truck, since the benefits outweigh the costs. 
C)  that he should purchase the truck, since his profits will rise by $250. 
D)  to purchase several trucks with the same costs and benefits. 
A)  that he should not purchase the truck, since the costs outweigh the benefits. 
B)  that he should purchase the truck, since the benefits outweigh the costs. 
C)  that he should purchase the truck, since his profits will rise by $250. 
D)  to purchase several trucks with the same costs and benefits.

Question 17

The Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is:

Accepted Answer

A)  $3. 
B)  your enjoyment of the burrito. 
C)  $3 and your enjoyment of the burrito. 
D)  $3, your enjoyment of the burrito, and your enjoyment of the nachos. 
A)  $3. 
B)  your enjoyment of the burrito. 
C)  $3 and your enjoyment of the burrito. 
D)  $3, your enjoyment of the burrito, and your enjoyment of the nachos.

Question 18

To encourage people to retire later, because people usually exploit opportunities to make themselves better off, the government could:

Accepted Answer

A)  reduce Social Security benefits. 
B)  raise the tax rate on older individuals. 
C)  engage in a public service campaign explaining the value of these employees to the economy. 
D)  increase Social Security benefits. 
A)  reduce Social Security benefits. 
B)  raise the tax rate on older individuals. 
C)  engage in a public service campaign explaining the value of these employees to the economy. 
D)  increase Social Security benefits.

Question 19

Economists tend to believe that to change people's behavior you must:

Accepted Answer

A)  appeal to their concern for society. 
B)  change their incentives. 
C)  legislate the change. 
D)  appeal to their religious values. 
A)  appeal to their concern for society. 
B)  change their incentives. 
C)  legislate the change. 
D)  appeal to their religious values.

Question 20

The most efficient way to dispose of industrial waste is to dump it in a nearby river or parcel of land. Why is this illegal?

Accepted Answer

Because while it may be quite efficient,

The phrase gains from trade refers to the:

An economy is efficient when:

Which of the following is NOT one of the four principles of individual choice?

Which of the following is an example of marginal analysis?

When individuals act in their own self-interest:

Which of the following methods of discouraging speeding is likely to be MOST effective because people usually exploit opportunities to make themselves better off?

When hurricane Katrina devastated the Gulf coast, the businesses in the area, even those not physically damaged by the storm, had losses. Explain how this illustrates the principle that "one person's spending is another person's income."

A choice made _____ is a choice whether to do a little more or a little less of something.

Suppose small business owners decide to spend less. How will this affect an economy?

We are forced to make choices because of:

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

When someone says resources are scarce, this suggests that:

Increases in total output realized when individuals specialize in particular tasks and trade are known as:

Whenever a choice is made:

If the market for corn is in equilibrium:

The Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is:

To encourage people to retire later, because people usually exploit opportunities to make themselves better off, the government could:

Economists tend to believe that to change people's behavior you must:

The most efficient way to dispose of industrial waste is to dump it in a nearby river or parcel of land. Why is this illegal?

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 1: First Principles

The phrase gains from trade refers to the:

An economy is efficient when:

Which of the following is NOT one of the four principles of individual choice?

Which of the following is an example of marginal analysis?

When individuals act in their own self-interest:

Which of the following methods of discouraging speeding is likely to be MOST effective because people usually exploit opportunities to make themselves better off?

When hurricane Katrina devastated the Gulf coast, the businesses in the area, even those not physically damaged by the storm, had losses. Explain how this illustrates the principle that "one person's spending is another person's income."

A choice made _____ is a choice whether to do a little more or a little less of something.

Suppose small business owners decide to spend less. How will this affect an economy?

We are forced to make choices because of:

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

When someone says resources are scarce, this suggests that:

Increases in total output realized when individuals specialize in particular tasks and trade are known as:

Whenever a choice is made:

If the market for corn is in equilibrium:

The Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is:

To encourage people to retire later, because people usually exploit opportunities to make themselves better off, the government could:

Economists tend to believe that to change people's behavior you must:

The most efficient way to dispose of industrial waste is to dump it in a nearby river or parcel of land. Why is this illegal?

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters