Question 1

Since 1994, obesity rates in the United States

Accepted Answer

A) have been on a slow and steady decline. 
B) have increased in all 50 states. 
C) have primarily increased in the Southeast and remained constant or slightly decreased in the remainder of the country. 
D) have remained fairly constant throughout the country. 
A) have been on a slow and steady decline. 
B) have increased in all 50 states. 
C) have primarily increased in the Southeast and remained constant or slightly decreased in the remainder of the country. 
D) have remained fairly constant throughout the country.

Question 2

If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the percentage change in price?

Accepted Answer

A) 13 percent 
B) 30 percent 
C) 75 percent 
D) 77 percent 
A) 13 percent 
B) 30 percent 
C) 75 percent 
D) 77 percent

Question 3

You explain to your roommate Surya, who makes beaded headbands, about an economic theory which asserts that consumers will purchase more of a product at lower prices than they will at higher prices.She contends that the theory is incorrect because over the past two years she has lowered the price of her headbands and yet has seen a decrease in sales.How would you respond to Surya?

Accepted Answer

A) Surya is right; she has evidence to back her claim. The theory must be erroneous. 
B) Surya is making the mistake of assuming that correlation implies causation. 
C) I will explain to her that she is making the error of reverse causality: it is the decrease in demand that has caused her to lower her prices. 
D) I will explain to her that there are some omitted variables that have contributed to a decrease in her sales such as changes in income. 
A) Surya is right; she has evidence to back her claim. The theory must be erroneous. 
B) Surya is making the mistake of assuming that correlation implies causation. 
C) I will explain to her that she is making the error of reverse causality: it is the decrease in demand that has caused her to lower her prices. 
D) I will explain to her that there are some omitted variables that have contributed to a decrease in her sales such as changes in income.

Question 4

The prevalence of Alzheimer's dementia is very high among residents living in nursing homes.A student concludes that it is likely that living in a nursing home causes Alzheimer's dementia.What is the flaw in the student's reasoning?

Accepted Answer

A) The student has failed to take into account other causes of Alzheimer's disease. 
B) The student is drawing a false conclusion; he is confusing cause and effect. 
C) The student is using an inadequate sample size. 
D) The student is drawing a false conclusion by making the mistake of omitting critical variables such as the age and gender of the residents. 
A) The student has failed to take into account other causes of Alzheimer's disease. 
B) The student is drawing a false conclusion; he is confusing cause and effect. 
C) The student is using an inadequate sample size. 
D) The student is drawing a false conclusion by making the mistake of omitting critical variables such as the age and gender of the residents.

Question 5

The extra cost associated with undertaking an activity is called

Accepted Answer

A) net loss. 
B) marginal cost. 
C) opportunity cost. 
D) foregone cost. 
A) net loss. 
B) marginal cost. 
C) opportunity cost. 
D) foregone cost.

Question 6

Scenario 1-1
Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of $5,000 per week.A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we're on the right track.We are producing the optimal number of cell phones."
-Refer to Scenario 1-1.Had the firm not produced and sold the last 3,000 cell phones, would its profit be higher or lower, and by how much?

Accepted Answer

A) Its profit will be $6,700 higher. 
B) Its profit will be $700 higher. 
C) Its profit will be $700 lower. 
D) Its profit will be $6,000 lower. 
A) Its profit will be $6,700 higher. 
B) Its profit will be $700 higher. 
C) Its profit will be $700 lower. 
D) Its profit will be $6,000 lower.

Question 7

Automobile manufacturers produce a range of automobiles such as sports utility vehicles, luxury sedans, pickup trucks, and compact cars.What fundamental economic question are they addressing by making this range of products?

Accepted Answer

A) How to produce goods that consumers want? 
B) Why produce a variety of automobiles? 
C) What to produce? 
D) Who to produce automobiles for? 
A) How to produce goods that consumers want? 
B) Why produce a variety of automobiles? 
C) What to produce? 
D) Who to produce automobiles for?

Question 8

Political candidates often hold fundraisers by charging "per plate" for dinner.Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate.Does this transaction benefit both parties?

Accepted Answer

A) No, political candidates should never be allowed to overcharge for a fundraising dinner as that limits the number of people who can afford to attend. 
B) Yes, it was a voluntary exchange that benefited both parties. 
C) No, Wendy paid too much for four dinners. 
D) Yes, but only if the dinners served actually cost $1,000 each. 
A) No, political candidates should never be allowed to overcharge for a fundraising dinner as that limits the number of people who can afford to attend. 
B) Yes, it was a voluntary exchange that benefited both parties. 
C) No, Wendy paid too much for four dinners. 
D) Yes, but only if the dinners served actually cost $1,000 each.

Question 9

Which of the following statements is true?

Accepted Answer

A) Any time you have to decide which action to take you are experiencing economic equity. 
B) Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as with a stock clearance sale. 
C) Every individual, no matter how rich or poor, is faced with situations that require trade-offs. 
D) Economics is a social science that studies the trade-offs we are forced to make because resources are unlimited. 
A) Any time you have to decide which action to take you are experiencing economic equity. 
B) Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as with a stock clearance sale. 
C) Every individual, no matter how rich or poor, is faced with situations that require trade-offs. 
D) Economics is a social science that studies the trade-offs we are forced to make because resources are unlimited.

Question 10

Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish?

Accepted Answer

A) Failure to do this could reduce the efficiency of the system by producing some goods and services that are not as highly valued as others. 
B) Failure to do this could lead to an inequitable allocation of goods and services produced. 
C) Failure to do this could lead to drastic shortages of goods and services. 
D) Failure to do this could reduce efficiency and lead to an inequitable allocation of output. 
A) Failure to do this could reduce the efficiency of the system by producing some goods and services that are not as highly valued as others. 
B) Failure to do this could lead to an inequitable allocation of goods and services produced. 
C) Failure to do this could lead to drastic shortages of goods and services. 
D) Failure to do this could reduce efficiency and lead to an inequitable allocation of output.

Question 11

Markets promote

Accepted Answer

A) equity and competition. 
B) voluntary exchange and equality. 
C) equity and equality. 
D) competition and voluntary exchange. 
A) equity and competition. 
B) voluntary exchange and equality. 
C) equity and equality. 
D) competition and voluntary exchange.

Question 12

The relationship between consumer spending and disposable personal income is

Accepted Answer

A) an inverse relationship. 
B) a direct relationship. 
C) a negative relationship. 
D) independent. 
A) an inverse relationship. 
B) a direct relationship. 
C) a negative relationship. 
D) independent.

Question 13

Which of the following is a normative economic statement?

Accepted Answer

A) Rising global demand for coal has led to increases in the price of coal. 
B) With rising mortgage rates and rising unemployment rates, the number of unsold homes has increased. 
C) The state of Texas is considering increasing funds for light-rail development to promote the use of public transportation. 
D) Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable. 
A) Rising global demand for coal has led to increases in the price of coal. 
B) With rising mortgage rates and rising unemployment rates, the number of unsold homes has increased. 
C) The state of Texas is considering increasing funds for light-rail development to promote the use of public transportation. 
D) Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.

Question 14

The machines workers have to work with are considered

Accepted Answer

A) human capital. 
B) physical capital. 
C) entrepreneurship. 
D) financial capital. 
A) human capital. 
B) physical capital. 
C) entrepreneurship. 
D) financial capital.

Question 15

DeShawn's Detailing is a service that details cars at the customers' homes or places of work.DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service.For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package.Should DeShawn continue to offer the engine detailing service?

Accepted Answer

A) yes, he still makes a profit by selling the engine detailing service with the basic detailing package 
B) yes, but only if he raises the price of the basic detailing package 
C) no, his marginal benefit is less than his marginal cost 
D) More information is needed for DeShawn to make this decision. 
A) yes, he still makes a profit by selling the engine detailing service with the basic detailing package 
B) yes, but only if he raises the price of the basic detailing package 
C) no, his marginal benefit is less than his marginal cost 
D) More information is needed for DeShawn to make this decision.

Question 16

The term "market" refers to trading arrangements by which buyers and sellers come together.

Accepted Answer

A) True 
 B)False

Question 17

When voluntary exchange takes place, neither party gains from the exchange.

Accepted Answer

A) True 
 B)False

Question 18

Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Accepted Answer

A) True 
 B)False

Question 19

Who receives the most of what is produced in a market economy?

Accepted Answer

A) lawmakers and other politically favored groups 
B) those who are willing and able to buy them 
C) everyone receives an equal amount 
D) people who earn the highest incomes 
A) lawmakers and other politically favored groups 
B) those who are willing and able to buy them 
C) everyone receives an equal amount 
D) people who earn the highest incomes

Question 20

Suppose that some teachers have decided that economic and financial uncertainty have made the prospect of retiring more risky, and therefore carry a higher cost than not retiring.By using all available information as they act to achieve their goals, these teachers are exemplifying the economic idea that

Accepted Answer

A) people are rational. 
B) people respond to economic incentives. 
C) optimal decisions are made at the margin. 
D) equity is more important than efficiency. 
A) people are rational. 
B) people respond to economic incentives. 
C) optimal decisions are made at the margin. 
D) equity is more important than efficiency.

Since 1994, obesity rates in the United States

If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the percentage change in price?

The prevalence of Alzheimer's dementia is very high among residents living in nursing homes.A student concludes that it is likely that living in a nursing home causes Alzheimer's dementia.What is the flaw in the student's reasoning?

The extra cost associated with undertaking an activity is called

Automobile manufacturers produce a range of automobiles such as sports utility vehicles, luxury sedans, pickup trucks, and compact cars.What fundamental economic question are they addressing by making this range of products?

Political candidates often hold fundraisers by charging "per plate" for dinner.Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate.Does this transaction benefit both parties?

Which of the following statements is true?

Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish?

Markets promote

The relationship between consumer spending and disposable personal income is

Which of the following is a normative economic statement?

The machines workers have to work with are considered

The term "market" refers to trading arrangements by which buyers and sellers come together.

When voluntary exchange takes place, neither party gains from the exchange.

Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Who receives the most of what is produced in a market economy?

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 1: Economics: Foundations and Models

Since 1994, obesity rates in the United States

If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the percentage change in price?

The prevalence of Alzheimer's dementia is very high among residents living in nursing homes.A student concludes that it is likely that living in a nursing home causes Alzheimer's dementia.What is the flaw in the student's reasoning?

The extra cost associated with undertaking an activity is called

Automobile manufacturers produce a range of automobiles such as sports utility vehicles, luxury sedans, pickup trucks, and compact cars.What fundamental economic question are they addressing by making this range of products?

Political candidates often hold fundraisers by charging "per plate" for dinner.Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate.Does this transaction benefit both parties?

Which of the following statements is true?

Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish?

Markets promote

The relationship between consumer spending and disposable personal income is

Which of the following is a normative economic statement?

The machines workers have to work with are considered

The term "market" refers to trading arrangements by which buyers and sellers come together.

When voluntary exchange takes place, neither party gains from the exchange.

Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Who receives the most of what is produced in a market economy?

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters