Question 1

One thing that distinguishes normative principles from positive principles is that:

Accepted Answer

A)  normative principles are pessimistic and positive principles are optimistic. 
B)  normative principles reflect the social norms of the community, and positive principles reflect universal truths. 
C)  normative principles tell us how people should make economic decisions, and positive principles tell us how people actually do make decisions. 
D)  normative principles tell us how people actually make economic decisions, and positive principles tell us how people should make decisions. 
A)  normative principles are pessimistic and positive principles are optimistic. 
B)  normative principles reflect the social norms of the community, and positive principles reflect universal truths. 
C)  normative principles tell us how people should make economic decisions, and positive principles tell us how people actually do make decisions. 
D)  normative principles tell us how people actually make economic decisions, and positive principles tell us how people should make decisions. C

Question 2

Catherine and Nancy both own homes with lawns of similar size. Catherine mows her own lawn while Nancy hires someone to mow hers. Assume both women are rational decision makers. Which is the best explanation of the different decisions they make?

Accepted Answer

A)  The opportunity cost of Nancy's time is higher than the cost to her of hiring someone to mow the lawn. 
B)  Nancy can get her lawn mowed for less than Catherine. 
C)  Nancy doesn't own a lawnmower. 
D)  Nancy earns more than Catherine does. 
A)  The opportunity cost of Nancy's time is higher than the cost to her of hiring someone to mow the lawn. 
B)  Nancy can get her lawn mowed for less than Catherine. 
C)  Nancy doesn't own a lawnmower. 
D)  Nancy earns more than Catherine does. A

Question 3

Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfares are $450. If the Chicago-Atlanta round-trip air fare is $350, should you go to Miami?

Accepted Answer

A)  No, there is a loss of $50. 
B)  No, there is a loss of $100. 
C)  Yes, there is economic surplus of $50. 
D)  Yes, there is economic surplus of $400. 
A)  No, there is a loss of $50. 
B)  No, there is a loss of $100. 
C)  Yes, there is economic surplus of $50. 
D)  Yes, there is economic surplus of $400. C

Question 4

Relative to a person who earns minimum wage, a person who earns $30 per hour has:

Accepted Answer

A)  a lower opportunity cost of working longer hours. 
B)  a higher opportunity cost of taking a day off. 
C)  a lower opportunity cost of driving farther to work. 
D)  the same opportunity cost of spending time on leisure activities. 
A)  a lower opportunity cost of working longer hours. 
B)  a higher opportunity cost of taking a day off. 
C)  a lower opportunity cost of driving farther to work. 
D)  the same opportunity cost of spending time on leisure activities.

Question 5

You had to pay $600 (non-refundable) for your meal plan for Fall semester which gives you up to 150 meals. If you eat only 100 meals, your average cost for a meal equals:

Accepted Answer

A)  $6. 
B)  $5. 
C)  $4. 
D)  $0.25. 
A)  $6. 
B)  $5. 
C)  $4. 
D)  $0.25.

Question 6

Jody has purchased a non-refundable $25 ticket to attend a Miley Cyrus concert on Friday evening. Subsequently, she is asked to go to dinner and dancing at no expense to her. If she uses cost-benefit analysis to choose between going to the concert and going on the date, she should:

Accepted Answer

A)  include only the entertainment value of the concert in the opportunity cost of going on the date. 
B)  include the cost of the ticket plus the entertainment value of the concert in the opportunity cost of going on the date. 
C)  include only the cost of concert ticket in the opportunity cost of going on the date. 
D)  include neither the cost of the ticket nor the entertainment value of the concert in the opportunity cost of going on the date. 
A)  include only the entertainment value of the concert in the opportunity cost of going on the date. 
B)  include the cost of the ticket plus the entertainment value of the concert in the opportunity cost of going on the date. 
C)  include only the cost of concert ticket in the opportunity cost of going on the date. 
D)  include neither the cost of the ticket nor the entertainment value of the concert in the opportunity cost of going on the date.

Question 7

The following table shows the relationship between the speed of a computer's CPU and the benefits and costs. Assume that all other features of the computer are the same, i.e., CPU speed is the only source of variation. $$\begin{array} { | l | l | l | l | l | } 
\hline \text { CPU Mhz } & \text { Total Benefit } & \text { Marginal Benefit } & \text { Total Cost } & \text { Marginal Cost } \
\hline 600 & \$ 1,000 & & \$ 900 & \
\hline 700 & \$ 1,500 & & & \$ 100 \
\hline 800 & & \$ 400 & \$ 1,400 & \
\hline 900 & \$ 2,200 & & \$ 1,900 & \
\hline 1,000 & \$ 2,400 & & & \$ 600 \
\hline
\end{array}$$ The total cost of a 700 Mhz computer is:

Accepted Answer

A)  $1,000. 
B)  $900. 
C)  $200. 
D)  $100. 
A)  $1,000. 
B)  $900. 
C)  $200. 
D)  $100.

Question 8

Microeconomics is distinguished from macroeconomics in that microeconomics focuses on:

Accepted Answer

A)  the performance of the national economy. 
B)  the overall price level. 
C)  choices made by individuals or groups in the context of individual markets. 
D)  how to improve the performance of the national economy. 
A)  the performance of the national economy. 
B)  the overall price level. 
C)  choices made by individuals or groups in the context of individual markets. 
D)  how to improve the performance of the national economy.

Question 9

An editorial in the paper argues that students should only be allowed to attend school so long as the marginal cost of educating that student is less than the marginal benefit of that student's education. The writer's reasoning is an application of:

Accepted Answer

A)  positive economics. 
B)  negative economics. 
C)  normative economics. 
D)  economic naturalism. 
A)  positive economics. 
B)  negative economics. 
C)  normative economics. 
D)  economic naturalism.

Question 10

You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. (Assume that you would not have been willing to pay any more than $35 for this concert.) Your boss called and she is looking for someone to cover a shift on Saturday at the same time as the concert. You will have to work 4 hours and she will pay you time and a half, which is $9/hr. What is the opportunity cost of going to the concert?

Accepted Answer

A)  $1 
B)  $9 
C)  $35 
D)  $36 
A)  $1 
B)  $9 
C)  $35 
D)  $36

Question 11

Which of the following would not be analyzed in microeconomics?

Accepted Answer

A)  How to make the largest profit? 
B)  Whether to study or watch TV tonight. 
C)  How an early freeze in California will affect the price of fruit? 
D)  Whether the federal budget should always be balanced. 
A)  How to make the largest profit? 
B)  Whether to study or watch TV tonight. 
C)  How an early freeze in California will affect the price of fruit? 
D)  Whether the federal budget should always be balanced.

Question 12

Pat can either drive to work, which takes half an hour and uses $1.50 worth of gas, or take the bus, which takes an hour and costs $1.00. How should Pat get to work?

Accepted Answer

A)  Pat should always take the bus because it costs $0.50 less. 
B)  Pat should always drive because it saves half an hour. 
C)  Pat should drive if saving a half hour is worth $0.50 or more. 
D)  Pat should take the bus if a half hour of time is worth $0.50 or more. 
A)  Pat should always take the bus because it costs $0.50 less. 
B)  Pat should always drive because it saves half an hour. 
C)  Pat should drive if saving a half hour is worth $0.50 or more. 
D)  Pat should take the bus if a half hour of time is worth $0.50 or more.

Question 13

With ATMs, it is possible to retrieve cash from the bank at any time. One hundred years ago, one could only get cash from the bank during business hours, say, 9 am to 3 pm. The difference has arisen because:

Accepted Answer

A)  flexibility was not valued 100 years ago. 
B)  it was impossible to provide 24-hour service 100 years ago. 
C)  the cost of providing 24-hour service is much lower today. 
D)  government forced banks to become more convenient. 
A)  flexibility was not valued 100 years ago. 
B)  it was impossible to provide 24-hour service 100 years ago. 
C)  the cost of providing 24-hour service is much lower today. 
D)  government forced banks to become more convenient.

Question 14

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:

Accepted Answer

A)  not an economic problem because neither one costs money. 
B)  not an economic problem because it's an hour that is wasted no matter what Chris does. 
C)  an economic problem because the tuition Chris pays covers both the gym and the library. 
D)  an economic problem because Chris has only one hour during which he can study or work out. 
A)  not an economic problem because neither one costs money. 
B)  not an economic problem because it's an hour that is wasted no matter what Chris does. 
C)  an economic problem because the tuition Chris pays covers both the gym and the library. 
D)  an economic problem because Chris has only one hour during which he can study or work out.

Question 15

The cost-benefit principle indicates that an action should be taken:

Accepted Answer

A)  if the total benefits exceed the total costs. 
B)  if the average benefits exceed the average costs. 
C)  if the net benefit (benefit minus cost) is zero. 
D)  if the extra benefit is greater than or equal to the extra costs. 
A)  if the total benefits exceed the total costs. 
B)  if the average benefits exceed the average costs. 
C)  if the net benefit (benefit minus cost) is zero. 
D)  if the extra benefit is greater than or equal to the extra costs.

Question 16

The following table shows the relationship between the speed of a computer's CPU and the benefits and costs. Assume that all other features of the computer are the same, i.e., CPU speed is the only source of variation. $$\begin{array} { | l | l | l | l | l | } 
\hline \text { CPU Mhz } & \text { Total Benefit } & \text { Marginal Benefit } & \text { Total Cost } & \text { Marginal Cost } \
\hline 600 & \$ 1,000 & & \$ 900 & \
\hline 700 & \$ 1,500 & & & \$ 100 \
\hline 800 & & \$ 400 & \$ 1,400 & \
\hline 900 & \$ 2,200 & & \$ 1,900 & \
\hline 1,000 & \$ 2,400 & & & \$ 600 \
\hline
\end{array}$$ The marginal benefit of upgrading from a 600 Mhz computer to a 700 Mhz computer is:

Accepted Answer

A)  $1,500. 
B)  $500. 
C)  $50. 
D)  $5. 
A)  $1,500. 
B)  $500. 
C)  $50. 
D)  $5.

Question 17

The range of topics or issues that fit within the definition of economics is:

Accepted Answer

A)  limited to market activities, e.g., buying soap. 
B)  limited to individuals and firms. 
C)  extremely wide, requiring only the ideas of choice and scarcity. 
D)  very limited. 
A)  limited to market activities, e.g., buying soap. 
B)  limited to individuals and firms. 
C)  extremely wide, requiring only the ideas of choice and scarcity. 
D)  very limited.

Question 18

Ginger bought a phone that came with a $10 rebate. Ginger should fill out and mail in the rebate form if:

Accepted Answer

A)  the opportunity cost of the time and trouble of sending in the rebate form is less than $10. 
B)  the opportunity cost of the time and trouble of sending in the rebate form is more than $10. 
C)  she would have bought the phone without the rebate, and so sending in the rebate form involves no opportunity cost. 
D)  Ginger's surplus from purchasing the phone was less than $10. 
A)  the opportunity cost of the time and trouble of sending in the rebate form is less than $10. 
B)  the opportunity cost of the time and trouble of sending in the rebate form is more than $10. 
C)  she would have bought the phone without the rebate, and so sending in the rebate form involves no opportunity cost. 
D)  Ginger's surplus from purchasing the phone was less than $10.

Question 19

Matt has decided to purchase his textbooks for the semester. His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170. Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16. The benefit to Matt of buying his books at the bookstore is _____.

Accepted Answer

A)  $5 
B)  $9 
C)  $170 
D)  $175 
A)  $5 
B)  $9 
C)  $170 
D)  $175

Question 20

If all the world's resources were to magically increase a hundredfold, then:

Accepted Answer

A)  the scarcity principle would still govern behavior. 
B)  economics would no longer be relevant. 
C)  the scarcity principle would disappear. 
D)  tradeoffs would become unnecessary. 
A)  the scarcity principle would still govern behavior. 
B)  economics would no longer be relevant. 
C)  the scarcity principle would disappear. 
D)  tradeoffs would become unnecessary.

One thing that distinguishes normative principles from positive principles is that:

Catherine and Nancy both own homes with lawns of similar size. Catherine mows her own lawn while Nancy hires someone to mow hers. Assume both women are rational decision makers. Which is the best explanation of the different decisions they make?

Relative to a person who earns minimum wage, a person who earns $30 per hour has:

You had to pay $600 (non-refundable) for your meal plan for Fall semester which gives you up to 150 meals. If you eat only 100 meals, your average cost for a meal equals:

Jody has purchased a non-refundable $25 ticket to attend a Miley Cyrus concert on Friday evening. Subsequently, she is asked to go to dinner and dancing at no expense to her. If she uses cost-benefit analysis to choose between going to the concert and going on the date, she should:

Microeconomics is distinguished from macroeconomics in that microeconomics focuses on:

An editorial in the paper argues that students should only be allowed to attend school so long as the marginal cost of educating that student is less than the marginal benefit of that student's education. The writer's reasoning is an application of:

Which of the following would not be analyzed in microeconomics?

Pat can either drive to work, which takes half an hour and uses $1.50 worth of gas, or take the bus, which takes an hour and costs $1.00. How should Pat get to work?

With ATMs, it is possible to retrieve cash from the bank at any time. One hundred years ago, one could only get cash from the bank during business hours, say, 9 am to 3 pm. The difference has arisen because:

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:

The cost-benefit principle indicates that an action should be taken:

The range of topics or issues that fit within the definition of economics is:

Ginger bought a phone that came with a $10 rebate. Ginger should fill out and mail in the rebate form if:

If all the world's resources were to magically increase a hundredfold, then:

Comparative Advantage

Supply and Demand

Macroeconomics: the Birds-Eye View of the Economy

Measuring Economic Activity: Gdp and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

Workers, Wages, and Unemployment

Saving and Capital Formation

Money, Prices, and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economics Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: the Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Filters

Exam 1: Thinking Like an Economist

One thing that distinguishes normative principles from positive principles is that:

Catherine and Nancy both own homes with lawns of similar size. Catherine mows her own lawn while Nancy hires someone to mow hers. Assume both women are rational decision makers. Which is the best explanation of the different decisions they make?

Relative to a person who earns minimum wage, a person who earns $30 per hour has:

You had to pay $600 (non-refundable) for your meal plan for Fall semester which gives you up to 150 meals. If you eat only 100 meals, your average cost for a meal equals:

Jody has purchased a non-refundable $25 ticket to attend a Miley Cyrus concert on Friday evening. Subsequently, she is asked to go to dinner and dancing at no expense to her. If she uses cost-benefit analysis to choose between going to the concert and going on the date, she should:

Microeconomics is distinguished from macroeconomics in that microeconomics focuses on:

An editorial in the paper argues that students should only be allowed to attend school so long as the marginal cost of educating that student is less than the marginal benefit of that student's education. The writer's reasoning is an application of:

Which of the following would not be analyzed in microeconomics?

Pat can either drive to work, which takes half an hour and uses $1.50 worth of gas, or take the bus, which takes an hour and costs $1.00. How should Pat get to work?

With ATMs, it is possible to retrieve cash from the bank at any time. One hundred years ago, one could only get cash from the bank during business hours, say, 9 am to 3 pm. The difference has arisen because:

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:

The cost-benefit principle indicates that an action should be taken:

The range of topics or issues that fit within the definition of economics is:

Ginger bought a phone that came with a $10 rebate. Ginger should fill out and mail in the rebate form if:

If all the world's resources were to magically increase a hundredfold, then:

Comparative Advantage

Supply and Demand

Macroeconomics: the Birds-Eye View of the Economy

Measuring Economic Activity: Gdp and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

Workers, Wages, and Unemployment

Saving and Capital Formation

Money, Prices, and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economics Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: the Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Filters