Question 1

Voluntary exchange between buyers and sellers generates ________ in a market economy.

Accepted Answer

A)  scarcity 
B)  allocative efficiency 
C)  productive efficiency 
D)  equity 
A)  scarcity 
B)  allocative efficiency 
C)  productive efficiency 
D)  equity

Question 2

The distribution of income primarily determines which of the fundamental economic questions?

Accepted Answer

A)  What goods and services are to be produced? 
B)  How the goods and services are to be produced? 
C)  Who will receive the goods and services produced? 
D)  How to plan the economy? 
A)  What goods and services are to be produced? 
B)  How the goods and services are to be produced? 
C)  Who will receive the goods and services produced? 
D)  How to plan the economy?

Question 3

________ is a problem that occurs when one concludes that a change in variable X caused a change in variable Y when in actual fact,it is a change in variable Y that caused a change in variable X.

Accepted Answer

A)  The omitted variable 
B)  The positive-to-negative relationship 
C)  Reverse causality 
D)  Nonlinear slope 
A)  The omitted variable 
B)  The positive-to-negative relationship 
C)  Reverse causality 
D)  Nonlinear slope

Question 4

Which of the following correctly describes the relationship between economic efficiency and economic equity?

Accepted Answer

A)  They are both automatically achieved in a free market economy. 
B)  They always call for opposite outcomes. 
C)  There is no conflict between the two goals. 
D)  There is often a trade-off between the two. 
A)  They are both automatically achieved in a free market economy. 
B)  They always call for opposite outcomes. 
C)  There is no conflict between the two goals. 
D)  There is often a trade-off between the two.

Question 5

Which of the following is motivated by an equity concern?

Accepted Answer

A)  Some states have transferred funds to food bank programs in order to increase benefits to lower-income families. 
B)  Following the implementation of subsidies for energy conservation, household demand for rooftop solar panels increased quite significantly in California. 
C)  The United Network for Organ Sharing advocates a system of rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs. 
D)  The United States offers patent protection to pharmaceutical manufacturers to prevent others from duplicating their products. 
A)  Some states have transferred funds to food bank programs in order to increase benefits to lower-income families. 
B)  Following the implementation of subsidies for energy conservation, household demand for rooftop solar panels increased quite significantly in California. 
C)  The United Network for Organ Sharing advocates a system of rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs. 
D)  The United States offers patent protection to pharmaceutical manufacturers to prevent others from duplicating their products.

Question 6

In economics,the term ________ means "additional" or "extra."

Accepted Answer

A)  allocative 
B)  marginal 
C)  equity 
D)  optimal 
A)  allocative 
B)  marginal 
C)  equity 
D)  optimal

Question 7

________ have a horizontal and a vertical axis and are used in economics to illustrate relationships between two economic variables.

Accepted Answer

A)  Two-dimensional graphs 
B)  One-dimensional graphs 
C)  Pie Charts 
D)  Bar graphs 
A)  Two-dimensional graphs 
B)  One-dimensional graphs 
C)  Pie Charts 
D)  Bar graphs

Question 8

All of the following are part of an economic model except

Accepted Answer

A)  assumptions. 
B)  hypotheses. 
C)  data. 
D)  opinions. 
A)  assumptions. 
B)  hypotheses. 
C)  data. 
D)  opinions.

Question 9

Positive analysis is concerned with "what ought to be",while normative analysis is concerned with "what is."

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is motivated by an efficiency concern?

Accepted Answer

A)  In December 2006, the Bush administration restarted a short-term housing assistance program for victims of Hurricane Katrina. 
B)  Each year, the University of Notre Dame conducts a lottery to parcel out the 30,000 seats available to contributors, former athletes and parents in the 80,000-seat stadium. 
C)  The United Network for Organ Sharing advocates a system of rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs. 
D)  The federal government's housing choice voucher program assists very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. 
A)  In December 2006, the Bush administration restarted a short-term housing assistance program for victims of Hurricane Katrina. 
B)  Each year, the University of Notre Dame conducts a lottery to parcel out the 30,000 seats available to contributors, former athletes and parents in the 80,000-seat stadium. 
C)  The United Network for Organ Sharing advocates a system of rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs. 
D)  The federal government's housing choice voucher program assists very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market.

Question 11

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.What is the marginal cost of adding the engine detailing to the basic detailing package?

Accepted Answer

A)  $20 
B)  $30 
C)  $60 
D)  $60 plus the value of his time 
A)  $20 
B)  $30 
C)  $60 
D)  $60 plus the value of his time

Question 12

Figure 1-3  
-Refer to Figure 1-3.Calculate the area of the trapezoid X.

Accepted Answer

A)  $270 
B)  $720 
C)  $810 
D)  $2,520 
A)  $270 
B)  $720 
C)  $810 
D)  $2,520

Question 13

A college must decide if it wants to offer more Internet-based classes.This decision involves answering the economic question of "what to produce."

Accepted Answer

A) True 
 B)False

Question 14

Which of the following questions or statements regarding medical school is normative?

Accepted Answer

A)  How do changes in expected future incomes affect the decisions of medical students about which specialty to choose? 
B)  Medical students who enter specialized fields make a larger contribution to society than do student who enter primary care. 
C)  What role does tuition play in a student's decision about whether to attend medical school? 
D)  Have tuition increases had a large effect or a small effect on the number of applications to medical school? 
A)  How do changes in expected future incomes affect the decisions of medical students about which specialty to choose? 
B)  Medical students who enter specialized fields make a larger contribution to society than do student who enter primary care. 
C)  What role does tuition play in a student's decision about whether to attend medical school? 
D)  Have tuition increases had a large effect or a small effect on the number of applications to medical school?

Question 15

By definition,economics is the study of

Accepted Answer

A)  how to make money in the stock market. 
B)  how to make money in a market economy. 
C)  the choices people make to attain their goals, given their scarce resources. 
D)  supply and demand. 
A)  how to make money in the stock market. 
B)  how to make money in a market economy. 
C)  the choices people make to attain their goals, given their scarce resources. 
D)  supply and demand.

Question 16

What is opportunity cost?

Accepted Answer

Opportunity cost refers to the highest-v

Question 17

What is a centrally planned economy?

Accepted Answer

A centrally planned economy is

Question 18

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 19

If the marginal cost of keeping a doctor's office open one additional hour per day is $200,then the doctor should keep the office open for one extra hour

Accepted Answer

A)  only if the marginal benefit she receives is greater than $200 plus an acceptable profit margin. 
B)  as long as the marginal benefit she receives is just equal to or greater than $200. 
C)  as long as the marginal cost does not rise. 
D)  until the marginal benefit she receives reaches zero. 
A)  only if the marginal benefit she receives is greater than $200 plus an acceptable profit margin. 
B)  as long as the marginal benefit she receives is just equal to or greater than $200. 
C)  as long as the marginal cost does not rise. 
D)  until the marginal benefit she receives reaches zero.

Question 20

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

Exam 1: Economics: Foundations and Models

Voluntary exchange between buyers and sellers generates ________ in a market economy.

The distribution of income primarily determines which of the fundamental economic questions?

________ is a problem that occurs when one concludes that a change in variable X caused a change in variable Y when in actual fact,it is a change in variable Y that caused a change in variable X.

Which of the following correctly describes the relationship between economic efficiency and economic equity?

Which of the following is motivated by an equity concern?

In economics,the term ________ means "additional" or "extra."

________ have a horizontal and a vertical axis and are used in economics to illustrate relationships between two economic variables.

All of the following are part of an economic model except

Positive analysis is concerned with "what ought to be",while normative analysis is concerned with "what is."

Which of the following is motivated by an efficiency concern?

Figure 1-3 -Refer to Figure 1-3.Calculate the area of the trapezoid X.

A college must decide if it wants to offer more Internet-based classes.This decision involves answering the economic question of "what to produce."

Which of the following questions or statements regarding medical school is normative?

By definition,economics is the study of

What is opportunity cost?

What is a centrally planned economy?

Markets promote

If the marginal cost of keeping a doctor's office open one additional hour per day is $200,then the doctor should keep the office open for one extra hour

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?

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

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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