Question 1

The principle that people will exploit opportunities to do what is best for others is the basis of all predictions by economists about individual behavior.

Accepted Answer

A) True 
 B)False

Question 2

The study of economics arises because of the necessity of choice, and the necessity of choice arises because of the fundamental problem of scarcity of resources.

Accepted Answer

A) True 
 B)False

Question 3

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 4

One person's spending is another person's:

Accepted Answer

A)  loss. 
B)  income. 
C)  physical capital. 
D)  opportunity cost. 
A)  loss. 
B)  income. 
C)  physical capital. 
D)  opportunity cost.

Question 5

At various times, the nations that constitute the Organization of Petroleum Exporting Countries (OPEC) have restricted the supply of oil to increase their profits. This is an example of:

Accepted Answer

A)  individual actions whose side effects are not properly taken into account by the market. 
B)  one party preventing mutually beneficial trades in an attempt to capture a greater share of resources for itself. 
C)  the unsuitability of some goods for efficient management by markets. 
D)  regulating self-interest. 
A)  individual actions whose side effects are not properly taken into account by the market. 
B)  one party preventing mutually beneficial trades in an attempt to capture a greater share of resources for itself. 
C)  the unsuitability of some goods for efficient management by markets. 
D)  regulating self-interest.

Question 6

Market failure may occur because:

Accepted Answer

A)  individual actions have side effects that are not properly taken into account by the market. 
B)  one party to a trade benefits more than another. 
C)  all goods are suited for efficient management by markets. 
D)  of regulated self-interest. 
A)  individual actions have side effects that are not properly taken into account by the market. 
B)  one party to a trade benefits more than another. 
C)  all goods are suited for efficient management by markets. 
D)  of regulated self-interest.

Question 7

Florida schools offered cash bonuses to students who scored high on the state's standardized exams. The cash bonuses are an example of this economic principle:

Accepted Answer

A)  Resources are scarce. 
B)  The real cost of something is what you must give up to get it. 
C)  There are gains from trade. 
D)  People usually take advantage of opportunities to make themselves better off. 
A)  Resources are scarce. 
B)  The real cost of something is what you must give up to get it. 
C)  There are gains from trade. 
D)  People usually take advantage of opportunities to make themselves better off.

Question 8

Although freshwater is very abundant in most places, it is scarce because:

Accepted Answer

A)  it has no alternative uses. 
B)  there is not enough of it to meet all needs. 
C)  it is a free good. 
D)  scarce goods in general are not all that costly. 
A)  it has no alternative uses. 
B)  there is not enough of it to meet all needs. 
C)  it is a free good. 
D)  scarce goods in general are not all that costly.

Question 9

Because of the opportunity cost, if the United States spends $87 billion in the rebuilding of Iraq, it has to forgo the opportunity to spend $87 billion on some other program.

Accepted Answer

A) True 
 B)False

Question 10

In equilibrium there will be no further opportunities for gains from trade.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is NOT true?

Accepted Answer

A)  Resource scarcity is a major economic concern in the rich countries of the world. 
B)  Most opportunity costs are zero. 
C)  An economic situation is in equilibrium when no individual would be better off taking a different action. 
D)  Some very talented, skilled individuals who can do some things better than most people should specialize in doing that one thing. 
A)  Resource scarcity is a major economic concern in the rich countries of the world. 
B)  Most opportunity costs are zero. 
C)  An economic situation is in equilibrium when no individual would be better off taking a different action. 
D)  Some very talented, skilled individuals who can do some things better than most people should specialize in doing that one thing.

Question 12

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 13

Which of the following is a question of marginal analysis?

Accepted Answer

A)  What additional output does a family business produce when it hires one more worker? 
B)  How do tax cuts change the growth rate of median income? 
C)  When a large corporation lays off workers, how do profits change if sales remain constant? 
D)  Should a commuter take the bus to work rather than driving. 
A)  What additional output does a family business produce when it hires one more worker? 
B)  How do tax cuts change the growth rate of median income? 
C)  When a large corporation lays off workers, how do profits change if sales remain constant? 
D)  Should a commuter take the bus to work rather than driving.

Question 14

Nate and Dylan are brothers. They have to mow the lawn and clean their rooms before they can go to the high school football game. Nate mows the lawn and Dylan picks up the rooms, and they make it to the football game on time. This statement best represents this economic concept:

Accepted Answer

A)  People usually exploit opportunities to make themselves better off. 
B)  There are gains from trade. 
C)  Markets usually lead to efficiency. 
D)  One person's spending is another person's income. 
A)  People usually exploit opportunities to make themselves better off. 
B)  There are gains from trade. 
C)  Markets usually lead to efficiency. 
D)  One person's spending is another person's income.

Question 15

The BEST example of making a choice at the margin is whether to:

Accepted Answer

A)  buy a new computer. 
B)  quit your job. 
C)  eat another slice of pizza. 
D)  attend college. 
A)  buy a new computer. 
B)  quit your job. 
C)  eat another slice of pizza. 
D)  attend college.

Question 16

Gains from trade exist for:

Accepted Answer

A)  individuals only. 
B)  states only. 
C)  countries only. 
D)  individuals, states, and countries. 
A)  individuals only. 
B)  states only. 
C)  countries only. 
D)  individuals, states, and countries.

Question 17

Which of the following is NOT one of the five principles for understanding how individual choices interact?

Accepted Answer

A)  There are gains from trade. 
B)  Markets move toward equilibrium. 
C)  Resources should be used as efficiently as possible to achieve society's goals. 
D)  Markets always lead to efficiency. 
A)  There are gains from trade. 
B)  Markets move toward equilibrium. 
C)  Resources should be used as efficiently as possible to achieve society's goals. 
D)  Markets always lead to efficiency.

Question 18

Alison is offered two jobs. One pays $45,000 per year and offers three weeks of vacation, while the other offer provides two weeks of vacation and a salary of $54,000. What is the opportunity cost for Alison if she chooses the job offer of $54,000?

Accepted Answer

A)  $45,000 plus the three weeks of vacation 
B)  $45,000 per year 
C)  one week of vacation 
D)  two weeks of vacation 
A)  $45,000 plus the three weeks of vacation 
B)  $45,000 per year 
C)  one week of vacation 
D)  two weeks of vacation

Question 19

When a market is in equilibrium:

Accepted Answer

A)  a person could do better if he or she did something different. 
B)  people have exploited all opportunities to make themselves better off. 
C)  government has directed the market in such a way as to achieve this point. 
D)  markets are not working efficiently. 
A)  a person could do better if he or she did something different. 
B)  people have exploited all opportunities to make themselves better off. 
C)  government has directed the market in such a way as to achieve this point. 
D)  markets are not working efficiently.

Question 20

By early 2008 the U.S. economy was in a significant downturn. The unemployment rate began to increase, and home prices began to fall. Congress passed a stimulus package that gave tax rebates to virtually every person who paid taxes in 2007. Which of the 12 principles is described by this package?

Accepted Answer

Government policies can change spending.

Exam 1: First Principles

The principle that people will exploit opportunities to do what is best for others is the basis of all predictions by economists about individual behavior.

The study of economics arises because of the necessity of choice, and the necessity of choice arises because of the fundamental problem of scarcity of resources.

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

One person's spending is another person's:

At various times, the nations that constitute the Organization of Petroleum Exporting Countries (OPEC) have restricted the supply of oil to increase their profits. This is an example of:

Market failure may occur because:

Florida schools offered cash bonuses to students who scored high on the state's standardized exams. The cash bonuses are an example of this economic principle:

Although freshwater is very abundant in most places, it is scarce because:

Because of the opportunity cost, if the United States spends $87 billion in the rebuilding of Iraq, it has to forgo the opportunity to spend $87 billion on some other program.

In equilibrium there will be no further opportunities for gains from trade.

Which of the following statements is NOT true?

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

Which of the following is a question of marginal analysis?

Nate and Dylan are brothers. They have to mow the lawn and clean their rooms before they can go to the high school football game. Nate mows the lawn and Dylan picks up the rooms, and they make it to the football game on time. This statement best represents this economic concept:

The BEST example of making a choice at the margin is whether to:

Gains from trade exist for:

Which of the following is NOT one of the five principles for understanding how individual choices interact?

Alison is offered two jobs. One pays $45,000 per year and offers three weeks of vacation, while the other offer provides two weeks of vacation and a salary of $54,000. What is the opportunity cost for Alison if she chooses the job offer of $54,000?

When a market is in equilibrium:

By early 2008 the U.S. economy was in a significant downturn. The unemployment rate began to increase, and home prices began to fall. Congress passed a stimulus package that gave tax rebates to virtually every person who paid taxes in 2007. Which of the 12 principles is described by this package?

Economic Models- Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas- Meddling With Markets

Elasticity

Taxes

The Rational Consumer

International Trade

Decision Making by Individuals and Firms

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Macroeconomics- the Big Picture

Gdp and the Consumer Price Index

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Macroeconomics- Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

Toward a Fuller Understanding

Consumer Preferences and Consumer Choice

Indifference Curve Analysis of Labor Supply

Filters