Question 1

Which of the following principles underlies the gains from trade?

Accepted Answer

A)  Resources are scarce. 
B)  Marginal analysis is used for "how much" decisions. 
C)  Resources should be used as efficiently as possible to achieve society's goals. 
D)  People usually exploit opportunities to make themselves better off. 
A)  Resources are scarce. 
B)  Marginal analysis is used for "how much" decisions. 
C)  Resources should be used as efficiently as possible to achieve society's goals. 
D)  People usually exploit opportunities to make themselves better off.

Question 2

We have to make choices because:

Accepted Answer

A)  we have unlimited income. 
B)  resources are scarce. 
C)  resources are infinite. 
D)  with good planning, trade-offs can be avoided. 
A)  we have unlimited income. 
B)  resources are scarce. 
C)  resources are infinite. 
D)  with good planning, trade-offs can be avoided.

Question 3

Owen had a typewriter shop, but he went out of business because no one buys typewriters anymore. This statement best represents this economic concept:

Accepted Answer

A)  Resources are scarce. 
B)  People usually exploit opportunities to make themselves better off. 
C)  Markets move toward equilibrium. 
D)  One person's spending is another person's income. 
A)  Resources are scarce. 
B)  People usually exploit opportunities to make themselves better off. 
C)  Markets move toward equilibrium. 
D)  One person's spending is another person's income.

Question 4

If an economy's resources are used efficiently, then it is guaranteed that the economy will also achieve equity.

Accepted Answer

A) True 
 B)False

Question 5

The best measure of the opportunity cost of any choice is:

Accepted Answer

A)  the monetary cost of that choice. 
B)  whatever you have given up to make that choice, even if no monetary costs are involved. 
C)  the cost associated with not taking full advantage of the opportunity offered by that choice. 
D)  your hourly wage. 
A)  the monetary cost of that choice. 
B)  whatever you have given up to make that choice, even if no monetary costs are involved. 
C)  the cost associated with not taking full advantage of the opportunity offered by that choice. 
D)  your hourly wage.

Question 6

Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is:

Accepted Answer

A)  zero-the tickets were free. 
B)  the price listed on the ticket. 
C)  whatever Khalil would have done had he not gone to the opera. 
D)  the price listed on the ticket and whatever Khalil would have done had he not gone to the opera. 
A)  zero-the tickets were free. 
B)  the price listed on the ticket. 
C)  whatever Khalil would have done had he not gone to the opera. 
D)  the price listed on the ticket and whatever Khalil would have done had he not gone to the opera.

Question 7

Scarcity in economics means that:

Accepted Answer

A)  we do not have sufficient resources to produce all of the goods and services we want. 
B)  the wants of people are limited. 
C)  there must be poor people in rich countries. 
D)  economists are clearly not doing their job. 
A)  we do not have sufficient resources to produce all of the goods and services we want. 
B)  the wants of people are limited. 
C)  there must be poor people in rich countries. 
D)  economists are clearly not doing their job.

Question 8

The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost of buying a burger is your enjoyment of the:

Accepted Answer

A)  burger. 
B)  bagel. 
C)  burrito. 
D)  bagel and the burrito. 
A)  burger. 
B)  bagel. 
C)  burrito. 
D)  bagel and the burrito.

Question 9

A friend comes up to you and offers you a free ticket to a professional baseball game that night. You decide to attend the game. The game takes five hours and costs you $15 for transportation. If you had not attended the game, you would have worked at your part-time job for $8 an hour. What is the cost to you of attending the game?

Accepted Answer

A)  The cost is zero-the ticket is free. 
B)  $65 
C)  $40 
D)  $55 
A)  The cost is zero-the ticket is free. 
B)  $65 
C)  $40 
D)  $55

Question 10

Intel finds it difficult to hire enough skilled computer engineers. This statement best represents this economic concept:

Accepted Answer

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

Question 11

Which of the following statements is CORRECT?

Accepted Answer

A)  Resource scarcity is not a major concern in the rich countries of the world. 
B)  Some 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 everything better than most people should not specialize in doing any one thing. 
A)  Resource scarcity is not a major concern in the rich countries of the world. 
B)  Some 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 everything better than most people should not specialize in doing any one thing.

Question 12

A key theme fundamental to all of economics is that:

Accepted Answer

A)  wants are limited. 
B)  the United States is a rich country, but we are simply not aware of it. 
C)  people have unlimited wants but limited means to satisfy them. 
D)  resources are unlimited. 
A)  wants are limited. 
B)  the United States is a rich country, but we are simply not aware of it. 
C)  people have unlimited wants but limited means to satisfy them. 
D)  resources are unlimited.

Question 13

According to the textbook, markets usually lead to efficiency.

Accepted Answer

A) True 
 B)False

Question 14

Opportunity cost is:

Accepted Answer

A)  about half of the monetary cost of a product. 
B)  the dollar payment for a product. 
C)  the benefit derived from a product. 
D)  the value of the best alternative forgone in making any choice. 
A)  about half of the monetary cost of a product. 
B)  the dollar payment for a product. 
C)  the benefit derived from a product. 
D)  the value of the best alternative forgone in making any choice.

Question 15

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 16

Equity means that:

Accepted Answer

A)  everyone gets an efficient share of the goods and services produced. 
B)  everyone gets his or her fair share of the goods and services produced. 
C)  more of some goods and services can be produced only if the production of others is reduced. 
D)  more of all goods and services may be produced. 
A)  everyone gets an efficient share of the goods and services produced. 
B)  everyone gets his or her fair share of the goods and services produced. 
C)  more of some goods and services can be produced only if the production of others is reduced. 
D)  more of all goods and services may be produced.

Question 17

An economic situation is in equilibrium when no individual would be better off taking a different action.

Accepted Answer

A) True 
 B)False

Question 18

The problem of scarcity is confronted by:

Accepted Answer

A)  industrialized societies only. 
B)  preindustrial societies only. 
C)  societies governed by communist philosophies only. 
D)  all societies. 
A)  industrialized societies only. 
B)  preindustrial societies only. 
C)  societies governed by communist philosophies only. 
D)  all societies.

Question 19

Although for smokers the marginal benefit from smoking may exceed the marginal cost of smoking, the negative effects of second-hand smoke may increase the marginal costs of smoking to society to a point where it exceeds that marginal benefit to society. 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)  some goods' unsuitability 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)  some goods' unsuitability for efficient management by markets. 
D)  regulating self-interest.

Question 20

Which of the following is NOT a resource in the production of rice?

Accepted Answer

A)  fertile land 
B)  labor 
C)  capital equipment 
D)  money 
A)  fertile land 
B)  labor 
C)  capital equipment 
D)  money

Exam 1: First Principles

Which of the following principles underlies the gains from trade?

We have to make choices because:

Owen had a typewriter shop, but he went out of business because no one buys typewriters anymore. This statement best represents this economic concept:

If an economy's resources are used efficiently, then it is guaranteed that the economy will also achieve equity.

The best measure of the opportunity cost of any choice is:

Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is:

Scarcity in economics means that:

The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost of buying a burger is your enjoyment of the:

Intel finds it difficult to hire enough skilled computer engineers. This statement best represents this economic concept:

Which of the following statements is CORRECT?

A key theme fundamental to all of economics is that:

According to the textbook, markets usually lead to efficiency.

Opportunity cost is:

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:

Equity means that:

An economic situation is in equilibrium when no individual would be better off taking a different action.

The problem of scarcity is confronted by:

Although for smokers the marginal benefit from smoking may exceed the marginal cost of smoking, the negative effects of second-hand smoke may increase the marginal costs of smoking to society to a point where it exceeds that marginal benefit to society. This is an example of:

Which of the following is NOT a resource in the production of rice?

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

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