Question 1

Which question is an example 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)  What is the impact of a trade embargo on labour cost? 
D)  Should a commuter take the bus to work instead of 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)  What is the impact of a trade embargo on labour cost? 
D)  Should a commuter take the bus to work instead of driving?

Question 2

In 2013,the federal government passed a tax cut.The country did NOT incur any opportunity cost from this decision.

Accepted Answer

A) True 
 B)False

Question 3

Freshwater is considered a scarce good because:

Accepted Answer

A)  not enough of it is available for all needs. 
B)  it does not have any uses. 
C)  scarce goods are not expensive. 
D)  not enough of it is available for all needs and because it is not expensive. 
A)  not enough of it is available for all needs. 
B)  it does not have any uses. 
C)  scarce goods are not expensive. 
D)  not enough of it is available for all needs and because it is not expensive.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Which principle underlies the interaction of individual choices?

Accepted Answer

A)  Choices are necessary because resources are scarce. 
B)  There are gains from trade. 
C)  "How much" is a decision at the margin 
D)  People usually respond to incentives,exploiting opportunities to make themselves better off. 
A)  Choices are necessary because resources are scarce. 
B)  There are gains from trade. 
C)  "How much" is a decision at the margin 
D)  People usually respond to incentives,exploiting opportunities to make themselves better off.

Question 6

You can spend $100 on either a new economics textbook or a new tablet computer.If you choose to buy the new economics textbook,the opportunity cost is:

Accepted Answer

A)  $100. 
B)  your enjoyment of the new tablet computer. 
C)  both the $100 and your enjoyment of the new tablet computer. 
D)  impossible to determine. 
A)  $100. 
B)  your enjoyment of the new tablet computer. 
C)  both the $100 and your enjoyment of the new tablet computer. 
D)  impossible to determine.

Question 7

When a factory closes,why is it bad news for the local restaurants?

Accepted Answer

A)  Sales taxes are likely to increase. 
B)  Unemployed factory workers have lower incomes and are less likely to dine out. 
C)  Unemployed factory workers are eligible for government unemployment benefits. 
D)  The opportunity cost of dining out has fallen. 
A)  Sales taxes are likely to increase. 
B)  Unemployed factory workers have lower incomes and are less likely to dine out. 
C)  Unemployed factory workers are eligible for government unemployment benefits. 
D)  The opportunity cost of dining out has fallen.

Question 8

A choice made _____ is a choice whether to do a little more or a little less of an activity.

Accepted Answer

A)  at the front end 
B)  in the beginning 
C)  at the margin 
D)  ceteris paribus 
A)  at the front end 
B)  in the beginning 
C)  at the margin 
D)  ceteris paribus

Question 9

Handicapped-designated parking spaces are an example of the market economy achieving efficiency.

Accepted Answer

A) True 
 B)False

Question 10

The student centre on campus has burritos,bagels,or burgers for lunch,and they all cost the same.You love burgers and bagels,but you decide to have a burger today.If they were out of burgers,you would have bought a bagel.Which economic principle does this statement BEST represent?

Accepted Answer

A)  The true cost of something is its opportunity cost. 
B)  "How much" is a decision at the margin. 
C)  One person's spending is another person's income. 
D)  There are gains from trade. 
A)  The true cost of something is its opportunity cost. 
B)  "How much" is a decision at the margin. 
C)  One person's spending is another person's income. 
D)  There are gains from trade.

Question 11

When people want more goods and services than are available,the economy undergoes inflation.Which economic principle does this statement BEST represent?

Accepted Answer

A)  There are gains from trade. 
B)  When markets don't achieve efficiency,government intervention can improve society's welfare. 
C)  Overall spending sometimes gets out of line with the economy's productive capacity. 
D)  Government policies can change spending. 
A)  There are gains from trade. 
B)  When markets don't achieve efficiency,government intervention can improve society's welfare. 
C)  Overall spending sometimes gets out of line with the economy's productive capacity. 
D)  Government policies can change spending.

Question 12

According to economic models of trade,when Canada and Mexico trade:

Accepted Answer

A)  Canada will be worse off because wages in Mexico are so low. 
B)  Mexico will be worse off because Canada is a stronger economic power. 
C)  both Mexico and Canada will be better off. 
D)  both Mexico and Canada will be worse off. 
A)  Canada will be worse off because wages in Mexico are so low. 
B)  Mexico will be worse off because Canada is a stronger economic power. 
C)  both Mexico and Canada will be better off. 
D)  both Mexico and Canada will be worse off.

Question 13

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

Accepted Answer

A) True 
 B)False

Question 14

One day,Martha wakes up and in frustration yells,"Decisions,decisions,decisions! Why do I have to make decisions about everything?" Martha's frustrations stem from the fact that:

Accepted Answer

A)  like all economic beings,she faces constraints and cannot have everything she wants. 
B)  she doesn't realize she can have everything she wants. 
C)  she is the only one who faces constraints in life. 
D)  she really doesn't want anything. 
A)  like all economic beings,she faces constraints and cannot have everything she wants. 
B)  she doesn't realize she can have everything she wants. 
C)  she is the only one who faces constraints in life. 
D)  she really doesn't want anything.

Question 15

If you decide to go to Florida with your friends during spring break,you cannot go to Paris with your sister in the summer.Which economic principle does this statement BEST represent?

Accepted Answer

A)  The true cost of something is its opportunity cost. 
B)  "How much" is a decision at the margin. 
C)  People usually respond to incentives,exploiting opportunities to make themselves better off. 
D)  There are gains from trade. 
A)  The true cost of something is its opportunity cost. 
B)  "How much" is a decision at the margin. 
C)  People usually respond to incentives,exploiting opportunities to make themselves better off. 
D)  There are gains from trade.

Question 16

As long as individuals know that they can find the goods and services they want in the market,they are willing to forgo being self-sufficient and are willing to specialize.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following policies is MOST likely to reduce traffic congestion in a large metropolitan area because people usually exploit opportunities to make themselves better off?

Accepted Answer

A)  a limited number of free early-bird parking passes given only to those who arrive prior to 6 A.M. 
B)  a toll road that requires each car to pay a fee to enter the city center 
C)  an increase in the price of subway and bus fare to and from the city 
D)  asking citizens to carpool 
A)  a limited number of free early-bird parking passes given only to those who arrive prior to 6 A.M. 
B)  a toll road that requires each car to pay a fee to enter the city center 
C)  an increase in the price of subway and bus fare to and from the city 
D)  asking citizens to carpool

Question 18

If every individual were required to be self-sufficient:

Accepted Answer

A)  living standards would fall. 
B)  living standards for some individuals would fall,but for others,they would rise. 
C)  living standards would rise. 
D)  it's impossible to say how living standards would change. 
A)  living standards would fall. 
B)  living standards for some individuals would fall,but for others,they would rise. 
C)  living standards would rise. 
D)  it's impossible to say how living standards would change.

Question 19

Which statement is NOT one of the four principles of individual choice?

Accepted Answer

A)  Choices are necessary because resources are scarce. 
B)  Unpaid volunteer work is irrational since economic rationality dictates that individuals should only engage in work they are paid for. 
C)  The true cost of something is its opportunity cost. 
D)  "How much" is a decision at the margin. 
A)  Choices are necessary because resources are scarce. 
B)  Unpaid volunteer work is irrational since economic rationality dictates that individuals should only engage in work they are paid for. 
C)  The true cost of something is its opportunity cost. 
D)  "How much" is a decision at the margin.

Question 20

Owen had a typewriter shop,but he went out of business because no one buys typewriters anymore.Which economic principle does this statement BEST represent?

Accepted Answer

A)  Choices are necessary because resources are scarce. 
B)  People usually respond to incentives,exploiting opportunities to make themselves better off. 
C)  Markets move toward equilibrium. 
D)  One person's spending is another person's income. 
A)  Choices are necessary because resources are scarce. 
B)  People usually respond to incentives,exploiting opportunities to make themselves better off. 
C)  Markets move toward equilibrium. 
D)  One person's spending is another person's income.

Exam 1: First Principles

Which question is an example of marginal analysis?

In 2013,the federal government passed a tax cut.The country did NOT incur any opportunity cost from this decision.

Freshwater is considered a scarce good because:

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

Which principle underlies the interaction of individual choices?

You can spend $100 on either a new economics textbook or a new tablet computer.If you choose to buy the new economics textbook,the opportunity cost is:

When a factory closes,why is it bad news for the local restaurants?

A choice made _____ is a choice whether to do a little more or a little less of an activity.

Handicapped-designated parking spaces are an example of the market economy achieving efficiency.

The student centre on campus has burritos,bagels,or burgers for lunch,and they all cost the same.You love burgers and bagels,but you decide to have a burger today.If they were out of burgers,you would have bought a bagel.Which economic principle does this statement BEST represent?

When people want more goods and services than are available,the economy undergoes inflation.Which economic principle does this statement BEST represent?

According to economic models of trade,when Canada and Mexico trade:

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

One day,Martha wakes up and in frustration yells,"Decisions,decisions,decisions! Why do I have to make decisions about everything?" Martha's frustrations stem from the fact that:

If you decide to go to Florida with your friends during spring break,you cannot go to Paris with your sister in the summer.Which economic principle does this statement BEST represent?

As long as individuals know that they can find the goods and services they want in the market,they are willing to forgo being self-sufficient and are willing to specialize.

Which of the following policies is MOST likely to reduce traffic congestion in a large metropolitan area because people usually exploit opportunities to make themselves better off?

If every individual were required to be self-sufficient:

Which statement is NOT one of the four principles of individual choice?

Owen had a typewriter shop,but he went out of business because no one buys typewriters anymore.Which economic principle does this statement BEST represent?

Economic Models

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve- Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, risk, and Private Information

Graphs in Economics

Consumer Preferences

Indifference Curve Analysis

Filters