Question 1

The rule of rational choice:

Accepted Answer

A) requires the availability of complete information before decisions can be made. 
B) can only be applied in business decisions. 
C) involves "marginal thinking." 
D) is clearly not the basis on which criminals make decisions. 
E) is the basis on which only greedy people make decisions. 
A) requires the availability of complete information before decisions can be made. 
B) can only be applied in business decisions. 
C) involves "marginal thinking." 
D) is clearly not the basis on which criminals make decisions. 
E) is the basis on which only greedy people make decisions.

Question 2

Human capital consists of computers, tools, and equipment owned by private individuals.

Accepted Answer

A) True 
 B)False

Question 3

You lose $20 from your wallet and decide to miss an hour from work in order to search for it.To an economist, this means that:

Accepted Answer

A) you estimate the expected cost of searching for one hour to be greater than $20. 
B) you must earn more than $20 per hour. 
C) in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage. 
D) you are irrational, since it is always a waste of time to search for lost money. 
E) you place no value on your time. 
A) you estimate the expected cost of searching for one hour to be greater than $20. 
B) you must earn more than $20 per hour. 
C) in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage. 
D) you are irrational, since it is always a waste of time to search for lost money. 
E) you place no value on your time.

Question 4

Which of the following policies would be most effective in promoting monthly water conservation?

Accepted Answer

A) A $100 flat fee for any household that uses over 1500 gallons 
B) A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons 
C) A $125 fee for all households in addition to a $0.50 per gallon fee for all consumption 
D) A $200 fee for all households with zero charge per gallon of consumption 
E) A $50 fee for all households with zero charge per gallon of consumption 
A) A $100 flat fee for any household that uses over 1500 gallons 
B) A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons 
C) A $125 fee for all households in addition to a $0.50 per gallon fee for all consumption 
D) A $200 fee for all households with zero charge per gallon of consumption 
E) A $50 fee for all households with zero charge per gallon of consumption

Question 5

The opportunity cost of a decision is the value of the best foregone alternative.

Accepted Answer

A) True 
 B)False

Question 6

Airlines that restrict the use of frequent flyer miles during holiday periods likely do so because:

Accepted Answer

A) the opportunity cost to airlines of filling seats with frequent flyers is lower at these times. 
B) the opportunity cost to airlines of filling seats with frequent flyers is higher at these times. 
C) passengers have more transportation alternatives available to them at these times. 
D) airlines want to protect their most loyal customers from the discomfort of overcrowded airplanes. 
A) the opportunity cost to airlines of filling seats with frequent flyers is lower at these times. 
B) the opportunity cost to airlines of filling seats with frequent flyers is higher at these times. 
C) passengers have more transportation alternatives available to them at these times. 
D) airlines want to protect their most loyal customers from the discomfort of overcrowded airplanes.

Question 7

In a market economy, prices help determine the distribution of goods and services but not the allocation of resources.

Accepted Answer

A) True 
 B)False

Question 8

Small, developing countries must first become self-sufficient before they can benefit from international trade.

Accepted Answer

A) True 
 B)False

Question 9

How can market failure occur in the market for hybrid automobiles? What could the government try to do to improve the situation?

Accepted Answer

An unregulated market would be likely to

Question 10

Why would economists disagree over positive analysis?

Accepted Answer

Economists might disagree over positive

Question 11

Economists presume that when making a decision, individuals consider both the current action and the future consequences of that action.

Accepted Answer

A) True 
 B)False

Question 12

If a country wanted to maximize the value of its output, each job should be carried out by the person who:

Accepted Answer

A) has the highest opportunity cost. 
B) has a comparative advantage in that activity. 
C) can complete the particular job most rapidly. 
D) enjoys that job the least. 
A) has the highest opportunity cost. 
B) has a comparative advantage in that activity. 
C) can complete the particular job most rapidly. 
D) enjoys that job the least.

Question 13

Darla is surprised to find that the quality of in-flight service remains much the same despite a steep hike in air-fares recently.What could be wrong in her assumption that a higher price naturally translates into better quality?

Accepted Answer

The fact that two variables might be rel

Question 14

A hypothesis is a normative statement.

Accepted Answer

A) True 
 B)False

Question 15

Jared declines to purchase a new bicycle priced at $200.An economist would conclude that:

Accepted Answer

A) Jared does not enjoy riding a bicycle. 
B) the expected marginal benefit of the bicycle to Jared exceeds $200. 
C) the expected marginal benefit of the bicycle to Jared is less than $200. 
D) the expected marginal benefit of the bicycle to Jared is less than $100. 
E) the bicycle seller is trying to take advantage of Jared by charging an exorbitant price. 
A) Jared does not enjoy riding a bicycle. 
B) the expected marginal benefit of the bicycle to Jared exceeds $200. 
C) the expected marginal benefit of the bicycle to Jared is less than $200. 
D) the expected marginal benefit of the bicycle to Jared is less than $100. 
E) the bicycle seller is trying to take advantage of Jared by charging an exorbitant price.

Question 16

Which of the following statements is true?

Accepted Answer

A) The opportunity cost of a decision is equal to the explicit cost in monetary terms. 
B) The opportunity cost of a decision is the value of the best foregone alternative. 
C) Some economic decisions have zero opportunity cost. 
D) The opportunity cost of attending college is the same for all students at the same university but may differ among students at different universities. 
E) None of the above statements are true. 
A) The opportunity cost of a decision is equal to the explicit cost in monetary terms. 
B) The opportunity cost of a decision is the value of the best foregone alternative. 
C) Some economic decisions have zero opportunity cost. 
D) The opportunity cost of attending college is the same for all students at the same university but may differ among students at different universities. 
E) None of the above statements are true.

Question 17

If Xavier gives up a job in which he earns $23,000 per year in order to go to college full time, his foregone income is part of the opportunity cost of going to college.

Accepted Answer

A) True 
 B)False

Question 18

A nation has a comparative advantage in the production of cars over another nation if:

Accepted Answer

A) it can produce cars with fewer resources than the other country. 
B) it can produce cars at a lower opportunity cost than the other country. 
C) it can produce cars at a higher opportunity cost than the other country. 
D) it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country. 
E) it is more self-sufficient in all areas of production, including automobile manufacturing. 
A) it can produce cars with fewer resources than the other country. 
B) it can produce cars at a lower opportunity cost than the other country. 
C) it can produce cars at a higher opportunity cost than the other country. 
D) it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country. 
E) it is more self-sufficient in all areas of production, including automobile manufacturing.

Question 19

Marginal thinking is best demonstrated by:

Accepted Answer

A) choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. 
B) deciding to never purchase a coat made with animal skins or furs. 
C) acquiring the information relevant to a choice before making that choice. 
D) measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake. 
E) choosing to purchase beer until there is no additional enjoyment from the consumption of beer. 
A) choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. 
B) deciding to never purchase a coat made with animal skins or furs. 
C) acquiring the information relevant to a choice before making that choice. 
D) measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake. 
E) choosing to purchase beer until there is no additional enjoyment from the consumption of beer.

Question 20

Why is abstraction important in developing economic theories?

Accepted Answer

Economic theories cannot realistically i

The rule of rational choice:

Human capital consists of computers, tools, and equipment owned by private individuals.

You lose $20 from your wallet and decide to miss an hour from work in order to search for it.To an economist, this means that:

Which of the following policies would be most effective in promoting monthly water conservation?

The opportunity cost of a decision is the value of the best foregone alternative.

Airlines that restrict the use of frequent flyer miles during holiday periods likely do so because:

In a market economy, prices help determine the distribution of goods and services but not the allocation of resources.

Small, developing countries must first become self-sufficient before they can benefit from international trade.

How can market failure occur in the market for hybrid automobiles? What could the government try to do to improve the situation?

Why would economists disagree over positive analysis?

Economists presume that when making a decision, individuals consider both the current action and the future consequences of that action.

If a country wanted to maximize the value of its output, each job should be carried out by the person who:

Darla is surprised to find that the quality of in-flight service remains much the same despite a steep hike in air-fares recently.What could be wrong in her assumption that a higher price naturally translates into better quality?

A hypothesis is a normative statement.

Jared declines to purchase a new bicycle priced at $200.An economist would conclude that:

Which of the following statements is true?

If Xavier gives up a job in which he earns $23,000 per year in order to go to college full time, his foregone income is part of the opportunity cost of going to college.

A nation has a comparative advantage in the production of cars over another nation if:

Marginal thinking is best demonstrated by:

Why is abstraction important in developing economic theories?

The Role and Method of Economics

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters

Exam 2: The Economic Way of Thinking

The rule of rational choice:

Human capital consists of computers, tools, and equipment owned by private individuals.

You lose $20 from your wallet and decide to miss an hour from work in order to search for it.To an economist, this means that:

Which of the following policies would be most effective in promoting monthly water conservation?

The opportunity cost of a decision is the value of the best foregone alternative.

Airlines that restrict the use of frequent flyer miles during holiday periods likely do so because:

In a market economy, prices help determine the distribution of goods and services but not the allocation of resources.

Small, developing countries must first become self-sufficient before they can benefit from international trade.

How can market failure occur in the market for hybrid automobiles? What could the government try to do to improve the situation?

Why would economists disagree over positive analysis?

Economists presume that when making a decision, individuals consider both the current action and the future consequences of that action.

If a country wanted to maximize the value of its output, each job should be carried out by the person who:

Darla is surprised to find that the quality of in-flight service remains much the same despite a steep hike in air-fares recently.What could be wrong in her assumption that a higher price naturally translates into better quality?

A hypothesis is a normative statement.

Jared declines to purchase a new bicycle priced at $200.An economist would conclude that:

Which of the following statements is true?

If Xavier gives up a job in which he earns $23,000 per year in order to go to college full time, his foregone income is part of the opportunity cost of going to college.

A nation has a comparative advantage in the production of cars over another nation if:

Marginal thinking is best demonstrated by:

Why is abstraction important in developing economic theories?

The Role and Method of Economics

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters