Deck 1: Economics and Life

Question 1

Which of the following is considered a microeconomic issue?

A)Chinese economic growth has declined.
B)The Federal Reserve cuts key interest rates in order to stimulate lending.
C)Walmart decides to add more self-checkout machines as the cost of labor rises.
D)India experiences a reduction in unemployment after opening its borders to trade.

Answer 1

Walmart decides to add more self-checkout machines as the cost of labor rises.

Question 2

Alan could apply the principles of economic decision making when deciding:how to spend his paycheck.who to marry.what to have for dinner after a long day at work.

A)I, II, and III
B)I only
C)I and III
D)II and III

Answer 2

I, II, and III

Question 3

Which of the following is considered a macroeconomic issue?

A)T-Mobile and Sprint announce plans for a merger.
B)Sears goes bankrupt and the entire retail fashion industry experiences losses.
C)The unemployment rate in the U.S. falls during the month of June.
D)Microsoft decides to offer all users a free upgrade to Windows 10.

Answer 3

The unemployment rate in the U.S. falls during the month of June.

Question 4

Which of the following is a topic that would be studied in macroeconomics?

A)Gasoline price changes
B)Unemployment rates over time
C)Taxation strategies of major corporations
D)Consumer participation in Facebook

Question 5

Which of the following questions would a macroeconomist most likely try to answer?

A)What stage of the business cycle is our economy currently in?
B)Why do Broadway musicals and airlines have different price discrimination strategies?
C)How much would marijuana consumption change if the market became legal?
D)Should IZZE increase its distribution from national to international?

Question 6

Which of the following is considered a microeconomic issue?

A)The unemployment rate in the United States from 1980 to present day
B)Apple's newest version of the iPhone
C)France's growth rate over the last year
D)All of these are examples of microeconomic issues.

Question 7

The two broad fields that make up the subject of economics are:

A)microeconomics and macroeconomics.
B)personal investments and business investments.
C)fiscal policy and monetary policy.
D)imports and exports.

Question 8

Which of the following statements best describes the study of economics?

A)Economics studies how the Federal Reserve handles fluctuation in business cycles.
B)Economics studies how individuals and groups manage scarce resources.
C)Economics studies how people maximize returns in the stock market.
D)Economics studies how governments determine appropriate tax rates.

Question 9

Suppose Disney World decides to charge local residents a lower price than other park visitors. This would fall under which field of economics?

A)Macroeconomics
B)Public policy
C)Customer service
D)Microeconomics

Question 10

Which of the following questions would be studied in microeconomics?

A)Why did our economic growth rate slow down during the 2000s?
B)How did the recession end in 2009 if unemployment continued to rise?
C)How will the legalization of marijuana in Colorado affect the market for cigarettes?
D)When should Congress raise taxes in order to tackle the debt crisis?

Question 11

Which of the following is considered a microeconomic issue?

A)The local university decides to raise tuition for online course offerings.
B)The country of Zimbabwe has experienced a decline in inflation.
C)The economic growth rate rises in the United States.
D)The unemployment rate in Greece falls.

Question 12

A macroeconomist would study how:

A)the economy works on a regional, national, or international scale.
B)rent ceilings impact the construction rates of new apartments.
C)the increase in the female labor force participation rate impacts childhood obesity.
D)grocery cart rental fees impact parking lot accident rates.

Question 13

Who makes decisions about how to allocate resources?

A)Individuals
B)Businesses
C)Governments
D)All of these make decisions about resource allocation.

Question 14

Economists have observed that economic growth generally leads to improved standards of living. This observation is most related to the field of:

A)microeconomics.
B)public policy.
C)macroeconomics.
D)financial economics.

Question 15

The Bureau of Economic Analysis releases last quarter's growth rate in real GDP. This release would most likely have been written by a:

A)monetary economist.
B)macroeconomist.
C)microeconomist.
D)labor economist.

Question 16

Which of the following is considered a microeconomic issue?

A)The Bureau of Economic Analysis reviews quarterly national income accounting data.
B)A firm decides to purchase pay-per-click online advertising.
C)The Federal Reserve increases the discount rate.
D)The CPI reports a rise in inflation during the month of July.

Question 17

Which of the following is considered a macroeconomic topic?

A)iTunes raises the price of all its music.
B)iTunes raises the price of its pop artists' music only.
C)A local McDonald's franchise decides to hire more workers.
D)The U.S. labor force participation rate falls.

Question 18

The principles of economics can explain which of the following?Why people choose to work or go to collegeWhy a country might prosperHow the value of money changes over time

A)II and III only
B)I and II only
C)III only
D)I, II, and III

Question 19

Which broad field of economics would most likely study how consumers respond to a hike in alcohol taxes?

A)Microeconomics
B)Marginal economics
C)Macroeconomics
D)Monetary economics

Question 20

The broad field of _____ would most likely study how all consumers respond to a hike in cigarette taxes.

A)microeconomics
B)development economics
C)macroeconomics
D)labor economics

Question 21

Which of the following is a problem created by scarcity?

A)The college course you need to take in the fall is only offered at times that conflict with your work schedule.
B)The White House eliminates tours for the public due to budget constraints.
C)Your cell phone battery is low and you decline a phone call from a friend to conserve energy.
D)All of these are problems created by scarcity.

Question 22

Scarcity can best be defined as a situation in which:

A)consumers look for bargains.
B)some producers are selfish with resources.
C)people respond to incentives.
D)all wants cannot be satisfied due to resource constraints.

Question 23

Mimi gets a job twenty miles from her house and purchases a new car to commute. As a result of this new expense, Mimi decides to sell her season tickets to the local football stadium. Mimi's situation can be described as:

A)ignoring sunk costs.
B)a trade-off.
C)irrational decision making.
D)a normative choice.

Question 24

Which of the following is a basic tenant of the economic concept of scarcity?

A)Developing countries will always have a battle to fight hunger.
B)Resources are often wasted, which results in shortages.
C)Income must be redistributed through taxation in order to address income disparity.
D)Limited resources require economies to make choices among production alternatives.

Question 25

The greatest constraint faced by banks considering the alternative of lending to Bangladeshi villagers is:

A)not having qualified loan officers to make the loans.
B)having limited funds available for loans.
C)not being able to determine appropriate currency exchange rates.
D)counterfeit financial reports that make it difficult to properly assess collateral.

Question 26

The assumption of rational behavior:

A)offers a perfect framework for how people actually behave.
B)helps economists explain how people behave in a way that will best achieve their goals.
C)explains why people voluntarily engage in decisions for which costs exceed benefits.
D)is best applied to psychology and should not be used in the science of economics.

Question 27

Which of the following economic decisions would most likely be studied by a macroeconomist?

A)Domino's Pizza decides to provide quantity discounts in order to increase revenue.
B)A local entrepreneur decides to open a Waffle House in the local Walmart parking lot.
C)The government of Estonia implements a flat rate personal income tax for all citizens.
D)Prices for train fares rise as labor unions negotiate higher wage rates.

Question 28

Which of the following is not a direct result of scarcity?

A)Buildings in New York City are taller than buildings in Greenville, SC due to fewer acres of land per person.
B)Due to high gas prices, Shana decides to trade her Chevy Tahoe for a Honda Accord.
C)A college student misses a test review in order to get a few more hours of sleep.
D)The energy industry is searching for a way to store the extra power generated by renewable energy.

Question 29

The problems created by scarcity:

A)could be solved if more people worked overtime.
B)are of no concern to the top income earners.
C)concern individuals, but are not a concern on the macro level.
D)apply to everyone because resources are limited in general.

Question 30

When we assume that consumers want to pay the lowest price possible, we assume that consumers are:

A)cheap.
B)deceitful.
C)rational.
D)informed.

Question 31

Which of the following statements about scarcity is true?

A)Scarcity is an undeniable part of everyone's reality due to the world's limited resources.
B)Scarcity is not a problem for billionaires like Bill Gates.
C)Scarcity in the world can be eliminated by rational decision making.
D)Scarcity is a problem studied in microeconomics and is not a macroeconomic concern.

Question 32

Suppose Hassan wants to rent a house near the lake over a holiday weekend, but the only house available is out of his price range. This is an example of:

A)a resource constraint.
B)rising marginal benefits.
C)changing incentives.
D)sunk costs.

Question 33

When we believe the best result will come from the decision we have made, we are being:

A)gullible.
B)short-sighted.
C)rational.
D)considerate.

Question 34

Which of the following statements about rationality is true?Economists wish to prove that all individuals are rational.Engaging in a behavior for which the marginal costs exceed the marginal benefits is irrational.As long as the marginal benefit of an action is positive, the action is rational.Individuals are hardly ever rational.

A)II only
B)I and III
C)II and IV
D)II, III, and IV

Question 35

Scarcity reflects our inability to satisfy wants due to:

A)an unequal distribution of resources.
B)limited resources.
C)inefficient political systems.
D)unemployed workers.

Question 36

The problem of having unlimited wants under the constraint of limited resources describes:

A)opportunity cost.
B)sunk costs.
C)scarcity.
D)the marginal principle.

Question 37

The famous saying, "There is no such thing as a free lunch," is an example of which economic concept?

A)Maximization
B)Trade-offs
C)Basic necessities
D)The income effect

Question 38

Trade-offs:

A)are associated with every decision.
B)do not exist if we receive something for free.
C)always result in market failure.
D)can be avoided through economic planning.

Question 39

How should we best approach the issue of scarcity?

A)We should only desire things that we are capable of consuming and producing.
B)We should make changes to fiscal policy until the situation of scarcity is eliminated.
C)We should make decisions that allow us to arrange our resources rationally.
D)We should adopt economic policies that will lead to unlimited resources.

Question 40

Individuals, firms, and societies are limited in the amount of goods and services that they can produce. This is a direct result of:

A)unemployment.
B)waste.
C)irrational behavior.
D)scarcity.

Question 41

Jasmin purchases a coffee cup from her local gas station for $5.00 that can be refilled at any time for $0.50. The marginal cost of her 10th cup of coffee is:

A)$0.50.
B)$5.00.
C)$10.00.
D)$5.50.

Question 42

Jimmy is invited to a costume party with a 1990s theme. His first thought is to dress up as MC Hammer, but he is also considering going as a lifeguard from Baywatch. The opportunity cost of arriving dressed like MC Hammer is:

A)the cost of purchasing parachute pants like those MC Hammer would wear.
B)the money he saves since he doesn't need to purchase red swimming trunks.
C)the enjoyment he would have received if he had dressed as a lifeguard.
D)There is no opportunity cost because he was going to attend the party either way.

Question 43

A gas station that does not offer pay at the pump service decides to require drivers to prepay for gas to decrease the amount of drive-offs. Which of the following could be an opportunity cost of this decision?

A)The value of the gas that is no longer stolen by people who drove off
B)The time saved from not having to look for people waiting for you to turn on the pump
C)Lost revenue from people who underestimate how much their gas tank can hold so they don't end up overpaying
D)A loss of snack sales due to people paying for gas before pumping rather than after pumping

Question 44

Economists assume that people choose to do something when they believe:

A)the benefits outweigh the costs of the decision.
B)it will make society better off.
C)their decision cannot be questioned by anyone else.
D)it won't harm anyone and will better themselves.

Question 45

A local fast-food restaurant mails coupons for a free sandwich to every home in the community. Natasha, who is on a diet, receives one of the coupons. Which of the following is an opportunity cost of redeeming the sandwich coupon for Natasha?

A)Lost wages due to spending time going out to eat rather than eating the Healthy Choice meal she brought to work
B)The benefit she would receive from sticking to her "get fit for the summer" diet plan
C)The benefit she would receive from eating a "Blastin' Burger," one of her favorite fast food options
D)There is no opportunity cost of redeeming the coupon because the sandwich is free.

Question 46

A college student decides to spend his afternoon watching three movies rented from Redbox. The cost of each movie is $1. The student was willing to pay $4 to rent each of the first two movies and $2 to rent the third movie. What was the marginal benefit received by the student when renting the second movie?

A)$1
B)$8
C)$4
D)$2

Question 47

If Johnny weren't in economics class this morning, he'd be sleeping. The value Johnny places on sleeping represents his:

A)marginal benefit.
B)incentives.
C)sunk cost.
D)opportunity cost.

Question 48

Suppose a university offers college seniors one "free" course. Is this course also free to society?

A)Yes, because the seniors live in society.
B)Yes, because the school has satisfied the assumption of making a rational choice.
C)No, because if a college senior takes the last seat in the class, then a paying student will not have the opportunity to take it.
D)No, because some students will not take a free class seriously and will ultimately become less productive workers.

Question 49

The drug approval process regulated by the Federal Drug Administration (FDA)slows the pace at which helpful medications reach the marketplace. The alternative of having the medication available to consumers earlier is an example of:

A)the opportunity cost of the FDA's regulation.
B)how easy it is to identify and evaluate sunk costs.
C)the marginal benefit of the FDA's regulation.
D)promoting consumer health in the population.

Question 50

You decide to drive your car on a long road trip of 1,500 miles. The opportunity cost of driving your car:

A)is only the amount of money spent on gas.
B)is zero, because the car is paid for.
C)includes lost wages you could have earned instead of driving.
D)equals the total expenses of the trip.

Question 51

Cameron can spend his weekend afternoon doing one of three things: playing golf, driving his boat, or cleaning his house. Although he enjoys golfing, he sometimes becomes frustrated when playing so he decides to enjoy a more relaxing afternoon on his boat. Cameron never really considered the idea of cleaning the house, but he did give playing golf some serious thought. Cameron's opportunity cost of driving the boat is:

A)having a messy house, since he decided not to clean it.
B)the enjoyment he would have gotten from playing golf.
C)having a messy house and not being able to enjoy playing golf.
D)enjoying a relaxing day out on the lake.

Question 52

Aria purchases a coffee cup from her local gas station for $5.00 that can be refilled at any time for $0.50. Economists would say that the $5.00 she spent on the cup is:

A)an opportunity cost.
B)a sunk cost.
C)a marginal cost.
D)The money spent on the cup can be all of these costs.

Question 53

A college student decides to spend his afternoon watching three movies rented from Redbox. The cost of each movie is $1. The student was willing to pay $4 to rent each of the first two movies and $2 to rent the third movie. What was the marginal benefit received by the student when renting the first movie?

A)$1
B)$8
C)$4
D)$2

Question 54

You're trying to determine whether to spend your Saturday afternoon attending a street festival, working to earn $100, or studying for your midterm exam. You really don't want to work, so you flip a coin between attending the street festival and studying. The coin flip determines that you should stay home and study. The opportunity cost of your time spent studying includes:

A)the loss of $100 worth of wages and the joy from going to the street festival.
B)earning a high score on your midterm and thus improving your grade in the class.
C)the benefit that you could have received from attending the street festival.
D)the time you spent deciding and using a coin flip to determine your Saturday afternoon activity.

Question 55

You are shopping at the local mall with an $80 gift card that expires tomorrow. Only three items catch your attention: a bottle of perfume, a remote control helicopter, and an "Amazing Ab Belt." You would be willing to give up $60 for the perfume, $70 for the belt, and $80 for the helicopter. Knowing this, you decide to purchase the helicopter. The opportunity cost of the helicopter is:

A)$130, the combined value of the alternatives forgone.
B)$80, the amount spent using the gift card.
C)$70, the value of the ab belt.
D)$60, the value of the perfume.

Question 56

A local street festival that previously sold bracelets in exchange for unlimited alcohol consumption is now concerned about overconsumption. If the festival providers decide to instead sell tickets for each drink, will overall alcohol consumption at the next festival decrease?

A)No, because the marginal cost per additional drink will decrease for consumers.
B)No, because the marginal cost per additional drink will increase for consumers.
C)Yes, because the marginal cost per additional drink will increase for consumers.
D)Yes, because the marginal benefit per additional drink will increase for consumers.

Question 57

Opportunity cost:

A)only includes explicit, out-of-pocket expenses.
B)is the value of your next best alternative.
C)is never provided in dollar values.
D)would not include wages lost when you take a vacation.

Question 58

Making a decision "on the margin" involves comparing:

A)additional benefits against additional costs.
B)total benefits against total costs, including benefits and costs from past decisions.
C)sunk costs against opportunity costs.
D)all of the benefits you could expect to get, without considering costs.

Question 59

When making a decision, it is often more difficult to identify the ______ associated with the decision because ______.

A)costs; an individual must weigh monetary costs and opportunity costs differently
B)costs; an individual should consider opportunity costs but ignore sunk costs
C)benefits; it is impossible to put a dollar value on benefits
D)benefits; individual people identify benefits while firms identify costs

Question 60

Your sister always brags about how savvy she is as a grocery shopper, claiming she saves lots of money by using coupons and shopping at multiple stores to get the lowest prices on all goods. Why might your sister be overestimating her savings?

A)She does not count the value of the time it takes her to sort and clip coupons as a cost.
B)She does not count the cost of the gas she uses driving extra miles to multiple grocery stores.
C)She does not count the value of the time it takes her to check out at multiple stores and use multiple coupons, compared to a trip to one store with no coupons.
D)All of these are correct.

Question 61

A university posts a notice that anyone who registers for classes after the deadline will be charged an additional $30 fee. This is an example of:

A)a trade-off.
B)a disincentive.
C)marginal cost.
D)group responsibility.

Question 62

Emir decides to sign up for a college accounting course. He pays the $500 tuition, but before the course starts he is offered a job that would conflict with the class time. The tuition is no longer refundable. In deciding whether to accept or decline the job offer, the $500 spent on the class is:

A)the opportunity cost of the job.
B)the expected gain in pay from taking the accounting course.
C)a sunk cost.
D)a sunk benefit.

Question 63

A car dealership advertises free satellite radio for one year with the purchase of a new car. This is an example of:

A)bait and switch.
B)marginal sales.
C)an incentive.
D)voluntary exchange.

Question 64

After paying the membership fee for a warehouse club like Costco, members are able to purchase items at a discounted price. Suppose the price of one pound of chicken is $4.99 at a typical grocery store but $2.99 at Costco. Also suppose the annual price of a Costco membership is $60. The marginal cost of your 5th pound of chicken purchased at Costco is:

A)$2.99.
B)$2.00.
C)−$2.00.
D)$62.99.

Question 65

Suppose that a policy maker knows there are currently 1,000 cars purchased each year in the city. In order to build a new park next year, which will cost $500,000, the policy maker decides to impose a tax of $500 on each car purchased. Which of the following scenarios is most likely to occur?

A)The $500 tax will disincentivize car purchases, and fewer than $500,000 will be raised.
B)The $500 tax will have no effect on car purchases, and the $500,000 will be raised.
C)Knowing the purpose of the $500 tax, more people will be incentivized to make car purchases, and the park will be funded.
D)The $500 tax is a sunk cost and thus will be ignored by people making car purchases.

Question 66

A college student decides to spend his afternoon watching three movies rented from Redbox. The cost of each movie is $1. The student was willing to pay $4 to rent each of the first two movies and $2 to rent the third movie. What was the marginal benefit received by the student when renting the third movie?

A)$1
B)$8
C)$4
D)$2

Question 67

After paying $12 to enter an all-you-can-eat buffet, you can eat as much food as you desire. Which of the following statements is true?

A)The marginal benefit of your first plate of food is larger than the marginal benefit of your third plate of food.
B)The marginal cost of a plate of food is sunk.
C)You should eat as much as possible to maximize your benefit.
D)It is inefficient to eat at buffet restaurants.

Question 68

Applying for a loan in five-person groups is an example of:

A)family and friends lending.
B)party of five lending.
C)group responsibility.
D)trade-off.

Question 69

After paying $12 to enter an all-you-can-eat buffet, you can eat as much food as you desire. The marginal cost of an additional plate of food is:

A)the benefit you will get from consuming the food.
B)$12 minus the time it takes you to eat the food.
C)zero dollars.
D)a sunk cost, and therefore irrelevant.

Question 70

A fast-food chain announces a "buy one get one free" offer on breakfast sandwiches bought before 9am. This is an example of:

A)the use of incentives.
B)a macroeconomic decision.
C)hoarding scarce resources.
D)trade-offs.

Question 71

The extra benefit associated with producing or consuming the next unit of a good or service is known as the:

A)revenue product.
B)spillover.
C)marginal benefit.
D)economic benefit.

Question 72

The additional cost associated with producing or consuming the next unit of a good or service is known as the:

A)variable cost.
B)marginal cost.
C)utility cost.
D)sunk cost.

Question 73

An Italian restaurant decreases the price of pizza relative to the price of spaghetti, so customers buy more pizza. This is an example of responding to:

A)marginal science.
B)incentives.
C)disincentives.
D)sunk benefit.

Question 74

The deadline for your research paper is tomorrow and you anticipate you'll need a full day's worth of writing to complete the paper. Unfortunately, you are scheduled to work all day in the cafeteria. You can turn the paper in one day late for a 10 percent penalty or take the day off of work and turn the paper in by the deadline. Losing a day of wages will cost you $90. The marginal cost of turning the paper in on time is:

A)the 10 percent penalty on your final score.
B)$90 in forgone wages.
C)respect from your professor.
D)the 10 percent penalty on your score and $90 in forgone wages.

Question 75

You and a friend decide to go see a movie at the theater, spending $15 each on the tickets. Halfway through the movie you're struggling to stay awake and your friend is scrolling through Facebook. You suggest leaving the movie to do something else, since you're both obviously bored. However, your friend declines, stating he doesn't want to waste the $15 he spent on the ticket. Your friend is considering the ______ of the movie.

A)opportunity cost
B)sunk cost
C)marginal benefit
D)total cost

Question 76

Muhammad Yunus, founder of the Grameen bank, was highly successful in his use of applying social incentives through group responsibility in order to maximize loan repayment rates. This success created an incentive for other banks to:

A)offer similar loans to the poor.
B)go out of business.
C)seek government action to ban group responsibility lending.
D)avoid catering to a high risk group.

Question 77

Muhammad Yunus revolutionized banking in Bangladesh by issuing loans using group responsibility. This change to group responsibility:

A)reduced the trade-offs faced when making a loan.
B)provided an incentive for villagers to repay loans.
C)increased scarcity, making it easier to repay loans.
D)provided an incentive for villagers to offer collateral for loans.

Question 78

You have paid all expenses to travel to your favorite beach for a vacation. You made these payments early in order to receive a discount, and all payments are nonrefundable. Unfortunately, the weatherman is now predicting that a hurricane will hit the area during your vacation dates. As you decide whether or not to take the trip, you should not consider the:

A)money that has already been spent on the trip.
B)satisfaction you are likely to receive at the beach during a hurricane.
C)best alternative use of your time if you do not take the trip.
D)additional costs you didn't anticipate while on the trip.

Question 79

Many theaters sell empty seats at a deep discount just before show time. What economic concept is displayed by this behavior?

A)Consumer demand
B)Sunk costs
C)Price optimization
D)Thinking at the margin

Question 80

Which of the following is an example of a positive incentive?

A)Discover offers 0 percent balance transfer rates to anyone who opens a new credit card.
B)McDonald's decides to add a white chocolate mocha to its menu.
C)A teacher who has taught for 30 years decides to retire and focus on gardening.
D)A business decides to leave the industry after facing stiff competition.