ECON 213 quiz 1 Liberty University complete answers

ECON 213 quiz 1 Liberty University complete answers

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Question 1

Economics is the study of:

Select one:

a. markets

b. How to make workers more productive and firms more profitable.

c. How to allocate resources to satisfy wants and needs.

d. How to make money.

e. Capitalism

Question 2

An example of a direct positive incentive is:

Select one:

a. Threatening to fire those who do not perform well.

b. Unemployment insurance for those who are laid off.

c. A prison sentence for committing a crime.

d. Providing a workplace safety program.

e. Providing a commission for sales.

Question 3

A health insurance company may offer its policyholders a discount on their premiums if they prove that

they have stopped smoking. What type of incentive is the health insurance company offering?

Select one:

a. an unintended incentive.

b. A neutral incentive.

c. complementary incentive.

d. A direct incentive.

e. An indirect incentive.

Question 4

The cost of a trade-off is known as the ________ of that decision.

Select one:

a. opportunity cost

b. marginal cost

c. net cost

d. comparative cost

e. explicit cost

Question 5

Instead of taking an economics course, you could have taken a history course that meets at the exact

same time. The total cost of taking the economics course would be:

Select one:

a. the fact that you could not take the history course at the same time.

b. the tuition cost, the cost of the textbook and notebook, and the fact that you could not take the history

course at the same time.

c. the tuition cost for the economics course plus the price of the textbook and a notebook for the

economics course.

d. the price of the textbook and a notebook for the economics course.

e. the tuition cost for the economics course.

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Question 6

The opportunity cost of working rather than going to school is:

Select one:

a. zero because the person is earning an income by working.

b. the cost of clothing and transportation.

c. the higher wages that come with additional education.

d. the cost of food and housing.

e. the annual wages earned by working.

Question 7

On the television show “MythBusters,” the hosts design experiments, collect data, and test theories based

on popular myths. This is an example of:

Select one:

a. the scientific method as used in economics.

b. economic growth.

c. absolute advantage.

d. gains from trade.

e. production possibilities.

Question 8

The area inside (within) the production possibilities frontier (PPF) contains:

Select one:

a. normative points.

b. inefficient points.

c. efficient points.

d. positive points.

e. high opportunity cost points.

Question 9

How will a reduction in the national unemployment rate affect a nation’s production possibilities frontier

(PPF)?

Select one:

a. It will move society to a point farther inside the PPF.

b. It will cause the PPF to shift inward.

c. It will move society outward to a point closer to or on the PPF.

d. It will push society to a point outside its PPF.

e. It will cause the PPF to shift outward.

Question 12

The movie Saving Private Ryan is about a military mission to find and recover a particular soldier—

Private Ryan. The movie is predominantly about how much was given up in an effort to save this one

particular soldier. The main economic theme of the movie is:

Select one:

a. opportunity cost.

b. comparative advantage.

c. positive advantage.

d. normative analysis.

e. absolute advantage.

Question 15

Consider the following scenario to answer the questions that follow: Two friends, Rachel and Joey, enjoy

baking bread and making apple pies. Rachel takes two hours to bake 1 loaf of bread and one hour to

make 1 pie. Joey takes four hours to bake 1 loaf of bread and four hours to make 1 pie.

What is Joey’s opportunity cost of baking 1 loaf of bread?

Select one:

a. 1 loaf of bread

b. 1/2 loaf of bread.

c. 1 pie

d. 2 pies

e. 4 pies

Question 16

Consider the following scenario to answer the questions that follow: Two friends, Rachel and Joey, enjoy

baking bread and making apple pies. Rachel takes two hours to bake 1 loaf of bread and one hour to

make 1 pie. Joey takes four hours to bake 1 loaf of bread and four hours to make 1 pie.

What is Rachel’s opportunity cost of baking 1 pie?

Select one:

a. 1 pie

b. 2 pies

c. 2 loaves of bread.

d. 1 loaf of bread

e. 1/2 loaf of bread

Question 17

The ability of one producer to create more of a good than another producer using the same quantity of

resources is called:

Select one:

a. a positive-sum game.

b. absolute advantage.

c. gains from trade

d. the law of increasing relative cost.

e. comparative advantage.

Question 18

The ability of one producer to produce a good at a lower opportunity cost than another producer is called:

Select one:

a. absolute advantage.

b. a zero-sum game.

c. comparative advantage.

d. a normative statement.

e. the law of increasing relative cost.

Question 19

For both parties to benefit from specialization and trade, the trading parties must agree on:

Select one:

a. the appropriate level of investment for the future.

b. the source of comparative advantage.

c. who has the absolute advantage in production.

d. a plan not to trade with other parties.

e. a price somewhere between their opportunity costs of production.

Question 20

Why do economists use models?

Select one:

a. Models allow us to control exogenous factors.

b. Models allow us to study a simplified version of a complex world.

c. Models make the world harder to understand.

d. Models allow us to examine more factors than what actually exists in our world.

e. Models are used to add complexity to a simple world.

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Question 1 The government has been considering doing away with minting pennies because they are rarely used for purchases (with most people collecting them or throwing them away). How would an economist best explain this?

Question 2 In a growing number of cities, stores are required either not to make available plastic or paper bags or to do so only for an additional fee. If this fee can be refunded when you recycle the bag, the refund acts as a(n):

Question 3 When trade is voluntary, who benefits?

Question 4 A health insurance company may offer its policy­holders a discount on their premiums if they prove that they have stopped smoking. What type of incentive is the health insurance company offering?

Question 5 The government controls for many indirect incentives in safety net social programs by:

Question 6 If you don’t like changing the oil in your car and pay your father to do it for you, you have provided him with a(n):

Question 7 How are changes in opportunity cost related to decision­making behavior?

Question 8 As a discipline, economics is best described by which of the following?

Question 9 A person has a comparative advantage in the production of a good when she or he can produce the product at a(n) ________ opportunity cost compared to another person.

Question 10 An economist is an individual who would be least able to answer which research question?

Question 11 Kelly is an architect, and she is trying to decide whether to hire Mike, a draftsman, to assist with her work. Kelly could hire Mike at $20 per hour, but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle. Which of the following is true?

Question 12 Indirect incentives create:

Question 13 An opportunity cost is the:

Question 14 Which scenario describes studying for an economics course without applying the scarcity principle?

Question 15 Economists believe that individuals compare the benefits and costs of various options when making a decision and in so doing act ________.

Question 16 Economics professors are well aware of the importance of incentives. Which of the following situations shows the use of a positive incentive?

Question 17 When you chose a major, you likely thought about your skills. Let’s say you don’t enjoy dealing with numbers. How could you explain to your parents, using logic from economics, why you chose to major in English instead of mathematics?

Question 18 The government places warnings on cigarette and liquor packages. These warnings serve as a(n):

Question 19 What is the strongest argument for why we need more economists today than ever before?

Question 20 The basic goal of economics is:

 

Rational decision-making under conditions of scarcity requires individuals to

Many stores are open 24 hours a day. When store managers make the decision to stay open 24 hours, it must be the case that

Google has started a project to scan all books and make those that are not copyrighted available to people free of charge. Why is it important that only books without a copyright are available

Which scenario describes studying for an economics course without applying the scarcity principle

Some public transit systems use an “honor system” whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer. With what population would such a system be successful

Public buildings in the United States are required to be accessible to the disabled and, as a result, almost all have an elevator. What would be an example of a positive direct incentive for those who can use stairs

The basic goal of economics is

What is the strongest argument for why we need more economists today than ever before

I asked my neighbor to rake the leaves on his lawn because they are blowing into my yard. He responded that it wouldn’t be rational for him to do so. Why would this be the case

What is the opportunity cost of taking this exam

The opportunity cost of going to school rather than working is the cost of

Which of the following concepts do economists focus their study on when explaining how humans behave

The U.S. federal government offers homeowners a tax deduction for their home loan interest payments. This reduction in taxes serves as a(n) ________ to buy a house

How are changes in opportunity cost related to decision-making behavior

The patent system

Economics is the study of

An example of a direct positive incentive is

Opportunity cost is the ________ alternative forfeited when a choice is made.

In a growing number of cities, stores are required either not to make available plastic or paper bags or to do so only for an additional fee. What kind of incentive is this fee?

Kelly is an architect, and she is trying to decide whether to hire Mike, a draftsman, to assist with her work. Kelly could hire Mike at $20 per hour, but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle. Which of the following is true

 

Question 1

What is the strongest argument for why we need more economists today than ever before?

Question 2

Which scenario describes studying for an economics course without applying the scarcity principle?

Question 3

The U.S. federal government offers homeowners a tax deduction for their home loan interest payments. This reduction in taxes serves as a(n) ________ to buy a house.

Question 4

As a new firm in the applepicking business, you have considered adding an economist to your management team. What would this economist be unable to help your managerial team with?

Question 5

Some public transit systems use an “honor system” whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer. With what population would such a system be successful?

Question 6

The government has been trying to mint dollar coins instead of printing paper dollar bills, but people have been reluctant to use coins instead of paper bills. How would an economist explain this reluctance?

Question 7

Saudi Arabia has a comparative advantage in producing oil because it:

Question 8

Which of the following is not a type of incentive?

Question 9

The U.S. federal government offers homeowners a tax deduction for their home loan interest payments. This reduction in taxes may have encouraged too many people to own a home. If the tax deduction caused people who otherwise would have rented to own, the tax deduction serves as a(n):

Question 10

When you chose a major, you likely thought about your skills. Let’s say you don’t enjoy dealing with numbers. How could you explain to your parents, using logic from economics, why you chose to major in English instead of mathematics?

Question 11

A parent that pays a child an allowance for doing chores is providing a(n):

Question 12

I asked my neighbor to rake the leaves on his lawn because they are blowing into my yard. He responded that it wouldn’t be rational for him to do so. Why would this be the case?

Question 13

The basic goal of economics is:

Question 14

Economics is the study of:

Question 15

A good is ________ if it takes even a small amount of time, energy, or money to acquire.

Question 16

Many professors have a policy that punishes individuals if they don’t come to class. Instead of punishing students who don’t attend class, what could the professor do to provide a positive incentive to come to class?

Question 17

A person has a comparative advantage in the production of a good when she or he can produce the product at a(n) ________ opportunity cost compared to another person.

Question 18

When a parent tells you not to study economics because it is a pointless discipline, why is he or she incorrect?

Question 19

Indirect incentives create:

Question 20

Google has started a project to scan all books and make those that are not copyrighted available to people free of charge. Why is it important that only books without a copyright are available?

 

Question 1 The opportunity cost of working rather than going to school is:

Question 2 I asked my neighbor to rake the leaves on his lawn because they are blowing into my yard. He responded that it wouldn’t be rational for him to do so. Why would this be the case?

Question 3 As a discipline, economics is best described by which of the following?

Question 4 Some public transit systems use an “honor system” whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer. With what population would such a system be successful?

Question 5 Which of the following is a microeconomic question?

Question 6 One way to promote a new business is to offer free items. If you were to open a new restaurant and offer free food, you likely would have a line out the door. How would an economist understand the behavior of those standing in line?

Question 7 How are changes in opportunity cost related to decision­making behavior?

Question 8 A camera takes a picture of drivers who do not stop at a red light, and this practice is used to issue a traffic ticket. These red light cameras can be understood as serving as a(n):

Question 9 The need to study economics would cease to exist if:

Question 10 An example of a direct positive incentive is:

Question 11 Saudi Arabia has a comparative advantage in producing oil because it:

Question 12 Public buildings in the United States are required to be accessible to the disabled and, as a result, almost all have an elevator. What would be an example of a positive direct incentive for those who can use stairs?

Question 13 According to economists, one reason few professional athletes have PhD’s is that the:

Question 14 Which scenario describes studying for an economics course without applying the scarcity principle?

Question 15 Microeconomics is the branch of economics that focuses on the:

Question 16 Which of the following is a macroeconomic question?

Question 17 The opportunity cost of a purchase is:

Question 18 Instead of taking an economics course, you could have taken a history course that meets at the exact same time. The total cost of taking the economics course would be:

Question 19 Economists believe that optimal decisions are made up to the point where:

Question 20 An economist is an individual who would be least able to answer which research question?

 

Question 1 Economics professors are well aware of the importance of incentives. Which of the following situations shows the use of a positive incentive?

Question 2 Some public transit systems use an “honor system” whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer. With what population would such a system be successful?

Question 3 As a new firm in the apple­picking business, you have considered adding an economist to your management team. What would this economist be unable to help your managerial team with?

Question 4 Indirect incentives create:

Question 5 What is the opportunity cost of taking this exam?

Question 6 When most economists wake up in the morning, their first decision is whether or not to hit the snooze bar on the alarm clock. What statement best represents their thought process as a rational decision­maker?

Question 7 Who benefits from voluntary trade?

Question 8 Opportunity cost is the ________ alternative forfeited when a choice is made.

Question 9 The opportunity cost of a purchase is:

Question 10 Why would economists find it surprising if the CEO of a large company does his or her own housework?

Question 11 The U.S. federal government offers homeowners a tax deduction for their home loan interest payments. This reduction in taxes serves as a(n) ________ to buy a house.

Question 12 Many stores are open 24 hours a day. When store managers make the decision to stay open 24 hours, it must be the case that:

Question 13 What is the strongest argument for why we need more economists today than ever before?

Question 14 An opportunity cost is the:

Question 15 Economics is concerned with the trade­offs that emerge because of scarcity. The term “trade­offs” refers to:

Question 16 The government controls for many indirect incentives in safety net social programs by:

Question 17 Which of the following is a microeconomic question?

Question 18 Microeconomics is the study of:

Question 19 While generous disability insurance can help those who have been permanently injured, it can also increase the likelihood that individuals will falsely claim to be disabled. This likelihood is a(n):

Question 20 When consumers discard their gasoline­powered automobiles for electric­powered ones, this partially reflects the ________ of gasoline:

 

Question 1 Microeconomics is the branch of economics that focuses on the:

Question 2 The cost of a trade­off is known as the ________ of that decision.

Question 3 The U.S. federal government offers homeowners a tax deduction for their home loan interest payments. This reduction in taxes may have encouraged too many people to own a home. If the tax deduction caused people who otherwise would have rented to own, the tax deduction serves as a(n):

Question 4 In a growing number of cities, stores are required either not to make available plastic or paper bags or to do so only for an additional fee. If this fee can be refunded when you recycle the bag, the refund acts as a(n):

Question 5 More oranges are grown in Florida than North Dakota because Florida’s warm climate gives it a ________ in growing oranges.

Question 6 Because of scarcity:

Question 7 Economists believe that optimal decisions are made up to the point where:

Question 8 Why would economists find it surprising if the CEO of a large company does his or her own housework?

Question 9 When consumers discard their gasoline­powered automobiles for electric­powered ones, this partially reflects the ________ of gasoline:

Question 10 Opportunity cost is the ________ alternative forfeited when a choice is made.

Question 11 Economists believe that individuals compare the benefits and costs of various options when making a decision and in so doing act ________.

Question 12 The basic goal of economics is:

Question 13 The patent system:

Question 14 Who benefits from voluntary trade?

Question 15 As a new firm in the apple­picking business, you have considered adding an economist to your management team. What would this economist be unable to help your managerial team with?

Question 16 Public buildings in the United States are required to be accessible to the disabled and, as a result, almost all have an elevator. What would be an example of a positive direct incentive for those who can use stairs?

Question 17 A person has a comparative advantage in the production of a good when she or he can produce the product at a(n) ________ opportunity cost compared to another person.

Question 18 In economics, choices are necessary because of the presence of:

Question 19 Macroeconomics is the study of:

Question 20 Many stores are open 24 hours a day. When store managers make the decision to stay open 24 hours, it must be the case that:

 

Question 1 What is the strongest argument for why we need more economists today than ever before?

Question 2 Google has started a project to scan all books and make those that are not copyrighted available to people free of charge. Why is it important that only books without a copyright are available?

Question 3 How are changes in opportunity cost related to decision­making behavior?

Question 4 If you don’t like changing the oil in your car and pay your father to do it for you, you have provided him with a(n):

Question 5 The United States is able to experience economic growth to the extent that:

Question 6 Economists believe that individuals compare the benefits and costs of various options when making a decision and in so doing act ________.

Question 7 When trade is voluntary, who benefits?

Question 8 An economist is an individual who would be least able to answer which research question?

Question 9 Actions and activities are encouraged with which type of incentive?

Question 10 The term ________ means “additional.”

Question 11 Economists believe that optimal decisions are made up to the point where:

Question 12 If the government wanted to give people a negative direct incentive not to save money, what would be the appropriate policy?

Question 13 Which scenario describes studying for an economics course without applying the scarcity principle?

Question 14 Entrepreneurs are willing to take risks because:

Question 15 While generous disability insurance can help those who have been permanently injured, it can also increase the likelihood that individuals will falsely claim to be disabled. This likelihood is a(n):

Question 16 An activity’s marginal benefit is ________ at the optimal quantity.

Question 17 An example of a direct positive incentive is:

Question 18 Economics is concerned with the trade­offs that emerge because of scarcity. The term “trade­-offs” refers to:

Question 19 The government has been trying to mint dollar coins instead of printing paper dollar bills, but people have been reluctant to use coins instead of paper bills. How would an economist explain this reluctance?

Question 20 A person has a comparative advantage in the production of a good when she or he can produce the product at a(n) ________ opportunity cost compared to another person.

 

A car insurance company is willing to offer accident-free drivers a discount. This is an example of:
a. scarcity.
b. a comparative advantage.
c. a positive incentive. 
d. an opportunity cost.
e. a negative incentive.

A person has a comparative advantage in the production of a good when she or he can produce the product at a ________ opportunity cost compared to another person.
a. higher
b. lower 
c. equal
d. diminishing
e. increasing

According to economists, one reason few professional athletes have PhD's is that the:
a. explicit cost of going to graduate school would be too high.
b. marginal benefit of going to graduate school is too high.
c. comparative cost of going to graduate school is too high.
d. marginal cost of going to graduate school is too high.
e. opportunity cost of going to graduate school is too high.

An example of a direct positive incentive is:
a. a prison sentence for committing a crime.
b. providing a workplace safety program.
c. threatening to fire those who do not perform well.
d. providing a commission for sales.
e. unemployment insurance for those who are laid off.

As a new firm in the apple-picking business, you have considered adding an economist to your management team. What would this economist be unable to help your managerial team with?
a. Determining why people eat apples 
b. Determining the effect government regulations would have on the price of apples
c. Determining how many apples consumers will purchase at different prices
d. Determining the lowest cost way of picking apples
e. Determining the lowest cost way of distributing apples

Comparative advantage emerges because of the presence of:
a. scarcity.
b. incentives.
c. marginal benefits equaling marginal costs.
d. trade.
e. differing opportunity costs.

Economics is the study of:
a. markets.
b. how to make workers more productive and firms more profitable.
c. how to make money.
d. how to allocate resources to satisfy wants and needs. 
e. capitalism.

Economists believe that individuals compare the benefits and costs of various options when making a decision and in so doing act ________.
a. unpredictably
b. fairly
c. collectively
d. selfishly
e. rationally

Economists believe that optimal decisions are made up to the point where:
a. marginal benefit is zero.
b. marginal benefits are greater than marginal costs.
c. marginal cost is zero.
d. marginal costs are greater than marginal benefits.
e. marginal benefits are equal to marginal costs.

I asked my neighbor to rake the leaves on his lawn because they are blowing into my yard. He responded that it wouldn't be rational for him to do so. Why would this be the case?
a. My neighbor is a lawyer who values his time at $200 an hour and knows that he can hire a high school kid to rake leaves for $20 an hour. 
b. My neighbor lacks the equipment to rake leaves and thinks it would take too long to do the job.
c. My neighbor is getting revenge on me because I didn't rake the leaves on my lawn last year.
d. My neighbor is a busy person and doesn't have time to rake leaves.
e. My neighbor is a high school teacher and values his time at $15 an hour, and he knows that he can hire one of his students to rake leaves for $20 an hour.

If the government wanted to give people a negative direct incentive not to save money, what would be the appropriate policy?
a. providing funding for an advertising campaign encouraging people to spend more money
b. providing individuals a subsidy to save their money
c. imposing a tax on individuals for saving their money 
d. informing individuals that saving money causes people not to spend money, which will cause them to lose their jobs
e. informing consumers about all that they could buy with their money with the hope that they spend more

In 2009, the federal government created a program called Cash for Clunkers whereby consumers could trade in a less efficient car for a more efficient car and receive a higher value than they would have otherwise. How would an economist understand the decision that consumers faced?
a. The Cash for Clunkers program served as an indirect incentive to replacing a fuel-inefficient car.
b. The Cash for Clunkers program served as a negative incentive to replacing a fuel-inefficient car.
c. Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal benefits would exceed marginal costs. 
d. The Cash for Clunkers program increased the opportunity cost of replacing a car.
e. Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal costs would exceed marginal benefits.

Instead of deciding to finish high school, you could have decided to work full-time. How would an economist explain your decision to receive your high school degree?
a. The cost of going to high school was greater than the benefit of working full-time.
b. The benefit of going to high school was greater than the benefit of working full-time. 
c. The benefit of working full-time was greater than the cost of going to high school.
d. The benefit of working full-time was greater than the benefit of going to high school.
e. The cost of working full-time was greater than the benefit of going to high school.

Macroeconomics is the study of:
a. the economic motives of voters and elected officials.
b. the interaction between the government and businesses.
c. the operation of the economy as a whole. 
d. individual decision-making units such as households and businesses.
e. how government purchases affect specific markets.

Microeconomics is the branch of economics that focuses on the:
a. entire economy.
b. production side of the economy.
c. consumption side of the economy.
d. choices and decision-making of individuals and firms. 
e. involvement of the government in the entire economy.

More oranges are grown in Florida than North Dakota because Florida's warm climate gives it a ________ in growing oranges.
a. producer advantage
b. comparative advantage 
c. revenue advantage
d. planning advantage
e. public advantage

Public buildings in the United States are required to be accessible to the disabled and, as a result, almost all have an elevator. What would be an example of a positive direct incentive for those who can use stairs?
a. Using the stairs will give you some exercise and make you healthier. 
b. Using the stairs will put elevator repair professionals out of work.
c. Using the stairs will make it seem that you care about your health and that you aren't lazy.
d. Using the stairs will increase the risk of tripping and falling.
e. Using the stairs will take more time than taking the elevator and will increase the risk of missing an important meeting.

Rational decision-making under conditions of scarcity requires individuals to:
a. earn as much income as possible.
b. place a monetary value on everything.
c. know the prices of all goods they might buy.
d. understand that trade-offs are necessary. 
e. be alert to price reductions on desired products.

Restaurants, bars, and convenience stores are often located near college campuses. These businesses frequently charge higher than normal prices. They are taking advantage of the fact that:
a. students are able to pay higher prices than the rest of the population, so the businesses can charge higher prices than they otherwise would have been able to charge.
b. students place a high value on their scarce time and are unwilling to pay higher prices; but because students are spending their parents' money, they buy from businesses closer to campus anyway.
c. students place a low value on their scarce time and are willing to pay higher prices than they would at locations farther from campus.
d. students are unable to pay higher prices than the rest of the population, but they are able to succeed because they can sell to a large number of people.
e. students place a high value on their scarce time and are willing to pay higher prices than they would at locations farther from campus.

Saudi Arabia has a comparative advantage in producing oil because it:
a. forces the use of oil for the production of all electricity.
b. has forced other countries not to sell their oil.
c. has specialized in the production of oil given its natural resources. 
d. has specialized in the production of all goods.
e. benefits from the heavy use of oil for transportation.

The basic goal of economics is:
a. controlling tastes and wishes so that there will be enough resources to produce all the goods and services that people want.
b. addressing the scarcity problem created because the population's desire for goods exceeds the ability to produce them. 
c. determining how to distribute all that is produced in an economy.
d. matching limited resources to people's limited wants and needs.
e. controlling the effects of government actions.

The cost of a trade-off is known as the ________ of that decision.
a. comparative cost
b. opportunity cost 
c. explicit cost
d. marginal cost
e. net cost

The opportunity cost for Elijah of going to a water park is:
a. zero, if it is raining that day and the water park is closed.
b. the price of the admission pass plus the highest valued alternative activity Elijah could have done instead.
c. zero, if he can go with his parents who will pay.
d. the price of the admission pass.
e. the highest valued alternative activity Elijah could have done instead.

The opportunity cost of a purchase is:
a. always equal to the selling price of what you purchased.
b. the lowest possible price.
c. zero if the item is what you want most.
d. always greater for people who are out of work than for people who are working.
e. the alternative good or service that one sacrifices because a different good was purchased.

The patent system:
a. acts as an indirect positive incentive.
b. acts as a direct positive incentive. 
c. does not provide an incentive.
d. acts as a direct negative incentive.
e. acts as an indirect negative incentive.

The term ________ means "additional."
a. "opportunity cost"
b. "trade-off"
c. "incentive"
d. "marginal" 
e. "comparative"

Thomas Malthus's prediction of mass starvation failed to come true because of increases in:
a. government involvement.
b. population.
c. income.
d. productivity.
e. temperature.

What creates comparative advantage?
a. higher opportunity costs
b. specialization 
c. population growth
d. scarcity
e. lower costs

What is the opportunity cost of taking this exam?
a. all of the things that you could have done by not studying
b. each of the questions that you miss on the exam
c. the money you spent on tuition
d. the highest valued alternative that you gave up to prepare for and attend the exam 
e. the money you spent purchasing the textbook and the other materials you study with

When trade is voluntary, who benefits?
a. both the buyer and the seller 
b. the buyer
c. No one benefits.
d. the seller
e. Trade is never voluntary.

 

In economics, choices are necessary because of the presence of:
a. luxuries.
b. inefficiency.
c. needs.
d. scarcity.
e. incentives.

The basic goal of economics is:
a. controlling the effects of government actions.
b. determining how to distribute all that is produced in an economy.
c. addressing the scarcity problem created because the population's desire for goods exceeds the ability to produce them.
d.matching limited resources to people's limited wants and needs.
e. controlling tastes and wishes so that there will be enough resources to produce all the goods and services that people want.

As a discipline, economics is best described by which of the following?
a. the study of how to control the effects of government actions
b. the study of how to control the preferences of consumers so that there will be enough resources to produce all the goods and services that consumers want
c. the study of how to use scarce resources to satisfy unlimited wants and needs
d. the study of how to dispose of excess goods and services that nobody wants
e. the study of how to maximize profits for firms

10. As a new firm in the apple-picking business, you have considered adding an economist to your management team. What would this economist be unable to help your managerial team with?
a. Determining the lowest cost way of picking apples
b. Determining how many apples consumers will purchase at different prices
c. Determining why people eat apples
d. Determining the effect government regulations would have on the price of apples
e. Determining the lowest cost way of distributing apples

Which of the following statements best represents the fact that I cannot put in extra hours of work because of scarcity?
a. I don't have enough time for additional work because I need to spend time with my family and there are only so many hours in the day.
b. I don't like going to work, so why would I work more than I have to?
c. I don't think that overtime pay is high enough.
d. I am worried that if I work extra hours, I will get bored with my job.
e. I don't want my coworkers to feel pressure to work more because I am working additional hours.

Macroeconomics is the study of:
a. the economic motives of voters and elected officials.
b. individual decision-making units such as households and businesses.
c. how government purchases affect specific markets.
d. the operation of the economy as a whole.
e. the interaction between the government and businesses.

Microeconomics is the branch of economics that focuses on the:
a. entire economy.
b. production side of the economy.
c. consumption side of the economy.
d. involvement of the government in the entire economy.
e. choices and decision-making of individuals and firms.

The patent system:
a. acts as a direct positive incentive.
b. acts as a direct negative incentive.
c. acts as an indirect positive incentive.
d. acts as an indirect negative incentive.
e. does not provide an incentive.

Public buildings in the United States are required to be accessible to the disabled and, as a result, almost all have an elevator. What would be an example of a positive direct incentive for those who can to use stairs?
a. Using the stairs will make it seem that you care about your health and that you aren't lazy.
b. Using the stairs will increase the risk of tripping and falling.
c. Using the stairs will take more time than taking the elevator and will increase the risk of missing an important meeting.
d. Using the stairs will give you some exercise and make you healthier.
e. Using the stairs will put elevator repair professionals out of work.

An example of a direct positive incentive is:
a. a prison sentence for committing a crime.
b. unemployment insurance for those who are laid off.
c. providing a workplace safety program.
d. providing a commission for sales.
e. threatening to fire those who do not perform well.

Economics professors are well aware of the importance of incentives. Which of the following situations shows the use of a positive incentive?
a. Students who show up late to class will not be allowed in the classroom.
b. Students who do not have a doctor's note will not be allowed to take an exam at a different time.
c. Students can choose whether or not they want to attend class—there is no attendance policy.
d. Students can choose to do extra credit at the end of the semester.
e. The professor decides to teach the class by reading out of the textbook to the entire class.

Actions and activities are discouraged with which type of incentive?
a. positive
b. negative
c. neutral
d. complementary
e. unintended

When a ticket is given to a pedestrian for jaywalking, what type of incentive exists?
a. a positive incentive
b. a negative incentive
c. a neutral incentive
d. a complementary incentive
e. an unintended incentive

In a growing number of cities, stores are required either not to make available plastic or paper bags or to do so only for an additional fee. What kind of incentive is this fee?
a. a direct incentive
b. an indirect incentive
c. a neutral incentive
d. a complementary incentive
e. an unintended incentive

A health insurance company may offer its policyholders a discount on their premiums if they prove that they have stopped smoking. What type of incentive is the health insurance company offering?
a. a direct incentive
b. an indirect incentive
c. a neutral incentive
d. a complementary incentive
e. an unintended incentive

What is the indirect incentive in the unemployment insurance program?
a. Workers get paid when they are laid off.
b. Workers face an incentive to find a new job as quickly as possible.
c. Workers face no incentive to find a new job until the insurance runs out.
d. Workers are paid only a portion of their wages by the unemployment insurance program.
e. Workers on unemployment insurance are given training opportunities.

The government has been trying to encourage the use of fuel-efficient cars. One way it has been doing this has been by allowing fuel-efficient cars to use a separate highway lane. This encourages people to use fuel-efficient cars because:
a. those who place a high value on their scarce time may be encouraged to buy a fuel-efficient car to take advantage of the speedier separate highway lane.
b. those who place a low value on their scarce time may be encouraged to buy a fuel-efficient car to take advantage of the speedier separate highway lane.
c. those who are more concerned about the environment are also those who happen to place a high value on their time.
d. those who purchase a fuel-efficient car are forced to pay more for a new car, and the use of the separate highway lane compensates them for this.
e. those who purchase a fuel-efficient car are likely to be unhappy because it is less powerful or more cramped inside; use of the separate highway lane compensates them for this.

Rational decision-making under conditions of scarcity requires individuals to:
a. place a monetary value on everything.
b. know the prices of all goods they might buy.
c. be alert to price reductions on desired products.
d. understand that trade-offs are necessary.
e. earn as much income as possible.

Kelly is an architect, and she is trying to decide whether to hire Mike, a draftsman, to assist with her work. Kelly could hire Mike at $20 per hour, but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle. Which of the following is true?
a. Kelly should not hire Mike because it would be faster for her to do the work herself.
b. Kelly should do the drafting work herself because she has the lower opportunity cost.
c. Mike should be hired at the $20 per hour wage rate.
d. Mike should be hired, but only if he is paid more than $30 per hour.
e. Kelly should hire someone who earns minimum wage instead of Mike.

An opportunity cost is the:
a. lowest possible cost.
b. highest possible cost.
c. monetary price paid for a good or service.
d. cost of a purchase or decision as measured by what is given up.
e. cost of finding the lowest price for a product.

The trade-offs that are made because of scarcity:
a. are important in developing economies, but they do not apply to developed economies.
b. are important in developed economies, but they do not apply to developing economies.
c. are different when they involve the wants of people, but they are similar when they involve the needs of people.
d. can be accurately made to the extent that they can be quantified.
e. depend on the decision-maker's value judgments about the relative importance of the alternatives.

Instead of taking an economics course, you could have taken a history course that meets at the exact same time. The total cost of taking the economics course would be:
a. the tuition cost for the economics course.
b. the fact that you could not take the history course at the same time.
c. the tuition cost for the economics course plus the price of the textbook and a notebook for the economics course.
d. the tuition cost, the cost of the textbook and notebook, and the fact that you could not take the history course at the same time.
e. the price of the textbook and a notebook for the economics course.

The opportunity cost of going to school rather than working is the cost of:
a. food.
b. housing.
c. clothing.
d. health care.
e. potential wages.

Restaurants, bars, and convenience stores are often located near college campuses. These businesses frequently charge higher than normal prices. They are taking advantage of the fact that:
a. students are able to pay higher prices than the rest of the population, so the businesses can charge higher prices than they otherwise would have been able to charge.
b. students are unable to pay higher prices than the rest of the population, but they are able to succeed because they can sell to a large number of people.
c. students place a high value on their scarce time and are willing to pay higher prices than they would at locations farther from campus.
d. students place a low value on their scarce time and are willing to pay higher prices than they would at locations farther from campus.
e. students place a high value on their scarce time and are unwilling to pay higher prices; but because students are spending their parents' money, they buy from businesses closer to campus anyway.

According to economists, one reason few professional athletes have PhD's is that the:
a. opportunity cost of going to graduate school is too high.
b. marginal benefit of going to graduate school is too high.
c. marginal cost of going to graduate school is too high.
d. comparative cost of going to graduate school is too high.
e. explicit cost of going to graduate school would be too high.

Economists believe that optimal decisions are made up to the point where:
a. marginal benefit is zero.
b. marginal cost is zero.
c. marginal benefits are greater than marginal costs.
d. marginal costs are greater than marginal benefits.
e. marginal benefits are equal to marginal costs.

One way to promote a new business is to offer free items. If you were to open a new restaurant and offer free food, you likely would have a line out the door. How would an economist understand the behavior of those standing in line?
a. Those waiting in line place a high value on the use of their time.
b. Those waiting in line believe that the marginal cost of waiting in line exceeds the marginal benefit of waiting in line.
c. Those waiting in line place a low value on the use of their time.
d. Those waiting in line believe that the marginal cost of waiting in line is zero.
e. Those waiting in line believe that the marginal benefit of waiting in line is zero.

In 2009, the federal government created a program called Cash for Clunkers whereby consumers could trade in a less efficient car for a more efficient car and receive a higher value than they would have otherwise. How would an economist understand the decision that consumers faced?
a. Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal benefits would exceed marginal costs.
b. Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal costs would exceed marginal benefits.
c. The Cash for Clunkers program increased the opportunity cost of replacing a car.
d. The Cash for Clunkers program served as a negative incentive to replacing a fuel-inefficient car.
e. The Cash for Clunkers program served as an indirect incentive to replacing a fuel-inefficient car.

Comparative advantage emerges because of the presence of:
a. trade.
b. differing opportunity costs.
c. marginal benefits equaling marginal costs.
d. scarcity.
e. incentives.

When trade is voluntary, who benefits?
a. the seller
b. the buyer
c. No one benefits.
d. both the buyer and the seller
e. Trade is never voluntary.

Saudi Arabia has a comparative advantage in producing oil because it:
a. has specialized in the production of oil given its natural resources.
b. has forced other countries not to sell their oil.
c. has specialized in the production of all goods.
d. forces the use of oil for the production of all electricity.
e. benefits from the heavy use of oil for transportation.

 

     1.   In economics, choices are necessary because of the presence of:

a.
luxuries.
b.
inefficiency.
c.
needs.
d.
scarcity.
e.
incentives.
 

     2.   Economics is the study of:

a.
how to make money.
b.
how to allocate resources to satisfy wants and needs.
c.
capitalism.
d.
how to make workers more productive and firms more profitable.
e.
markets.
 

 

     3.   Thomas Malthus’s prediction of mass starvation failed to come true because of increases in:

a.
population.
b.
productivity.
c.
temperature.
d.
government involvement.
e.
income.
 

     4.   The basic goal of economics is:

a.
controlling the effects of government actions.
b.
determining how to distribute all that is produced in an economy.
c.
addressing the scarcity problem created because the population’s desire for goods exceeds the ability to produce them.
d.
matching limited resources to people’s limited wants and needs.
e.
controlling tastes and wishes so that there will be enough resources to produce all the goods and services that people want.
 

     5.   An economist is an individual who would be least able to answer which research question?

a.
how much of a product is purchased at a specific price
b.
how the tastes and preferences of consumers are determined
c.
what firms decide to produce
d.
how goods and services are distributed to the population
e.
how firms decide to produce a good or service
 

     6.   The need to study economics would cease to exist if:

a.
the government stopped controlling people’s actions.
b.
people were free to make decisions on their own.
c.
people put forth the effort required to attain the goods and services they wanted.
d.
people earned more than they spent.
e.
there were enough resources to produce all the goods and services people would like to obtain.
 

     7.   As a discipline, economics is best described by which of the following?

a.
the study of how to control the effects of government actions
b.
the study of how to control the preferences of consumers so that there will be enough resources to produce all the goods and services that consumers want
c.
the study of how to use scarce resources to satisfy unlimited wants and needs
d.
the study of how to dispose of excess goods and services that nobody wants
e.
the study of how to maximize profits for firms
 

     8.   When a parent tells you not to study economics because it is a pointless discipline, why is he or she incorrect?

a.
The government continues to play a role in our daily lives.
b.
People have the freedom to do whatever they want, and economists have nothing to add to their decision-making process.
c.
There are not enough resources to produce all the goods and services that are wanted and needed.
d.
Economics has nothing to offer in terms of understanding the stock market.
e.
Economics has nothing to offer in terms of understanding government programs like Social Security.
     9.   When consumers discard their gasoline-powered automobiles for electric-powered ones, this partially reflects the ________ of gasoline:

a.
scarcity
b.
luxury
c.
necessity
d.
specialization
e.
incentive
 

   10.   As a new firm in the apple-picking business, you have considered adding an economist to your management team. What would this economist be unable to help your managerial team with?

a.
Determining the lowest cost way of picking apples
b.
Determining how many apples consumers will purchase at different prices
c.
Determining why people eat apples
d.
Determining the effect government regulations would have on the price of apples
e.
Determining the lowest cost way of distributing apples
 

   11.   A good is ________ if it takes even a small amount of time, energy, or money to acquire.

a.
abundant
b.
in shortage
c.
cheap
d.
scarce
e.
virtually free
 

   12.   Because of scarcity:

a.
individuals and societies are allowed no choice about which wants and needs to satisfy.
b.
individuals and societies must choose which wants and needs to satisfy.
c.
all choices about wants and using resources must be made by the government.
d.
choices can be made about which wants to satisfy, but not about which resources to use.
e.
choices must be made about which resources to use, but not about which wants to satisfy.
 

   13.   Which of the following statements best represents the fact that I cannot put in extra hours of work because of scarcity?

a.
I don’t have enough time for additional work because I need to spend time with my family and there are only so many hours in the day.
b.
I don’t like going to work, so why would I work more than I have to?
c.
I don’t think that overtime pay is high enough.
d.
I am worried that if I work extra hours, I will get bored with my job.
e.
I don’t want my coworkers to feel pressure to work more because I am working additional hours.
   14.   Which scenario describes studying for an economics course without applying the scarcity principle?

a.
I study two hours for every one hour I am in the classroom.
b.
I study three afternoons a week until I understand the material or until dinner, whichever comes first.
c.
I study with my roommate who is also taking the course, and we discuss economic concepts during any free time we can find.
d.
I study for this course and do nothing else.
e.
I talk to an economist whenever I have a chance to do so.
 

 

   15.   What is the strongest argument for why we need more economists today than ever before?

a.
We have a need for more wealth given the higher standard of living that individuals demand.
b.
Economists are needed to address the allocation of scarce resources as a result of the world’s growing population.
c.
Economists are needed to make sure that firms continue to make profits.
d.
Economists are needed to make sure that consumers are well informed about their possible purchase options and that they budget their finances appropriately.
e.
Economists are needed to make sure that the government doesn’t involve itself too much in the economy.
 

   16.   Macroeconomics is the study of:

a.
the economic motives of voters and elected officials.
b.
individual decision-making units such as households and businesses.
c.
how government purchases affect specific markets.
d.
the operation of the economy as a whole.
e.
the interaction between the government and businesses.
 

   17.   Which of the following is a macroeconomic question?

a.
How many textbooks should be published by a publisher?
b.
How much should English majors earn after college?
c.
How do members of a household decide whether to clean their own house or hire someone else to do it?
d.
What is the rate of unemployment?
e.
What is the price of a new 40-inch television?
 

   18.   Microeconomics is the study of:

a.
how government activities affect the economy.
b.
individual decision-making units.
c.
collective decision-making.
d.
the operation of the economy as a whole.
e.
the interaction between the government and businesses.
 

   19.   Microeconomics is the branch of economics that focuses on the:

a.
entire economy.
b.
production side of the economy.
c.
consumption side of the economy.
d.
involvement of the government in the entire economy.
e.
choices and decision-making of individuals and firms.
 

   20.   Which of the following is a microeconomic question?

a.
What are the total production levels in the economy?
b.
How can we best encourage economic growth?
c.
What is the overall price level in the economy?
d.
What are the variables that determine the price of a specific good?
e.
How can we reduce the unemployment rate among Hispanic men?
 

   21.   Which of the following is not a type of incentive?

a.
positive
b.
negative
c.
complementary
d.
indirect
e.
direct
 

   22.   The patent system:

a.
acts as a direct positive incentive.
b.
acts as a direct negative incentive.
c.
acts as an indirect positive incentive.
d.
acts as an indirect negative incentive.
e.
does not provide an incentive.
 

   23.   Which of the following concepts do economists focus their study on when explaining how humans behave?

a.
fairness
b.
money
c.
emotions
d.
incentives
e.
justice
 

   24.   Entrepreneurs are willing to take risks because:

a.
technology provides a way to sidestep the patent and copyright system.
b.
the patent and copyright system provides an exclusive right to sell the product for a period of time.
c.
the patent and copyright system guarantees a certain level of profit.
d.
technology always increases costs and prevents competitors from entering the market.
e.
the patent and copyright system guarantees that the risks taken will be rewarded.
 

   25.   Public buildings in the United States are required to be accessible to the disabled and, as a result, almost all have an elevator. What would be an example of a positive direct incentive for those who can use stairs?

a.
Using the stairs will make it seem that you care about your health and that you aren’t lazy.
b.
Using the stairs will increase the risk of tripping and falling.
c.
Using the stairs will take more time than taking the elevator and will increase the risk of missing an important meeting.
d.
Using the stairs will give you some exercise and make you healthier.
e.
Using the stairs will put elevator repair professionals out of work.
 

   26.   If the government wanted to give people a negative direct incentive not to save money, what would be the appropriate policy?

a.
providing individuals a subsidy to save their money
b.
providing funding for an advertising campaign encouraging people to spend more money
c.
informing individuals that saving money causes people not to spend money, which will cause them to lose their jobs
d.
imposing a tax on individuals for saving their money
e.
informing consumers about all that they could buy with their money with the hope that they spend more
 

   27.   An example of a direct negative incentive is:

a.
providing a commission for sales.
b.
awarding a promotion for hard work.
c.
threatening to fire those who do not perform well.
d.
providing an orientation for new employees.
e.
providing generous benefits and pay for employees.
   28.   An example of a direct positive incentive is:

a.
a prison sentence for committing a crime.
b.
unemployment insurance for those who are laid off.
c.
providing a workplace safety program.
d.
providing a commission for sales.
e.
threatening to fire those who do not perform well.
 

   29.   Actions and activities are encouraged with which type of incentive?

a.
positive
b.
negative
c.
neutral
d.
complementary
e.
unintended
 

   30.   A parent that pays a child an allowance for doing chores is providing a(n):

a.
positive incentive.
b.
negative incentive.
c.
neutral incentive.
d.
complementary incentive.
e.
unintended incentive.
 

   31.   Economics professors are well aware of the importance of incentives. Which of the following situations shows the use of a positive incentive?

a.
Students who show up late to class will not be allowed in the classroom.
b.
Students who do not have a doctor’s note will not be allowed to take an exam at a different time.
c.
Students can choose whether or not they want to attend class—there is no attendance policy.
d.
Students can choose to do extra credit at the end of the semester.
e.
The professor decides to teach the class by reading out of the textbook to the entire class.
 

   32.   A car insurance company is willing to offer accident-free drivers a discount. This is an example of:

a.
a positive incentive.
b.
a negative incentive.
c.
an opportunity cost.
d.
a comparative advantage.
e.
scarcity.
 

   33.   Many professors have a policy that punishes individuals if they don’t come to class. Instead of punishing students who don’t attend class, what could the professor do to provide a positive incentive to come to class?

a.
Those who come to class are given extra points.
b.
Those who do not come to class have their grade reduced.
c.
Those who come to class will be asked questions, and if they answer them incorrectly, their grade will be lowered.
d.
Those who come to class will be ridiculed.
e.
Those who do not come to class might be dropped from the course.
 

   34.   Actions and activities are discouraged with which type of incentive?

a.
positive
b.
negative
c.
neutral
d.
complementary
e.
unintended
 

   35.   A camera takes a picture of drivers who do not stop at a red light, and this practice is used to issue a traffic ticket. These red light cameras can be understood as serving as a(n):

a.
positive incentive to encourage individuals to stop at a red light.
b.
negative incentive to discourage individuals from driving through a red light.
c.
indirect incentive to encourage individuals to stop at a red light.
d.
direct incentive to encourage individuals to stop at a red light.
e.
negative incentive to encourage individuals to drive through a red light.
 

   36.   The government places warnings on cigarette and liquor packages. These warnings serve as a(n):

a.
positive incentive.
b.
negative incentive.
c.
indirect incentive.
d.
opportunity cost.
e.
way to make cigarettes and liquor more scarce.
 

   37.   When a ticket is given to a pedestrian for jaywalking, what type of incentive exists?

a.
a positive incentive
b.
a negative incentive
c.
a neutral incentive
d.
a complementary incentive
e.
an unintended incentive
 

   38.   Google has started a project to scan all books and make those that are not copyrighted available to people free of charge. Why is it important that only books without a copyright are available?

a.
If all books were scanned and available free of charge, copyright holders would face a positive incentive to continue writing and publishing books.
b.
If all books were scanned and available free of charge, copyright holders would face a negative incentive to continue writing and publishing books.
c.
If only copyrighted texts were scanned and available free of charge, copyright holders would face an indirect incentive to continue writing and publishing books.
d.
If only non-copyrighted books were scanned and available free of charge, copyright holders would face a negative incentive to continue writing and publishing books.
e.
If only non-copyrighted books were scanned and available free of charge, copyright holders would face an indirect incentive to continue writing and publishing books.
 

   39.   The U.S. federal government offers homeowners a tax deduction for their home loan interest payments. This reduction in taxes serves as a(n) ________ to buy a house.

a.
direct incentive
b.
indirect incentive
c.
neutral incentive
d.
complementary incentive
e.
unintended incentive
 

   40.   In a growing number of cities, stores are required either not to make available plastic or paper bags or to do so only for an additional fee. What kind of incentive is this fee?

a.
a direct incentive
b.
an indirect incentive
c.
a neutral incentive
d.
a complementary incentive
e.
an unintended incentive
 

   41.   In a growing number of cities, stores are required either not to make available plastic or paper bags or to do so only for an additional fee. If this fee can be refunded when you recycle the bag, the refund acts as a(n):

a.
direct incentive.
b.
indirect incentive.
c.
neutral incentive.
d.
complementary incentive.
e.
unintended incentive.
 

   42.   If you don’t like changing the oil in your car and pay your father to do it for you, you have provided him with a(n):

a.
direct incentive.
b.
indirect incentive.
c.
neutral incentive.
d.
complementary incentive.
e.
unintended incentive.
 

   43.   A health insurance company may offer its policy-holders a discount on their premiums if they prove that they have stopped smoking. What type of incentive is the health insurance company offering?

a.
a direct incentive.
b.
an indirect incentive.
c.
a neutral incentive.
d.
a complementary incentive.
e.
an unintended incentive.
 

   44.   Indirect incentives create:

a.
positive consequences.
b.
negative consequences.
c.
indirect consequences.
d.
direct consequences.
e.
unintended consequences.
 

   45.   The government controls for many indirect incentives in safety net social programs by:

a.
limiting payment to a specified time period.
b.
providing only a partial payment.
c.
allowing individuals to apply to only a certain number of safety net social programs.
d.
requiring individuals to repay the benefits they received.
e.
establishing income limits for those who apply for safety net social programs.
 

   46.   What is the indirect incentive in the unemployment insurance program?

a.
Workers get paid when they are laid off.
b.
Workers face an incentive to find a new job as quickly as possible.
c.
Workers face no incentive to find a new job until the insurance runs out.
d.
Workers are paid only a portion of their wages by the unemployment insurance program.
e.
Workers on unemployment insurance are given training opportunities.
 

   47.   The U.S. federal government offers homeowners a tax deduction for their home loan interest payments. This reduction in taxes may have encouraged too many people to own a home. If the tax deduction caused people who otherwise would have rented to own, the tax deduction serves as a(n):

a.
direct incentive.
b.
indirect incentive.
c.
neutral incentive.
d.
complementary incentive.
e.
unintended incentive.
 

   48.   While generous disability insurance can help those who have been permanently injured, it can also increase the likelihood that individuals will falsely claim to be disabled. This likelihood is a(n):

a.
direct incentive.
b.
indirect incentive.
c.
positive incentive.
d.
innovation.
e.
marginal cost.
 

   49.   The government has been trying to encourage the use of fuel-efficient cars. One way it has been doing this has been by allowing fuel-efficient cars to use a separate highway lane. This encourages people to use fuel-efficient cars because:

a.
those who place a high value on their scarce time may be encouraged to buy a fuel-efficient car to take advantage of the speedier separate highway lane.
b.
those who place a low value on their scarce time may be encouraged to buy a fuel-efficient car to take advantage of the speedier separate highway lane.
c.
those who are more concerned about the environment are also those who happen to place a high value on their time.
d.
those who purchase a fuel-efficient car are forced to pay more for a new car, and the use of the separate highway lane compensates them for this.
e.
those who purchase a fuel-efficient car are likely to be unhappy because it is less powerful or more cramped inside; use of the separate highway lane compensates them for this.
 

   50.   In the area of many college campuses, parking spaces are often scarce. If these parking spaces have parking meters, which population described below would pay for parking?

a.
A population that is willing to take risks and believes that they will not be caught if they don’t place change in the meter
b.
A population that places a high opportunity cost on making sure they have change and placing change in the meter
c.
A population that is willing to take risks, believes that they will not be caught if they don’t place change in the meter, and disregards any possible $5 ticket for parking illegally
d.
A population that is unwilling to take risks and believes there is a high chance that they will not be caught if they don’t pay for parking
e.
A population that is unwilling to take risks, believes there is a high chance that they will be caught if they don’t pay their share, and places a high value on doing the “right” thing
 

   51.   Some public transit systems use an “honor system” whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer. With what population would such a system be successful?

a.
a population that is willing to take risks and believes that they will not be caught if they don’t pay their fare
b.
a population that places a high opportunity cost on taking time to purchase a ticket
c.
a population that is willing to take risks, believes that they will not be caught if they don’t pay their fare, and treats fines for not paying a fare as a nuisance
d.
a population that is unwilling to take risks and believes there is a high chance that they will be caught if they don’t pay their fare
e.
a population that is unwilling to take risks, believes there is a high chance that they will not be caught if they don’t pay their fare, and places a low value on doing the right thing
 

   52.   Rational decision-making under conditions of scarcity requires individuals to:

a.
place a monetary value on everything.
b.
know the prices of all goods they might buy.
c.
be alert to price reductions on desired products.
d.
understand that trade-offs are necessary.
e.
earn as much income as possible.
 

   53.   Economics is concerned with the trade-offs that emerge because of scarcity. The term “trade-offs” refers to:

a.
the decision about whether households or businesses should bear the entire burden of the scarcity problem.
b.
the buying and selling that occur as unwanted goods are exchanged for goods that are desired.
c.
the alternatives given up when making choices.
d.
recycling and transforming old goods into new goods to reduce scarcity problems.
e.
forcing businesses to produce some goods and services and not others.
 

   54.   What is the opportunity cost of taking this exam?

a.
all of the things that you could have done by not studying
b.
each of the questions that you miss on the exam
c.
the highest valued alternative that you gave up to prepare for and attend the exam
d.
the money you spent purchasing the textbook and the other materials you study with
e.
the money you spent on tuition
 

   55.   Kelly is an architect, and she is trying to decide whether to hire Mike, a draftsman, to assist with her work. Kelly could hire Mike at $20 per hour, but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle. Which of the following is true?

a.
Kelly should not hire Mike because it would be faster for her to do the work herself.
b.
Kelly should do the drafting work herself because she has the lower opportunity cost.
c.
Mike should be hired at the $20 per hour wage rate.
d.
Mike should be hired, but only if he is paid more than $30 per hour.
e.
Kelly should hire someone who earns minimum wage instead of Mike.
 

   56.   The cost of a trade-off is known as the ________ of that decision.

a.
marginal cost
b.
net cost
c.
opportunity cost
d.
comparative cost
e.
explicit cost
 

   57.   Opportunity cost is the ________ alternative forfeited when a choice is made.

a.
least-valued
b.
highest-valued
c.
most recently considered
d.
most convenient
e.
first
 

   58.   An opportunity cost is the:

a.
lowest possible cost.
b.
highest possible cost.
c.
monetary price paid for a good or service.
d.
cost of a purchase or decision as measured by what is given up.
e.
cost of finding the lowest price for a product.
 

   59.   The opportunity cost of a purchase is:

a.
zero if the item is what you want most.
b.
always equal to the selling price of what you purchased.
c.
always greater for people who are out of work than for people who are working.
d.
the alternative good or service that one sacrifices because a different good was purchased.
e.
the lowest possible price.
 

   60.   An opportunity cost:

a.
can be measured only when the decision involves expenditures of money.
b.
can be measured only when the decision involves spending time on one thing and not on another.
c.
is impossible to measure.
d.
is equal to the value of what is given up to make a purchase or take an action.
e.
exists for every decision made by individuals and businesses, but not by the government.
 

   61.   The trade-offs that are made because of scarcity:

a.
are important in developing economies, but they do not apply to developed economies.
b.
are important in developed economies, but they do not apply to developing economies.
c.
are different when they involve the wants of people, but they are similar when they involve the needs of people.
d.
can be accurately made to the extent that they can be quantified.
e.
depend on the decision-maker’s value judgments about the relative importance of the alternatives.
 

   62.   How are changes in opportunity cost related to decision-making behavior?

a.
The lower the opportunity cost of doing an activity X, the more likely activity X will be done.
b.
The higher the opportunity cost of doing activity X, the more likely activity X will be done.
c.
Changes in the opportunity cost play no role in decision-making.
d.
The lower the opportunity cost of doing activity Y, the more likely activity X will be done.
e.
The higher the opportunity cost of doing activity Y, the less likely activity X will be done.
 

   63.   I asked my neighbor to rake the leaves on his lawn because they are blowing into my yard. He responded that it wouldn’t be rational for him to do so. Why would this be the case?

a.
My neighbor lacks the equipment to rake leaves and thinks it would take too long to do the job.
b.
My neighbor is a busy person and doesn’t have time to rake leaves.
c.
My neighbor is getting revenge on me because I didn’t rake the leaves on my lawn last year.
d.
My neighbor is a lawyer who values his time at $200 an hour and knows that he can hire a high school kid to rake leaves for $20 an hour.
e.
My neighbor is a high school teacher and values his time at $15 an hour, and he knows that he can hire one of his students to rake leaves for $20 an hour.
 

   64.   Instead of taking an economics course, you could have taken a history course that meets at the exact same time. The total cost of taking the economics course would be:

a.
the tuition cost for the economics course.
b.
the fact that you could not take the history course at the same time.
c.
the tuition cost for the economics course plus the price of the textbook and a notebook for the economics course.
d.
the tuition cost, the cost of the textbook and notebook, and the fact that you could not take the history course at the same time.
e.
the price of a textbook and a notebook for the economics course.
 

   65.   The opportunity cost for Elijah of going to a water park is:

a.
the price of the admission pass.
b.
zero, if he can go with his parents who will pay.
c.
zero, if it is raining that day and the water park is closed.
d.
the price of the admission pass plus the highest valued alternative activity Elijah could have done instead.
e.
the highest valued alternative activity Elijah could have done instead.
 

   66.   Why would economists find it surprising if the CEO of a large company does his or her own housework?

a.
The opportunity cost of CEO’s time is quite high because they have an abundance of time to spend on housework.
b.
The opportunity cost of CEO’s time is quite low because they have a scarcity of time to spend on housework.
c.
The opportunity cost of CEO’s time is quite low because they have an abundance of time to spend on housework.
d.
The opportunity cost of CEO’s time is quite high because they have a scarcity of time to spend on housework.
e.
The opportunity cost of a CEO’s time is equal to that of everyone else that works at the same company.
 

   67.   The opportunity cost of going to school rather than working is the cost of:

a.
food.
b.
housing.
c.
clothing.
d.
health care.
e.
potential wages.
 

   68.   The opportunity cost of working rather than going to school is:

a.
the cost of food and housing.
b.
the cost of clothing and transportation.
c.
zero because the person is earning an income by working.
d.
the higher wages that come with additional education.
e.
the annual wages earned by working.
 

   69.   When you chose a major, you likely thought about your skills. Let’s say you don’t enjoy dealing with numbers. How could you explain to your parents, using logic from economics, why you chose to major in English instead of mathematics?

a.
The opportunity cost of learning mathematics is too high.
b.
The opportunity cost of learning to appreciate literature is too high.
c.
The expected value of a major in English after graduation is low.
d.
The expected value of a major in mathematics after graduation is high.
e.
The opportunity cost of going to college is too low.
 

   70.   Restaurants, bars, and convenience stores are often located near college campuses. These businesses frequently charge higher than normal prices. They are taking advantage of the fact that:

a.
students are able to pay higher prices than the rest of the population, so the businesses can charge higher prices than they otherwise would have been able to charge.
b.
students are unable to pay higher prices than the rest of the population, but they are able to succeed because they can sell to a large number of people.
c.
students place a high value on their scarce time and are willing to pay higher prices than they would at locations farther from campus.
d.
students place a low value on their scarce time and are willing to pay higher prices than they would at locations farther from campus.
e.
students place a high value on their scarce time and are unwilling to pay higher prices; but because students are spending their parents’ money, they buy from businesses closer to campus anyway.
   71.   The government has been considering doing away with minting pennies because they are rarely used for purchases (with most people collecting them or throwing them away). How would an economist best explain this?

a.
More people are using credit and debit cards, so they are not in the habit of using monetary change.
b.
Prices have increased over time, and it would take far too many pennies to buy anything of value.
c.
Prices have increased over time, and the opportunity cost of carrying around large quantities of pennies has become too large.
d.
Prices have increased over time, and the opportunity cost of carrying around pennies has fallen.
e.
People who use pennies probably aren’t spending enough money; removing the penny will force people to spend more.
 

   72.   The government has been trying to mint dollar coins instead of printing paper dollar bills, but people have been reluctant to use coins instead of paper bills. How would an economist explain this reluctance?

a.
More people are using credit and debit cards, so people are not accustomed to using change.
b.
Retailers find it too expensive to deal with coins and would have to raise their prices if consumers used coins more.
c.
The opportunity cost of carrying around large quantities of coins is too large.
d.
Prices have increased over time, and the opportunity cost of carrying around a large number of coins would be low.
e.
People who receive a dollar coin are more likely to collect than spend the money, and the economy won’t grow as quickly because less is being spent.
 

   73.   According to economists, one reason few professional athletes have PhD’s is that the:

a.
opportunity cost of going to graduate school is too high.
b.
marginal benefit of going to graduate school is too high.
c.
marginal cost of going to graduate school is too high.
d.
comparative cost of going to graduate school is too high.
e.
explicit cost of going to graduate school would be too high.
 

   74.   Economists believe that individuals compare the benefits and costs of various options when making a decision and in so doing act ________.

a.
fairly
b.
selfishly
c.
collectively
d.
unpredictably
e.
rationally
 

   75.   The term ________ means “additional.”

a.
“marginal”
b.
“comparative”
c.
“incentive”
d.
“opportunity cost”
e.
“trade-off”
 

   76.   Economists believe that optimal decisions are made up to the point where:

a.
marginal benefit is zero.
b.
marginal cost is zero.
c.
marginal benefits are greater than marginal costs.
d.
marginal costs are greater than marginal benefits.
e.
marginal benefits are equal to marginal costs.
 

   77.   An activity’s marginal benefit is ________ at the optimal quantity.

a.
zero
b.
greater than zero
c.
less than zero
d.
equal to the marginal cost
e.
greater than the marginal cost
 

   78.   When most economists wake up in the morning, their first decision is whether or not to hit the snooze bar on the alarm clock. What statement best represents their thought process as a rational decision-maker?

a.
I had a really late night grading exams, and I deserve 10 more minutes of sleep.
b.
The total amount of work I have to do today is rather small, so the total benefit to going to work for a full 8 hours is also small.
c.
The total amount of work I have to do today is rather small, so the marginal cost of going to work 10 minutes late is small.
d.
The total amount of work I have to do today is rather small, so the marginal benefit of sleeping 10 more minutes is rather large.
e.
The marginal benefit of sleeping 10 more minutes is greater than the marginal benefit of 10 more minutes of work.
 

   79.   One way to promote a new business is to offer free items. If you were to open a new restaurant and offer free food, you likely would have a line out the door. How would an economist understand the behavior of those standing in line?

a.
Those waiting in line place a high value on the use of their time.
b.
Those waiting in line believe that the marginal cost of waiting in line exceeds the marginal benefit of waiting in line.
c.
Those waiting in line place a low value on the use of their time.
d.
Those waiting in line believe that the marginal cost of waiting in line is zero.
e.
Those waiting in line believe that the marginal benefit of waiting in line is zero.
 

   80.   Instead of deciding to finish high school, you could have decided to work full-time. How would an economist explain your decision to receive your high school degree?

a.
The cost of going to high school was greater than the benefit of working full-time.
b.
The benefit of working full-time was greater than the benefit of going to high school.
c.
The benefit of going to high school was greater than the benefit of working full-time.
d.
The cost of working full-time was greater than the benefit of going to high school.
e.
The benefit of working full-time was greater than the cost of going to high school.
 

   81.   Many stores are open 24 hours a day. When store managers make the decision to stay open 24 hours, it must be the case that:

a.
the marginal benefit of staying open all day and the marginal cost to remaining open all day are at least equal.
b.
the marginal benefit of staying open all day must always be greater than the marginal cost to remaining open all day.
c.
the marginal cost of staying open all day must always be greater than the marginal benefit to remaining open all day.
d.
the calculation of marginal benefits or marginal costs of remaining open all day play no role.
e.
the marginal benefit of remaining open all day is zero.
   82.   In 2009, the federal government created a program called Cash for Clunkers whereby consumers could trade in a less efficient car for a more efficient car and receive a higher value than they would have otherwise. How would an economist understand the decision that consumers faced?

a.
Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal benefits would exceed marginal costs.
b.
Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal costs would exceed marginal benefits.
c.
The Cash for Clunkers program increased the opportunity cost of replacing a car.
d.
The Cash for Clunkers program served as a negative incentive to replacing a fuel-inefficient car.
e.
The Cash for Clunkers program served as an indirect incentive to replacing a fuel-inefficient car.
 

   83.   Who benefits from voluntary trade?

a.
buyers
b.
sellers
c.
the government
d.
buyers and sellers
e.
buyers and the government
 

   84.   What creates comparative advantage?

a.
lower costs
b.
higher opportunity costs
c.
specialization
d.
scarcity
e.
population growth
 

   85.   Comparative advantage emerges because of the presence of:

a.
trade.
b.
differing opportunity costs.
c.
marginal benefits equaling marginal costs.
d.
scarcity.
e.
incentives.
 

   86.   The opportunity cost to free trade is:

a.
economic growth.
b.
government involvement.
c.
a gain of domestic jobs.
d.
lower prices.
e.
greater efficiency.
 

   87.   A person has a comparative advantage in the production of a good when she or he can produce the product at a(n) ________ opportunity cost compared to another person.

a.
higher
b.
lower
c.
equal
d.
diminishing
e.
increasing
 

   88.   When trade is voluntary, who benefits?

a.
the seller
b.
the buyer
c.
No one benefits.
d.
both the buyer and the seller
e.
Trade is never voluntary.
 

   89.   More oranges are grown in Florida than North Dakota because Florida’s warm climate gives it a ________ in growing oranges.

a.
comparative advantage
b.
public advantage
c.
revenue advantage
d.
producer advantage
e.
planning advantage
 

   90.   The United States is able to experience economic growth to the extent that:

a.
specialization and trade are encouraged.
b.
the government involves itself in the economy.
c.
trade is restricted.
d.
jobs are protected from outsourcing.
e.
consumers are encouraged to buy domestically produced goods.
 

   91.   Saudi Arabia has a comparative advantage in producing oil because it:

a.
has specialized in the production of oil given its natural resources.
b.
has forced other countries not to sell their oil.
c.
has specialized in the production of all goods.
d.
forces the use of oil for the production of all electricity.
e.
benefits from the heavy use of oil for transportation.
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