Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

The fact that two variables might be rel...

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

The rule of rational choice:

Accepted Answer

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

Question 5

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

Accepted Answer

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

Question 6

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

Accepted Answer

A)  it can produce cars with fewer resources than the other country.
B)  it can produce cars at a lower opportunity cost than the other country.
C)  it can produce cars at a higher opportunity cost than the other country.
D)  it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country.
E)  it is more self-sufficient in all areas of production, including automobile manufacturing.F) None of the above
G) A) and B)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

An unregulated market would be likely to...

Question 9

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

Accepted Answer

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

Question 10

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

Accepted Answer

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

Question 11

Why is abstraction important in developing economic theories?

Accepted Answer

Economic theories cannot realistically i...

Question 12

A hypothesis is a normative statement.

Accepted Answer

A) True 
 B)False

Question 13

Why would economists disagree over positive analysis?

Accepted Answer

Economists might disagree over positive ...

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Marginal thinking is best demonstrated by:

Accepted Answer

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

Question 17

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

Accepted Answer

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

Question 18

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

Accepted Answer

A)  has the highest opportunity cost.
B)  has a comparative advantage in that activity.
C)  can complete the particular job most rapidly.
D)  enjoys that job the least.E) None of the above
F) All of the above

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true?

Accepted Answer

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

Exam 2: The Economic Way of Thinking

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

Correct AnswerverifiedAn unregulated market would be likely to...View AnswerShow Answer

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

Correct AnswerverifiedThe fact that two variables might be rel...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A hypothesis is a normative statement.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Why would economists disagree over positive analysis?

Correct AnswerverifiedEconomists might disagree over positive ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The rule of rational choice:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Why is abstraction important in developing economic theories?

Correct AnswerverifiedEconomic theories cannot realistically i...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Marginal thinking is best demonstrated by:

Correct AnswerverifiedShow Answer

Correct Answer
verified
An unregulated market would be likely to...
View Answer

Correct Answer
verified
The fact that two variables might be rel...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Economists might disagree over positive ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Economic theories cannot realistically i...
View Answer

Correct Answer
verified

Correct Answer
verified