Question 1

A radio station gives "free money" to those listeners whose names are drawn and announced over the airwaves from postcards the listeners sent into the radio station. Is the money really free for the listener?

Accepted Answer

While most students can identify the mon...

Question 2

The economizing problem is essentially one of deciding how to make the best use of

Accepted Answer

A)   limited resources to satisfy limited wants.
B)   unlimited resources to satisfy limited wants.
C)   limited resources to satisfy virtually unlimited wants.
D)   unlimited resources to satisfy unlimited wants.E) C) and D)
F) All of the above

Question 3

People are willing to pay more for a diamond than for a bottle of water because

Accepted Answer

A)   the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water.
B)   the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.
C)   producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices.
D)   water prices are held artificially low by governments, since water is necessary for life.E) A) and B)
F) None of the above

Question 4

Economic analysis is based on the premise that

Accepted Answer

A)   people act only out of selfish motives.
B)   people are always fully informed when making choices.
C)   changes in the personal benefits or costs of an action influence behavior in a predictable way.
D)   most human behavior is unpredictable.E) A) and B)
F) B) and C)

Question 5

Criteria for rationing goods and resources must be established because of

Accepted Answer

A)   scarcity.
B)   the use of capitalism as the method of economic organization.
C)   the inability of politicians to develop efficient forms of economic organization.
D)   shortages resulting from government inefficiency.E) B) and C)
F) All of the above

Question 6

Which one of the following statements is most clearly inconsistent with the economic way of thinking?

Accepted Answer

A)   "If you give a person a fish, you feed him for a day; if you teach him to fish, you feed him for life."
B)   "If the government provides a good free to citizens, then the opportunity cost of the good is zero."
C)   "If you derive the same satisfaction from a hamburger as a chicken sandwich, it makes sense to have the cheaper alternative for lunch."
D)   "When it is cheaper to have someone else mow your lawn than to mow it yourself, hiring someone to do the job is consistent with economizing behavior."E) All of the above
F) B) and D)

Question 7

In economics the term utility refers to

Accepted Answer

A)   the subjective benefit or satisfaction a person expects to receive from a choice or course of action.
B)   the number of possible uses for a resource.
C)   the fact that human desire for goods is unlimited while the resources available to meet those desires is limited.
D)   the highest valued alternative that must be sacrificed when a choice is made.E) A) and C)
F) None of the above

Question 8

Economic choice and competitive behavior are the result of

Accepted Answer

A)   basic human greed.
B)   poverty.
C)   private ownership of resources.
D)   scarcity.E) A) and B)
F) A) and C)

Question 9

Which of the following is true?

Accepted Answer

A)   Human choice is generally not influenced by changes in incentives.
B)   What is true for the individual must be true for the group as a whole.
C)   Using scarce resources to meet one need reduces our ability to meet needs in other areas.
D)   The economic way of thinking stresses that good intentions usually lead to sound economic policy.E) A) and B)
F) B) and C)

Question 10

Which of the following represents a normative statement?

Accepted Answer

A)   Incentives matter.
B)   The temperature in this room is 120 degrees.
C)   It is too hot in this room.
D)   People will buy less butter at $1.50 per pound than they will at $1.00 per pound.E) B) and C)
F) None of the above

Question 11

Which one of the following statements is correct?

Accepted Answer

A)   Policymakers have good intentions and therefore their proposals will create good outcomes.
B)   Potential secondary effects do not need to be considered when deciding whether to implement a new government program.
C)   A good outcome is guaranteed from a government program if it is created with good intentions.
D)   Government programs can be implemented with good intentions but can lead to undesirable outcomes because of unintended consequences.E) None of the above
F) A) and B)

Question 12

"Mediocre economists often consider only the immediate apparent effects of a change, whereas a good economist will also consider effects that may only become observable over time." This statement most clearly emphasizes

Accepted Answer

A)   the fallacy of composition.
B)   economizing behavior.
C)   the importance of secondary effects.
D)   the fact that association is not causation.E) None of the above
F) C) and D)

Question 13

A firm producing cans buys three tons of aluminum per day at $200 per ton. If it buys four tons per day, it receives a quantity discount on all units and pays only $175 per ton. The marginal cost of the fourth ton per day is

Accepted Answer

A)   $100.
B)   $175.
C)   $700.
D)   $225.E) A) and B)
F) B) and C)

Question 14

Which of the following is an example of a normative economic statement?

Accepted Answer

A)   The inflation rate in the United States decreased from 4 percent last year to 3 percent this year as a result of lower energy prices.
B)   The economy grew at an annual rate of 5 percent during the first quarter of this year.
C)   If two automobile companies merge, it is likely that the price of automobiles will rise.
D)   An increase in international trade benefits some workers but hurts others.
E)   The minimum wage should be increased so that low income workers can afford to keep up with the cost of living.F) C) and E)
G) B) and D)

Question 15

A restaurant offers an "all you can eat" lunch buffet for $12. Jim has eaten three servings and is trying to decide whether or not to go back for a fourth. The economic way of thinking suggests that Jim should go back for the fourth serving if and only if

Accepted Answer

A)   his marginal benefit of the additional serving is greater than zero.
B)   his marginal benefit of the additional serving is at least $3.
C)   his marginal benefit of the additional serving is $12 or more.
D)   his total value from the meal exceeds $12.E) All of the above
F) None of the above

Question 16

All but one of the following are elements of the economic way of thinking. Which one is not part of the economic way of thinking?

Accepted Answer

A)   Incentives matter.
B)   The value of goods can be determined objectively.
C)   Economic thinking is marginal thinking.
D)   Information is scarce.E) B) and C)
F) A) and D)

Question 17

The economic way of thinking stresses that

Accepted Answer

A)   greed is the primary motivation for human action.
B)   only material goods lead to happiness.
C)   an objective value can be attached to physical goods.
D)   as the cost of an option increases, people will be less likely to choose that option.E) A) and B)
F) A) and C)

Question 18

Who is more likely to drive carelessly, Sue in her 1980 Ford with bad brakes or Sally, who has a 2005 BMW with all the most recent safety options?

Accepted Answer

On the surface, we might conclude that S...

Question 19

Evaluate this statement: "People engaged in economizing behavior will always buy the lowest priced item they can find."

Accepted Answer

As long as price is the only factor, we ...

Question 20

Which of the following is a positive economic statement?

Accepted Answer

A)   Raising the federal minimum wage to $6.50 per hour will cause the rate of unemployment to increase.
B)   The United States spends too much on welfare.
C)   Philosophy is not as interesting as economics.
D)   Cold weather is much more enjoyable than warm weather.E) A) and B)
F) None of the above

Exam 1: The Economic Approach

Which one of the following statements is most clearly inconsistent with the economic way of thinking?

Correct AnswerverifiedShow Answer

Economic analysis is based on the premise that

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"Mediocre economists often consider only the immediate apparent effects of a change, whereas a good economist will also consider effects that may only become observable over time." This statement most clearly emphasizes

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Economic choice and competitive behavior are the result of

Correct AnswerverifiedShow Answer

Evaluate this statement: "People engaged in economizing behavior will always buy the lowest priced item they can find."

Correct AnswerverifiedAs long as price is the only factor, we ...View AnswerShow Answer

A radio station gives "free money" to those listeners whose names are drawn and announced over the airwaves from postcards the listeners sent into the radio station. Is the money really free for the listener?

Correct AnswerverifiedWhile most students can identify the mon...View AnswerShow Answer

Who is more likely to drive carelessly, Sue in her 1980 Ford with bad brakes or Sally, who has a 2005 BMW with all the most recent safety options?

Correct AnswerverifiedOn the surface, we might conclude that S...View AnswerShow Answer

A firm producing cans buys three tons of aluminum per day at $200 per ton. If it buys four tons per day, it receives a quantity discount on all units and pays only $175 per ton. The marginal cost of the fourth ton per day is

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Which one of the following statements is correct?

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Which of the following is a positive economic statement?

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All but one of the following are elements of the economic way of thinking. Which one is not part of the economic way of thinking?

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The economizing problem is essentially one of deciding how to make the best use of

Correct AnswerverifiedShow Answer

People are willing to pay more for a diamond than for a bottle of water because

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Which of the following is an example of a normative economic statement?

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The economic way of thinking stresses that

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In economics the term utility refers to

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Criteria for rationing goods and resources must be established because of

Correct AnswerverifiedShow Answer

Which of the following represents a normative statement?

Correct AnswerverifiedShow Answer

A restaurant offers an "all you can eat" lunch buffet for $12. Jim has eaten three servings and is trying to decide whether or not to go back for a fourth. The economic way of thinking suggests that Jim should go back for the fourth serving if and only if

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

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As long as price is the only factor, we ...
View Answer

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While most students can identify the mon...
View Answer

Correct Answer
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On the surface, we might conclude that S...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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