Question 1

Comparative advantage emerges because of the presence of

Accepted Answer

A)   trade.
B)   differing opportunity costs.
C)   marginal benefits that equal marginal costs.
D)   scarcity.
E)   incentives.

Question 2

If Alexander doesn't like changing the oil in his car and pays his father to do it for him,he has provided his father with a(n) ________ incentive.

Accepted Answer

A)   direct
B)   indirect
C)   neutral
D)   complementary
E)   unintended

Question 3

A mother takes her daughter on an outing and promises her ice cream if she behaves.In addition,she warns her that if she misbehaves,she won't be allowed to play with her toys at home.The latter is an example of a(n) ________ incentive and reinforces the efficacy of the ice cream,a(n) ________ incentive.

Accepted Answer

A)   direct; indirect
B)   indirect; direct
C)   negative; positive
D)   positive; negative
E)   negative; direct

Question 4

The presence of scarcity means that no choices come without

Accepted Answer

A)   shortages.
B)   trade-offs.
C)   regret.
D)   incentives.
E)   consumption.

Question 5

When trade is voluntary,who benefits?

Accepted Answer

A)   the seller
B)   the buyer
C)   No one benefits.
D)   both the buyer and the seller
E)   Trade is never voluntary.

Question 6

William can create 30 meals in one hour,or wash 90 dishes in the same time.Jeremy can create 25 meals in one hour,or wash 50 dishes in one hour.Using opportunity cost,who should specialize in what task?

Accepted Answer

A)   William is more productive and therefore should make meals and wash dishes.
B)   Since creating meals is harder,William should create meals and wash dishes.
C)   Since washing dishes is easier,Jeremy should wash dishes and create meals.
D)   Jeremy can wash twice as many dishes per meal,so Jeremy should wash dishes.
E)   Jeremy gives up fewer dish washings per meal creation,so Jeremy should create meals.

Question 7

Shoppers at supermarkets often abandon their empty shopping carts at various locations in the parking lot,despite the risk of damage to vehicles or the additional labor cost of retrieving those carts.How might an economist explain this behavior?

Accepted Answer

A)   People go to the supermarket when they have the energy to shop only,without considering the cost of returning their carts.
B)   The perceived potential benefit of going to a cart return location is less than the time and energy cost to the shopper.
C)   People are generally lazy and gravitate toward any decision with the lowest cost.
D)   Once a shopper leaves the parking lot,the abandoned cart becomes someone else's problem.
E)   Because food prices are always subsidized by the government,shoppers are ignorant of additional costs.

Question 8

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

Accepted Answer

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 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 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.

Question 9

________ is value added by making additional effort.

Accepted Answer

A)   Income
B)   Money
C)   Marginal benefit
D)   Optimization
E)   Opportunity benefit

Question 10

Which statement represents a rational application of opportunity cost?

Accepted Answer

A)   The value of the choice must be greater than or equal to the cost of the next-best alternative.
B)   The value of the next-best alternative must be greater than or equal to the cost of the choice.
C)   Opportunity cost is useful for evaluating a decision after the fact,but not during the decision-making process.
D)   The value of the choice must be greater than the sum of all available alternatives.
E)   The value of the next-best alternative is irrelevant since the alternative was not selected.

Question 11

________ show(s) how resources and final goods and services flow through the economy.

Accepted Answer

A)   Money
B)   Government
C)   Allocation
D)   Trade-offs
E)   Circular flow

Question 12

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

Accepted Answer

A)   Mary studies two hours for every one hour she is in the classroom.
B)   Jonah studies three afternoons a week until he understands the material or until dinner,whichever comes first.
C)   Lucy studies with her roommate who is also taking the course,and they discuss economic concepts during any free time they can find.
D)   Chloe studies for this course and does nothing else.
E)   Rafael talks to an economist whenever he has a chance to do so.

Question 13

A nation will engage in voluntary trade if

Accepted Answer

A)   the terms are mutually beneficial for both parties.
B)   the trade is approved by the World Trade Center.
C)   there are no domestic costs associated with trade.
D)   it allows a trade partner to specialize.
E)   it lacks a comparative advantage in the production of every good.

Question 14

An economist is an individual who would be LEAST able to answer which research question?

Accepted Answer

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

Question 15

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?

Accepted Answer

A)   Using the stairs will make it seem that they care about their health and that they 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 them some exercise and make them healthier.
E)   Using the stairs will put elevator repair professionals out of work.

Question 16

The allocation of limited resources within an environment of almost unlimited wants is the focus of

Accepted Answer

A)   capitalism.
B)   fiscal policy.
C)   economics.
D)   scarcity.
E)   altruism.

Question 17

Economists believe that individuals compare the benefits and costs of various options when making decisions and in so doing act

Accepted Answer

A)   fairly.
B)   selfishly.
C)   collectively.
D)   unpredictably.
E)   rationally.

Question 18

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

Accepted Answer

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

Question 19

Explain how a market might develop naturally without planning by government.

Accepted Answer

When individuals attempt to produce mult...

Question 20

Choosing to trade ________ specialization,________ opportunity costs.

Accepted Answer

A)   reduces; reducing
B)   reduces; increasing
C)   increases; decreasing
D)   increases; increasing
E)   increases; but doesn't change

Exam 1: Five Foundations of Economics

William can create 30 meals in one hour,or wash 90 dishes in the same time.Jeremy can create 25 meals in one hour,or wash 50 dishes in one hour.Using opportunity cost,who should specialize in what task?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If Alexander doesn't like changing the oil in his car and pays his father to do it for him,he has provided his father with a(n) ________ incentive.

Correct AnswerverifiedShow Answer

Economists believe that individuals compare the benefits and costs of various options when making decisions and in so doing act

Correct AnswerverifiedShow Answer

________ is value added by making additional effort.

Correct AnswerverifiedShow Answer

Shoppers at supermarkets often abandon their empty shopping carts at various locations in the parking lot,despite the risk of damage to vehicles or the additional labor cost of retrieving those carts.How might an economist explain this behavior?

Correct AnswerverifiedShow Answer

________ show(s) how resources and final goods and services flow through the economy.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

An economist is an individual who would be LEAST able to answer which research question?

Correct AnswerverifiedShow Answer

The presence of scarcity means that no choices come without

Correct AnswerverifiedShow Answer

Choosing to trade ________ specialization,________ opportunity costs.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When trade is voluntary,who benefits?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A nation will engage in voluntary trade if

Correct AnswerverifiedShow Answer

Which statement represents a rational application of opportunity cost?

Correct AnswerverifiedShow Answer

Comparative advantage emerges because of the presence of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The allocation of limited resources within an environment of almost unlimited wants is the focus of

Correct AnswerverifiedShow Answer

Explain how a market might develop naturally without planning by government.

Correct AnswerverifiedWhen individuals attempt to produce mult...View AnswerShow Answer

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Choosing to trade specialization, opportunity costs.

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When individuals attempt to produce mult...
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