Question 1

A new startup airline is offering a free round-trip ticket to Hawaii to the first 600 people who enter the airline's main office on the airline's first day of business. You arrive 24 hours before it is scheduled to open to be sure to get the free ticket, and you buy food from vendors while waiting in line. You successfully obtain the ticket. What was the cost to you for obtaining the ticket?

Accepted Answer

A)   zero
B)   the cost of food while you wait in line
C)   the cost of food while you wait in line and the opportunity cost of your time spent in line
D)   the actual value of the ticket

Question 2

The incentives built into the market economy ensure that resources are put to good use and that opportunities to make people better off are not wasted. This means that:

Accepted Answer

A)   people usually are not selfish enough to exploit opportunities to make themselves better off.
B)   markets move toward equilibrium.
C)   resources should be used as efficiently as possible to achieve society's goals.
D)   markets usually lead to efficiency.

Question 3

If all of the opportunities to make someone better off (without making someone else worse off)  have been exploited, an economy is:

Accepted Answer

A)   equitable.
B)   inefficient.
C)   marginally optimal.
D)   efficient.

Question 4

You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and a candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is:

Accepted Answer

A)   $1 plus the enjoyment you would have received from the candy bar.
B)   $2 minus the enjoyment you received from the bag of chips.
C)   $1.
D)   the enjoyment you would have received from the candy bar.

Question 5

A busy professor needs to decide whether to stay in his office to grade papers for another hour or to go home and go to bed. This is an example of:

Accepted Answer

A)   equity versus efficiency.
B)   how one person's spending is another person's income.
C)   economic incentives.
D)   marginal analysis.

Question 6

The trade-off between equity and efficiency occurs because:

Accepted Answer

A)   the efficient allocation of resources is bad for business and industry.
B)   allocating resources fairly may cause inefficiency.
C)   everyone must pay more tax to ensure equity.
D)   efficiency is politically unpopular.

Question 7

The principle that people will exploit opportunities to do what is best for others is the basis of all predictions by economists about individual behavior.

Accepted Answer

A) True 
 B)False

Question 8

Specialization and trade usually lead to:

Accepted Answer

A)   lower economic growth.
B)   the exchange of goods and services in markets.
C)   lower living standards.
D)   higher prices.

Question 9

Because of the opportunity cost, if the United States spends $87 billion in the rebuilding of Iraq, it has to forgo the opportunity to spend $87 billion on some other program.

Accepted Answer

A) True 
 B)False

Question 10

Which statement is FALSE?

Accepted Answer

A)   Efficiency exists when an economy realizes the maximum possible gains from trade given the available resources.
B)   If an economy is efficient, it is possible to make only a few people better off without reducing other individuals' economic welfare.
C)   Economic efficiency exists when all opportunities to make people better off have been fully exploited.
D)   Free markets usually lead to efficiency, but not necessarily equity.

Question 11

According to standard economic theory, markets usually lead to efficiency.

Accepted Answer

A) True 
 B)False

Question 12

When a chef prepares a dinner for a customer, which factor is physical capital?

Accepted Answer

A)   the chef
B)   the oven
C)   the food ingredients
D)   the chef's training and experience

Question 13

An economy is efficient if one person can be made better off by reallocating resources without making anyone else worse off.

Accepted Answer

A) True 
 B)False

Question 14

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

Accepted Answer

A) True 
 B)False

Question 15

You can spend $100 on either a new economics textbook or a new tablet computer. If you choose to buy the new economics textbook, the opportunity cost is:

Accepted Answer

A)   $100.
B)   your enjoyment of the new tablet computer.
C)   both the $100 and your enjoyment of the new tablet computer.
D)   impossible to determine.

Question 16

Because people usually exploit opportunities to make themselves better off, if the price of gasoline rises and stays high for an extended period, we expect people to:

Accepted Answer

A)   increase the number of miles they drive.
B)   buy larger and less fuel-efficient cars.
C)   use more public transportation.
D)   ride their bicycles less.

Question 17

The concept of the margin decision deals with:

Accepted Answer

A)   making incremental choices.
B)   choosing all or none of something.
C)   engaging in unethical activities.
D)   making difficult choices.

Question 18

Which topic is studied in macroeconomics?

Accepted Answer

A)   the change in automobile sales due to a change in the price of automobiles
B)   the effect of a tax reduction on the profits of an individual business
C)   recessions
D)   the unemployment of workers displaced by technological change in the typesetting industry

Question 19

An economy has achieved _____ if it _____ pass up any opportunities to make some people better off without making others worse off.

Accepted Answer

A)   efficiency; does not
B)   equity; does
C)   efficiency; does
D)   equity; does not

Question 20

Economists define an efficient use of resources as a situation in which:

Accepted Answer

A)   one person can be made better off but only by making another person worse off.
B)   all persons can be made better off without making anyone worse off.
C)   all persons receive an equal share of the resources.
D)   all persons are made worse off when one person is made better off.

Exam 1: First Principles

According to standard economic theory, markets usually lead to efficiency.

Correct Answer
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Because people usually exploit opportunities to make themselves better off, if the price of gasoline rises and stays high for an extended period, we expect people to:

Correct Answer
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The concept of the margin decision deals with:

Correct Answer
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Which statement is FALSE?

Correct Answer
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You can spend $100 on either a new economics textbook or a new tablet computer. If you choose to buy the new economics textbook, the opportunity cost is:

Correct Answer
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The incentives built into the market economy ensure that resources are put to good use and that opportunities to make people better off are not wasted. This means that:

Correct Answer
verified

You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and a candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is:

Correct Answer
verified

Because of the opportunity cost, if the United States spends $87 billion in the rebuilding of Iraq, it has to forgo the opportunity to spend $87 billion on some other program.

Correct Answer
verified

Specialization and trade usually lead to:

Correct Answer
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If all of the opportunities to make someone better off (without making someone else worse off) have been exploited, an economy is:

Correct Answer
verified

The principle that people will exploit opportunities to do what is best for others is the basis of all predictions by economists about individual behavior.

Correct Answer
verified

Economists define an efficient use of resources as a situation in which:

Correct Answer
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Which topic is studied in macroeconomics?

Correct Answer
verified

Correct Answer
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An economy is efficient if one person can be made better off by reallocating resources without making anyone else worse off.

Correct Answer
verified

When a chef prepares a dinner for a customer, which factor is physical capital?

Correct Answer
verified

The trade-off between equity and efficiency occurs because:

Correct Answer
verified

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

Correct Answer
verified

An economy has achieved _ if it _ pass up any opportunities to make some people better off without making others worse off.

Correct Answer
verified

A busy professor needs to decide whether to stay in his office to grade papers for another hour or to go home and go to bed. This is an example of:

Correct Answer
verified

Exam 1: First Principles

According to standard economic theory, markets usually lead to efficiency.

Correct AnswerverifiedShow Answer

Because people usually exploit opportunities to make themselves better off, if the price of gasoline rises and stays high for an extended period, we expect people to:

Correct AnswerverifiedShow Answer

The concept of the margin decision deals with:

Correct AnswerverifiedShow Answer

Which statement is FALSE?

Correct AnswerverifiedShow Answer

You can spend $100 on either a new economics textbook or a new tablet computer. If you choose to buy the new economics textbook, the opportunity cost is:

Correct AnswerverifiedShow Answer

The incentives built into the market economy ensure that resources are put to good use and that opportunities to make people better off are not wasted. This means that:

Correct AnswerverifiedShow Answer

You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and a candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is:

Correct AnswerverifiedShow Answer

Because of the opportunity cost, if the United States spends $87 billion in the rebuilding of Iraq, it has to forgo the opportunity to spend $87 billion on some other program.

Correct AnswerverifiedShow Answer

Specialization and trade usually lead to:

Correct AnswerverifiedShow Answer

If all of the opportunities to make someone better off (without making someone else worse off) have been exploited, an economy is:

Correct AnswerverifiedShow Answer

The principle that people will exploit opportunities to do what is best for others is the basis of all predictions by economists about individual behavior.

Correct AnswerverifiedShow Answer

Economists define an efficient use of resources as a situation in which:

Correct AnswerverifiedShow Answer

Which topic is studied in macroeconomics?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An economy is efficient if one person can be made better off by reallocating resources without making anyone else worse off.

Correct AnswerverifiedShow Answer

When a chef prepares a dinner for a customer, which factor is physical capital?

Correct AnswerverifiedShow Answer

The trade-off between equity and efficiency occurs because:

Correct AnswerverifiedShow Answer

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

Correct AnswerverifiedShow Answer

An economy has achieved _____ if it _____ pass up any opportunities to make some people better off without making others worse off.

Correct AnswerverifiedShow Answer

A busy professor needs to decide whether to stay in his office to grade papers for another hour or to go home and go to bed. This is an example of:

Correct AnswerverifiedShow Answer

Correct Answer
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An economy has achieved _ if it _ pass up any opportunities to make some people better off without making others worse off.

Correct Answer
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Correct Answer
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