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?

Accepted Answer

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.

Question 2

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

Accepted Answer

A)   abundant
B)   in shortage
C)   cheap
D)   scarce
E)   virtually free

Question 3

The discipline of economics is largely based on encouraging individuals to engage in certain activities and discouraging them from engaging in others. Why is encouraging or discouraging individuals through incentives so important?

Accepted Answer

Economics as a discipline focuses on how...

Question 4

Actions and activities are discouraged with which type of incentive?

Accepted Answer

A)   positive
B)   negative
C)   neutral
D)   complementary
E)   unintended

Question 5

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:

Accepted Answer

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.

Question 6

Entrepreneurs are willing to take risks because:

Accepted Answer

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.

Question 7

Macroeconomics is the study of:

Accepted Answer

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.

Question 8

The trade-offs that are made because of scarcity:

Accepted Answer

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.

Question 9

List and briefly explain each of the five foundations of economic thought.

Accepted Answer

The five foundations of economic thought...

Question 10

Which of the following is a microeconomic question?

Accepted Answer

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?

Question 11

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) :

Accepted Answer

A)   direct incentive.
B)   indirect incentive.
C)   positive incentive.
D)   innovation.
E)   marginal cost.

Question 12

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:

Accepted Answer

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.

Question 13

Microeconomics is the branch of economics that focuses on the:

Accepted Answer

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.

Question 14

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?

Accepted Answer

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.

Question 15

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 a(n) :

Accepted Answer

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.

Question 16

Actions and activities are encouraged with which type of incentive?

Accepted Answer

A)   positive
B)   negative
C)   neutral
D)   complementary
E)   unintended

Question 17

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

Accepted Answer

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.

Question 18

Because of scarcity:

Accepted Answer

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.

Question 19

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

Accepted Answer

A)   food.
B)   housing.
C)   clothing.
D)   health care.
E)   potential wages.

Question 20

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

Accepted Answer

A)   fairness
B)   money
C)   emotions
D)   incentives
E)   justice

Exam 1: The Five Foundations of Economics

Actions and activities are discouraged with which type of incentive?

Correct AnswerverifiedShow Answer

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 a(n) :

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Actions and activities are encouraged with which type of incentive?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Entrepreneurs are willing to take risks because:

Correct AnswerverifiedShow Answer

Macroeconomics is the study of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The discipline of economics is largely based on encouraging individuals to engage in certain activities and discouraging them from engaging in others. Why is encouraging or discouraging individuals through incentives so important?

Correct AnswerverifiedEconomics as a discipline focuses on how...View AnswerShow Answer

Because of scarcity:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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) :

Correct AnswerverifiedShow Answer

Microeconomics is the branch of economics that focuses on the:

Correct AnswerverifiedShow Answer

The trade-offs that are made because of scarcity:

Correct AnswerverifiedShow Answer

Which of the following is a microeconomic question?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

List and briefly explain each of the five foundations of economic thought.

Correct AnswerverifiedThe five foundations of economic thought...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Economics as a discipline focuses on how...
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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Correct Answer
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Correct Answer
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Correct Answer
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The five foundations of economic thought...
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Correct Answer
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