Question 1

An activity's marginal benefit is _____at the optimal quantity.

Accepted Answer

A)   zero
B)   greater than zero
C)   less than zero
D)   equal to the marginal cost
E)   greater than the marginal cost

Question 2

If opportunity cost is the value of the best alternative not chosen, why is a rejected option important?

Accepted Answer

Alternatives are still valuable measurin...

Question 3

Economics professors are well aware of the importance of incentives. Which of the following situations shows the use of a positive incentive?

Accepted Answer

A)   Students who show up late to class will not be allowed in the classroom.
B)   Students who do not have a doctor's note will not be allowed to take an exam at a different time.
C)   Students can choose whether they want to attend class-there is no attendance policy.
D)   Students can choose to get a higher grade by doing extra credit work.
E)   The professor decides to teach the class by reading out of the textbook to the entire class.

Question 4

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 5

The patent system

Accepted Answer

A)   acts as a direct positive incentive.
B)   acts as a direct negative incentive.
C)   acts as an indirect positive incentive.
D)   acts as an indirect negative incentive.
E)   does not provide an incentive.

Question 6

What creates comparative advantage?

Accepted Answer

A)   lower costs
B)   higher opportunity costs
C)   specialization
D)   scarcity
E)   population growth

Question 7

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 8

The government controls for some 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 9

A camera takes pictures of drivers who do not stop at a red light, and this practice is used to issue traffic tickets. These red light cameras can be understood as serving an) ____________

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 10

Benefits from trade would NOT include

Accepted Answer

A)   lower prices.
B)   less competition.
C)   more variety of goods and services in the market.
D)   the ability of producers to specialize.
E)   more employment for the country.

Question 11

Opportunity cost is the______ alternative forfeited when a choice is made.

Accepted Answer

A)   least-valued
B)   highest-valued
C)   most recently considered
D)   most convenient
E)   first

Question 12

The presence of scarcity means that no choices come without

Accepted Answer

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

Question 13

The government has been trying to mint dollar coins instead of printing paper dollar bills, but people have been reluctant to use coins instead of paper bills. How would an economist explain this reluctance?

Accepted Answer

A)   More people are using credit and debit cards, so people are not accustomed to using change.
B)   Retailers find it too expensive to deal with coins and would have to raise their prices if consumers used coins more.
C)   The opportunity cost of carrying around large quantities of coins is too large.
D)   Prices have increased over time, and the opportunity cost of carrying around a large number of coins would be low.
E)   People who receive a dollar coin are more likely to collect than spend the money, and the economy won't grow as quickly because less is being spent.

Question 14

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 15

The government places warnings on cigarette and liquor packages. These warnings serve as an)

Accepted Answer

A)   positive incentive.
B)   negative incentive.
C)   indirect incentive.
D)   opportunity cost.
E)   way to make cigarettes and liquor more scarce.

Question 16

The opportunity cost to free trade is

Accepted Answer

A)   economic growth.
B)   government involvement.
C)   domestic jobs.
D)   lower prices.
E)   greater efficiency.

Question 17

Economic growth in developed countries has been altered by the increased popularity of the Internet. How has the Internet, in terms of both negative and positive incentives, promoted but also discouraged economic growth?

Accepted Answer

The Internet has certainly done a great ...

Question 18

What is the indirect incentive in the unemployment insurance program?

Accepted Answer

A)   Workers get paid when they are laid off.
B)   Workers face an incentive to find a new job as quickly as possible.
C)   Workers have a reduced incentive to find a new job until the insurance runs out.
D)   Workers are paid all of their wages by the unemployment insurance program.
E)   Workers on unemployment insurance are given training opportunities.

Question 19

When consumers discard their gasoline-powered automobiles for electric-powered ones, this partially reflects the _____of gasoline.

Accepted Answer

A)   scarcity
B)   luxury
C)   necessity
D)   specialization
E)   incentive

Question 20

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 students

Accepted Answer

A)   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)   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)   place a high value on their scarce time and are willing to pay higher prices than they would at locations farther from campus.
D)   place a low value on their scarce time and are willing to pay higher prices than they would at locations farther from campus.
E)   place a high value on their scarce time and are unwilling to pay higher prices.

Exam 1: Five Foundations of Economics

A camera takes pictures of drivers who do not stop at a red light, and this practice is used to issue traffic tickets. These red light cameras can be understood as serving an) ____________

Correct AnswerverifiedShow Answer

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

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

If opportunity cost is the value of the best alternative not chosen, why is a rejected option important?

Correct AnswerverifiedAlternatives are still valuable measurin...View AnswerShow Answer

The patent system

Correct AnswerverifiedShow Answer

What is the indirect incentive in the unemployment insurance program?

Correct AnswerverifiedShow Answer

The presence of scarcity means that no choices come without

Correct AnswerverifiedShow Answer

Economics professors are well aware of the importance of incentives. Which of the following situations shows the use of a positive incentive?

Correct AnswerverifiedShow Answer

Economic growth in developed countries has been altered by the increased popularity of the Internet. How has the Internet, in terms of both negative and positive incentives, promoted but also discouraged economic growth?

Correct AnswerverifiedThe Internet has certainly done a great ...View AnswerShow Answer

An activity's marginal benefit is _____at the optimal quantity.

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 students

Correct AnswerverifiedShow Answer

The opportunity cost to free trade is

Correct AnswerverifiedShow Answer

The government has been trying to mint dollar coins instead of printing paper dollar bills, but people have been reluctant to use coins instead of paper bills. How would an economist explain this reluctance?

Correct AnswerverifiedShow Answer

Opportunity cost is the______ alternative forfeited when a choice is made.

Correct AnswerverifiedShow Answer

Benefits from trade would NOT include

Correct AnswerverifiedShow Answer

The government places warnings on cigarette and liquor packages. These warnings serve as an)

Correct AnswerverifiedShow Answer

What creates comparative advantage?

Correct AnswerverifiedShow Answer

When consumers discard their gasoline-powered automobiles for electric-powered ones, this partially reflects the _____of gasoline.

Correct AnswerverifiedShow Answer

When trade is voluntary, who benefits?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Alternatives are still valuable measurin...
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The Internet has certainly done a great ...
View 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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