Question 1

What is one cause of inflation?

Accepted Answer

A)   the persistent rise in prices in the economy
B)   the inability of production to keep up with spending in the economy
C)   increased spending by people and the government.
D)   economic growth without money growth

Question 2

The term "marginal" in economics means "additional."

Accepted Answer

A) True 
 B)False

Question 3

Decreasing one's driving speed when a police cruiser is seen is an application of the principle of:

Accepted Answer

A)   gains from trade.
B)   returns from specialization.
C)   marginal thinking.
D)   opportunity cost.

Question 4

Without trade, we would all be able to produce:

Accepted Answer

A)   products we enjoy with trade.
B)   somewhat less than we do now.
C)   very little.
D)   more than we do now.

Question 5

The general manager of a Major League Baseball team reasons that hiring an all-star-caliber third baseman would allow the team to win 13 more games per season, generating more fan interest and higher ticket sales. The estimated increase in ticket and merchandise sales is $10.5 million per year, but it would cost the team $12 million a year to hire an all-star-caliber third baseman. Using marginal cost-benefit thinking, the general manager will not hire the all-star-caliber third baseman.

Accepted Answer

A) True 
 B)False

Question 6

In an episode of DuckTales (a Disney cartoon starring Scrooge McDuck)  entitled "Dough Ray Me," one of the characters invented a duplicating machine. Other characters used the machine to start duplicating money at a phenomenal rate. What would you expect to happen? (And indeed, the episode does show this happening.)

Accepted Answer

A)   More people would save money.
B)   The government would print more money.
C)   It would create massive inflation.
D)   Wages would fall.

Question 7

Imposing the death penalty on rapists may increase the number of murders, because:

Accepted Answer

A)   the death penalty is not a deterrent to the behavior of a rapist.
B)   once a victim is raped there is no additional penalty imposed for also killing the victim.
C)   rapists are irrational and place no value on the life of their victim.
D)   rapists do not think about the consequences of their actions.

Question 8

Which of the following statements is TRUE about trade?

Accepted Answer

A)   Everyone can benefit from trade, even people who trade with someone from a foreign country.
B)   Comparative advantage is based on specializing in products that have a high opportunity cost of production.
C)   If a person can do everything better than anyone else, there is no reason for that person to trade with others.
D)   Trade makes one party better off but the other party worse off, so there is no net gain to society.

Question 9

The Fed's decisions:

Accepted Answer

A)   are always right.
B)   affect the economy with no lag at all.
C)   often take months for their effects to be felt in the economy.
D)   never help avoid recessions.

Question 10

The legendary rock band KISS, which sold more than 100 million albums worldwide, is often said to be only concerned about making as much money as possible. This example highlights the idea that:

Accepted Answer

A)   greed is bad.
B)   markets align self-interest with the social interest.
C)   government can sometimes improve market outcomes.
D)   incentives are not always important.

Question 11

The opportunity cost of attending college is:

Accepted Answer

A)   tuition and books.
B)   travel expenses, tuition, and books.
C)   psychic costs of missing your family and friends while in school.
D)   lost wages from not working full time.

Question 12

You must decide whether to attend class tomorrow morning or take your friend to the airport. Your decision highlights the following "big idea" in economics.

Accepted Answer

A)   Institutions matter.
B)   Incentives matter.
C)   Economics is fun.
D)   Trade-offs are everywhere.

Question 13

How is the unemployment rate related to the opportunity cost of college?

Accepted Answer

A)   As the unemployment rate increases, the opportunity cost of attending college falls because fewer opportunities for employment exist.
B)   As the unemployment rate decreases, the opportunity cost of attending college falls since it becomes easier to pay for tuition when employed.
C)   As the unemployment rate increases, the opportunity cost of attending college increases because fewer people are giving up the opportunity of working to attend college.
D)   As the unemployment rate increases, the opportunity cost of attending college increases because more people are giving up the opportunity of working to attend college.

Question 14

If the costs of staying at a party a few more minutes are higher than the benefits, you should:

Accepted Answer

A)   stay longer.
B)   leave the party.
C)   never have attended the party in the first place.
D)   have thrown your own party.

Question 15

People are rational and sometimes respond in unpredictable ways to incentives.

Accepted Answer

A) True 
 B)False

Question 16

A student spends four years in college. College tuition, fees, and room and board cost $10,000 per year. This student's opportunity cost of attending college is $10,000.

Accepted Answer

A) True 
 B)False

Question 17

Economists think that people are self-interested:

Accepted Answer

A)   only when monetary incentives are present.
B)   because they respond to incentives in predictable ways.
C)   only rarely in response to incentives.
D)   unless they are being altruistic.

Question 18

Self-sufficiency:

Accepted Answer

A)   is the key to prosperity.
B)   is not a popular idea.
C)   results in poverty and death.
D)   means being able and willing to trade.

Question 19

In Zimbabwe, price increases of 150,000 percent per year were caused by:

Accepted Answer

A)   the country's unsustainable trade deficit.
B)   marginal tax rates as high as 90 percent.
C)   large increases in the money supply.
D)   deregulated prices.

Question 20

When markets don't align self-interest with social interest:

Accepted Answer

A)   markets will still manage to reach an efficient outcome.
B)   governments may improve the situation by changing incentives.
C)   societal costs will always exceed individual benefits.
D)   individual benefits will exceed societal benefits.

Exam 1: The Big Ideas

Economists think that people are self-interested:

Correct Answer
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The opportunity cost of attending college is:

Correct Answer
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Imposing the death penalty on rapists may increase the number of murders, because:

Correct Answer
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When markets don't align self-interest with social interest:

Correct Answer
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Correct Answer
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The term "marginal" in economics means "additional."

Correct Answer
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You must decide whether to attend class tomorrow morning or take your friend to the airport. Your decision highlights the following "big idea" in economics.

Correct Answer
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Correct Answer
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In Zimbabwe, price increases of 150,000 percent per year were caused by:

Correct Answer
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Which of the following statements is TRUE about trade?

Correct Answer
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Decreasing one's driving speed when a police cruiser is seen is an application of the principle of:

Correct Answer
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Without trade, we would all be able to produce:

Correct Answer
verified

People are rational and sometimes respond in unpredictable ways to incentives.

Correct Answer
verified

Self-sufficiency:

Correct Answer
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A student spends four years in college. College tuition, fees, and room and board cost $10,000 per year. This student's opportunity cost of attending college is $10,000.

Correct Answer
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What is one cause of inflation?

Correct Answer
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How is the unemployment rate related to the opportunity cost of college?

Correct Answer
verified

If the costs of staying at a party a few more minutes are higher than the benefits, you should:

Correct Answer
verified

The Fed's decisions:

Correct Answer
verified

The legendary rock band KISS, which sold more than 100 million albums worldwide, is often said to be only concerned about making as much money as possible. This example highlights the idea that:

Correct Answer
verified

Exam 1: The Big Ideas

Economists think that people are self-interested:

Correct AnswerverifiedShow Answer

The opportunity cost of attending college is:

Correct AnswerverifiedShow Answer

Imposing the death penalty on rapists may increase the number of murders, because:

Correct AnswerverifiedShow Answer

When markets don't align self-interest with social interest:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The term "marginal" in economics means "additional."

Correct AnswerverifiedShow Answer

You must decide whether to attend class tomorrow morning or take your friend to the airport. Your decision highlights the following "big idea" in economics.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In Zimbabwe, price increases of 150,000 percent per year were caused by:

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE about trade?

Correct AnswerverifiedShow Answer

Decreasing one's driving speed when a police cruiser is seen is an application of the principle of:

Correct AnswerverifiedShow Answer

Without trade, we would all be able to produce:

Correct AnswerverifiedShow Answer

People are rational and sometimes respond in unpredictable ways to incentives.

Correct AnswerverifiedShow Answer

Self-sufficiency:

Correct AnswerverifiedShow Answer

A student spends four years in college. College tuition, fees, and room and board cost $10,000 per year. This student's opportunity cost of attending college is $10,000.

Correct AnswerverifiedShow Answer

What is one cause of inflation?

Correct AnswerverifiedShow Answer

How is the unemployment rate related to the opportunity cost of college?

Correct AnswerverifiedShow Answer

If the costs of staying at a party a few more minutes are higher than the benefits, you should:

Correct AnswerverifiedShow Answer

The Fed's decisions:

Correct AnswerverifiedShow Answer

The legendary rock band KISS, which sold more than 100 million albums worldwide, is often said to be only concerned about making as much money as possible. This example highlights the idea that:

Correct AnswerverifiedShow Answer

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