Question 1

Your professor loves her work,teaching economics.She has been offered other positions in the corporate world that would increase her income by 25 percent,but she has decided to continue working as a professor.Her decision would not change unless the marginal

Accepted Answer

A)  cost of teaching increased.
B)  benefit of teaching increased.
C)  cost of a corporate job increased.
D)  benefit of a corporate job decreased.

Question 2

A bagel shop sells fresh baked bagels from 5 a.m.until 7 p.m.every day.The shop does not sell day-old bagels,so all unsold bagels are thrown away at 7 p.m.each day.The cost of making and selling a dozen bagels is $1.00;there are no costs associated with throwing bagels away.If the manager has 8 dozen bagels left at 6:30 p.m.on a particular day,which of the following alternatives is most attractive?

Accepted Answer

A)  Lower the price of the remaining bagels,even if the price falls below $1.00 per dozen.
B)  Lower the price of the remaining bagels,but under no circumstances should the price fall below $1.00 per dozen.
C)  Throw the bagels away and produce 8 fewer dozen bagels tomorrow.
D)  Starting tomorrow,lower the price on all bagels so they will all be sold earlier in the day.

Question 3

If Jane attends graduate school,it will take her two years,during which time she will earn no income.She will pay a total of $100,000 for tuition,$20,000 for room and board,and $2,000 for books.If she spends the two years working rather than attending college,she will pay a total of $18,000 for room and board,pay no intuition,and buy no books.Based on this information,Jane's economic cost of attending graduate school would be $175,000 if,over the two years,she could earn a total of

Accepted Answer

A)  $53,000 instead of attending graduate school.
B)  $55,000 instead of attending graduate school.
C)  $71,000 instead of attending graduate school.
D)  $73,000 instead of attending graduate school.

Question 4

Suppose the state of Illinois passes a law that bans smoking in restaurants.As a result,residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there.Which of the following principles does this best illustrate?

Accepted Answer

A)  People respond to incentives
B)  Rational people think at the margin
C)  Trade can make everyone better off
D)  Markets are usually a good way to organize economic activity

Question 5

Hamid spends an hour studying instead of watching TV with his friends.The opportunity cost to him of studying is

Accepted Answer

A)  the improvement in his grades from studying for the hour.
B)  the improvement in his grades from studying minus the enjoyment of watching TV.
C)  the enjoyment he would have received if he had watched TV with his friends.
D)  zero.Since Hamid chose to study rather than to watch TV,the value of studying must have been greater to him than the value of watching TV.

Question 6

Ramona decides to spend two hours taking a nap rather than attending her classes.Her opportunity cost of napping is

Accepted Answer

A)  the value of the knowledge she would have received had she attended class.
B)  the $24 she could have earned if she had worked at her job for those two hours.
C)  the value of her nap minus the value of attending class.
D)  nothing,since she valued sleep more than attendance at class.

Question 7

Evidence indicates that seat belt laws have led to

Accepted Answer

A)  fewer pedestrian deaths.
B)  fewer automobile accidents.
C)  fewer deaths per automobile accident.
D)  All of the above are correct.

Question 8

Maureen's college raises the cost of room and board per semester.This increase raises Maureen's opportunity cost of attending college

Accepted Answer

A)  even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount.An increase in opportunity cost reduces Maureen's incentive to attend college.
B)  even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount.An increase in opportunity cost increases Maureen's incentive to attend college.
C)  only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges.An increase in opportunity cost reduces Maureen's incentive to attend college.
D)  only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges.An increase in opportunity cost increases Maureen's incentive to attend college.

Question 9

Suppose after graduating from college you get a job working at a bank earning $30,000 per year.After two years of working at the bank earning the same salary,you have an opportunity to enroll in a one-year graduate program that would require you to quit your job at the bank.Which of the following should not be included in a calculation of your opportunity cost?

Accepted Answer

A)  the cost of tuition and books to attend the graduate program
B)  the $30,000 salary that you could have earned if you retained your job at the bank
C)  the $45,000 salary that you will be able to earn after having completed your graduate program
D)  the value of insurance coverage and other employee benefits you would have received if you retained your job at the bank

Question 10

A typical society strives to get the most it can from its scarce resources.At the same time,the society attempts to distribute the benefits of those resources to the members of the society in a fair manner.In other words,the society faces a tradeoff between

Accepted Answer

A)  guns and butter.
B)  efficiency and equality.
C)  inflation and unemployment.
D)  work and leisure.

Question 11

Which of the following is true?

Accepted Answer

A)  Efficiency refers to the size of the economic pie;equality refers to how the pie is divided.
B)  Government policies usually improve upon both equality and efficiency.
C)  As long as the economic pie continually gets larger,no one will have to go hungry.
D)  Efficiency and equality can both be achieved if the economic pie is cut into equal pieces.

Question 12

The adage,"There is no such thing as a free lunch," means

Accepted Answer

A)  even people on welfare have to pay for food.
B)  the cost of living is always increasing.
C)  people face tradeoffs.
D)  all costs are included in the price of a product.

Question 13

Rational people make decisions "at the margin" by comparing

Accepted Answer

A)  average costs and benefits.
B)  total costs and benefits.
C)  additional costs and benefits.
D)  opportunity costs and benefits.

Question 14

When calculating the cost of college,which of the following should you probably include?

Accepted Answer

A)  The cost of your meal plan for the cafeteria.
B)  The cost of books required for college classes
C)  The income you earn at your part-time job.
D)  The cost of living in the dormitory.

Question 15

When the government redistributes income from the wealthy to the poor,

Accepted Answer

A)  efficiency is improved,but equality is not.
B)  both wealthy people and poor people benefit directly.
C)  people work less and produce fewer goods and services.
D)  the government collects more revenue in total.

Question 16

A barber currently cuts hair for 50 clients per week and earns a profit.He is considering expanding his operation in order to serve more clients.Should he expand?

Accepted Answer

A)  Yes,because cutting hair is profitable.
B)  No,because he may not be able to sell more services.
C)  It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients.
D)  It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

Question 17

When the government attempts to improve equality in an economy the result is often

Accepted Answer

A)  an increase in overall output in the economy.
B)  additional government revenue since overall income will increase.
C)  a reduction in equality.
D)  a reduction in efficiency.

Question 18

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million.If the company builds a 31st house,its total cost will increase to $7.76 million.Which of the following statements is correct?

Accepted Answer

A)  For the first 30 houses,the average cost per house was $250,000.
B)  The marginal cost of the 31st house,if it is built,will be $260,000.
C)  If the company can experience a marginal benefit of $275,000 by building the 31st house,then the company should build it.
D)  All of the above are correct.

Question 19

Which of the following can policy do?

Accepted Answer

A)  alter incentives
B)  alter trade-offs
C)  change opportunity costs
D)  All of the above are correct.

Question 20

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight.If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300,the airline should

Accepted Answer

A)  sell the ticket because the marginal benefit exceeds the marginal cost.
B)  sell the ticket because the marginal benefit exceeds the average cost.
C)  not sell the ticket because the marginal benefit is less than the marginal cost.
D)  not sell the ticket because the marginal benefit is less than the average cost.

Exam 1: Ten Principles of Economics: How People Make Decisions

Correct Answer
verified

Rational people make decisions "at the margin" by comparing

Correct Answer
verified

A barber currently cuts hair for 50 clients per week and earns a profit.He is considering expanding his operation in order to serve more clients.Should he expand?

Correct Answer
verified

Which of the following can policy do?

Correct Answer
verified

When the government redistributes income from the wealthy to the poor,

Correct Answer
verified

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight.If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300,the airline should

Correct Answer
verified

When the government attempts to improve equality in an economy the result is often

Correct Answer
verified

When calculating the cost of college,which of the following should you probably include?

Correct Answer
verified

Maureen's college raises the cost of room and board per semester.This increase raises Maureen's opportunity cost of attending college

Correct Answer
verified

Your professor loves her work,teaching economics.She has been offered other positions in the corporate world that would increase her income by 25 percent,but she has decided to continue working as a professor.Her decision would not change unless the marginal

Correct Answer
verified

Evidence indicates that seat belt laws have led to

Correct Answer
verified

The adage,"There is no such thing as a free lunch," means

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Suppose the state of Illinois passes a law that bans smoking in restaurants.As a result,residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there.Which of the following principles does this best illustrate?

Correct Answer
verified

A typical society strives to get the most it can from its scarce resources.At the same time,the society attempts to distribute the benefits of those resources to the members of the society in a fair manner.In other words,the society faces a tradeoff between

Correct Answer
verified

Hamid spends an hour studying instead of watching TV with his friends.The opportunity cost to him of studying is

Correct Answer
verified

Which of the following is true?

Correct Answer
verified

Ramona decides to spend two hours taking a nap rather than attending her classes.Her opportunity cost of napping is

Correct Answer
verified

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million.If the company builds a 31^st house,its total cost will increase to $7.76 million.Which of the following statements is correct?

Correct Answer
verified

Exam 1: Ten Principles of Economics: How People Make Decisions

Correct AnswerverifiedShow Answer

Rational people make decisions "at the margin" by comparing

Correct AnswerverifiedShow Answer

A barber currently cuts hair for 50 clients per week and earns a profit.He is considering expanding his operation in order to serve more clients.Should he expand?

Correct AnswerverifiedShow Answer

Which of the following can policy do?

Correct AnswerverifiedShow Answer

When the government redistributes income from the wealthy to the poor,

Correct AnswerverifiedShow Answer

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight.If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300,the airline should

Correct AnswerverifiedShow Answer

When the government attempts to improve equality in an economy the result is often

Correct AnswerverifiedShow Answer

When calculating the cost of college,which of the following should you probably include?

Correct AnswerverifiedShow Answer

Maureen's college raises the cost of room and board per semester.This increase raises Maureen's opportunity cost of attending college

Correct AnswerverifiedShow Answer

Your professor loves her work,teaching economics.She has been offered other positions in the corporate world that would increase her income by 25 percent,but she has decided to continue working as a professor.Her decision would not change unless the marginal

Correct AnswerverifiedShow Answer

Evidence indicates that seat belt laws have led to

Correct AnswerverifiedShow Answer

The adage,"There is no such thing as a free lunch," means

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose the state of Illinois passes a law that bans smoking in restaurants.As a result,residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there.Which of the following principles does this best illustrate?

Correct AnswerverifiedShow Answer

A typical society strives to get the most it can from its scarce resources.At the same time,the society attempts to distribute the benefits of those resources to the members of the society in a fair manner.In other words,the society faces a tradeoff between

Correct AnswerverifiedShow Answer

Hamid spends an hour studying instead of watching TV with his friends.The opportunity cost to him of studying is

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

Ramona decides to spend two hours taking a nap rather than attending her classes.Her opportunity cost of napping is

Correct AnswerverifiedShow Answer

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million.If the company builds a 31st house,its total cost will increase to $7.76 million.Which of the following statements is correct?

Correct AnswerverifiedShow 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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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million.If the company builds a 31^st house,its total cost will increase to $7.76 million.Which of the following statements is correct?

Correct Answer
verified