Question 1

An example of a direct negative incentive is:

Accepted Answer

A)   providing a commission for sales.
B)   awarding a promotion for hard work.
C)   threatening to fire those who do not perform well.
D)   providing an orientation for new employees.
E)   providing generous benefits and pay for employees.

Question 2

Economics is the study of:

Accepted Answer

A)   how to make money.
B)   how to allocate resources to satisfy wants and needs.
C)   capitalism.
D)   how to make workers more productive and firms more profitable.
E)   markets.

Question 3

In economics, choices are necessary because of the presence of:

Accepted Answer

A)   luxuries.
B)   inefficiency.
C)   needs.
D)   scarcity.
E)   incentives. D

Question 4

What creates comparative advantage?

Accepted Answer

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

Question 5

Instead of taking an economics course, you could have taken a history course that meets at the exact same time. The total cost of taking the economics course would be:

Accepted Answer

A)   the tuition cost for the economics course.
B)   the fact that you could not take the history course at the same time.
C)   the tuition cost for the economics course plus the price of the textbook and a notebook for the economics course.
D)   the tuition cost, the cost of the textbook and notebook, and the fact that you could not take the history course at the same time.
E)   the price of the textbook and a notebook for the economics course.

Question 6

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 7

Actions and activities are encouraged with which type of incentive?

Accepted Answer

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

Question 8

Why would economists find it surprising if the CEO of a large company does his or her own housework?

Accepted Answer

A)   The opportunity cost of CEO's time is quite high because they have an abundance of time to spend on housework.
B)   The opportunity cost of CEO's time is quite low because they have a scarcity of time to spend on housework.
C)   The opportunity cost of CEO's time is quite low because they have an abundance of time to spend on housework.
D)   The opportunity cost of CEO's time is quite high because they have a scarcity of time to spend on housework.
E)   The opportunity cost of a CEO's time is equal to that of everyone else that works at the same company.

Question 9

Which of the following statements best represents the fact that I cannot put in extra hours of work because of scarcity?

Accepted Answer

A)   I don't have enough time for additional work because I need to spend time with my family and there are only so many hours in the day.
B)   I don't like going to work, so why would I work more than I have to?
C)   I don't think that overtime pay is high enough.
D)   I am worried that if I work extra hours, I will get bored with my job.
E)   I don't want my coworkers to feel pressure to work more because I am working additional hours. A

Question 10

How are changes in opportunity cost related to decision-making behavior?

Accepted Answer

A)   The lower the opportunity cost of doing an activity X, the more likely activity X will be done.
B)   The higher the opportunity cost of doing activity X, the more likely activity X will be done.
C)   Changes in the opportunity cost play no role in decision-making.
D)   The lower the opportunity cost of doing activity Y, the more likely activity X will be done.
E)   The higher the opportunity cost of doing activity Y, the less likely activity X will be done.

Question 11

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 12

Indirect incentives create:

Accepted Answer

A)   positive consequences.
B)   negative consequences.
C)   indirect consequences.
D)   direct consequences.
E)   unintended consequences.

Question 13

When you chose a major, you likely thought about your skills. Let's say you don't enjoy dealing with numbers. How could you explain to your parents, using logic from economics, why you chose to major in English instead of mathematics?

Accepted Answer

A)   The opportunity cost of learning mathematics is too high.
B)   The opportunity cost of learning to appreciate literature is too high.
C)   The expected value of a major in English after graduation is low.
D)   The expected value of a major in mathematics after graduation is high.
E)   The opportunity cost of going to college is too low. A

Question 14

The U.S. federal government offers homeowners a tax deduction for their home loan interest payments. This reduction in taxes may have encouraged too many people to own a home. If the tax deduction caused people who otherwise would have rented to own, the tax deduction serves as a(n) :

Accepted Answer

A)   direct incentive.
B)   indirect incentive.
C)   neutral incentive.
D)   complementary incentive.
E)   unintended incentive.

Question 15

If you don't like changing the oil in your car and pay your father to do it for you, you have provided him with a(n) :

Accepted Answer

A)   direct incentive.
B)   indirect incentive.
C)   neutral incentive.
D)   complementary incentive.
E)   unintended incentive.

Question 16

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 17

Actions and activities are discouraged with which type of incentive?

Accepted Answer

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

Question 18

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 19

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

Question 20

What is meant when one says that decisions are made at the margin? Provide an example of how you have made a decision at the margin.

Accepted Answer

When decisions are made at the margin, o...

Exam 1: The Five Foundations of Economics

An example of a direct negative incentive is:

Correct AnswerverifiedShow Answer

Economics is the study of:

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In economics, choices are necessary because of the presence of:

Correct AnswerverifiedD

What creates comparative advantage?

Correct AnswerverifiedShow Answer

Instead of taking an economics course, you could have taken a history course that meets at the exact same time. The total cost of taking the economics course would be:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Actions and activities are encouraged with which type of incentive?

Correct AnswerverifiedShow Answer

Why would economists find it surprising if the CEO of a large company does his or her own housework?

Correct AnswerverifiedShow Answer

Which of the following statements best represents the fact that I cannot put in extra hours of work because of scarcity?

Correct AnswerverifiedA

How are changes in opportunity cost related to decision-making behavior?

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

Indirect incentives create:

Correct AnswerverifiedShow Answer

When you chose a major, you likely thought about your skills. Let's say you don't enjoy dealing with numbers. How could you explain to your parents, using logic from economics, why you chose to major in English instead of mathematics?

Correct AnswerverifiedA

The U.S. federal government offers homeowners a tax deduction for their home loan interest payments. This reduction in taxes may have encouraged too many people to own a home. If the tax deduction caused people who otherwise would have rented to own, the tax deduction serves as a(n) :

Correct AnswerverifiedShow Answer

If you don't like changing the oil in your car and pay your father to do it for you, you have provided him with a(n) :

Correct AnswerverifiedShow Answer

When consumers discard their gasoline-powered automobiles for electric-powered ones, this partially reflects the ________ of gasoline:

Correct AnswerverifiedShow Answer

Actions and activities are discouraged with which type of incentive?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is meant when one says that decisions are made at the margin? Provide an example of how you have made a decision at the margin.

Correct AnswerverifiedWhen decisions are made at the margin, o...View AnswerShow Answer

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