Question 1

The U.S.federal government imposes a tariff on cheaper steel arriving from other countries.When producers make the decision to purchase domestic steel,what must first occur?
A) Producers always purchase domestic steel because the quality is superior to foreign products.
B) The price of domestic steel must be at least equal to or greater than that of foreign steel.
C) Producers never purchase domestic steel because it can't be produced as efficiently as foreign products.
D) The government must subsidize the manufacturing costs of domestic steel.
E) The price of foreign steel must be at least equal to or greater than that of domestic steel.

Accepted Answer

In order for producers to make the decision to purchase domestic steel, the price of foreign steel must be at least equal to or greater than that of domestic steel. This is because the tariff imposed on foreign steel raises its price, making domestic steel relatively more affordable in comparison.

Question 2

________ show(s)how resources and final goods and services flow through the economy.
A) Money
B) Government
C) Allocation
D) Trade-offs
E) Circular flow

Accepted Answer

The circular flow model is a visual representation of how resources, goods, and services move through the economy. It shows the interdependence between households and firms in the market system. The model illustrates that households provide inputs (land, labor, capital) to firms in exchange for income, while firms provide goods and services to households in exchange for revenue. The circular flow model also includes government and international trade.

Question 3

A double coincidence of wants means that
A) each party in an exchange transaction has what the other party desires.
B) one party in an exchange transaction wants twice what the other party is offering.
C) both parties desire the same good or service,making exchange impossible.
D) desires in the marketplace are always unpredictable,so it takes at least two exchanges for every market participant to be satisfied.
E) both parties in an exchange have a desire,but no means by which to pay for it.

Accepted Answer

A double coincidence of wants occurs when both parties in an exchange transaction have what the other party desires, allowing for a mutually beneficial transaction.

Question 4

Marginal decisions are said to be made on the ________ unit(s)under consideration.
A) total
B) additional
C) average of
D) sum of
E) previous

Accepted Answer

Marginal decisions are made by considering the additional unit under consideration, rather than the total or average of all units.

Question 5

Shoppers at supermarkets often abandon their empty shopping carts at various locations in the parking lot,despite the risk of damage to vehicles or the additional labor cost of retrieving those carts.How might an economist explain this behavior?
A) People go to the supermarket when they have the energy to shop only,without considering the cost of returning their carts.
B) The perceived potential benefit of going to a cart return location is less than the time and energy cost to the shopper.
C) People are generally lazy and gravitate toward any decision with the lowest cost.
D) Once a shopper leaves the parking lot,the abandoned cart becomes someone else's problem.
E) Because food prices are always subsidized by the government,shoppers are ignorant of additional costs.

Accepted Answer

According to the economic principle of rational self-interest, people will engage in an activity only if the perceived benefits outweigh the perceived costs. In this case, shoppers may perceive the benefit of not returning the cart as the time and energy saved, while the cost of damage to vehicles or the additional labor cost may not be significant enough for them to consider. Therefore, they may choose to abandon the carts in the parking lot rather than return them.

Question 6

Which is NOT a benefit of trade?
A) reaping the rewards of specialization
B) creation of value for all parties involved
C) equivalent gains for all parties involved
D) improved allocation of resources
E) More wants are satisfied.

Accepted Answer

While trade generally creates value and allows for specialization and improved allocation of resources, equivalent gains for all parties involved is not always the case. There may be disparities in bargaining power or resource endowments that lead to one party benefiting more than another, resulting in unequal gains.

Question 7

It is crucial to recognize that ________ and ________ are separate evaluations made at the margin.
A) costs; benefits
B) buying; selling
C) incentives; trade-offs
D) economics; accounting
E) trade-offs; opportunity costs

Accepted Answer

When making decisions, it is important to consider both the costs and benefits, but they must be evaluated separately at the margin. The marginal cost is the additional cost of producing one more unit or taking one more action, while the marginal benefit is the additional benefit gained from producing one more unit or taking one more action. By weighing the marginal costs and benefits, decision-makers can determine whether or not it is worth it to produce or take that additional unit or action.

Question 8

A possible opportunity cost of NOT engaging in free trade is
A) a loss of domestic jobs.
B) a smaller variety of goods and services.
C) higher prices.
D) economic growth.
E) import tariffs.

Accepted Answer

The answer of A possible opportunity cost of NOT engaging...

Question 9

At any quantity,when the marginal benefit equals the marginal cost,that quantity is said to be
A) excessive.
B) inadequate.
C) optimal.
D) equivalent.
E) allocated.

Accepted Answer

When the marginal benefit equals the marginal cost, it means that the cost of producing one more unit is equal to the benefit gained from one more unit. This is considered the optimal quantity because any increase or decrease in production would result in a decrease in overall benefit or increase in overall cost. Therefore, the optimal quantity is the point where both marginal benefit and marginal cost are equal.

Question 10

________ avoids the double coincidence of wants.
A) Bartering
B) Mandated trade
C) Government ownership
D) Money
E) Demand

Accepted Answer

Money serves as a medium of exchange, making transactions easier and avoiding the need for a double coincidence of wants that is required in bartering. With money, one party can sell their goods or services for money and use that money to buy other goods or services they need.

Question 11

Decision makers engage in marginal thinking by
A) comparing the average cost and benefit of all units produced.
B) comparing the sum of the cost and benefit of all units produced.
C) ignoring benefits,which are a subjective determination.
D) comparing the benefit of one additional unit with its cost to produce.
E) focusing on mass production,which often keeps costs down.

Accepted Answer

Marginal thinking involves comparing the benefit of producing one additional unit with its cost. This allows decision makers to determine whether it is worthwhile to produce one more unit or not. Comparing the average cost and benefit of all units (A) or the sum of cost and benefit of all units (B) does not take into account the incremental cost and benefit of one additional unit. Ignoring benefits (C) is not a characteristic of marginal thinking. Focusing on mass production (E) may not necessarily be related to marginal thinking.

Question 12

________ is value added by making additional effort.
A) Income
B) Money
C) Marginal benefit
D) Optimization
E) Opportunity benefit

Accepted Answer

Marginal benefit refers to the additional benefit gained from making an extra effort or investment. This can be in terms of revenue, savings, or any other form of value. It is an important concept in economics and business decision-making as it helps to assess the return on investment and optimize resource allocation.

Question 13

Rodrigo operates a dry-cleaning service and charges customers $5 per article of clothing.Based on his knowledge of operations,the 1,000 th piece of clothing costs him $4.95 to dry-clean.If he takes additional business,however,the 1,001st piece will cost $5 for the service.Does he take the additional business?
A) No,he has hidden costs that far exceed his estimate of $5,so he loses money.
B) No,taking on additional business doesn't earn him any money.
C) Yes,if he turns away business,his service will be forced to close.
D) Maybe.If a competitor is accepting that many customers,he must at least equal that amount.
E) Yes.At a $5 cost,he breaks even and is indifferent.He necessarily turns away business when the cost of the additional unit exceeds the income.

Accepted Answer

Since Rodrigo charges $5 per article, he breaks even at the 1,001st piece of clothing, as it costs him $5 to dry-clean. Therefore, he should take the additional business, since he neither gains nor loses money on it. However, he should turn away business if the cost of the additional unit exceeds the income. Therefore, option E is the best choice.

Question 14

Disparities in opportunity cost among competitors are the cause of
A) optimization.
B) comparative advantage.
C) trade-offs.
D) command economies.
E) marginal benefits.

Accepted Answer

Disparities in opportunity cost among competitors are the cause of comparative advantage. This is because countries or individuals with a lower opportunity cost for producing a certain good or service have a comparative advantage in producing that good or service, and can trade with countries or individuals who have a higher opportunity cost for producing that good or service.

Question 15

________ is the process of breaking down decisions into smaller parts.
A) Economics
B) Marginal analysis
C) Divisional analysis
D) Segmentation
E) Reduction

Accepted Answer

Marginal analysis involves breaking down decisions into smaller parts, specifically by examining the marginal cost and benefit of each unit of a decision. Economics and divisional analysis may involve some degree of breaking down decisions, but they are not specifically focused on smaller parts as marginal analysis is. Segmentation and reduction are not applicable in this context.

Question 16

________ involves individuals trading goods they already have or providing services in exchange for something they want.
A) Circular flow model
B) Circular flow model with money
C) Optimization
D) Barter
E) Cash exchange

Accepted Answer

Barter involves individuals trading goods or services without the use of money. Instead, they exchange items they already have or provide services in exchange for something they want.

Question 17

People often clean cabinet doors,but do not regularly clean inside the cabinet.The insides of cabinets aren't visible and require the removal of contents in order to clean.This is an example of ________ thinking.
A) conscientious
B) deferential
C) dismal
D) incentive
E) marginal

Accepted Answer

This is an example of marginal thinking because the cleaning is only focused on what is visible and easily accessible, rather than considering the entire space that needs to be cleaned.

Question 18

If specialization and outsourcing can harm domestic workers,why do countries still engage in trade?
A) Most workers have little influence on politicians and are ignored.
B) The gains from trade far outweigh the costs,and the economy benefits overall.
C) Domestic workers can move to a country with a greater need for their skills.
D) Welfare programs can support unemployed workers.
E) Shipping companies have a powerful lobby in Congress.

Accepted Answer

While specialization and outsourcing may harm some domestic workers, countries still engage in trade because the gains from trade outweigh the costs. Trade allows countries to benefit from comparative advantage, resulting in lower prices for consumers, increased efficiency, and new job opportunities in different sectors. The overall benefits to the economy and society are significant, making trade a worthwhile pursuit.

Question 19

An economist would argue that the true cost of a college education exceeds the cost of tuition,housing,and books because of
A) opportunity cost.
B) invisible costs.
C) inflation.
D) tax credits.
E) scholarships.

Accepted Answer

An economist would argue that in addition to the visible costs such as tuition, housing, and books, there are also opportunity costs associated with attending college, such as lost income from not working during those years. This is why the true cost of a college education exceeds the tangible expenses.

Question 20

According to marginal thinking,an individual will continue to consume until after the benefit of additional consumption ________ its cost.
A) is equal to
B) totals
C) is greater than
D) is less than
E) marginalizes

Accepted Answer

According to marginal thinking, an individual will continue to consume until after the benefit of additional consumption is less than its cost. This is because marginal thinking involves comparing the additional benefits of a choice against its additional costs, and consumption typically stops when the costs outweigh the benefits.

Quiz 1: Five Foundations of Economics

The U.S.federal government imposes a tariff on cheaper steel arriving from other countries.When producers make the decision to purchase domestic steel,what must first occur?

________ show(s) how resources and final goods and services flow through the economy.

A double coincidence of wants means that

Marginal decisions are said to be made on the ________ unit(s) under consideration.

Shoppers at supermarkets often abandon their empty shopping carts at various locations in the parking lot,despite the risk of damage to vehicles or the additional labor cost of retrieving those carts.How might an economist explain this behavior?

Which is NOT a benefit of trade?

It is crucial to recognize that and are separate evaluations made at the margin.

A possible opportunity cost of NOT engaging in free trade is

At any quantity,when the marginal benefit equals the marginal cost,that quantity is said to be

________ avoids the double coincidence of wants.

Decision makers engage in marginal thinking by

________ is value added by making additional effort.

Disparities in opportunity cost among competitors are the cause of

________ is the process of breaking down decisions into smaller parts.

________ involves individuals trading goods they already have or providing services in exchange for something they want.

People often clean cabinet doors,but do not regularly clean inside the cabinet.The insides of cabinets aren't visible and require the removal of contents in order to clean.This is an example of ________ thinking.

If specialization and outsourcing can harm domestic workers,why do countries still engage in trade?

An economist would argue that the true cost of a college education exceeds the cost of tuition,housing,and books because of

According to marginal thinking,an individual will continue to consume until after the benefit of additional consumption ________ its cost.