Question 1

Economists assume that
A) individuals behave in unpredictable ways.
B) consumer behavior is explained by the existence of unlimited resources.
C) people put other people's interests ahead of their own.
D) optimal decisions are made at the margin.

Accepted Answer

Economists assume that optimal decisions are made at the margin, meaning that individuals make decisions based on the additional benefits versus the additional costs of a particular choice. This is a fundamental principle in economics. Options A, B, and C are incorrect because they do not align with basic economic assumptions.

Question 2

What is an economic model?
A) It is a description of an economic issue that includes all possible related information.
B) It is a description of an economic issue based on official government information.
C) It is a detailed version of some aspect of economic life used to analyze an economic issue.
D) It is a simplified version of some aspect of economic life used to analyze an economic issue.

Accepted Answer

An economic model is a simplified version of some aspect of economic life used to analyze an economic issue. It is not a comprehensive description of all possible information, nor is it necessarily based on official government information.

Question 3

The study of economics arises due to
A) money.
B) scarcity.
C) greed.
D) resources.

Accepted Answer

Economics is the study of how societies allocate scarce resources among competing uses. Scarcity is the fundamental economic problem facing all societies, which forces them to make choices about how to allocate limited resources to fulfill their unlimited wants and needs. Therefore, scarcity is the main reason why economics exists as a discipline.

Question 4

The basic economic problem of scarcity
A) has always existed and will continue to exist.
B) will eventually disappear as technology continues to advance.
C) is a problem only in developing economies.
D) does not apply to the wealthy in society.

Accepted Answer

Scarcity is a fundamental economic problem that arises because resources are limited while human wants and needs are unlimited. It has been present throughout history and will continue to exist in the future.

Question 5

In the first six months of 2003, branches of Commerce Bank in New York City were robbed 14 times. The New York City Police recommended steps the bank could take to deter robberies, including the installation of plastic barriers called "bandit barriers." The police were surprised the bank did not take their advice. According to a deputy commissioner of police, "Commerce does very little of what we recommend. They've told our detectives they have no interest in ever putting in the barriers." It would seem that Commerce Bank would have a strong incentive to install "bandit barriers" to deter robberies. Why wouldn't they do it?
A) The banks would rather delay installation of any theft deterring equipment in anticipation of new, lower-cost innovations in the security devices market.
B) The banks must have weighed the cost of installing bandit barriers against the benefits and decided that they have "no interest in ever putting in the barriers."
C) The banks are concerned that "bandit barriers" would send the wrong message to customers-that the bank is unsafe.
D) The banks probably resent any interference from the police department.

Accepted Answer

The passage states that Commerce Bank was recommended to install "bandit barriers" by the police department to deter robberies, but they didn't take their advice. The deputy commissioner of police stated that Commerce Bank has "no interest in ever putting in the barriers." This suggests that the bank weighed the cost of installing bandit barriers against the benefits and decided it wasn't worth it.

Question 6

Consider the following statements:
a. 	Consumers rent more kayaks from a vendor that rents kayaks at a lower price than other rival kayak vendors along Waikiki beach.
b. 	Department stores take steps to increase security since they believe it is more costly to allow shoplifting than to install expensive security monitoring equipment.
c. 	Farmers produce more cotton when its selling price falls.
Which of the above statements demonstrates that economic agents respond to incentives? 
A) a only.
B) b only.
C) c only.
D) a and b.
E) a, b, and c.

Accepted Answer

Both statement a and b indicate that economic agents respond to incentives. In statement a, consumers are incentivized to rent from the vendor with the lower price, showing that price is a determining factor in consumer behavior. In statement b, department stores are incentivized to increase security in order to avoid the cost of shoplifting, which demonstrates how businesses respond to potential losses. Statement c, on the other hand, suggests that farmers respond to changes in the market price, but doesn't necessarily demonstrate how they are incentivized to do so.

Question 7

The term "market" in economics refers to
A) a place where money changes hands.
B) a legal institution where exchange can take place.
C) a group of buyers and sellers of a product and the arrangement by which they come together to trade.
D) an organization which sells goods and services.

Accepted Answer

In economics, a market refers to a group of buyers and sellers of a product who come together to engage in voluntary exchange. It is not limited to a physical location or a legal institution, but can exist in various forms such as online marketplaces or auction sites. The market is characterized by the forces of supply and demand, which determine prices and quantities exchanged.

Question 8

Your roommate, Serafina, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment?
A) Yes, I agree with her. One cannot make predictions about economic behavior because in reality people make incorrect choices in many situations.
B) I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits.
C) Yes, I agree with her. Economic theory should allow for irrational behavior so that we can have more reliable predictions.
D) I disagree with her. If we cannot assume that decisions are correct, then we will not be able to examine the moral implications of these decisions.

Accepted Answer

Serafina's statement is incorrect because economics does not assume that consumers and firms always make the correct decision, but rather that they behave rationally according to their preferences and given the available information. The concept of rationality does not mean that every choice is correct, but rather that economic agents make choices that maximize their utility or profit.

Question 9

One reason some manufacturing companies began moving production to China in the early 2000s was due to lower wages that could be paid to Chinese workers. Moving manufacturing to China to take advantage of lower wages so goods could be produced at a lower cost than if produced in the United States exemplifies which key economic idea?
A) People are rational.
B) People respond to economic incentives.
C) Optimal decisions are made at the margin.
D) The market system relies on the principle of voluntary exchange.

Accepted Answer

Lower wages in China created an economic incentive for manufacturing companies to move production to China, demonstrating how people respond to economic incentives.

Question 10

Economics is the study of the ________ people make to attain their goals, given their ________ resources.
A) purchases; unlimited
B) choices; scarce
C) income; available
D) decisions; household

Accepted Answer

Economics is the study of how people make choices to attain their goals, given their limited or scarce resources. Therefore, option B is the correct choice as it accurately defines the subject matter of economics. Options A, C, and D do not fully capture the essence of the economic concept being described.

Question 11

Scarcity refers to the situation in which
A) unlimited wants exceed limited resources.
B) unlimited resources exceed limited wants.
C) a country's population is larger than its resource base.
D) a nation's poverty level increases faster than its population.

Accepted Answer

Scarcity refers to the condition in which resources are limited and wants or needs are infinite or endless. As a result, individuals and society as a whole must make choices about how to use these scarce resources efficiently to meet their needs and wants. Option A is the only answer that aligns with this definition. Option B is incorrect as it describes an abundance of resources instead of scarcity. Option C is not a complete definition of scarcity. Option D is also incorrect and not related to the concept of scarcity.

Question 12

One reason some manufacturing companies have moved production from overseas locations back to the United States is an increasing preference by U.S. consumers for products made in the United States. Assuming that managers at these companies used all available information, including the increased preference by U.S. consumers for domestically produced, when making the decision to move production back to the United States exemplifies which key economic idea?
A) People are rational.
B) People respond to economic incentives.
C) Optimal decisions are made at the margin.
D) The market system relies on the principle of voluntary exchange.

Accepted Answer

The answer of One reason some manufacturing companies have moved...

Question 13

Which of the following best describes an assumption economists make about human behavior?
A) They assume that individuals act rationally all the time in all circumstances.
B) They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.
C) They assume that people take into account the question of fairness in all decisions they make.
D) They assume that individuals act randomly.

Accepted Answer

Economists assume that individuals behave rationally, but they also recognize that people may not always behave rationally due to various factors such as emotions, biases, and cognitive limitations. However, assuming rational behavior is useful in analyzing and predicting the choices people make in most circumstances.

Question 14

What does the term "marginal" mean in economics?
A) the edge of a market
B) an additional or extra
C) illegal
D) secondary
E) trivial

Accepted Answer

In economics, the term "marginal" refers to an additional or extra unit of a good or service. For example, marginal cost is the cost of producing one more unit of a good or service.

Question 15

Economists assume that rational people
A) never use all available information as they act to achieve their goals.
B) undertake activities that benefit others and hurt themselves.
C) only weigh the benefits and costs of the most desirable alternative actions.
D) respond to economic incentives.

Accepted Answer

Economists assume that rational people respond to economic incentives, meaning that they make decisions based on the costs and benefits associated with a particular action. This assumption is based on the idea that individuals seek to maximize their own well-being, and will take actions that they believe will lead to the greatest benefits for themselves based on the incentives they face.

Question 16

Economics promotes which of the following as the way to make the best decision?
A) Continue an enjoyable activity as long as you do not have to pay for it.
B) Continue an enjoyable activity until it is no longer enjoyable.
C) Continue an enjoyable activity until you cannot afford to pursue it.
D) Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost.

Accepted Answer

Economics promotes the concept of marginal analysis, which involves comparing the marginal benefit and marginal cost of a decision. The best decision is to continue an activity up to the point where its marginal benefit equals its marginal cost, as any further activity would result in a decrease in net benefit. Therefore, choice D is the best option.

Question 17

According to the Centers for Disease Control and Prevention, ________ in 2015 in which less than 20 percent of the population was considered obese.
A) Colorado was the only state
B) there were only 5 states
C) there were more than 25 states
D) there were no states

Accepted Answer

The answer of According to the Centers for Disease Control...

Question 18

An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper?
A) marginal revenue
B) gross earnings
C) pure profit
D) marginal costs
E) net benefit

Accepted Answer

Economists use the term "marginal revenue" to describe the money received from the sale of an additional unit of a product. In this case, the additional unit being sold is a ream of printer paper, and the price is fixed at $4.50 per ream. Therefore, the marginal revenue for each additional ream sold would also be $4.50.

Question 19

In 2017, President Trump considered imposing a tariff on automobiles assembled by U.S. manufacturers in Mexico that were to be sold in the United States. If this tariff was imposed and as a result, some of these manufacturers moved their automobile assembly from Mexico back to the United States, these firms would be reacting to which of the three key economic ideas?
A) Firms attempt to maximize revenues.
B) Optimal decisions are made at the margin.
C) People are rational.
D) People respond to economic incentives.

Accepted Answer

If these manufacturers moved their automobile assembly back to the United States, it would be because of the economic incentive created by the tariff. This aligns with the idea that people respond to economic incentives, making D the correct option.

Question 20

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that
A) people without health insurance will be less likely to be overweight than people with health insurance.
B) people without health insurance will be more likely to be overweight than people with health insurance.
C) people without health insurance will be equally likely to be overweight as people with health insurance.
D) there is no correlation between not having health insurance and being overweight.

Accepted Answer

Holding other personal characteristics constant, economists might expect that people without health insurance will be less likely to be overweight than those with health insurance because individuals without health insurance may have less access to healthcare services, including preventive care and counseling on diet and exercise, which could contribute to better weight management. Additionally, the financial burden of healthcare costs without insurance may incentivize healthier behaviors to avoid medical expenses.

Quiz 1: Economics: Foundations and Models

Economists assume that

What is an economic model?

The study of economics arises due to

The basic economic problem of scarcity

The term "market" in economics refers to

Your roommate, Serafina, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment?

Economics is the study of the people make to attain their goals, given their resources.

Scarcity refers to the situation in which

Which of the following best describes an assumption economists make about human behavior?

What does the term "marginal" mean in economics?

Economists assume that rational people

Economics promotes which of the following as the way to make the best decision?

According to the Centers for Disease Control and Prevention, ________ in 2015 in which less than 20 percent of the population was considered obese.

An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper?

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that