Question 1

The revenue received from the sale of an additional unit of a product
A) is a marginal benefit to the firm.
B) is called profit.
C) is called gross sales.
D) is called a net gain.

Accepted Answer

The revenue received from the sale of an additional unit of a product is the marginal benefit to the firm. Marginal benefit refers to the additional benefit that a firm receives by producing one more unit of output.

Question 2

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 the police recommended the installation of bandit barriers to deter robberies and were surprised when Commerce Bank did not take their advice. The passage also notes that Commerce Bank was advised by the police to take steps to deter robberies, but they did not follow their advice. Therefore, it can be inferred that the bank weighed the cost of the installation of bandit barriers against the benefits and decided that there are no benefits in installing them.

Question 3

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 emphasizes the concept of marginal analysis, which involves comparing the marginal benefit (additional benefit received from an additional unit) and the marginal cost (additional cost incurred from an additional unit) of a decision. The optimal decision is made when the marginal benefit is equal to the marginal cost, also known as the "optimal point." Therefore, choice D is the best option as it promotes the use of marginal analysis to make the best decision.

Question 4

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 the group of buyers and sellers of a product and the arrangement by which they come together to trade. It does not necessarily have to occur in a physical place or be limited to legal institutions. It can take on various forms such as online markets or black markets. A and D are too narrow in their definitions, while B is not broad enough.

Question 5

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

Rational people are assumed to respond to economic incentives. This means they make decisions based on the costs and benefits of their actions and choose the option that maximizes their personal gain.

Question 6

________ involves undertaking an activity until its marginal benefits equal marginal costs.
A) Scarcity reduction
B) Central planning
C) Marginal analysis
D) Market intervention

Accepted Answer

Marginal analysis involves comparing the marginal benefits and marginal costs of an activity in order to determine the optimal level of that activity. This is done by continuing the activity until the marginal benefit is equal to the marginal cost, which ensures that no additional benefit can be gained by continuing the activity.

Question 7

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

The basic economic problem of scarcity refers to the idea that resources are limited and cannot meet all human wants and needs. This problem has always existed and will continue to do so, as there will always be scarcity of something, no matter how much technology improves or how wealthy a society becomes.

Question 8

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. For example, marginal cost is the cost of producing one additional unit of a good or service.

Question 9

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.

Question 10

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 occurs when there are unlimited wants (needs and desires) for goods and services, but the resources available to produce those goods and services are limited. It is the fundamental economic problem facing societies, businesses, and individuals, and requires choices to be made about how to allocate resources efficiently. None of the other options accurately describe the concept of scarcity.

Question 11

Before a doctor decides to keep her office open on Saturdays, she should
A) make sure that the marginal cost of doing so will exceed the marginal benefit.
B) only consider the increase in total profit from doing so.
C) weigh the costs and benefits of staying open on Saturdays before deciding if she should go through with this idea.
D) only look at the marginal benefit of doing so, because marginal cost will not change.

Accepted Answer

The doctor should weigh the costs and benefits of staying open on Saturdays before making a decision. This means considering both the marginal costs and the marginal benefits of keeping the office open on Saturdays. Simply looking at the increase in total profit or only considering the marginal benefit without factoring in the marginal cost would not provide a comprehensive analysis of the situation.

Question 12

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 may not always behave rationally, but rational behavior is still useful in explaining the choices people make. This means that while people may sometimes make choices that do not seem rational, economists still rely on the assumption of rational behavior as a baseline for understanding human decision-making.

Question 13

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

Economics assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits. This assumption does not imply that all decisions made by consumers and firms are correct or optimal, but rather that they are rational in the sense that they reflect the best available information and preferences of the agents at the time of decision-making. While it is true that everyone makes mistakes, economics assumes that these mistakes are random and cancel each other out in the aggregate, allowing for reliable predictions about economic behavior.

Question 14

According to the Centers for Disease Control and Prevention, ________ in 2013 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 15

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

Marginal revenue is the additional revenue earned from the sale of one additional unit of a good or service. In this case, the sale of an additional ream of paper would generate a marginal revenue of $4.50.

Question 16

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

The assumption that optimal decisions are made at the margin is a foundational principle in economics. This means that individuals weigh the costs and benefits of small changes or increments in their decisions, rather than making drastic or all-or-nothing choices. A, B, and C are not accurate assumptions made by economists.

Question 17

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 related information or based solely on official government information.

Question 18

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 all about making choices. It is the study of how individuals, businesses, governments, and societies make choices about how to allocate scarce resources. Therefore, the best choice is B, as it directly addresses the concept of scarce resources.

Question 19

Consider the following statements: a. Consumers rent more DVDs from a video store that rents DVDs at a lower price than other rival video stores in the area.
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

All three statements show that economic agents respond to incentives. Statement A shows that consumers respond to the incentive of a lower price for renting DVDs. Statement B shows that department stores respond to the incentive to reduce the costs of shoplifting by investing in security equipment. Statement C shows that farmers respond to the incentive of higher profits by producing more cotton even when the selling price falls.

Question 20

The cost incurred from the production of an additional unit of a product
A) is a marginal cost to the firm.
B) is called a loss.
C) is called opportunity cost.
D) must be zero for a firm to be efficient.

Accepted Answer

The cost incurred from the production of an additional unit of a product is known as marginal cost. It is important for firms to consider the marginal cost when making production decisions in order to maximize profits.

Quiz 1: Economics: Foundations and Models

The revenue received from the sale of an additional unit of a product

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

The term "market" in economics refers to

Economists assume that rational people

________ involves undertaking an activity until its marginal benefits equal marginal costs.

The basic economic problem of scarcity

What does the term "marginal" mean in economics?

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

Scarcity refers to the situation in which

Before a doctor decides to keep her office open on Saturdays, she should

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

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?

According to the Centers for Disease Control and Prevention, ________ in 2013 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?

Economists assume that

What is an economic model?

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

The cost incurred from the production of an additional unit of a product