Deck 1: Exploring Economics

Question 1

The opportunity cost of undertaking an activity is defined as the _____ activity.

A) cost forgone by not undertaking another
B) monetary cost of undertaking that
C) benefit forgone by not undertaking the next best
D) monetary benefit of undertaking that

Answer 1

benefit forgone by not undertaking the next best

Question 2

The highest valued alternative that is forgone when you choose an action is called its

A) opportunity cost.
B) utility.
C) scarcity.
D) benefit.

Answer 2

opportunity cost.

Question 3

(Figure: Graph Examples) Which graph is an example of a bar chart?

A) graph A
B) graph B
C) graph C
D) graph D

Answer 3

graph D

Question 4

Which statement is NOT considered a key principle of economics?

A) Scarcity exists for everyone.
B) People face economic incentives on a regular basis.
C) Irrational behavior requires thinking at the margin.
D) Information is important to producers and consumers.

Question 5

Stylized economic models must include

A) assumptions.
B) inflation.
C) money.
D) complexity.

Question 6

Microeconomics is concerned with issues such as

A) inflation.
B) unemployment.
C) which job to take.
D) interest rates.

Question 7

Production efficiency occurs when goods are

A) produced with the lowest possible resource cost.
B) allocated equally to those who paid the most for them.
C) delivered to those who have the greatest willingness and ability to acquire them.
D) allocated to those with the greatest need.

Question 8

Time series graphs

A) show data that can be split into percentages that, when combined, make up the whole.
B) show the relative importance of some variable's components as a share of the whole.
C) include the value of a variable on the horizontal axis and minutes, hours, days, months, quarters, or years on the vertical axis.
D) include the value of a variable on the vertical axis and minutes, hours, days, months, quarters, or years on the horizontal axis.

Question 9

Opportunity cost involves nonmonetary costs rather than monetary costs.

Question 10

Which statement about economic models is FALSE?

A) In practice, it is easy for an economist to isolate economic variables.
B) Economists hold all other variables constant in order to see the impact of one particular variable.
C) Economic models lead to economic theories that must be tested.
D) Economic models are built using assumptions.

Question 11

A society that is able to produce goods and services at the lowest possible cost is experiencing

A) allocative efficiency.
B) production efficiency.
C) opportunity costs.
D) scarcity.

Question 12

Which concept would be addressed by microeconomics?

A) the national unemployment rate
B) the reasons for a decline in a country's total output
C) the price of college tuition that an individual student pays
D) the inflation rate in Brazil

Question 13

Suppose Mike has three hours of time to spend so he ranks the following activities in order of priority: (1) see a movie, (2) attend a ball game, (3) study economics. Assume that each activity takes three hours. What is Mike's opportunity cost of seeing a movie?

A) attending a ball game and studying economics
B) studying economics
C) attending a ball game
D) either attending a ball game or studying economics

Question 14

Setting government policy to achieve economic goals is challenging because policies that tend to reduce unemployment are likely to

A) reduce economic growth.
B) cause upward pressure on inflation.
C) be completely ineffective in the short run.
D) reduce inflation to nearly zero.

Question 15

Economists like to use graphs and equations primarily because

A) these tools efficiently express economic concepts.
B) economics should be difficult.
C) mathematical aptitude is necessary to understand economics.
D) the use of mathematics reduces rigor.

Question 16

When economists say that all societies face scarcity, they are describing

A) free lunches.
B) unlimited resources.
C) unlimited wants.
D) tradeoffs societies must make.

Question 17

Economic problems are analyzed using stylized models that are

A) as detailed as possible.
B) based on recent case studies.
C) very complex and mathematical.
D) simplified by using assumptions.

Question 18

Ceteris paribus means

A) everything changes.
B) everything is held constant.
C) other things being equal.
D) nothing changes.

Question 19

When two variables appear to be related according to a scatter plot, one must be causing the other to occur.

Question 20

Economists believe that

A) making information available to market participants improves market function.
B) information should be sold to the highest bidder.
C) the flow of information has minimal impact on market efficiency.
D) data is more important to traders than information.

Question 21

Which statement is NOT a key principle of economics?

A) People follow incentives.
B) Productivity determines the standard of living.
C) Rational thinking requires perfect information.
D) Government can sometimes correct market failure.

Question 22

Which statement is NOT true?

A) There are often tradeoffs between efficiency and equity.
B) Both efficiency and equity are subjective concepts.
C) There are often disagreements over what is an equitable distribution of income.
D) Another term for "equity" is "fairness."

Question 23

Heather has one employee in her sweater shop who can sew 6 sweaters a day. When she hires a second person, the two employees can make 10 sweaters together. Thinking at the margin, the extra benefit received from hiring a second worker is _____ sweaters.

A) 4
B) 6
C) 10
D) 16

Question 24

John, a farmer, thinks he will make a profit next year if the weather stays the same, if the price of his crop doesn't change, and if the price of fertilizer and seed does not change. An economist would say that this farmer thinking he will make a profit the following year is an example of

A) laissez-faire.
B) ceteris paribus.
C) post hoc ergo propter hoc.
D) e pluribus unum.

Question 25

Which statement is NOT true of economic model building?

A) There may be exceptions to economic models.
B) Adding more complexity to models does not always provide greater insights.
C) Economic models always reach verifiable results.
D) Economic models provide generalizations about economic behavior.

Question 26

Economists look for rational responses to incentives.

Question 27

When specialization is used

A) society is more productive, while individuals are less productive.
B) there are greater gains in overall well-being.
C) there is more emphasis on self-reliance.
D) opportunity costs tend to be constant.

Question 28

The opportunity costs of attending college do NOT include

A) food expenditures.
B) the costs of textbooks or eBooks.
C) the forgone wages that could have been earned working.
D) required student activity fees.

Question 29

For a nation, _____ productivity growth leads to _____ standards of living.

A) high; low
B) low; high
C) high; unchanging
D) high; high

Question 30

In the equation S = 130 - 2T, where S is hot chocolate sales and T is temperature, the slope is

A) -65.
B) -2.
C) 2.
D) 130.

Question 31

The government can always successfully intervene in the case of market failure.

Question 32

Macroeconomics deals with aggregate variables, and microeconomics deals with individual issues.

Question 33

Which statement does NOT involve thinking at the margin?

A) If John works another hour, he will beat the rush hour traffic.
B) Sally worked eight hours today.
C) Dylan's supervisor asked him to work an extra four hours this week.
D) If Jill works on her day off, she will make an additional $300.

Question 34

Scarcity occurs when an individual's resources exceed his wants.

Question 35

Which paired variables might indicate a correlation but NOT causation?

A) advertising expenditures and sales
B) snowfall amounts and stock market performance
C) age and health care expenditures
D) grade point average and future income

Question 36

The idea that wants are virtually unlimited but the resources to meet those wants are limited is called

A) the want-resource paradox.
B) the economic gap.
C) the dismal conclusion.
D) scarcity.

Question 37

Supply and demand analysis is used

A) only in microeconomics.
B) only in macroeconomics.
C) in both microeconomics and macroeconomics.
D) in neither microeconomics nor macroeconomics.

Question 38

Normative questions involve societal beliefs on what should or should not be done.

Question 39

Which topic is a macroeconomic topic?

A) the study of the business cycle
B) price of a pair of Nike shoes
C) total sales for General Electric in 2009
D) labor market for computer analysts

Question 40

Marginal analysis is defined as when a person continues to make a decision until the value of the outcome is zero.

Question 41

What would be a possible opportunity cost of a person going to a doctor for a check-up?

A) the cost of getting nontraditional care
B) the opportunity to make an acquaintance in the waiting room
C) lost income due to not being at work for those hours
D) the cost of the insurance reimbursing the doctor

Question 42

Rational behavior requires thinking at the margin. Which example represents this type of thinking?

A) deciding whether a second burger is worth the extra $2
B) deciding whether the overtime pay is worth working on your day off
C) deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery
D) All of these examples represent thinking at the margin.

Question 43

Employers give stock options to full-time employees who have been on the job more than three years. This is an example of

A) people following incentives.
B) thinking on the margin.
C) irrational behavior.
D) opportunity costs.

Question 44

Admission prices to Dollywood are $50 for a one-day ticket, $80 for a two-day ticket, and $100 for an annual pass. Based on these prices, the marginal cost of visiting Dollywood the second day is _____, the third day is _____, and the fourth day is _____.

A) $30; $20; $0
B) $30; $10; $10
C) $40; $33.33; $25
D) $80; $100; $100

Question 45

Much of economic analysis is directed toward ensuring an efficient allocation of resources.

Question 46

(Figure: Graph Examples) Which graph is an example of a scatter plot?

A) graph A
B) graph B
C) graph C
D) graph D

Question 47

(Figure: Sales and Advertising) The graph shows the advertising expenditures and the resulting sales (in bottles) of a new caffeinated beverage called Jump. If consumer tastes change in the region where Jump is marketed and base sales increase by 1,500 bottles, what is the equation of the shifted line?

A) sales = 1,500 + 2 × advertising
B) sales = 3,000 + 2 × advertising
C) sales = 3,000 + 1,502 × advertising
D) sales = 4,500 + 2 × advertising

Question 48

A nation's standard of living is primarily a function of

A) natural resource availability.
B) government benefits.
C) national defense.
D) productivity.

Question 49

A national health care system is an example of an institution that influences the wealth of nations.

Question 50

Consider the equation Y = e + fX. Which letter represents the intercept?

A) e
B) f
C) X
D) Y

Question 51

The _____ the opportunity cost of an activity, the _____ a person will do that activity.

A) higher; more
B) higher; less
C) lower; less
D) It doesn't matter. Price alone will determine the action.

Question 52

The question "How do interest rates influence employment?" is an example of a normative question.

Question 53

The height of the bars in a bar chart may depict the number of data points in each category.

Question 54

Excessive pollution is an example of market failure.

Question 55

Assume that a student attends a four-year college with tuition costs of $20,000 per year; room and board costs of $5,000 per year; and books/entertainment costs of $1,000 per year. If the student did not go to college, she would work at a job that pays $25,000 per year but still face the same room and board, as well as entertainment expenses. The opportunity cost of attending college for this student for four years is

A) $80,000.
B) $100,000.
C) $124,000.
D) $180,000.

Question 56

Which statement is a characteristic of economic models?

A) Models try to boil down an economic situation to its most basic elements.
B) Models are always complex because the economy is complex.
C) Models attempt to reproduce reality exactly.
D) Models try to avoid invoking the ceteris paribus assumption.

Question 57

Which statement about economic models is TRUE?

A) In practice, it is easy for an economist to isolate economic variables.
B) Economists hold all other variables constant in order to see the impact of one particular variable.
C) To be useful, an economic model must include every detail possible and not be an abstraction.
D) Complex models are always better than simple ones.

Question 58

The problem of the medically uninsured involves

A) opportunity cost.
B) equity.
C) production efficiency.
D) allocative efficiency.

Question 59

If a restaurant that traditionally has served only lunch and dinner wants to open for breakfast, which factor should be considered?

A) rent
B) furniture
C) cost of the additional food
D) insurance costs

Question 60

There are no instances where efficient solutions to problems conflict with equity issues.

Question 61

In the equation S = 130 - 2T, where S is hot chocolate sales and T is temperature, sales _____ if temperature falls by 5 degrees.

A) decrease by 2
B) decrease by 10
C) increase by 2
D) increase by 10

Question 62

Which is the BEST example of a microeconomic issue?

A) The Federal Reserve will raise interest rates this week.
B) The unemployment rate will exceed 6% this month.
C) The country's price level has increased over the last quarter.
D) The production of automobiles decreased last year.

Question 63

People use _____ to determine how many hours to work, and businesses use _____ to determine how much of their product they are willing to supply to the market.

A) marginal analysis; marginal analysis
B) allocative efficiency; production efficiency
C) production efficiency; marginal analysis
D) marginal analysis; allocative efficiency

Question 64

In the equation Y = b - aX, a is the intercept.

Question 65

The purpose of invoking ceteris paribus is to

A) simplify the analysis being done.
B) make the economic model more realistic.
C) allow the model to take more complexity into account.
D) introduce risk into the model.

Question 66

Correlation between two variables is not enough evidence to suggest that a causal relationship exists between the two variables.

Question 67

Government intervention in the market is helpful when

A) consumers are free to buy from a number of different firms.
B) consumers and firms have good information.
C) firms face increasing competition from new entrants into the market.
D) firms engage in production activities that pollute the air and water.

Question 68

Questions that involve the understanding of basic facts are _____ questions.

A) positive
B) subjective
C) evaluative
D) normative

Question 69

Which statement is CORRECT?

A) "Correlation" and "causation" are synonyms.
B) Shortly after a new president takes office, the unemployment rate goes down. One must conclude that the new president's economic policies are responsible for the economic upturn.
C) The fact that two variables are correlated with each other does not mean that one causes the other.
D) If two variables move together, then they are causally related.

Question 70

To be useful, an economic model must include every detail possible and not be an abstraction.

Question 71

(Figure: Graph Examples) Which graph is an example of a pie chart?

A) graph A
B) graph B
C) graph C
D) graph D

Question 72

The answers to normative questions

A) are the same for all societies and cultures.
B) can be answered one way or another as long as the relevant information is available.
C) involve understanding basic facts.
D) often involve value judgments.

Question 73

Government policy to achieve high employment may cause inflation to rise too quickly.

Question 74

Consider the equation Y = e + fX. Which letter represents the slope?

A) e
B) f
C) X
D) Y

Question 75

Macroeconomics is concerned about the broader issues in the economy, such as inflation, unemployment, and national output of goods and services.

Question 76

(Figure: Crop Yield and Fertilizer) The graph shows a hypothetical relationship between tons of fertilizer used and crop yields. Which statement is NOT correct?

A) The slope of the curve between 1 and 2 tons of fertilizer is approximately 2.
B) The relationship between fertilizer usage and yield is nonlinear.
C) Because the relationship is nonlinear, it is difficult to create an economic model describing the relationship between the two variables.
D) Using more than 3 tons of fertilizer has minimal effect on yield.

Question 77

Most economists agree that there is no legitimate role for government to play in the economy.

Question 78

In the equation Y = e + fX, _____ is the independent variable and _____ is the slope.

A) Y; e
B) Y; f
C) X; e
D) X; f

Question 79

Macroeconomics studies the outcomes of individual markets in the national economy.

Question 80

A store sells one candy bar for $0.89 and two candy bars for $1.50. The marginal cost of the second candy bar is $0.75.