Chapter 1
At a price of $0.50, how many more or fewer cups of lemonade do Caroline and Emily sell when the temperature is 60 degrees than when the temperature is 80 degrees?
-10
Suppose there are three activities in which you could participate: 1. The opportunity cost of the first activity is missing 3 hours of work. 2. The opportunity cost of the second activity is missing a concert that you have tickets to. 3. The opportunity cost of the third activity is missing the afternoon nap that you take every day. Given this information, for which of these activities would you be able to compare opportunity costs? A. You can compare all the activities after you translate all the missed activities into dollar amounts. This is the correct answer. B. You can only compare activities 1 and 2, since they can both be easily stated in terms of dollars forgone. C. You can only compare activities 1 and 3, since they both relate to an amount of time that is lost. Your answer is not correct. D. You cannot compare any of these opportunity costs, since they each are measured in different units.
A
Suppose your friend makes each of the following statements. She might simply have a dour disposition, or she might be an economist! Explain briefly how she has come to each conclusion, and try to use the concepts of optimization and equilibrium. Statement 1: "There is no use moving to that shorter line." Which of these statements is related to optimization, and which is related to equilibrium? Statement 1 deals with ____________. A. equilibrium, because your friend presumes everyone is behaving optimally and the shorter line is slower. Your answer is correct. B. equilibrium, because it is a prediction rather than an observation. C. equilibrium, because your friend's statement can be tested using data. D. optimization, because you will need this information to identify your best feasible option.
A
Suppose your friend makes each of the following statements. She might simply have a dour disposition, or she might be an economist! Explain briefly how she has come to each conclusion, and try to use the concepts of optimization and equilibrium. Statement 3: "Do not actively trade stocks since it is impossible to predict whether the price will go up or down tomorrow." Statement 3 deals with ____________. A. empiricism, because it describes behavior using real-world data. This is the correct answer. B. empiricism, because it illustrates people optimizing using cost-benefit analysis. C. optimization, because it predicts how people's behavior will change. D. empiricism, because it evaluates whether people maximize their well-being.
A
Which of the following is more susceptible to the free-rider problem: state parks or city−wide pest control? A. Use of city−wide pest control is more susceptible since even those who don't pay taxes still benefit, while state parks can charge for admission, so that everyone who goes pays their share. Your answer is correct. B. State parks, since admission cannot be denied to anyone so everyone benefits, while city−wide pest control only benefit a small number of people at any given time. C. Both are equally susceptible to the free-rider problem. D. Neither are susceptible to the free-rider problem
A
All of the following are examples of empiricism except: A. analyzing theories about equilibrium. B. predicting human behavior. Your answer is correct. C. determining causation. D. analyzing theories about optimization.
B
In which of the following examples is prescriptive economic analysis necessary? A. Higher interest rates will reduce home prices. B. Jay chooses to go to Europe rather than China because of the huge discounts. This is the correct answer. C. If the government raises the tax on beer, this will lead to a fall in profits of the brewers. D. The government is right to introduce a ban on smoking in public places.
B
Suppose a total of 2,500 students are allowed in the engineering programs at all of the colleges in a particular city. From the previous three years' record, it shows that the number of students who enroll in the entrance exam for the engineering program increases if there is an increase in the number of IT recruiters the previous year.This year there is a total of 3,200 students who have enrolled to take the entrance exam of which only up to 2,500 of those who passed would get in. Based on either the students' perspective or the college perspective, what combination of economic key concepts does the situation follow? A. Optimization and empiricism B. Optimization, equilibrium, and empiricism Your answer is correct. C. Equilibrium and empiricism D. Optimization and equilibrium
B
Which of the following statements about the principles of economics is false? A. Based on the sales of last three years, a shopkeeper infers that the higher the discount offered on goods the higher will be its demand. This is an example of empiricism. B. An investor selecting and investing in a stock or a combination of stocks that always earns him 15% returns on his investment is an example of optimization. Your answer is correct. C. Five mobile operators selling mobile phones at the same price in a city is an example of equilibrium. D. A chess player selecting his best moves to win the chess tournament is an example of optimization.
B
Which of the following statements is true? A. Empiricism is not an integral part of optimization analysis. B. Data help establish whether theories match reality. Your answer is correct. C. Empiricism refers to the testing of ideas without using data. D. Data are not an integral part of optimization analysis.
B
Which of the following does not support the concept of an economic agent? (Check all that apply.) A. They make decisions by solving choice problems. B. Their decisions do not have an effect on the economy of a country. Your answer is correct. C. Groups are considered as a single decision maker. D. All economic agents are individuals.
B and D
Since the inputs used to produce goods are scarce, the total amount produced of most goods is ____ the amount that consumers would like to buy. To allocate the goods produced to the people who value them the most, we use ____
Below The price mechanism
Suppose your friend makes each of the following statements. She might simply have a dour disposition, or she might be an economist! Explain briefly how she has come to each conclusion, and try to use the concepts of optimization and equilibrium. Statement 2: "Do not bother trying to switch lanes during a traffic jam." Statement 2 deals with ____________. A. optimization, because other fans are maximizing their well-being. B. equilibrium, because other fans may change their behavior. C. optimization, because you are choosing your best feasible option. Your answer is correct. D. empiricism, because you believe you know what the other fans will do.
C
Which of the following statements is true of optimization? A. Economic agents can optimize only when they are able to perfectly estimate all future costs and benefits. B. Individuals who optimize do not consider costs when choosing the most feasible alternative. C. Economic agents who optimize attempt to choose the best feasible option, given the information that they have. Your answer is correct. D. Optimization analysis only relates to the financial budget of an economic agent.
C
Which of the following statements is true? A. A worker who shirks work is not an economic agent. B. A street gang is not an economic agent. C. A government is an example of an economic agent. Your answer is correct. D. All economic agents are necessarily individuals.
C
Which of the following cases can create a free-rider problem? (Check all that apply.) A. Use of a personal television by the owner. Your answer is not correct. B. Opening a savings account in a bank. Your answer is not correct. C. Use of public parks by locals. Your answer is correct. D. The street light on the road.
C and D
Which of the following statements explain positive economics? (Check all that apply.) A. It is not factual. B. It depends upon value judgements. Your answer is not correct. C. It can be rejected or amended depending on the evidence available. Your answer is correct. D. The predictions are testable.
C and D
For most people, one of the biggest challenges involved in studying economics is: A. it focuses solely on the financial side of everything. B. it has no real life application. C. it ignores human actions and motivations. D. it looks beyond simple cause and effect to the many possible long term effects of an action.
D
Which of the following best describes equilibrium? A. A situation where economic agents do not optimize as they do not have perfect information B. A situation where the government intervenes to allocate resources C. A situation where only one individual or firm makes an optimal decision D. A situation where no economic agent would benefit by changing his or her behavior
D
Which of the following is subject to the free-rider problem? A. Public libraries. B. National security. C. A neighborhood watch. D. All of the above
D
Which of the following statements is true? A. Economics is concerned with money, not choices. B. Economics does not provide insights into human behavior. C. Economic reasoning tends to reduce the quality of decision making. D. Economics can be used to predict people's actions.
D
Which of the following would be considered a scarce resource for producers? A. Low−skill labor. B. Natural resources for production. C. Equipment and tools. D. All of the above.
D
Which of the following would not be considered one of the possible opportunity costs of a recent high school graduate starting college right away. A. Getting a full−time job. B. Spending a year backpacking across Europe. C. Using your college fund to buy a new car.. D. None of these would be considered an opportunity cost. E. All of these is a possible opportunity cost.
E
Each member in a group might do what's best for himself or herself instead of behaving in a way that optimizes the well−being of the entire group. This gives rise to the problem of ________.
Free Riding
Free riding occurs when ____ are out of sync with ____
People's private benefits The public interest
Mason and Jack are neighbors. Mason wants to buy a new outdoor grill so he can barbecue. Mason has two options, a charcoal grill or a gas grill. By using ____ , he chooses to buy a gas grill. Mason knows that Jack would borrow his grill withoutasking; therefore, decides to use ____ in order to prevent his neighbor Jack from becoming a free-rider.
Prescriptive economic analysis Equilibrium analysis
A shortage is the amount by which the ____ exceeds the ____
Quantity demanded Quantity supplied
The concept of opportunity cost is a measure of ____
The value of the best alternative use of a resource
