economics 202

Which of the following statements is true? A. Every individual, no matter how rich or poor, is faced with situations that require trade-offs. B. Any time you have to decide which action to take you are experiencing economic equity. C. Economics is a social science that studies the trade-offs we are forced to make because resources are unlimited. D. Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as with a stock clearance sale.

A. Every individual, no matter how rich or poor, is faced with situations that require trade-offs.

You have an hour between your economics and math classes. What is the opportunity cost of that time if you use it to do math homework? A. It depends on what you would do if you had no math homework. B. It depends on how much you like math. C. zero, because an hour isn't long enough to go to a paying job D. zero, because it doesn't cost any money to do your math homework

A. It depends on what you would do if you had no math homework.

According to the U.S. Labor Department (BLS), the consumer price index (CPI) rose 7.5 percent compared with a year ago. Assume the 7.5 percent rate of inflation persists. Approximately how long will it take for the CPI to double? A. Less than a decade. B. A decade. C. More than a decade. D. More than a decade, but closer to a century.

A. Less than a decade.

Which of the following is a normative economic statement? A. The price of gasoline is too high. B. The current high price of gasoline is the result of strong worldwide demand. C. When the price of gasoline rises, the quantity of gasoline purchased falls. D. When the price of gasoline rises, transportation costs rise.

A. The price of gasoline is too high.

Which of the following is a factor of production? A. an oven in a bakery B. a share of General Motors' stock C. a credit card D. a $500 Treasury bond

A. an oven in a bakery

Economists employ economic models A. because reality is complex. B. to make the field more scientific. C. to make reality more complex. D. because economic theory is too easy without them.

A. because reality is complex.

Timothy O'Toole's Pub, a Chicago sports bar, has seen its business slow down ever since FTW, a Chicago bar and entertainment space (e.g., mini golf course), opened nearby. Since the opening of FTW, how has the opportunity cost of going to Timothy O'Toole's changed for the pub's customers who also like to play games? A. increased B. decreased C. not changed D. fallen to zero

A. increased

An unemployed individual decides to spend the day at the Art Institute of Chicago. If the museum were closed, they would go to the Lincoln Park Zoo. If the zoo were also closed they would stay home and watch Netflix. Assume the time and effort to reach the museum or zoo is the same. The opportunity cost of going to and enjoying the Art Institute is A. the cost of admission, any other monetary expenses (e.g., food), and the value of visiting the Lincoln Park Zoo. B. zero. C. the cost of admission and any other monetary expenses (e.g., food). D. the cost of admission, any other monetary expenses (e.g., food), and the value of the individual's wages while they were working (e.g., $18 per hour).

A. the cost of admission, any other monetary expenses (e.g., food), and the value of visiting the Lincoln Park Zoo.

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then A. the dollar has depreciated. B. the dollar has appreciated. C. the British pound has depreciated. D. the British pound has stayed constant in value.

A. the dollar has depreciated.

Which of the following is not an example of a transfer payment? A. unemployment insurance payments B. health insurance payments to an army private C. social security payments to retirees D. social security payments to disabled persons

B. health insurance payments to an army private

At the beginning of the Spring 2022 semester you ordered a used textbook from Amazon.com's Marketplace for $8.50 with $3.99 shipping and handling. Given only this information, ceteris paribus, what is the dollar amount change in 2022 nominal GDP associated with your purchase? A. $0. B. $3.99. C. $8.50. D. $12.49.

B. $3.99.

You're traveling in Ireland and are thinking about buying a new digital camera. You've decided you'd be willing to pay $125 for a new camera, but cameras in Ireland are all priced in euros. If the exchange rate is 0.85 euros per dollar, what's the highest price in euros you'd be willing to pay for a camera? A. 105 euros B. 106.25 euros C. 110.15 euros D. 147 euros

B. 106.25 euros

The U.S. inflation rate went from 1.4% in 2020 to 7% in 2021. What is the percentage point change? A. 4 percentage points. B. 5.6 percentage points. C. 8.4 percentage points. D. 400 percentage points.

B. 5.6 percentage points.

One day Mao Zedong (Chinese communist revolutionary who became the founding father of the People's Republic of China, ruling as the Chairman of the Communist Party of China from its establishment in 1949 until his death in 1976.) saw a sparrow eating grain. Believing sparrows were hurting China's grain supply, he and the Communist Party launched the "Four Pests Campaign". The Chinese military and population killed every sparrow they could find. Unfortunately for the Chinese, sparrows mainly eat insects, not grain. The locust population exploded and approximately 43 million people starved to death. What general economic concept does the story above represent? A. Optimal decisions are made at the margin. B. A law or policy may be implemented with the best intentions to help, but if there are secondary effects, things could end up being worse-off. C. People (e.g., leaders) are rational. D. People (e.g., leaders) respond to economic incentives.

B. A law or policy may be implemented with the best intentions to help, but if there are secondary effects, things could end up being worse-off.

If China decides to enact laws to clean up the environment, what would be the effect on GDP? A. GDP would increase reflecting the fact that the environment would be cleaner. B. GDP would decrease if the pollution controls reduce productivity by more than the cost of the controls. C. GDP would increase as the citizens of China were made happier as the environment was cleaned up. D. GDP would increase as the environmental costs of pollution were not included in the calculation of GDP

B. GDP would decrease if the pollution controls reduce productivity by more than the cost of the controls.

Which of the following is a positive economic statement? A. The standard of living in the United States should be higher. B. If the price of iPhones falls, a larger quantity of iPhones will be purchased. C. The government should revamp the health care system. D. The U.S. government should not have bailed out U.S. auto manufacturers.

B. If the price of iPhones falls, a larger quantity of iPhones will be purchased.

Which of the following statements about the economic decisions consumers, firms, and the government have to make is false? A. Governments face the problem of scarcity in making economic decisions. B. Only individuals face scarcity; firms and the government do not. C. Both firms and individuals face scarcity. D. Each faces the problem of scarcity which necessitates trade-offs in making economic

B. Only individuals face scarcity; firms and the government do not.

Soo Jin shares a one-bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics student, you rightly conclude that A. Soo Jin did not have a choice; her roommate was a slob. B. Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250. C. Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $950. D. the cost of having one's own space outweighs the benefits.

B. Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250.

In October 2018 and March 2019 two Boeing 737 Max airplanes crashed. Many analysts and commentators are calling for Boeing to abandon the 737 MAX completely and design a replacement. It is estimated Boeing spent (at least) one billion dollars in specifically researching the 737 Max plane. As a consequence of the crashes, new orders (i.e., demand) for the jet are down significantly. Which of the following statements is correct? A. The one billion dollars Boeing invested must be considered, as this represents the marginal cost of production. B. The one billion dollars Boeing spent on the 737 Max does not matter. C. The one billion dollars Boeing invested must be considered, as this represents the opportunity cost of production. D. Boeing must decide if the one billion dollars has covered the costs of its production thus far.

B. The one billion dollars Boeing spent on the 737 Max does not matter.

The prevalence of Alzheimer's dementia is very high among residents living in nursing homes. A student concludes that it is likely that living in a nursing home causes Alzheimer's dementia. What is the flaw in the student's reasoning? A. The student is committing a fallacy of composition. B. The student is drawing a false conclusion by committing the association-is-causation fallacy. C. The student is using an inadequate sample size. D. The student is drawing a false conclusion by making the mistake of omitting variables such as the age and gender of the residents.

B. The student is drawing a false conclusion by committing the association-is-causation fallacy.

The three fundamental questions that any economy must address are: A. What will be the prices of goods and services; how will these goods and services be produced; and who will receive them? B. What goods and services to produce; how will these goods and services be produced; and who receives them? C. Who gets jobs; what wages do workers earn; and who owns what property? D. How much will be saved; what will be produced; and how can these goods and services be fairly distributed?

B. What goods and services to produce; how will these goods and services be produced; and who receives them?

The relationship between consumer spending and disposable personal income is A. an inverse relationship. B. a direct relationship. C. a negative relationship. D. independent.

B. a direct relationship.

Economists assume that rational behavior is useful in explaining choices people make A. because irrational people do not make economic choices. B. even though people may not behave rationally all the time. C. because individuals act rationally all the time in all circumstances. D. even though people rarely, if ever, behave in a rational manner.

B. even though people may not behave rationally all the time.

The output of Mexican citizens who work in Texas would be included in the A. gross domestic product of Mexico. B. gross national product of Mexico. C. gross national product of the United States. D. net national product of the United States.

B. gross national product of Mexico.

A sharp increase in the number of medical errors increases the number of lawyers hired to determine medical malpractice settlements. This will A. increase GDP and increase well-being in the economy. B. increase GDP and decrease well-being in the economy. C. decrease GDP and increase well-being in the economy. D. decrease GDP and decrease well-being in the economy.

B. increase GDP and decrease well-being in the economy.

Which of the following is an example of a consumption expenditure? A. the construction of a new public library B. the purchase of a ticket to a New Orleans Saints game C. the purchase of a new fire truck D. the salary paid to the mayor of Denver

B. the purchase of a ticket to a New Orleans Saints game

A successful market economy requires A. a government-controlled banking system and government price controls. B. well-defined property rights and an independent court system to adjudicate disputes based on the law. C. generous unemployment benefits and paid medical leave for everyone in the labor force. D. an equitable distribution of income and limits on immigration.

B. well-defined property rights and an independent court system to adjudicate disputes based on the law.

Suppose you are deciding whether to go to Loyola for eight weeks (two months) this summer (e.g. Summer Session C) to take a full-time course load for the summer. The cost of tuition and textbooks is $10,800 and housing and other expenses will cost you $900 per month. If you do not go to school, you will live in your parents' house for free and they will cover your food and other expenses. Also, if you do not go to summer school you could work full-time. The best job you can get that you are willing to accept pays $600 per week. Assume all else is equal; e.g., time. What is the opportunity cost of going to school this summer? A. $13,200 B. $12,600 C. $17,400 D. $10,800

C. $17,400

In 2021, Victory Toyota, an automobile dealership in Chicago, spent $24,000 on a new car lift for its repair shop, $2,200 on a new copy machine for its sales division, and $250,000 into a money market (savings) account. Unsold cars and trucks were valued at $600,000 on January 1, 2021 and unsold cars and trucks were valued at $750,000 on December 31, 2021. What is Victory Toyota's total investment spending in 2021? A. $24,000 B. $26,200 C. $176,200 D. $426,200

C. $176,200

Suppose you are deciding whether to go to Loyola for eight weeks (two months) this summer (e.g. Summer Session C) to take a full-time course load for the summer. The cost of tuition and textbooks is $10,800 and housing and other expenses will cost you $900 per month. If you do not go to school, you will live in your parents' house for free and they will cover your food and other expenses. Also, if you do not go to summer school you could work full-time. The best job you can get that you are willing to accept pays $600 per week. Assume all else is equal; e.g., time. What is the implicit cost of attending school? A. $0 B. $600 C. $4,800 D. $700

C. $4,800

Which of the following statements is false? A. An inverse relationship has a negative slope value. B. A direct relationship has a positive slope value. C. A curved line has slope values that change at every point. D. A straight line has a slope of zero.

D. A straight line has a slope of zero.

________ is a problem that occurs when one concludes that a change in variable X caused a change in variable Y when in actual fact, it is a change in variable Y that caused a change in variable X. A. Omitted variable bias B. The positive-to-negative relationship C. Reverse causality D. Nonlinear slope

C. Reverse causality

Which of the following goods is directly counted in GDP? A. the lettuce that Subway purchases for its sandwiches B. the bread that Subway purchases for its sandwiches C. a 12-inch Subway sandwich purchased by a student D. the plastic bags that Subway purchases to wrap its sandwiches

C. a 12-inch Subway sandwich purchased by a student

Arlene quits her $125,000-a-year job to take care of her ailing parents. What is the opportunity cost of her decision? A. zero, since she will no longer be earning a salary B. It depends on the "going rate" for home-care providers. C. at least $125,000 D. the value she attributes to the satisfaction she receives from taking care of her parents

C. at least $125,000

Which of the following is not a durable good? A. furniture B. automobile C. clothing D. refrigerator

C. clothing

According to the principle of diminishing returns, if the number of workers is increased beyond the point of diminishing returns, then the additional worker A. increases total output by the same amount as previous workers. B. increases total output by more than the amount of previous workers. C. increases total output by less than the amount of previous workers. D. decreases total output.

C. increases total output by less than the amount of previous workers.

If the quantity of goods and services produced in the economy decreases, A. it may be possible for real GDP to increase. B. real GDP would certainly increase. C. it may be possible for nominal GDP to increase. D. nominal GDP would certainly increase.

C. it may be possible for nominal GDP to increase.

Which of the following is NOT a component of private investment, for purposes of GDP accounting? A. newly produced housing B. additions to firms' stock of inventories C. purchases by firms of used machinery D. newly built factories

C. purchases by firms of used machinery

Which of the following is not an example of an economic trade-off that a firm has to face? A. whether it is cheaper to produce with more machines or with more workers B. whether it is to outsource the production of a good or service C. whether or not consumers will buy its products D. whether it should produce more of its product

C. whether or not consumers will buy its products

The nominal GDP of the U.S. in 2016 was approximately $18.6 trillion. This means that A. the value of output in 2016 was around $18.6 trillion. B. total income in 2016 was around $18.6 trillion. C. total spending in 2016 was around $18.6 trillion. D. All of the above are correct.

D. All of the above are correct.

If a consumer can buy four pizzas for $24 and five pizzas for $25, then the marginal cost of the fifth pizza is A. $25. B. $6. C. $5. D. $1.

D. $1.

Suppose you are deciding whether to go to Loyola for eight weeks (two months) this summer (e.g. Summer Session C) to take a full-time course load for the summer. The cost of tuition and textbooks is $10,800 and housing and other expenses will cost you $900 per month. If you do not go to school, you will live in your parents' house for free and they will cover your food and other expenses. Also, if you do not go to summer school you could work full-time. The best job you can get that you are willing to accept pays $600 per week. Assume all else is equal; e.g., time. What is the explicit cost of attending school? A. $900 B. $10,800 C. $1,800 D. $12,600

D. $12,600

An example of people acting in their own self-interest would include A. individuals joining a car pool to go to work when tolls are imposed on congested highways. B. an adult, returning to college to pursue a degree to qualify for a promotion at work. C. a teenager earns an A grade average in school in order to use her parents' car. D. All of the above are examples of people acting in their own self-interest.

D. All of the above are examples of people acting in their own self-interest.

Which of the following is an example of scarcity? A. If you choose to play video games, you will not have as much time for exercise. B. If a city uses an acre of land to build a park, there will be less land for houses. C. If I decide to buy a new car, I may not have enough money to go away on vacation this year. D. All of the above are examples of scarcity.

D. All of the above are examples of scarcity.

Nancy and Melissa both have broken light fixtures in their living rooms. Nancy opts to hire an electrician, while Melissa spends two hours replacing the fixture herself. Which of the following is a possible explanation of this behavior? A. Nancy dislikes electrical work more than Melissa. B. Melissa is better at doing electrical work than Nancy. C. The opportunity cost of Nancy's time is higher than her cost to hire an electrician. D. All of the above are possible explanations of this behavior.

D. All of the above are possible explanations of this behavior.

You earned $46,000 in 2011, and your salary rose to $58,000 in 2021. If the CPI rose from 225 to 270 between 2011 and 2021, which of the following is true? A. There was deflation between 2009 and 2018. B. The purchasing power of your salary fell between 2009 and 2018. C. The purchasing power of your salary remained constant between 2009 and 2018. D. The purchasing power of your salary increased between 2009 and 2018.

D. The purchasing power of your salary increased between 2009 and 2018.

Which of the following correctly describes the relationship between economic efficiency and economic equity? A. They are both automatically achieved in a free market economy. B. They always call for opposite outcomes. C. There is no conflict between the two goals. D. There is often a trade-off between the two.

D. There is often a trade-off between the two.

Consider the following statements: Which of the above statements demonstrates that economic agents respond to incentives? a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area. b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. c. Firms produce more of a particular product when its selling price rises. A. a only B. b only C. c only D. a, b, and c

D. a, b, and c

Gross domestic product understates the total production of final goods and services because of the omission of A. exports. B. inflation. C. intermediate goods. D. household production.

D. household production.

An NBA star basketball player signs a contract that pays $223 million over four years. The $223 million is the ________ value. A. real B. implicit C. external D. nominal

D. nominal