Exam 1: Economics Practice Test 1
. Although for smokers the marginal benefit from smoking may exceed the marginal cost of smoking, the negative effects of second-hand smoke may increase the marginal costs of smoking to society to a point where it exceeds that marginal benefit to society. This is an example of: A) individual actions whose side effects are not properly taken into account by the market. B) one party preventing mutually beneficial trades in an attempt to capture a greater share of resources for itself. C) some goods' unsuitability for efficient management by markets. D) regulating self-interest.
A
Gains from trade arise because of: A) specialization in production. B) specialization in consumption. C) marginal analysis. D) individual choice.
A
Marla will make $10 by tutoring for an additional hour, but she will lose an hour of studying for her economics test. Marla decides to study rather than tutor. Marla's choice indicates that she: A) values an additional hour of studying more than the $10 she would earn tutoring. B) values an hour of studying less than the $10 she would earn tutoring. C) does not understand that there is no benefit from studying. D) doesn't need the money
A
Whenever a choice is made: A) the cost of that choice is opportunity cost. B) the cost is easy to measure in dollar terms. C) efficiency is improved. D) scarcity is not the problem.
A
You decide to join the economics club, but this means you can't join the accounting club because it meets at the same time. This statement best represents this economic concept: A) The real cost of something is what you must give up to get it. B) "How much" is a decision at the margin. C) People usually exploit opportunities to make themselves better off. D) There are gains from trade.
A
Economists tend to believe that to change people's behavior you must: A) appeal to their concern for society. B) change their incentives. C) legislate the change. D) appeal to their religious values.
B
For an economist, the cost of something is: A) the amount of money you paid for it. B) what you gave up to get it. C) always equal to its market value. D) the quantity of resources used to produce it.
B
When a chef prepares a dinner for a customer, which of the following is physical capital? A) the chef B) the oven C) the food ingredients D) the chef's training and experience
B
When the San Francisco city manager faces a complaint that the city council chamber podium is not accessible to individuals with disabilities, he responds that the $1 million improvement will not happen because "that money could be spent building 70 curb ramps." This statement best represents this economic concept: A) Resources are scarce. B) The real cost of something is what you must give up to get it. C) "How much" is a decision at the margin. D) When markets don't achieve efficiency, government intervention can improve society's welfare
B
Which of the following is NOT one of the four principles for understanding individual choice? A) Resources are scarce. B) Overall spending sometimes gets out of line with the economy's productive capacity. C) "How much" is a decision at the margin. D) People usually take advantage of opportunities to make themselves better off.
B
Which of the following policies is MOST likely to reduce traffic congestion in a large metropolitan area because people usually exploit opportunities to make themselves better off? A) a limited number of free early-bird parking passes given only to those who arrive prior to 6 A.M. B) a toll road that requires each car to pay a fee to enter the city center C) an increase in the price of subway and bus fare to and from the city D) asking citizens to carpool
B
A choice made _____ is a choice whether to do a little more or a little less of something. A) at the front end B) in the beginning C) at the margin D) ceteris paribus
C
A new fast-food restaurant offered a free meal (valued at $5) a week for a year to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers. The cost of the free meal a week for a year for Ramona was: A) zero. B) $260. C) whatever else she would have done with the 48 hours. D) The cost is impossible to determine.
C
An economy is efficient when: A) the problem of scarcity is eliminated. B) output is distributed equitably. C) all opportunities to make some people better off without making other people worse off have been taken. D) all opportunities to make some people worse off without making other people better off have been taken.
C
Because people usually exploit opportunities to make themselves better off, if the price of gasoline rises and stays high for an extended period, we expect people to: A) increase the number of miles they drive. B) buy larger and less fuel-efficient cars. C) use more public transportation. D) ride their bicycles less.
C
Because people usually exploit opportunities to make themselves better off, which of the following methods of reducing pollution is likely to be most effective? A) appealing to the polluter to be a good citizen B) publicizing the harmful effects of pollution C) imposing a tax per unit of pollution generated D) All three methods are equally effective.
C
Everyone benefits from street lighting, yet the marginal benefit to any one individual usually falls short of the marginal cost. This is an example of: A) individual actions whose side effects are not properly taken into account by the market. B) one party preventing mutually beneficial trades in an attempt to capture a greater share of resources for itself. C) the unsuitability of some goods for efficient management by markets. D) regulating self-interest
C
For a student who owns his or her own home and doesn't plan to live in the dorm, the cost of going to college is: A) tuition and the cost of housing. B) tuition, the cost of housing, and the cost of books. C) tuition, the cost of books, and forgone income. D) forgone income only
C
Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is: A) zero—the tickets were free. B) the price listed on the ticket. C) whatever Khalil would have done had he not gone to the opera. D) the price listed on the ticket and whatever Khalil would have done had he not gone to the opera.
C
One parent picks up the child from day care while the other parent goes to the grocery store and begins to make dinner. This is an example of the principle that: A) markets move toward equilibrium. B) government policies can change spending. C) there are gains from trade. D) markets usually lead to efficiency.
C
Resources are being used efficiently when: A) scarcity is no longer an issue. B) they are also used equitably. C) every opportunity to make people better off without making others worse off has been seized. D) gains from trade are still available.
C
Thinking in economic terms, when Mary Sweet-Tooth is deciding whether to eat another brownie, she: A) considers only the price of the brownie. B) considers only how much additional exercise she will need to do to work off the calories associated with eating another brownie. C) compares all of the benefits and costs of eating another brownie. D) considers whether she can do so without anyone else noticing.
C
When markets don't achieve efficiency: A) they must achieve equity. B) government must be participating in the market. C) government may intervene to improve society's welfare. D) they should be closed.
C
When the nations that constitute the Organization of Petroleum Exporting Countries (OPEC) restrict the supply of oil to increase their profits, the oil market: A) achieves an efficient outcome because profits increase. B) achieves an equitable outcome because the nations with oil resources receive the profits commensurate with that resource. C) fails because there is no longer an efficient allocation of resources. D) fails because there is no longer an equitable allocation of resources
C
Which of the following statements is CORRECT? A) Resource scarcity is not a major concern in the rich countries of the world. B) Some opportunity costs are zero. C) An economic situation is in equilibrium when no individual would be better off taking a different action. D) Some very talented, skilled individuals who can do everything better than most people should not specialize in doing any one thing.
C
You decide whether to eat one more slice of pizza based on how hungry you feel. This statement best represents this economic concept: A) Resources are scarce. B) The real cost of something is what you must give up to get it. C) "How much" is a decision at the margin. D) There are gains from trade.
C
Your elderly grandma tells you: "I haven't been taking my beloved walks because I'm concerned about falling and getting hurt. See, there is always a cost to doing something. But if you don't do anything, then there is no cost." Your grandma does not understand the economic concept of: A) scarcity. B) efficiency. C) opportunity cost. D) marginal analysis.
C
. Which of the following is NOT a resource in the production of rice? A) fertile land B) labor C) capital equipment D) money
D
A friend comes up to you and offers you a free ticket to a professional baseball game that night. You decide to attend the game. The game takes five hours and costs you $15 for transportation. If you had not attended the game, you would have worked at your part-time job for $8 an hour. What is the cost to you of attending the game? A) The cost is zero—the ticket is free. B) $65 C) $40 D) $55
D
Because people usually exploit opportunities to make themselves better off, to encourage young people to go to college in their home state, state universities can: A) charge higher tuition to in-state students. B) award special scholarships to out-of-state students. C) offer high-interest loans to in-state students. D) offer lower tuition to in-state students.
D
Economists use the term equilibrium to describe when: A) individuals are equal. B) no individual would be better off taking a different action. C) no individual has an incentive to change his or her behavior. D) no individual would be better off taking a different action or no individual has an incentive to change his or her behavior.
D
Manny is attending college and majoring in economics. By doing so, Manny is improving his: A) land. B) labor. C) capital. D) human capital.D
D
Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is: A) $10,000. B) whatever she would have purchased with the $10,000 instead. C) whatever she would have earned had she not been in college. D) whatever she would have purchased with the $10,000 plus whatever she would have earned had she not been in college.
D
Which of the following is NOT one of the five principles for understanding how individual choices interact? A) There are gains from trade. B) Markets move toward equilibrium. C) Resources should be used as efficiently as possible to achieve society's goals. D) Markets always lead to efficiency.
D
You are planning to study eight hours this week for your economics final and are considering studying a ninth hour. You should: A) compare the benefits of one more hour of study with the cost of one less hour of sleep. B) compare the benefits of one more hour of study with the cost of one less hour of studying calculus. C) compare the benefits of one more hour of study with the cost of one less hour of work at your part-time job. D) make your decision based on the cost of the next best alternative use of your time compared to the benefit of one more hour of study.
D
A resource is anything that: A) can be used in production. B) you pay for. C) is in scarce supply. D) can be consumed.
a
A key theme fundamental to all of economics is that: A) wants are limited. B) the United States is a rich country, but we are simply not aware of it. C) people have unlimited wants but limited means to satisfy them. D) resources are unlimited
c
How people choose among the alternatives available to them is: A) not part of the study of economics. B) impossible to describe. C) the study of microeconomics. D) not important in the study of microeconomics.
c
The basic concern of microeconomics is: A) to keep business firms from losing money. B) to prove that capitalism is better than socialism. C) to study the choices people make. D) to use unlimited resources to produce goods and services to satisfy limited wants
c
We are forced to make choices because of: A) exploitation. B) efficiency. C) scarcity. D) the margin.
c
