Honors Econ Chapter 1 and 2 Practice Test

A firm producing cans three tons of aluminum per day at $200 per ton. If it buys four tons per day, it receives a quantity discount on all units and pays only $175 per ton. The marginal cost of the fourth ton per day is

$100

The process of analyzing additional or incremental costs or benefits arising from a choice is known as:

Marginalism

The study of why an individual may decide to go to medical school instead of accepting a $30,000 a year job would be considered

Microeconomics

"Income distribution is too skewed to the rich in the United States." This is best described as a

Normative statement

The production possibility curve is used to illustrate the concept of

Opportunity costs

The amount of education that one has is a factor in the determination of his or her wage rate. This statement is best described as a

Positive statement

"I had been doing pretty poorly this season. Then my girlfriend gave me neon laces for my spikes and I won my next three races. Those laces must be good luck...if I keep on wearing them I can't help but win!"

Post hoc fallacy

The process by which resources are transformed into useful forms is

Production

Suppose that you are given $100 budget at work that can spent only on two items: staplers and pens. If a stapler cost $2.50 each, then the opportunity cost of purchasing one stapler is:

4 pens

Bill has spent $500 on his back-to-school wardrobe so far. He is considering whether he should replace his favorite pair of jeans now. He found a sweet pair on sale for $35 but they are not the same brand as his favorite pair. If he really wants the same brand of his favorite pair, they cost $80. What is the marginal cost of the decision if he decides to purchase the pair on sale?

$35

Design Brochure Design Web Site Matthew 10 2 Andrew 12 3 Refer to the table above. For Andrew, the opportunity cost of designing one Web site is

4 brochures

"There is no such thing as a free lunch." This statement best reflects the fact that:

An opportunity cost is always present when scarce resources are used to produce a good

Design Brochure Design Web Site Matthew 10 2 Andrew 12 3 Refer to the table above. To maximize total production,

Andrew should specialize in website design and Matthew should specialize in making brochures

A study of how increases in corporate income tax rates will affect national unemployment is an example of

Macroeconomics

Dina and Tina are making Mexican food tonight. Dina can make 4 burritos or 12 chimichangas in the same amount of time that Tina can make 7 burritos or 14 chimichangas. Which of the following is true concerning comparative advantage in the Mexican food scenario? A. Tina has the comparative advantage in chimichangas and Dina has the comparative advantage in burritos. B. Dina has the comparative advantage in chimichangas and Tina has the comparative advantage in burritos. C. Tina should produce both chimichangas and burritos, while Dina only helps with making tacos. D. Dina has the comparative advantage in both chimichangas and burritos

B. Dina has the comparative advantage in chimichangas and Tina has the comparative advantage in burritos.

Mow Lawns Pull Weeds Noah 60 minutes 30 minutes Sydney 90 minutes 60 minutes The table above provides the number of minutes it takes for Noah and Sydney to mow lawns and to pull weeds. Assuming they choose their jobs based on the principle of comparative advantage, which of the following should occur? A. Noah should mow lawns and Sydney should pull weeds. B. Sydney should mow lawns while Noah pulls weeds. C. Both Noah and Sydney should pull weeds, and they should hire an additional worker to mow lawns. D. Noah should split his time equally between both jobs. E. Sydney should split her time equally between both jobs.

B. Sydney should mow lawns while Noah pulls weeds.

Which of the following statements is FALSE? A. In a free market system, competition encourages firms to adopt efficient production techniques. B. Individuals guided by their own self-interest will produce products and services that other people want. C. Economic equity is the most important goal that a free market system strives to achieve. D. In a free market system, the basic economic questions are answered without the help of a central government plan or directive.

C. Economic equity is the most important goal that a free market system strives to achieve.

Which of the following is NOT an opportunity cost of using a whole night to study for a test? A. Going to the movies with friends B. Income that could have been earned at your part-time job C. The risk of getting a bad grade D. Better health as a result of getting enough sleep

C. The risk of getting a bad grade

Dina and Tina are making Mexican food tonight. Dina can make 4 burritos or 12 chimichangas in the same amount of time that Tina can make 7 burritos or 14 chimichangas. Which of the following is true concerning absolute advantage in the Mexican food scenario? A. Dina has a absolute advantage in making chimichangas, while Tina has the absolute advantage in making burritos. B. Tina has the absolute advantage in making chimichangas, while Dina has the absolute advantage in making burritos. C. Tina has the absolute advantage in making both chimichangas and burritos. D. Dina and Tina both have the absolute advantage in chimichangas.

C. Tina has the absolute advantage in making both chimichangas and burritos.

A tiger eats more food than a human being. Therefore, Tigers, as a group, eat more food than do all the humans on the earth. This statement is an example of

Fallacy of composition

In recent years, technological improvements in the United States have slowed and come less frequently than improvements in many other nations. Which criterion is being talked about in this situation?

Growth

Bill has spent $500 on his back-to-school wardrobe so far. He is considering whether he should replace his favorite pair of jeans now. He found a sweet pair on sale for $35 but they are not the same brand as his favorite pair. If he really wants the same brand of his favorite pair, they cost $80. What is the marginal cost of the decision if he decides to purchase the pair on sale? What does the $500 represent in Bill's situation above?

His sunk cost

What are the two major ways in which an economy can grow and push out its production possibilities curve?

Increases in resources supplies and advances in technology

An economy in which people and firms pursue their own self-interest WITHOUT ANY central direction is a(n)

Laissez-faire economy

The reason that opportunity cost arises is that

Resources are scarce

The concept of trade-offs (opportunity costs) would become irrelevant if

Scarcity were eliminated

High rates of unemployment in the 1970s gave workers concern for their job security that was not present in the 1960s. Which criteria is being discussed in this situation?

Stability