Question 1

One of the first major decisions that one faces after graduation is getting an apartment. Describe how you might employ the concepts of trade-offs, opportunity costs, and making decisions at the margin in deciding which apartment to rent.

Accepted Answer

Apartments have varying sizes, prices, a...

Question 2

Instead of deciding to finish high school, you could have decided to work full-time. How would an economist explain your decision to receive your high school degree?

Accepted Answer

A)   The cost of going to high school was greater than the benefit of working full-time.
B)   The benefit of working full-time was greater than the benefit of going to high school.
C)   The benefit of going to high school was greater than the benefit of working full-time.
D)   The cost of working full-time was greater than the benefit of going to high school.
E)   The benefit of working full-time was greater than the cost of going to high school.

Question 3

Health insurance companies have the goal of reducing payments to doctors and hospitals. One way they have done this is by requiring individuals to pay a deductible. For example, a $1,000 deductible means that individuals are responsible for the first $1,000 in healthcare expenses over the course of a year. In terms of incentives, explain how the presence of a deductible reduces expenses for the health insurance company.

Accepted Answer

Deductibles act as a positive and direct...

Question 4

What creates comparative advantage?

Accepted Answer

A)   lower costs
B)   higher opportunity costs
C)   specialization
D)   scarcity
E)   population growth

Question 5

A parent that pays a child an allowance for doing chores is providing a(n) :

Accepted Answer

A)   positive incentive.
B)   negative incentive.
C)   neutral incentive.
D)   complementary incentive.
E)   unintended incentive.

Question 6

The United States is able to experience economic growth to the extent that:

Accepted Answer

A)   specialization and trade are encouraged.
B)   the government involves itself in the economy.
C)   trade is restricted.
D)   jobs are protected from outsourcing.
E)   consumers are encouraged to buy domestically produced goods.

Question 7

Economics professors are well aware of the importance of incentives. Which of the following situations shows the use of a positive incentive?

Accepted Answer

A)   Students who show up late to class will not be allowed in the classroom.
B)   Students who do not have a doctor's note will not be allowed to take an exam at a different time.
C)   Students can choose whether or not they want to attend classÑthere is no attendance policy.
D)   Students can choose to do extra credit at the end of the semester.
E)   The professor decides to teach the class by reading out of the textbook to the entire class.

Question 8

The basic goal of economics is:

Accepted Answer

A)   controlling the effects of government actions.
B)   determining how to distribute all that is produced in an economy.
C)   addressing the scarcity problem created because the population's desire for goods exceeds the ability to produce them.
D)   matching limited resources to people's limited wants and needs.
E)   controlling tastes and wishes so that there will be enough resources to produce all the goods and services that people want.

Question 9

In 2009, the federal government created a program called Cash for Clunkers whereby consumers could trade in a less efficient car for a more efficient car and receive a higher value than they would have otherwise. How would an economist understand the decision that consumers faced?

Accepted Answer

A)   Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal benefits would exceed marginal costs.
B)   Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal costs would exceed marginal benefits.
C)   The Cash for Clunkers program increased the opportunity cost of replacing a car.
D)   The Cash for Clunkers program served as a negative incentive to replacing a fuel-inefficient car.
E)   The Cash for Clunkers program served as an indirect incentive to replacing a fuel-inefficient car.

Question 10

What is the strongest argument for why we need more economists today than ever before?

Accepted Answer

A)   We have a need for more wealth given the higher standard of living that individuals demand.
B)   Economists are needed to address the allocation of scarce resources as a result of the world's growing population.
C)   Economists are needed to make sure that firms continue to make profits.
D)   Economists are needed to make sure that consumers are well informed about their possible purchase options and that they budget their finances appropriately.
E)   Economists are needed to make sure that the government doesn't involve itself too much in the economy.

Question 11

When most economists wake up in the morning, their first decision is whether or not to hit the snooze bar on the alarm clock. What statement best represents their thought process as a rational decision-maker?

Accepted Answer

A)   I had a really late night grading exams, and I deserve 10 more minutes of sleep.
B)   The total amount of work I have to do today is rather small, so the total benefit to going to work for a full 8 hours is also small.
C)   The total amount of work I have to do today is rather small, so the marginal cost of going to work 10 minutes late is small.
D)   The total amount of work I have to do today is rather small, so the marginal benefit of sleeping 10 more minutes is rather large.
E)   The marginal benefit of sleeping 10 more minutes is greater than the marginal benefit of 10 more minutes of work.

Question 12

An example of a direct positive incentive is:

Accepted Answer

A)   a prison sentence for committing a crime.
B)   unemployment insurance for those who are laid off.
C)   providing a workplace safety program.
D)   providing a commission for sales.
E)   threatening to fire those who do not perform well.

Question 13

Due to the fact that firms concern themselves primarily with earning profits, a common complaint is that they often damage the environment in the process. More recently, markets have been set up so that firms can actually reduce their costs and profit more by damaging the environment less and selling their "right to pollute" to other companies. Discuss how this serves as a positive incentive for a firm to act in an environmentally responsible manner. What would be a way to discourage firms from polluting through the use of negative incentives?

Accepted Answer

Market environmentalism is a way by whic...

Question 14

An opportunity cost:

Accepted Answer

A)   can be measured only when the decision involves expenditures of money.
B)   can be measured only when the decision involves spending time on one thing and not on another.
C)   is impossible to measure.
D)   is equal to the value of what is given up to make a purchase or take an action.
E)   exists for every decision made by individuals and businesses, but not by the government.

Question 15

The opportunity cost to free trade is:

Accepted Answer

A)   economic growth.
B)   government involvement.
C)   a gain of domestic jobs.
D)   lower prices.
E)   greater efficiency.

Question 16

One way to promote a new business is to offer free items. If you were to open a new restaurant and offer free food, you likely would have a line out the door. How would an economist understand the behavior of those standing in line?

Accepted Answer

A)   Those waiting in line place a high value on the use of their time.
B)   Those waiting in line believe that the marginal cost of waiting in line exceeds the marginal benefit of waiting in line.
C)   Those waiting in line place a low value on the use of their time.
D)   Those waiting in line believe that the marginal cost of waiting in line is zero.
E)   Those waiting in line believe that the marginal benefit of waiting in line is zero.

Question 17

More oranges are grown in Florida than North Dakota because Florida's warm climate gives it a ________ in growing oranges.

Accepted Answer

A)   comparative advantage
B)   public advantage
C)   revenue advantage
D)   producer advantage
E)   planning advantage

Question 18

The need to study economics would cease to exist if:

Accepted Answer

A)   the government stopped controlling people's actions.
B)   people were free to make decisions on their own.
C)   people put forth the effort required to attain the goods and services they wanted.
D)   people earned more than they spent.
E)   there were enough resources to produce all the goods and services people would like to obtain.

Question 19

The government has been trying to mint dollar coins instead of printing paper dollar bills, but people have been reluctant to use coins instead of paper bills. How would an economist explain this reluctance?

Accepted Answer

A)   More people are using credit and debit cards, so people are not accustomed to using change.
B)   Retailers find it too expensive to deal with coins and would have to raise their prices if consumers used coins more.
C)   The opportunity cost of carrying around large quantities of coins is too large.
D)   Prices have increased over time, and the opportunity cost of carrying around a large number of coins would be low.
E)   People who receive a dollar coin are more likely to collect than spend the money, and the economy won't grow as quickly because less is being spent.

Question 20

In economics, choices are necessary because of the presence of:

Accepted Answer

A)   luxuries.
B)   inefficiency.
C)   needs.
D)   scarcity.
E)   incentives.

Exam 1: The Five Foundations of Economics

The United States is able to experience economic growth to the extent that:

Correct Answer
verified

An example of a direct positive incentive is:

Correct Answer
verified

What creates comparative advantage?

Correct Answer
verified

Economics professors are well aware of the importance of incentives. Which of the following situations shows the use of a positive incentive?

Correct Answer
verified

In economics, choices are necessary because of the presence of:

Correct Answer
verified

More oranges are grown in Florida than North Dakota because Florida's warm climate gives it a ________ in growing oranges.

Correct Answer
verified

The government has been trying to mint dollar coins instead of printing paper dollar bills, but people have been reluctant to use coins instead of paper bills. How would an economist explain this reluctance?

Correct Answer
verified

In 2009, the federal government created a program called Cash for Clunkers whereby consumers could trade in a less efficient car for a more efficient car and receive a higher value than they would have otherwise. How would an economist understand the decision that consumers faced?

Correct Answer
verified

What is the strongest argument for why we need more economists today than ever before?

Correct Answer
verified

An opportunity cost:

Correct Answer
verified

The opportunity cost to free trade is:

Correct Answer
verified

One way to promote a new business is to offer free items. If you were to open a new restaurant and offer free food, you likely would have a line out the door. How would an economist understand the behavior of those standing in line?

Correct Answer
verified

The need to study economics would cease to exist if:

Correct Answer
verified

Instead of deciding to finish high school, you could have decided to work full-time. How would an economist explain your decision to receive your high school degree?

Correct Answer
verified

A parent that pays a child an allowance for doing chores is providing a(n) :

Correct Answer
verified

One of the first major decisions that one faces after graduation is getting an apartment. Describe how you might employ the concepts of trade-offs, opportunity costs, and making decisions at the margin in deciding which apartment to rent.

Correct Answer
verified
Apartments have varying sizes, prices, a...
View Answer

When most economists wake up in the morning, their first decision is whether or not to hit the snooze bar on the alarm clock. What statement best represents their thought process as a rational decision-maker?

Correct Answer
verified

Correct Answer
verified
Market environmentalism is a way by whic...
View Answer

The basic goal of economics is:

Correct Answer
verified

Correct Answer
verified
Deductibles act as a positive and direct...
View Answer

Exam 1: The Five Foundations of Economics

The United States is able to experience economic growth to the extent that:

Correct AnswerverifiedShow Answer

An example of a direct positive incentive is:

Correct AnswerverifiedShow Answer

What creates comparative advantage?

Correct AnswerverifiedShow Answer

Economics professors are well aware of the importance of incentives. Which of the following situations shows the use of a positive incentive?

Correct AnswerverifiedShow Answer

In economics, choices are necessary because of the presence of:

Correct AnswerverifiedShow Answer

More oranges are grown in Florida than North Dakota because Florida's warm climate gives it a ________ in growing oranges.

Correct AnswerverifiedShow Answer

The government has been trying to mint dollar coins instead of printing paper dollar bills, but people have been reluctant to use coins instead of paper bills. How would an economist explain this reluctance?

Correct AnswerverifiedShow Answer

In 2009, the federal government created a program called Cash for Clunkers whereby consumers could trade in a less efficient car for a more efficient car and receive a higher value than they would have otherwise. How would an economist understand the decision that consumers faced?

Correct AnswerverifiedShow Answer

What is the strongest argument for why we need more economists today than ever before?

Correct AnswerverifiedShow Answer

An opportunity cost:

Correct AnswerverifiedShow Answer

The opportunity cost to free trade is:

Correct AnswerverifiedShow Answer

One way to promote a new business is to offer free items. If you were to open a new restaurant and offer free food, you likely would have a line out the door. How would an economist understand the behavior of those standing in line?

Correct AnswerverifiedShow Answer

The need to study economics would cease to exist if:

Correct AnswerverifiedShow Answer

Instead of deciding to finish high school, you could have decided to work full-time. How would an economist explain your decision to receive your high school degree?

Correct AnswerverifiedShow Answer

A parent that pays a child an allowance for doing chores is providing a(n) :

Correct AnswerverifiedShow Answer

One of the first major decisions that one faces after graduation is getting an apartment. Describe how you might employ the concepts of trade-offs, opportunity costs, and making decisions at the margin in deciding which apartment to rent.

Correct AnswerverifiedApartments have varying sizes, prices, a...View AnswerShow Answer

When most economists wake up in the morning, their first decision is whether or not to hit the snooze bar on the alarm clock. What statement best represents their thought process as a rational decision-maker?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedMarket environmentalism is a way by whic...View AnswerShow Answer

The basic goal of economics is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedDeductibles act as a positive and direct...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Apartments have varying sizes, prices, a...
View Answer

Correct Answer
verified

Correct Answer
verified
Market environmentalism is a way by whic...
View Answer

Correct Answer
verified

Correct Answer
verified
Deductibles act as a positive and direct...
View Answer