Question 1

Government policies can change the costs and benefits that people face. Those policies have the potential to
A)alter people's behavior.
B)alter people's decisions at the margin.
C)produce results that policymakers did not intend.
D)All of the above are correct.

Accepted Answer

Government policies can affect people's behavior and decisions by changing the costs and benefits that they face. However, these policies may also have unintended consequences that policymakers did not anticipate. Therefore, all of the choices are correct.

Question 2

Ralph Nader's book Unsafe at Any Speed caused Congress to require
A)safety glass in all new cars.
B)seat belts in all new cars.
C)air bags in all new cars.
D)stricter drunk driving laws in all states.

Accepted Answer

Ralph Nader's book Unsafe at Any Speed specifically advocated for the mandatory installation of seat belts in all new cars, leading to the passage of the National Traffic and Motor Vehicle Safety Act of 1966, which required seat belts to be included in all new cars.

Question 3

U.S. laws requiring that drivers wear seat belts have resulted in
A)a reduction in both driver deaths and pedestrian deaths.
B)fewer accidents and fewer deaths per accident.
C)fewer driver deaths, fewer accidents and fewer pedestrian deaths.
D)little change in the number of driver deaths, but more accidents and more pedestrian deaths.

Accepted Answer

The answer of U.S. laws requiring that drivers wear seat...

Question 4

Evidence indicates that seat belt laws have led to
A)fewer pedestrian deaths.
B)fewer automobile accidents.
C)fewer deaths per automobile accident.
D)All of the above are correct.

Accepted Answer

Seat belt laws have been shown to reduce the number of deaths per automobile accident, as they help prevent serious injuries to individuals who are properly restrained. While seat belt laws may also indirectly affect pedestrian safety and reduce the number of overall automobile accidents, the primary benefit is in reducing the severity of injuries in accidents that do occur.

Question 5

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal
A)cost of leaving was greater than the marginal benefit.
B)benefit of leaving was greater than the marginal cost.
C)benefit of teaching was greater than the marginal cost.
D)All of the above are correct.

Accepted Answer

The management professor has decided to take the corporate job, indicating that the marginal benefit of leaving (i.e. the 30 percent pay increase) is greater than the marginal cost of leaving (such as leaving students, colleagues, and the academic environment). Thus, choice B is the correct answer. Choice A, stating that the marginal cost of leaving was greater than the marginal benefit, is incorrect. Choice C, saying that the benefit of teaching was greater than the marginal cost, may or may not be true, but it is not relevant to this particular situation.

Question 6

Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate?
A)People respond to incentives.
B)Rational people think at the margin.
C)Trade can make everyone better off.
D)Markets are usually a good way to organize economic activity.

Accepted Answer

This scenario best illustrates the principle that people respond to incentives. The increase in tax on cigarettes in Wyoming has incentivized smokers to purchase their cigarettes in surrounding states where the tax is lower. This behavior shows that people are responsive to changes in incentives, in this case, the cost of cigarettes.

Question 7

People are likely to respond to a policy change
A)only if they think the policy is a good one.
B)only if the policy change changes the costs of their behavior.
C)only if the policy change changes the benefits of their behavior.
D)if the policy changes either the costs or benefits of their behavior.

Accepted Answer

People are likely to respond to a policy change if it changes either the costs or benefits of their behavior. This means that if the policy change affects the rewards or penalties associated with a behavior, people are more likely to adjust their behavior accordingly. The other options (A, B, and C) are not necessarily exclusive factors that determine whether people will respond to a policy change. People may respond to a policy even if they think it is a bad one or if the costs of their behavior remain the same but the benefits change.

Question 8

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?
A)to produce good quality products so that society would benefit from the resources used
B)to conserve on costs, so as to maintain efficiency in the economy
C)to produce enough to meet the output target, without regard for quality or cost
D)to produce those products that society desires most

Accepted Answer

The economic incentives for producers in the former Soviet Union was to meet output targets, regardless of quality or cost. This is because they were paid based on meeting those targets, so their priority was to produce enough to meet those targets, rather than focusing on quality or cost efficiency.

Question 9

Which of the following is not one of the four principles of individual decision making?
A)People face trade-offs.
B)Trade can make everyone better off.
C)People respond to incentives.
D)Rational people think at the margin.

Accepted Answer

The four principles of individual decision-making are: People face trade-offs, People respond to incentives, Rational people think at the margin, and People make decisions by comparing benefits and costs. "Trade can make everyone better off" is an economic principle but not one of the four principles of individual decision-making.

Question 10

Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result, residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there. Which of the following principles does this best illustrate?
A)People respond to incentives
B)Rational people think at the margin
C)Trade can make everyone better off
D)Markets are usually a good way to organize economic activity

Accepted Answer

This situation illustrates the principle that people respond to incentives. The ban on smoking in Illinois restaurants creates an incentive for residents of Wisconsin who do not like breathing second-hand smoke to drive across the border to Illinois to eat at restaurants there, where they can avoid the smoke.

Question 11

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal
A)cost of teaching increased.
B)benefit of teaching increased.
C)cost of a corporate job increased.
D)benefit of a corporate job decreased.

Accepted Answer

The answer of Your professor loves her work, teaching economics....

Question 12

One effect of the government-imposed seat belt law in the U.S. has been
A)a dramatic decrease in the number of pedestrian deaths.
B)safer driving.
C)an increase in the number of accidents.
D)a dramatic decrease in the number of driver deaths.

Accepted Answer

The answer of One effect of the government-imposed seat belt...

Question 13

Economists are particularly adept at understanding that people respond to
A)laws.
B)incentives.
C)punishments more than rewards.
D)rewards more than punishments.

Accepted Answer

Economists understand that people respond to incentives more than anything else. Incentives include rewards, punishments, laws, and regulations, but the key is that they must be structured in a way that influences behavior.

Question 14

Which of the following can policy do?
A)alter incentives
B)alter trade-offs
C)change opportunity costs
D)All of the above are correct.

Accepted Answer

Policy can alter incentives by offering rewards or punishments to influence behavior, alter trade-offs by choosing between different options and allocating resources accordingly, and change opportunity costs by creating new options or changing the costs of existing ones. All three options are correct.

Question 15

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?
A)automakers
B)pedestrians
C)drivers
D)owners of collision-repair shops

Accepted Answer

The answer of Based on the available evidence, which of...

Question 16

Which of the following statements exemplifies a principle of individual decisionmaking?
A)Trade can make everyone better off.
B)Governments can sometimes improve market outcomes.
C)The cost of something is what you give up to get it.
D)All of the above are correct.

Accepted Answer

The principle of individual decision-making is that individuals make decisions based on trade-offs, or what they give up in order to obtain something else. This is exemplified in the statement "The cost of something is what you give up to get it." The other statements are principles of market efficiency (A) and government intervention (B).

Question 17

Something that induces a person to act is called
A)a trade-off.
B)a policy.
C)an incentive.
D)an opportunity cost.

Accepted Answer

An incentive is something that encourages or motivates a person to take action. It could be in the form of a reward or punishment. A trade-off is a situation where one has to give up something in order to get something else. A policy is a plan or course of action adopted by an organization or government. Opportunity cost is the cost of choosing one option over the other. Therefore, among the options given, only an incentive fits the description of something that induces a person to act.

Question 18

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?
A)People face tradeoffs.
B)The cost of something is what you give up to get it.
C)Rational people think at the margin.
D)People respond to incentives.

Accepted Answer

This illustrates the principle that people respond to incentives. The tax on gasoline creates a financial incentive for people to seek out more fuel-efficient cars, as they can save money on gas in the long run.

Question 19

Following the implementation of laws requiring automobiles to have seat belts, which of the following occurred?
A)An individual's probability of surviving an auto accident rose.
B)There was an increase in pedestrian deaths.
C)There was an increase in automobile accidents.
D)All of the above are correct.

Accepted Answer

The answer of Following the implementation of laws requiring automobiles...

Question 20

Max and Maddy charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, seven people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have seven or five cars parked on their lawn does not affect their costs. From this information it follows that
A)they should leave the price at $10.
B)it does not matter if they charge $10 or $15.
C)they would do better charging $15 than $10.
D)they should raise the price even more.

Accepted Answer

The total revenue at $10 per car is $10 x 7 = $70. The total revenue at $15 per car is $15 x 5 = $75. Therefore, they would do better charging $15 than $10.

Quiz 1: Ten Principles of Economics

Government policies can change the costs and benefits that people face. Those policies have the potential to

Ralph Nader's book Unsafe at Any Speed caused Congress to require

U.S. laws requiring that drivers wear seat belts have resulted in

Evidence indicates that seat belt laws have led to

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal

Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate?

People are likely to respond to a policy change

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

Which of the following is not one of the four principles of individual decision making?

Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result, residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there. Which of the following principles does this best illustrate?

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal

One effect of the government-imposed seat belt law in the U.S. has been

Economists are particularly adept at understanding that people respond to

Which of the following can policy do?

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

Which of the following statements exemplifies a principle of individual decisionmaking?

Something that induces a person to act is called

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

Following the implementation of laws requiring automobiles to have seat belts, which of the following occurred?