Deck 1: First Principles

Question 1

When a chef prepares a dinner for a customer, which factor is physical capital?

A) the chef
B) the oven
C) the food ingredients
D) the chef's training and experience

Answer 1

the oven

Question 2

Scarcity in economics means that:

A) we often do not have sufficient resources to achieve our objectives.
B) the wants of people are limited.
C) there must be poor people in rich countries.
D) shortages exist in nearly all markets.

Answer 2

we often do not have sufficient resources to achieve our objectives.

Question 3

A central and fundamental theme in 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.

Answer 3

people have unlimited wants but limited means to satisfy them.

Question 4

Which topic is studied in macroeconomics?

A) the change in automobile sales due to a change in the price of automobiles
B) the effect of a tax reduction on the profits of an individual business
C) recessions
D) the unemployment of workers displaced by technological change in the typesetting industry

Question 5

Which factor is NOT an example of a resource?

A) land
B) labor
C) capital
D) production

Question 6

If resources are scarce, it means that they:

A) are insufficient to provide enough goods and services to satisfy all human material wants and needs.
B) have no opportunity cost.
C) are probably not valued by consumers.
D) have an unlimited supply.

Question 7

A resource is anything that:

A) can be used in production.
B) you pay for.
C) is in scarce supply.
D) can be consumed.

Question 8

Although freshwater is very abundant in most places, it is scarce because:

A) it has no alternative uses.
B) there is not enough of it to meet all needs.
C) it is a free good.
D) scarce goods in general are not all that costly.

Question 9

We have to make choices because:

A) we have unlimited income.
B) resources are scarce.
C) resources are infinite.
D) with good planning, trade-offs can be avoided.

Question 10

When we are forced to make choices, we are facing the concept of:

A) human capital.
B) inflation.
C) scarcity.
D) market failure.

Question 11

The problem of scarcity is confronted by:

A) industrialized societies only.
B) preindustrial societies only.
C) societies governed by communist philosophies only.
D) all societies.

Question 12

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.

Question 13

Manny is attending college and majoring in economics. By doing so, Manny is improving his:

A) land.
B) labor.
C) capital.
D) human capital.

Question 14

Which factor can BEST be considered to be a resource used in the production of computers?

A) money from investors
B) wages of computer engineers
C) computer engineers
D) taxes on the profits from the sale of the computers

Question 15

The basic concern of microeconomics is to:

A) keep business firms from losing money.
B) prove that capitalism is better than socialism.
C) study the choices people make.
D) use unlimited resources to produce goods and services to satisfy limited wants.

Question 16

We are forced to make choices because of:

A) exploitation.
B) efficiency.
C) scarcity.
D) the margin.

Question 17

Freshwater is considered a scarce good because:

A) not enough of it is available for all needs.
B) it does not have any uses.
C) scarce goods are not expensive.
D) not enough of it is available for all needs and because it is not expensive.

Question 18

The problem of determining what goods and services society should produce:

A) exists because we can produce more than we need or want.
B) exists because there are not enough resources to provide all of the goods and services that people want.
C) would not exist if all goods and services were scarce.
D) would not exist if government owned all of the resources.

Question 19

Which resource is NOT one that pertains to the production of rice?

A) fertile land
B) labor
C) capital equipment
D) money

Question 20

Scarcity exists when:

A) making choices among two or more alternatives is not necessary.
B) individuals can have more of any good without giving up anything.
C) individuals can have more of one good but only by giving up something else.
D) resources are unlimited.

Question 21

While buying refreshments for an upcoming party, you notice that a six-pack of Americana Beer costs $2 and a six-pack of Bavarian Beer costs $4. You buy the six-pack of Bavarian Beer, although you wonder if maybe two six-packs of Americana Beer would have been a better choice. The opportunity cost of the Bavarian Beer is:

A) $4.
B) a six-pack of Americana Beer.
C) two six-packs of Americana Beer.
D) $4 and the six-pack of Americana Beer.

Question 22

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 and other school materials.
C) tuition, the cost of books and other school materials, and forgone income.
D) forgone income only.

Question 23

You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and a candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is:

A) $1 plus the enjoyment you would have received from the candy bar.
B) $2 minus the enjoyment you received from the bag of chips.
C) $1.
D) the enjoyment you would have received from the candy bar.

Question 24

The BEST measure of the opportunity cost of any choice is:

A) the monetary cost of that choice.
B) whatever you have given up to make that choice, even if no monetary costs are involved.
C) the cost associated with not taking full advantage of the opportunity offered by that choice.
D) your hourly wage.

Question 25

Margo spends $30,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

A) $30,000.
B) whatever she would have purchased with the $30,000 instead.
C) whatever she would have earned had she not been in college.
D) whatever she would have purchased with the $30,000 plus whatever she would have earned had she not been in college.

Question 26

If the state government allocates additional spending on education programs, the opportunity cost is:

A) zero.
B) the dollar amount of the additional spending.
C) considered only if taxes have to be raised to fund the spending.
D) measured in terms of the best alternative uses for that money.

Question 27

The university recently inherited a large mansion from a wealthy alumnus. The university plans to use the mansion for faculty parties and to house distinguished guests. The opportunity cost of the mansion to the university is:

A) zero because it was a gift.
B) the original cost of building the mansion.
C) the amount the university would receive if it sold the mansion.
D) the cost of catering the parties at the mansion.

Question 28

A new startup airline is offering a free round-trip ticket to Hawaii to the first 600 people who enter the airline's main office on the airline's first day of business. You arrive 24 hours before it is scheduled to open to be sure to get the free ticket, and you buy food from vendors while waiting in line. You successfully obtain the ticket. What was the cost to you for obtaining the ticket?

A) zero
B) the cost of food while you wait in line
C) the cost of food while you wait in line and the opportunity cost of your time spent in line
D) the actual value of the ticket

Question 29

Opportunity cost is:

A) about half of the monetary cost of a product.
B) the dollar payment for a product.
C) the benefit derived from a product.
D) the value of the best alternative forgone in making any choice.

Question 30

The opportunity cost of something is:

A) larger during periods of rising prices.
B) equal to the monetary cost.
C) smaller during periods of falling prices.
D) what is given up to acquire it.

Question 31

You can spend $100 on either a new economics textbook or a new tablet computer. If you choose to buy the new economics textbook, the opportunity cost is:

A) $100.
B) your enjoyment of the new tablet computer.
C) both the $100 and your enjoyment of the new tablet computer.
D) impossible to determine.

Question 32

Khalil is offered a free ticket to the opera, which he cannot resell. 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.

Question 33

A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7; she could work at the college library at a wage of $6; or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to:

A) $7.
B) $6.
C) $13.
D) $0.

Question 34

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.

Question 35

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

Question 36

Zoe's grandparents are excited about finally paying off their mortgage because, as they say, "Our cost of housing is now zero." Zoe should explain to them the economic concept of:

A) marginal analysis: if the additional cost of housing is zero, then their additional benefit is also zero.
B) opportunity cost: by living in the house, they are giving up the opportunity to sell the house, buy a smaller one, and pocket the difference.
C) efficiency: If their cost of housing is now zero, they should let Zoe move in without charging her any rent. Zoe is better off, and her grandparents aren't hurt.
D) equity: it is unfair that some people are still paying off their mortgage.

Question 37

Whenever a choice is made:

A) the cost of that choice is the opportunity cost.
B) the cost is easy to measure in dollar terms.
C) efficiency is improved.
D) scarcity is not a problem.

Question 38

A new fast-food restaurant offered a prize-a free meal (valued at $5) each 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, and she successfully obtained the prize. The cost to Ramona of obtaining the "free meal a week for a year" prize was:

A) zero.
B) $260.
C) whatever else she would have done with the 48 hours.
D) The cost is impossible to determine.

Question 39

The Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is:

A) $3.
B) your enjoyment of the burrito.
C) $3 and your enjoyment of the burrito.
D) $3, your enjoyment of the burrito, and your enjoyment of the nachos.

Question 40

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.

Question 41

A choice made _____ is a choice whether to do a little more or a little less of an activity.

A) at the front end
B) in the beginning
C) at the margin
D) ceteris paribus

Question 42

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.

Question 43

You decide whether to eat one more slice of pizza based on how hungry you feel. Which economic principle does this statement BEST represent?

A) Choices are necessary because resources are scarce.
B) The true cost of something is its opportunity cost.
C) "How much" is a decision at the margin.
D) There are gains from trade.

Question 44

For which decision would marginal analysis be MOST relevant?

A) Should George accept a job with Delta Airlines or with Greenpeace?
B) Should Mary go to graduate school after graduating from college?
C) Should Vivek emigrate to the United States or stay in India?
D) Should Hong work an additional hour or take a short nap?

Question 45

Which of the following questions would NOT involve marginal analysis:

A) How many minutes should I exercise?.
B) How many workers should I hire?.
C) What is an acceptable rate of negative side effects from a new medicine?.
D) Should I attend college?

Question 46

The economic way of thinking entails:

A) the analysis of benefits but not costs.
B) the analysis of costs but not benefits.
C) making choices at the margin.
D) making the distinction between microeconomics and macroeconomics.

Question 47

You decide to join the economics club, but this means you can't join the accounting club because it meets at the same time. Which economic prinicple does this statement BEST represent?

A) The true cost of something is its opportunity cost.
B) "How much" is a decision at the margin.
C) People usually respond to incentives, exploiting opportunities to make themselves better off.
D) There are gains from trade.

Question 48

Your neighbor is mowing her yard one afternoon when she stops to have some lemonade. She drinks one glass and is now deciding whether or not to have a second glass. This is an example of _____ analysis.

A) marginal
B) benefit
C) cost
D) equilibrium

Question 49

Which decision is the BEST example of making a choice at the margin?

A) buying a new car
B) quitting your job
C) drinking another cup of coffee
D) attending college

Question 50

Marginal analysis studies how individuals decide:

A) whether to live on the margin of society.
B) whether to do a bit more of an activity versus a bit less of it.
C) whether to go to college.
D) how much down payment to make when buying stocks.

Question 51

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.

Question 52

A choice made _____ is a choice whether to do a little more or a little less of an activity.

A) at the fringe
B) in the beginning
C) at the margin
D) after the fact

Question 53

After eating three slices of pizza, you decide to eat one more piece. Your decision is an example of the economic concept called:

A) opportunity-cost decision.
B) people responding to incentives.
C) equity decision.
D) marginal decision making.

Question 54

For which decision would marginal analysis be MOST relevant?

A) Should I go to college or work after graduating from high school?
B) Should I eat another doughnut?
C) Should I use $20,000 as a down payment on a house or to buy a car?
D) Should I get married?

Question 55

Marginal analysis:

A) refers to decisions about whether or not to engage in a particular activity.
B) is primarily used when making an either-or choice.
C) is used primarily when deciding how much of an activity should be done.
D) does not help when making a "how much" choice.

Question 56

The concept of the margin decision deals with:

A) making incremental choices.
B) choosing all or none of something.
C) engaging in unethical activities.
D) making difficult choices.

Question 57

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.

Question 58

The BEST example of making a choice at the margin is whether to:

A) buy a new computer.
B) quit your job.
C) eat another slice of pizza.
D) attend college.

Question 59

If you decide to go to Cancún with your friends during spring break, you cannot go to Paris with your sister in the summer. Which economic principle does this statement BEST represent?

A) The true cost of something is its opportunity cost.
B) "How much" is a decision at the margin.
C) People usually respond to incentives, exploiting opportunities to make themselves better off.
D) There are gains from trade.

Question 60

The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost of buying a burger is your enjoyment of the:

A) burger.
B) bagel.
C) burrito.
D) bagel and the burrito.

Question 61

Which decision is an example of marginal analysis?

A) ordering a pizza, rather than eating leftover meatloaf
B) deciding whether to eat one more slices of pizza
C) using a coupon to save $2 on a pizza
D) writing a check to pay for the pizza, rather than using a credit card

Question 62

Which statement is NOT true according to standard economic theory?

A) Resources are scarce when they can satisfy everyone's wants.
B) The true cost of a choice is what you must give up to enjoy that choice.
C) People typically make choices that will make them better off.
D) Rational people use marginal analysis when making "how much" decisions.

Question 63

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.

Question 64

Which question is an example of marginal analysis?

A) What additional output does a family business produce when it hires one more worker?
B) How do tax cuts change the growth rate of median income?
C) What is the impact of a trade embargo on labor cost?
D) Should a commuter take the bus to work instead of driving.

Question 65

For which decision would marginal analysis be MOST relevant?

A) Should I invest all of my savings in real estate or should I keep it all in a savings account?
B) After I graduate from college, should I go to graduate school or should I get a job?
C) How many hours should I study for my exam?
D) Should I keep a pet?

Question 66

Which statement demonstrates how people respond to incentives to make themselves better off?

A) More students major in economics when they hear that salaries for economists are rising.
B) Students are assigned dorm rooms through a lottery system.
C) Students are encouraged to donate blood because it is the right thing to do.
D) Students and faculty are encouraged to wear college apparel to support the college athletic teams.

Question 67

Corner offices in high-rise office buildings usually cost more to rent than other offices. This BEST illustrates the economic concept of:

A) specialization.
B) scarcity.
C) equilibrium.
D) opportunity costs.

Question 68

To encourage people to retire later, given that people usually exploit opportunities to make themselves better off, the government could:

A) reduce Social Security benefits.
B) raise the tax rate on older, unretired individuals.
C) provide free housing to all retirees
D) increase Social Security benefits.

Question 69

Which method of discouraging speeding is likely to be MOST effective given that people usually exploit opportunities to make themselves better off?

A) increasing the number of signs stating the speed limit
B) increasing the fine associated with speeding tickets
C) public service announcements reminding drivers of the dangers of speeding
D) asking drivers to reduce speed

Question 70

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.

Question 71

You like to read Vogue and Sports Illustrated. You have only $5 to spend, so you buy only Sports Illustrated. Which economic concept does this statement BEST represent?

A) Scarcity
B) Equilibrium
C) Marginal Analysis
D) Specialization

Question 72

You are analyzing a trade-off when you compare the _____ and _____ of doing something.

A) direct costs; opportunity costs
B) marginal benefits; total benefits
C) costs; benefits
D) direct costs; total costs

Question 73

In an attempt to reduce shooting deaths, some cities have offered money to people who turn in illegal guns. This program is an example of the government using _____ to influence behavior.

A) financial incentives
B) law
C) marginal analysis
D) the gains from trade

Question 74

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

Question 75

Because people usually exploit opportunities to make themselves better off, which method of reducing pollution is likely to be MOST effective?

A) appealing to the polluter to be a good citizen
B) asking citizens to voluntarily reduce pollution
C) imposing a tax per unit of pollution generated
D) advertising the negative impact of pollution

Question 76

Which method of encouraging recycling is likely to be MOST effective given that people usually exploit opportunities to make themselves better off?

A) appealing to consumers to be a good citizen
B) publicizing the advantages of recycling
C) imposing a tax per unit of garbage generated
D) advertising different ways of recycling

Question 77

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.

Question 78

Because people usually exploit opportunities to make themselves better off, if the price of gasoline falls and stays low for an extended period, we expect people to:

A) reduce their reliance on gasoline-powered cars.
B) buy larger and less fuel-efficient cars.
C) use more public transportation.
D) ride bicycles.

Question 79

In Ventura County, California, strawberry production is limited by the number of acres available for agriculture production. Which economic concept does this statement BEST represent?

A) Scarcity
B) Marginal Analysis.
C) Equilibrium.
D) Opportunity Cost.

Question 80

Some baseball fans leave the game in the seventh or eighth inning to avoid the postgame traffic. These fans are:

A) not considering that they have already paid for their tickets.
B) making a marginal decision by comparing the cost of leaving early to the benefit of leaving early.
C) thinking only about the benefits of avoiding traffic.
D) underestimating the value of staying for the rest of the game.