Question 1

The economic perspective entails
A)irrational behavior by individuals and institutions.
B)a comparison of marginal benefits and marginal costs in decision making.
C)short-term but not long-term thinking.
D)rejection of the scientific method.

Accepted Answer

The economic perspective involves weighing the marginal benefits and marginal costs of decisions, implying a rational decision-making process based on cost-benefit analysis. It does not entail irrational behavior, short-term thinking or rejection of the scientific method.

Question 2

When economists say that people act rationally in their self-interest, they mean that individuals
A)look for and pursue opportunities to increase their utility.
B)generally disregard the interests of others.
C)are mainly creatures of habit.
D)are usually impulsive and unpredictable.

Accepted Answer

Economists assume that individuals act rationally in their self-interest, meaning they make choices that they believe will increase their own well-being or utility. This does not necessarily mean individuals always pursue their immediate self-interest or disregard the interests of others, but rather, they weigh the costs and benefits of their choices and act accordingly.

Question 3

Economics may best be defined as the
A)interaction between macro and micro considerations.
B)social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.
C)empirical testing of value judgments through the use of logic.
D)study of why people are rational.

Accepted Answer

Economics is the social science that studies how people, institutions, and society make optimal choices under conditions of scarcity. It involves analyzing the production, distribution, and consumption of goods and services. While it does consider both macro and micro considerations, its fundamental focus is on how people make choices in a world with limited resources. Empirical testing and logic are important tools used in economics, but they are not the defining characteristics of the discipline. The study of why people are rational is more closely associated with fields such as psychology and behavioral economics.

Question 4

You should decide to go to a movie
A)if the marginal cost of the movie exceeds its marginal benefit.
B)if the marginal benefit of the movie exceeds its marginal cost.
C)if your income will allow you to buy a ticket.
D)because movies are enjoyable.

Accepted Answer

According to the basic principles of economics, you should only engage in an activity if the expected marginal benefit exceeds the expected marginal cost. In this scenario, if the marginal benefit of going to the movie (the pleasure and enjoyment you'll receive) will be greater than the marginal cost (the ticket price, transportation, and any other relevant costs), then it is a rational decision to go to the movie.

Question 5

A person should consume more of something when its marginal
A)benefit exceeds its marginal cost.
B)cost exceeds its marginal benefit.
C)cost equals its marginal benefit.
D)benefit is still better.

Accepted Answer

When the marginal benefit exceeds the marginal cost, it means that each additional unit of consumption provides more benefit than cost. Therefore, it is optimal to consume more of it until the point where the marginal benefit equals the marginal cost. At this point, consuming any additional unit would result in a marginal cost that exceeds the marginal benefit, making it suboptimal to consume more.

Question 6

If someone produced too little of a good, this would suggest that
A)rational choice cannot be applied to many economic decisions.
B)the good was produced past the point where its marginal cost exceeded its marginal benefit.
C)government should intervene to produce more of the good.
D)the good was produced to the point where its marginal benefit exceeded its marginal cost.

Accepted Answer

If someone produced too little of a good, it implies that the marginal benefit of producing more of the good exceeds its marginal cost, and hence, rational choice would suggest producing more of the good until the point where the marginal benefit equals the marginal cost.

Question 7

For economists, the word "utility" means
A)versatility and flexibility.
B)rationality.
C)pleasure or satisfaction.
D)purposefulness.

Accepted Answer

In economics, utility refers to the satisfaction or pleasure that a consumer derives from consuming a particular good or service. It is not related to versatility, flexibility, rationality, or purposefulness.

Question 8

According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because
A)people are greedy.
B)productive resources are limited.
C)human beings are inherently insecure.
D)people are irrational.

Accepted Answer

Economists recognize that resources are finite and cannot meet all human wants and needs. This concept is known as scarcity, which is a fundamental economic problem. Therefore, it is not due to people being greedy, irrational, or inherently insecure.

Question 9

In economics, the pleasure, happiness, or satisfaction received from a product is called
A)marginal cost.
B)rational outcome.
C)status fulfillment.
D)utility.

Accepted Answer

The pleasure, happiness, or satisfaction received from a product is called utility in economics. Marginal cost refers to the additional cost incurred from producing one more unit of a product, while rational outcome refers to a decision made based on logical reasoning. Status fulfillment is not a commonly used term in economics.

Question 10

The assertion that "there is no free lunch" means that
A)there are always trade-offs between economic goals.
B)all production involves the use of scarce resources and thus the sacrifice of alternative goods.
C)marginal analysis is used in economic reasoning.
D)choices need not be made if behavior is rational.

Accepted Answer

The assertion that "there is no free lunch" means that all production involves the use of scarce resources and thus the sacrifice of alternative goods. In other words, there are always trade-offs between economic goals. Marginal analysis is a tool used in analyzing these trade-offs, but it does not negate the fact that choices and sacrifices must be made in the production of goods and services. The idea that choices need not be made if behavior is rational is a fallacy.

Question 11

According to economists, economic self-interest
A)is a reality that underlies economic behavior.
B)has the same meaning as selfishness.
C)means that people never make wrong decisions.
D)is usually self-defeating.

Accepted Answer

According to economists, economic self-interest is a reality that underlies economic behavior. This means that individuals and firms act in a way that promotes their own well-being and benefit. It is not the same as selfishness, as self-interest can also involve mutually beneficial exchanges and cooperation. While self-interest can lead to rational decision-making, it is not a guarantee that all decisions will be correct or optimal.

Question 12

Joe sold gold coins for $1,000 that he bought a year ago for $1,000.He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins.The economist's analysis in this case incorporates the idea of
A)opportunity costs.
B)marginal benefits that exceed marginal costs.
C)imperfect information.
D)normative economics.

Accepted Answer

The economist's analysis incorporates the idea of opportunity costs, which is the value of the next best alternative forgone in order to make a particular investment or decision. In this case, the opportunity cost is the 3 percent return on a bank certificate of deposit that Joe could have earned if he had invested his money differently. Therefore, Joe did lose money in terms of the opportunity cost.

Question 13

Economics involves marginal analysis because
A)most decisions involve changes from the present situation.
B)marginal benefits always exceed marginal costs.
C)marginal costs always exceed marginal benefits.
D)much economic behavior is irrational.

Accepted Answer

Marginal analysis involves examining the costs and benefits of making incremental changes to a current situation. Since most decisions involve some form of change, it makes sense to use marginal analysis to weigh the costs and benefits of those changes. B, C, and D are incorrect because marginal benefits and costs can vary depending on the situation, and economic behavior is not necessarily always irrational.

Question 14

Opportunity costs exist because
A)the decision to engage in one activity means forgoing some other activity.
B)wants are scarce relative to resources.
C)households and businesses make rational decisions.
D)most decisions do not involve sacrifices or trade-offs.

Accepted Answer

Opportunity costs exist because the decision to engage in one activity means forgoing some other activity.

Question 15

Purposeful behavior suggests that
A)everyone will make identical choices.
B)resource availability exceeds economic wants.
C)individuals may make different choices because of different desired outcomes.
D)an individual's economic goals cannot involve trade-offs.

Accepted Answer

Purposeful behavior assumes that individuals have certain goals or outcomes they wish to achieve. However, these goals or outcomes may differ from person to person, leading to different choices being made. Therefore, option C is the best choice as it acknowledges individual differences in decision making. The other choices, A, B, and D, do not capture this important aspect of purposeful behavior.

Question 16

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day.This fact
A)is an example of irrational behavior.
B)implies that electronic media sources are displacing print sources for many consumers.
C)contradicts the economic perspective.
D)implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.

Accepted Answer

This fact implies that for most people, the marginal benefit of reading a second newspaper is less than the marginal cost. People are likely weighing the potential benefits of reading a second newspaper, such as gaining additional news and information, against the cost of purchasing an additional newspaper, and determining that the marginal benefit does not outweigh the marginal cost. This is a rational decision based on individual preferences and constraints. Additionally, the fact that people rarely buy more than one newspaper each day suggests that electronic media sources may be displacing print sources for many consumers.

Question 17

In deciding whether to study for an economics quiz or go to a concert, one is confronted by the idea(s) of
A)scarcity and opportunity costs.
B)money and real capital.
C)complementary economic goals.
D)full production.

Accepted Answer

The decision to study for an economics quiz or go to a concert involves the concepts of scarcity and opportunity costs. Scarcity refers to the limited amount of time that a person has and the opportunity cost of one choice over the other. If the individual chooses to attend the concert, they forgo the opportunity to study for the quiz, which may result in a lower grade. Therefore, the best choice is to study for the economics quiz to minimize the opportunity cost and increase the likelihood of achieving a better outcome.

Question 18

The study of economics is primarily concerned with
A)keeping private businesses from losing money.
B)demonstrating that capitalistic economies are superior to socialistic economies.
C)choices that are made in seeking the best use of resources.
D)determining the most equitable distribution of society's output.

Accepted Answer

The study of economics is concerned with the choices that are made in seeking the best use of resources. It involves understanding how society produces, distributes, and consumes goods and services. While some aspects of economics may be related to private businesses and the distribution of output, the primary focus is on the efficient allocation of resources. Additionally, economics does not advocate for one economic system over another, as different economies may be better suited for different contexts.

Question 19

Purposeful behavior means that
A)people are selfish in their decision making.
B)people weigh costs and benefits to make decisions.
C)people are immune from emotions affecting their decisions.
D)decision makers do not make mistakes when weighing costs and benefits.

Accepted Answer

Purposeful behavior means making decisions based on goals and intentions, and people often weigh the costs and benefits of their actions before making a choice. While emotions can factor into decision making, people generally try to make rational choices based on their goals and interests. However, people can still make mistakes in evaluating costs and benefits, leading to decisions that don't align with their intended goals.

Question 20

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase.This is a reflection of
A)resource scarcity and the necessity of choice.
B)purposeful behavior.
C)marginal costs that exceed marginal benefits.
D)the trade-off problem that exists between competing goals.

Accepted Answer

This statement reflects the idea of purposeful behavior, where consumers make choices based on their desire to obtain the maximum benefit or satisfaction from their purchases. While resource scarcity and trade-offs may also be relevant factors in consumer decision making, they are not explicitly reflected in this statement. The idea of marginal costs and benefits may also be applicable, but it is not specifically mentioned in the statement.

Quiz 1: Limits, Alternatives, and Choices

The economic perspective entails

When economists say that people act rationally in their self-interest, they mean that individuals

Economics may best be defined as the

You should decide to go to a movie

A person should consume more of something when its marginal

If someone produced too little of a good, this would suggest that

For economists, the word "utility" means

According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because

In economics, the pleasure, happiness, or satisfaction received from a product is called

The assertion that "there is no free lunch" means that

According to economists, economic self-interest

Economics involves marginal analysis because

Opportunity costs exist because

Purposeful behavior suggests that

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day.This fact

In deciding whether to study for an economics quiz or go to a concert, one is confronted by the idea(s) of

The study of economics is primarily concerned with

Purposeful behavior means that

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase.This is a reflection of