Question 1

Which of the following is an assumption that economists make?

Accepted Answer

A)   Most people possess entrepreneurial talent.
B)   People are very good at assessing the costs of decisions accurately.
C)   Individuals and firms will act to provide the things people want.
D)   Individuals usually fail to optimize the use of their resources because they think on the margin.E) B) and D)
F) C) and D)

Question 2

Which of the following questions would a macroeconomist most likely try to answer?

Accepted Answer

A)   What stage of the business cycle is our economy currently in?
B)   Why do Broadway musicals and airlines have different price discrimination strategies?
C)   How much would marijuana consumption change if the market became legal?
D)   Should the 5-Hour Energy firm increase its distribution from national to international?E) B) and D)
F) A) and B)

Question 3

Which of the following is an example of a normative statement?

Accepted Answer

A)   Tom is a college student.
B)   Immigration should be allowed in the United States.
C)   The cost of basic health insurance rose from the previous year.
D)   The federal minimum wage is $7.25.E) A) and B)
F) A) and C)

Question 4

After investigating an idea to open a rooftop restaurant in the downtown area of your community,you discover that any rooftop restaurant would violate city regulations.These circumstances would not be considered normal due to:

Accepted Answer

A)   innovation.
B)   market failure.
C)   intervention.
D)   goals other than profit.E) C) and D)
F) B) and D)

Question 5

Which of the following is not a way we sometimes confuse correlation and causation?

Accepted Answer

A)   Correlation without causation
B)   Omitted variables
C)   Reverse causality
D)   Non-linear relationshipsE) All of the above
F) B) and C)

Question 6

Purchasing a smart phone data plan,premium movie channels,and University of Alabama football season tickets results in you having to drop your health insurance plan.This can be described as:

Accepted Answer

A)   home field advantage
B)   a trade-off
C)   irrational decision making
D)   healthy livingE) C) and D)
F) A) and B)

Question 7

Which actor in the simplified circular flow model is on the supply side of the factor market?

Accepted Answer

A)   Firms
B)   Households
C)   Market for goods and services
D)   GovernmentE) All of the above
F) A) and C)

Question 8

Which of the following is an example of a normative statement?

Accepted Answer

A)   The average price of a Whopper Jr. is $1.69.
B)   The United States ought to adopt a flat rate personal income tax.
C)   A higher percentage of prostitutes incarcerated in Miami test positive for AIDS when compared to registered prostitutes in Nevada.
D)   Average growth in real GDP per year was 1.84 percent between 2000 and 2010.E) None of the above
F) A) and B)

Question 9

Hardee's announces "buy one get one free" breakfast sandwiches.This is an example of:

Accepted Answer

A)   the use of incentives.
B)   a macroeconomic decision.
C)   hoarding scarce resources.
D)   how people assess the health benefit of fast food breakfast.E) A) and B)
F) A) and D)

Question 10

The extra cost associated with producing or consuming the next unit is called the:

Accepted Answer

A)   variable cost.
B)   marginal cost.
C)   utility cost.
D)   sunk cost.E) A) and B)
F) A) and C)

Question 11

Scarcity can best be defined as a situation in which:

Accepted Answer

A)   consumers look for bargains.
B)   some producers are selfish with resources.
C)   people respond to incentives.
D)   all wants cannot be satisfied due to resource constraints.E) All of the above
F) A) and C)

Question 12

The two broad fields that make up the subject of economics are:

Accepted Answer

A)   microeconomics and macroeconomics.
B)   personal investments and business investments.
C)   fiscal policy and monetary policy.
D)   imports and exports.E) None of the above
F) All of the above

Question 13

The principles of economics cannot explain which of the following:

Accepted Answer

A)   Why people choose to work or go to college.
B)   Why a country might prosper.
C)   How the value of money changes over time.
D)   How the temperature index is measured.E) A) and C)
F) A) and B)

Question 14

Opportunity Cost:

Accepted Answer

A)   only includes explicit, out of pocket expenses.
B)   is the value of your next best alternative.
C)   is never provided in dollar values.
D)   would not include lost wages from working when deciding to take a vacation.E) A) and B)
F) All of the above

Question 15

A relationship between two events where one event occurring brings about the other is described best as:

Accepted Answer

A)   a pattern.
B)   a trend.
C)   causation.
D)   correlation.E) C) and D)
F) A) and B)

Question 16

A local fast-food restaurant mails out coupons for a free sandwich to every home in the community.The opportunity cost of redeeming the sandwich for someone who was on a diet might be:

Accepted Answer

A)   lost wages due to spending time in a long line instead of eating a Healthy Choice meal in your office.
B)   not eating because you are on a "get fit for the summer" diet plan.
C)   eating a "Tough Man's Burger," which is one of your favorite fast food options.
D)   There was no opportunity cost for the sandwich because it was free.E) A) and C)
F) B) and C)

Question 17

An incentive is a concept that addresses which question used by economists?

Accepted Answer

A)   What are the wants and constraints of those involved?
B)   What are the trade-offs?
C)   How will others respond?
D)   Why isn't everyone already doing it?E) B) and C)
F) C) and D)

Question 18

Which of the following is a normative statement?

Accepted Answer

A)   College tuition rates are rising.
B)   Twenty-eight percent of U.S. adults have a bachelor's degree.
C)   The average income of a college graduate exceeds that of the average high school graduate.
D)   State governments should pay for the first two years of college at public institutions.E) A) and B)
F) A) and C)

Question 19

Which is not one of the four basic questions used by economists to break down problems?

Accepted Answer

A)   What do others think?
B)   What are the trade-offs?
C)   How will others respond?
D)   Why isn't everyone already doing it?E) A) and B)
F) None of the above

Question 20

Which of the following economic decisions would most likely be studied by a macroeconomist?

Accepted Answer

A)   Domino's Pizza decides to provide quantity discounts in order to increase revenue.
B)   A local entrepreneur decides to open a Waffle House in the local Walmart parking lot.
C)   The government of Estonia implements a flat rate personal income tax for all citizens.
D)   Prices for train fares rise as labor unions negotiate higher wage rates.E) A) and B)
F) A) and C)

Exam 1: Economics and Life

Scarcity can best be defined as a situation in which:

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Opportunity Cost:

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An incentive is a concept that addresses which question used by economists?

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Which of the following economic decisions would most likely be studied by a macroeconomist?

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A local fast-food restaurant mails out coupons for a free sandwich to every home in the community.The opportunity cost of redeeming the sandwich for someone who was on a diet might be:

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Hardee's announces "buy one get one free" breakfast sandwiches.This is an example of:

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Which of the following is an example of a normative statement?

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Purchasing a smart phone data plan,premium movie channels,and University of Alabama football season tickets results in you having to drop your health insurance plan.This can be described as:

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Which of the following questions would a macroeconomist most likely try to answer?

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Which of the following is a normative statement?

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The extra cost associated with producing or consuming the next unit is called the:

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The principles of economics cannot explain which of the following:

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After investigating an idea to open a rooftop restaurant in the downtown area of your community,you discover that any rooftop restaurant would violate city regulations.These circumstances would not be considered normal due to:

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Which actor in the simplified circular flow model is on the supply side of the factor market?

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Which of the following is an example of a normative statement?

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Which of the following is an assumption that economists make?

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A relationship between two events where one event occurring brings about the other is described best as:

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Which is not one of the four basic questions used by economists to break down problems?

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The two broad fields that make up the subject of economics are:

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Which of the following is not a way we sometimes confuse correlation and causation?

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