Quiz 1 Question 1 For a college student who wishes to calculate the true costs of going to college how should the costs of room and board be included in the calculation Answers a They should be counted only to the extent that they are more expensive at college than elsewhere b Room and board plus the cost of tuition equals the opportunity cost of going to college c They should be counted in full regardless of the costs of eating and sleeping elsewhere d They usually exceed the opportunity cost of going to college Question 2 What is the opportunity cost of an action Answers a The monetary payment the action required b The value of the best opportunity that must be sacrificed in order to take the action c The total time spent by all parties in carrying out the action d The cost of all alternative actions that could have been taken added together Question 3 Question 4 Because information is costly to acquire how does the cost change decision making Answers a People will rationally choose not to become fully informed when making decisions b People will generally choose to become as fully informed as possible when making decisions c People will generally choose to acquire no information that would be relevant to their decisions d None of the above are true Suppose an airline company has several empty seats on a flight and the full price of an air ticket is 700 while the marginal cost per passenger is 200 The flight leaves in one hour Which of the following actions will be the best profitable way to to ensure the remaining seats are sold Answers a Charge a stand by passenger 700 b Fill the seats at the last minute for any price c Charge a stand by passenger less than 200 d Charge a stand by passenger more than 200 e Charge a stand by passenger more than 700 Question 5 Modern economics as a field of study is usually thought to have begun with Answers a Adam Smith and the writing of The Wealth of Nations b Moses and the Ten Commandments c Aristotle and the writing of Politics and Ethics d David Ricardo and the writing of The Principles of Political Economy and Taxation Question 6 The difference between positive economic statements and normative economic statements is that Answers a positive statements are based on opinion while normative statements are based on fact b positive statements are true and normative statements are often false c positive statements are often false and normative statements are true d positive statements are based on fact while normative statements are based on opinion e both b and d Question 7 How is the value of a good determined Answers a It can be measured objectively by a survey of manufacturers of the good b It depends on the labor necessary to supply the good c It depends on many factors including who uses it and under what circumstances d It is determined by the cost of producing it Question 8 Economics is primarily the study of Answers a how to make money in the stock market b how to operate a business successfully c the allocation of scarce resources in an effort to satisfy wants that are virtually unlimited d the methods business firms use to reduce their costs of production Question 9 Harry a wheat farmer is deciding whether or not to add fertilizer to his crops If he adds 1 pound of fertilizer per acre the value of the resulting crops rises from 80 to 100 per acre According to marginal analysis Harry should add fertilizer if it costs less than how much Answers a 80 per pound b 12 50 per pound c 100 per pound d 20 per pound Question 10 What do economists mean when they use the term ceteris paribus Answers a Their conclusions are based on normative economics rather than positive economic analysis b The analysis is true for the individual but not for the economy as a whole c The relationship between two economic variables cannot be determined d All other variables except the ones specified are assumed to be constant Question 11 What is meant by scientific method Answers a Finding evidence to support preconceived theories about how the world works b The dispassionate development and testing of theories about how the world works c The use of controlled laboratory experiments to understand the way the world works d The use of modern electronic testing equipment to understand the world Question 12 Criteria for rationing goods and resources must be established due to which of the following Answers a The use of capitalism as a form of economic organization b The law of comparative advantage c The inability of politicians to develop efficient forms of economic organization d Scarcity imposed by nature Question 13 According to Adam Smith what is individual self interest Answers a It is a powerful force for economic progress when individuals are wisely directed by a strong central government b It could be either a positive or negative force for economic progress depending on the moral influences of political leaders c It is a powerful force for economic progress when it is directed by competitive markets d It is a major factor in retarding the economic progress of humankind Question 14 Which of the following about economic thinking is true Answers a If one individual gains from an economic activity then someone else must lose b If the intentions behind a policy are good you can be assured that the outcome will be desirable c If a good is provided free to an individual by government its production will not consume valuable scarce resources d Changes in personal costs and benefits will exert a predictable influence on the choices of people The fallacy of composition is the fallacious view that Question 15 Answers a it is possible for the whole to be greater than the sum of the individual parts b association does not necessarily indicate causation c what is true for the individual will also be true for the group d economic activity will benefit everyone Question 1 Quiz 2 The law of comparative advantage explains which of the following Answers a There will be an inverse relationship between the price of a product and the quantity of it that will be demanded b Larger firms will have lower per unit costs than smaller firms c Specialization and exchange will make it possible for trading partners to expand their combined output d An increase in the price of a good will lead to an expansion in the quantity supplied by business firms Question 2 Why is the production possibilities curve usually a bow shaped curve instead of a straight line Answers a Early economists
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