Student name:__________ 1) Economics is best

defined as the study of

D) the financial
A) inflation, interest rates, and the stock market. concerns of businesses and
B) supply and demand. individuals.
C) how people make choices in the face of scarcity
and the implications of those choices for society as a whole.

2) Economics is best defined as the study of

D) whether we will
A) the financial concerns of businesses and have enough resources in
individuals. the future.
B) the role of government in limiting the choices
people make.
C) choice in the face of limited resources.

3) Economists recognize that because people have

limited resources

D) our future is
A) government intervention is necessary. bleak.
B) they have to make trade-offs.
C) they will never be happy.

4) The Scarcity Principle states that

D) some countries
A) people don't have enough money to buy what they have fewer resources than
want. others.
B) society will eventually run out of resources.
C) with limited resources, having more of one thing
means having less of another.

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5) An implication of scarcity is that

D) people must
A) people will never be happy. make trade-offs.
B) making trade-offs becomes unnecessary as wealth
increases.
C) some people will always be poor.

6) If all the world's resources were to magically increase

one hundredfold, then

D) trade-offs would
A) people would still have to make trade-offs. become unnecessary.
B) economics would no longer be relevant.
C) scarcity would disappear.

7) The Scarcity Principle applies to

C) firms primarily.
A) poor people primarily. D) everyone.
B) consumers primarily.

8) Forest lives in complete isolation in Montana. He is

self-sufficient and feeds himself through hunting, fishing, and
farming. Which of the following statements about Forest is
true?

D) Forest doesn't
A) Forest has unlimited resources. have to consider costs and
B) Forest is not required to make trade-offs because he benefits.
is self-sufficient.
C) Forest has to make trade-offs.

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9) The Scarcity Principle applies to

D) only the poor.

A) all decisions.
B) only market decisions, e.g., buying a car.
C) only non-market decisions, e.g., watching a sunset.

10) Chris has a one-hour break between classes every

Wednesday. Chris can either stay at the library and study or
go to the gym and work out. The decision Chris must make is

D) an economic
A) not an economic problem because neither activity problem because Chris has
costs money. only one hour, and
B) not an economic problem because it's an hour that engaging in one activity
Chris has no matter what he does. means giving up the other.
C) an economic problem because the tuition Chris
pays covers the cost of both the gym and the library.

11) Jackie wants to go to the football game this weekend,

but she has a paper due on Monday. It will take her the whole
weekend to write the paper. Jackie decides to stay home and
work on the paper. According to the Scarcity Principle, the
reason Jackie doesn't go to the game is that

D) going to the
A) Jackie prefers schoolwork to football games. game won't be fun.
B) writing the paper is easier than going to the game.
C) Jackie can't go the game and finish the paper.

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12) Whether studying the output of the U.S. economy or
how many classes a student will take, a unifying concept is
that

trade-offs have to be made.

A) wants are limited and resources are unlimited, so D) both wants and
trade-offs are unnecessary. resources are unlimited, so
B) wants are unlimited and resources are scarce, so trade-offs are unnecessary.
trade-offs have to be made.
C) wants are limited and resources are unlimited, so

13) The Cost-Benefit Principle indicates that an action

should be taken if

D) its extra benefit

A) its total benefits exceed its total costs. is greater than or equal to
B) its average benefits exceed its average costs. its extra cost.
C) its net benefit (benefit minus cost) is zero.

14) If a person takes an action if, and only if, the extra extra costs, then that
benefits from taking that action are at least as great as the person is

D) not rational.
A) not following the Cost-Benefit Principle.
B) following the Scarcity Principle.
C) following the Cost-Benefit Principle.

15) Choosing to study for an exam until the extra benefit

(e.g., improved score) equals the extra cost (e.g., the value of
forgone activities) is

D) not rational
A) not an economic choice.
B) an application of the Cost-Benefit Principle.
C) an application of the Scarcity Principle.

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because it ignores the importance of total benefits and total
costs.

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16) The Scarcity Principle tells us ______, and the Cost-
Benefit Principle tells us ______.

D) how to make
A) that choices must be made; how to make good good choices; that choices
choices involve costs and benefits
B) that good choices eliminate scarcity; how to make
good choices
C) how to make choices; that choices must be made

17) According to the Cost-Benefit Principle, you should

go see the latest Fast and Furious movie with your friends this
weekend if

movies is greater than the

A) the extra benefits of seeing the movie are greater average cost of a ticket.
than the extra costs of seeing the movie.
B) you really like action movies.
C) you can afford to go to the movies.
D) the average benefit you get from going to the

18) A rational person

less than zero.

A) makes choices based on total benefits and total D) considers the
costs. financial benefits and
B) makes choices based on added benefits and added financial costs of making a
costs. choice.
C) undertakes activities until the net benefits become

19) Suppose that the extra cost to Ava of a third glass of

soda is zero because she's at a restaurant that gives free refills.
According to the Cost-Benefit Principle Ava should

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 drinking soda is positive.
A) drink a third glass of soda. D) not drink a third
B) drink a third glass of soda if the extra benefit of glass of soda.
doing so is positive.
C) drink a third glass of soda if her total benefit from

20) Janie must choose to either mow the lawn or wash will therefore choose to
clothes. If she mows the lawn, she will earn $30, and if she ______ because it
washes clothes, she will earn $45. She dislikes both tasks generates a ______
equally and they both take the same amount of time. Janie economic surplus.

D) wash clothes;
A) mow the lawn; bigger smaller
B) wash clothes; bigger
C) mow the law; smaller

21) Janie must choose to either mow the lawn or wash will therefore choose
clothes. If she mows the lawn, she will earn $25, and if she ______ because ______.
washes clothes, she will earn $40. She dislikes both tasks
equally and they both take the same amount of time. Janie

surplus
A) to wash clothes; it generates a bigger economic D) to wash clothes;
surplus it is easier
B) to mow the lawn; it is easier
C) to mow the lawn; it generates a smaller economic

22) Dean should play golf instead of preparing for

tomorrow's exam in economics if

than the economic surplus

A) he is irrational. from studying.
B) the benefit of golfing is greater than the benefit of D) Dean can play
studying. golf for free.
C) the economic surplus from playing golf is greater

Version 1 7
23) Lauren was accepted at three different graduate
schools, and she must choose one. Elite U costs $50,000 per
year and did not offer Lauren any financial aid. Lauren values
attending Elite U at $60,000 per year. State College costs
$30,000 per year and offered Lauren an annual $10,000
scholarship. Lauren values attending State College at $40,000
per year. NoName U costs $20,000 per year and offered
Lauren a full $20,000 annual scholarship. Lauren values
attending NoName at $15,000 per year. Lauren's opportunity
cost of attending Elite U is

C) $20,000.
A) $70,000. D) $15,000.
B) $50,000.

24) Lauren was accepted at three different graduate Lauren a full $20,000
schools, and she must choose one. Elite U costs $50,000 per annual scholarship. Lauren
year and did not offer Lauren any financial aid. Lauren values values attending NoName
attending Elite U at $60,000 per year. State College costs at $15,000 per year.
$30,000 per year and offered Lauren an annual $10,000 Lauren's opportunity cost
scholarship. Lauren values attending State College at $40,000 of attending State College
per year. NoName U costs $20,000 per year and offered is

C) $20,000.
A) $35,000. D) $15,000.
B) $30,000.

25) Lauren was

accepted at three different
graduate schools, and she
must choose one. Elite U
costs $45,000 per year and
did not offer Lauren any
financial aid. Lauren

Version 1 8
values attending Elite U at $80,000 per year. State College attending NoName at
costs $30,000 per year and offered Lauren an annual $10,000 $10,000 per year. Lauren's
scholarship. Lauren values attending State College at $45,000 opportunity cost of
per year. NoName U costs $25,000 per year and offered attending NoName U is
Lauren a full $25,000 annual scholarship. Lauren values

C) $35,000.
A) $25,000. D) $30,000.
B) $20,000.

26) Lauren was accepted at three different graduate

schools, and she must choose one. Elite U costs $50,000 per
year and did not offer Lauren any financial aid. Lauren values
attending Elite U at $60,000 per year. State College costs
$30,000 per year and offered Lauren an annual $10,000
scholarship. Lauren values attending State College at $40,000
per year. NoName U costs $20,000 per year and offered
Lauren a full $20,000 annual scholarship. Lauren values
attending NoName at $15,000 per year. Lauren's opportunity
cost of attending NoName U is

C) $20,000.
A) $60,000. D) $15,000.
B) $30,000.

27) Lauren was accepted at three different graduate economic surplus by

schools and must choose one. Elite U costs $50,000 per year attending
and did not offer Lauren any financial aid. Lauren values
attending Elite U at $60,000 per year. State College costs
$30,000 per year, and offered Lauren an annual $10,000
scholarship. Lauren values attending State College at $40,000
per year. NoName U costs $20,000 per year, and offered
Lauren a full $20,000 annual scholarship. Laruren values
attending NoName at $15,000 per year. Lauren maximizes her

A) Elite U.

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 B) State College. $20,000.
C) NoName U because she has a full scholarship
there.
D) NoName U because the annual cost is only

28) Lauren was accepted at three different graduate attending NoName at

schools, and she must choose one. Elite U costs $50,000 per $15,000 per year. What is
year and did not offer Lauren any financial aid. Lauren values Lauren's economic surplus
attending Elite U at $60,000 per year. State College costs from attending State
$30,000 per year and offered Lauren an annual $10,000 College instead of her next
scholarship. Lauren values attending State College at $40,000 best alternative?
per year. NoName U costs $20,000 per year and offered
Lauren a full $20,000 annual scholarship. Lauren values

C) $10,000
A) $40,000 D) $5,000
B) $20,000

29) Jen spends her afternoon at the beach, paying $1 to opportunity cost of going
rent a beach umbrella and $11 for food and drinks rather than to the beach is
spending an equal amount of money to go to a movie. Her

D) the value she

A) the $12 she spent on the umbrella, food, and places on seeing the movie
drinks. plus the $12 she spent on
B) only $0 because she would have spent $12 to go to the umbrella, food, and
the movie. drinks.
C) the value she places on seeing the movie.

30) Jen spends her afternoon at the beach, paying $1 to opportunity cost of going
rent a beach umbrella and $11 for food and drinks rather than to the beach is
spending an equal amount of money to go to a movie. Her

refreshments.
A) the $12 she spent on the umbrella and B) only $0 because

Version 1 10
she would have spent $12 to go to the movie. D) the value she
C) the value she places on seeing the movie plus the places on seeing the
$12 she spent on the umbrella and refreshments. movie.

31) All else equal, relative to a person who earns

minimum wage, a person who earns $30 per hour has

D) the same
A) a higher opportunity cost of working an additional opportunity cost of
hour. spending time on leisure
B) a higher opportunity cost of taking the day off activities.
work.
C) a lower opportunity cost of driving farther to work.

32) The opportunity cost of an activity includes the value

of

D) the chosen
A) all of the alternatives that must be forgone. activity minus the value of
B) the next-best alternative that must be forgone. the next-best alternative.
C) the least-best alternative that must be forgone.

33) Kendall is thinking about going to the movies tonight. Kendall's opportunity cost
A movie ticket costs $15, and she'll have to cancel a $20 dog- of going to the movies is
sitting job that she would have been willing to do for free.

C) $20.
A) $5. D) $35.
B) $15.

34) Kendall is thinking about going to the movies tonight. sitting job that she would
A movie ticket costs $20, and she'll have to cancel a $15 dog-

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have been willing to do for free. Kendall’s opportunity cost of going to the movies is

C) $24.
A) $35. D) $19.
B) $16.

35) The economic surplus of an action is

taking an action.
A) the benefit gained by taking an action. D) the money a
B) the difference between the explicit and implicit person has left over after
costs of taking an action. taking an action.
C) the difference between the benefit and the cost of

36) You are trying to decide whether to purchase a Harry same. If the cost of buying
Potter book online or borrow it from the library. There is no the book online is $13,
charge for borrowing a book from the library, but going to the then you should
library takes more time than ordering a book online.
Regardless of how you get the book, its benefit to you is the

$13.
A) borrow the book from the library because you can D) buy the book
get it from the library for free. online because it takes less
B) borrow the book from the library if the cost of time.
doing so (in terms of the extra time it takes) is less than $13.
C) borrow the book from the library if the cost of
doing so (in terms of the extra time it takes) is greater than

37) Alex received a four-year scholarship to State U that supplies. If Alex becomes
covered tuition and fees, room and board, and books and a full-time student, then

U.
A) attending State U for four years is costless for C) the opportunity
Alex. cost of attending State U
B) Alex has no incentive to study hard while at State includes the money Alex

Version 1 12
could have earned working for four years. each of the other schools to
D) the opportunity cost of attending State U includes which Alex was admitted.
the sum of the benefits Alex would have had from attending

38) Suppose Monique is willing to pay up to $15,000 for a economic _____ would be
used Ford pick-up truck. If she buys one for $12,000, her ______.

C) surplus; $3,000
A) benefit; $12,000 D) surplus; $12,000
B) cost; $15,000

39) Suppose Monique is willing to pay up to $14,000 for a economic ______ would
used Ford pick-up truck. If she buys one for $11,000, her be ______.

C) benefit; $3,000
A) surplus; $11,000 D) surplus; $3,000
B) surplus; $25,000

40) If individuals are rational, they should choose actions

that yield the

D) largest
A) largest total benefits. economic surplus.
B) smallest total costs.
C) smallest economic surplus.

41) Suppose the most you would be willing to pay for a

plane ticket home is $250. If you buy one for $175, then your
economic surplus is

C) $75.
A) $250. D) $0.
B) $175.

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42) Suppose the most you would be willing to pay for a 55
inch TV is $900. If you buy one for $400, then your economic
surplus is

C) $0.
A) $500. D) $400.
B) a 55 inch TV.

43) The Cost-Benefit Principle

enough education.
A) fully captures how people choose between D) provides little
alternatives. insight into how people
B) provides an abstract model of how people should actually chose between
choose between alternatives. alternatives.
C) describes how people behave once they have

44) Economists believe the Cost-Benefit Principle is

D) of little use to
A) a simple but useful model of how people should those who wish to learn
make choices. how to make better
B) a comprehensive description of all the factors that decisions.
influence people's choices.
C) an interesting intellectual exercise with little
applicability to the real world.

45) The cost-benefit model used by economists is

B) unrealistic
A) unrealistic because it is too detailed and specific to because everyone can
apply to most situations. think of times when he or

Version 1 14
she violated the principle. time.
C) useful because everyone follows it all of the time.
D) useful because most people follow it most of the

46) Economists use abstract models because

behavior.
A) every economic situation is unique, so it is D) computers have
impossible to make generalizations. allowed economists to
B) every economic situation is essentially the same, so develop abstract models.
specific details are unnecessary.
C) they are useful for describing general patterns of

47) The fact that most people make some decisions based
on intuition rather than calculation is

D) inconsistent
A) irrational, because intuition is usually wrong. with the cost-benefit
B) consistent with the cost-benefit model because model, but still rational.
calculating costs and benefits is irrational.
C) consistent with the cost-benefit model because
most people intuitively weigh costs and benefits.

48) Moe has a big exam tomorrow. He considered Moe always chooses
studying this evening but decided to hang out with Curly rationally, it must be true
instead. If neither activity involves any explicit costs, and that

Curly than from studying.

A) the opportunity cost of studying is greater than the D) Moe gets less
value Moe gets from spending time with Curly. benefit from spending time
B) the opportunity cost of studying is less than the with Curly than from
value Moe gets from spending time with Curly. studying.
C) Moe gets more benefit from spending time with

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49) If one fails to account for implicit costs in decision
making, then applying the cost-benefit rule will be flawed
because

D) the costs will be

A) the benefits will be overstated. overstated.
B) the costs will be understated.
C) the benefits will be understated.

50) Your classmates from the University of Chicago are graduation, which your
planning to go to Miami for spring break, and you are parents are forcing you to
undecided about whether you should go with them. The attend. The Chicago-
round-trip airfare is $600, but you have a frequent-flyer Atlanta round-trip airfare
coupon worth $500 that you could use to pay part of the is $450. If you do not use
airfare. All other costs for the vacation are exactly $900. The the frequent-flyer coupon
most you would be willing to pay for the trip is $1,400. Your to fly to Miami, should you
only alternative use for your frequent-flyer coupon is for your go to Miami?
trip to Atlanta two weeks after the break to attend your sister's

D) No, because
A) Yes, your benefit is more than your cost. there are no benefits in the
B) No, your benefit is less than your cost. trip.
C) Yes, your benefit is equal to your cost.

51) Your classmates from the University of Chicago are Chicago-Atlanta round-trip
planning to go to Miami for spring break, and you are airfare is $450. What is the
undecided about whether you should go with them. The opportunity cost of using
round-trip airfare is $600, but you have a frequent-flyer the coupon for the Miami
coupon worth $500 that you could use to pay part of the trip?
airfare. All other costs for the vacation are exactly $900. The
most you would be willing to pay for the trip is $1,400. Your
only alternative use for your frequent-flyer coupon is for your
trip to Atlanta two weeks after the break to attend your sister's
graduation, which your parents are forcing you to attend. The

B) $450
A) $100 C) $500

Version 1 16
 D) $550

Version 1 17
52) Your classmates from the University of Chicago are graduation, which your
planning to go to Miami for spring break, and you are parents are forcing you to
undecided about whether you should go with them. The attend. The Chicago-
round-trip airfare is $600, but you have a frequent-flyer Atlanta round-trip airfare
coupon worth $500 that you could use to pay part of the is $450. Should you use
airfare. All other costs for the vacation are exactly $900. The the frequent flyer coupon
most you would be willing to pay for the trip is $1,400. Your to go to Miami?
only alternative use for your frequent-flyer coupon is for your
trip to Atlanta two weeks after the break to attend your sister's

D) No, because
A) Yes, your benefit is more than your cost. there are no benefits in the
B) No, your benefit is less than your cost. trip.
C) Yes, your benefit is equal to your cost.

53) Your classmates from the University of Chicago are graduation, which your
planning to go to Miami for spring break, and you are parents are forcing you to
undecided about whether you should go with them. The attend. The Chicago-
round-trip airfare is $600, but you have a frequent-flyer Atlanta round-trip airfare
coupon worth $500 that you could use to pay part of the is $450. If the Chicago-
airfare. All other costs for the vacation are exactly $900. The Atlanta round-trip air fare
most you would be willing to pay for the trip is $1,400. Your were $350, should you use
only alternative use for your frequent-flyer coupon is for your the coupon to go to
trip to Atlanta two weeks after the break to attend your sister's Miami?

D) Yes, your
A) No, your economic surplus would be −$50. economic surplus would be
B) No, your economic surplus would be −$100. $400.
C) Yes, your economic surplus would be $50.

54) Sam earns $25,000

per year (after taxes), and
Sam's spouse, Ryan, earns
$35,000 (after taxes). They

Version 1 18
have two pre-school-aged children. Childcare for their Sam spending more time
children costs $12,000 per year. Given that Ryan doesn't want with the kids is greater
to stay home with the kids, regardless of what Sam does, Sam than
should stay home with the kids if, and only if, the value of

D) $12,000 per
A) $37,000 per year. year.
B) $25,000 per year.
C) $13,000 per year.

55) You paid $35 for a ticket (which is nonrefundable) to The cost to you of working
see SPAM, a local rock band, in concert on Saturday. Assume is $2/hr. Should you go to
that $35 is the most you would have been willing to pay for a the concert instead of
ticket. Your boss called, and she is looking for someone to working Saturday?
cover a shift on Saturday at the same time as the concert. You
would have to work 4 hours and she would pay you $11/hr.

the cost.
A) Yes, the benefit of going to the concert is more D) No, because
than the cost. there are no benefits of
B) No, the benefit of going to the concert is less than going to the concert.
the cost.
C) Yes, the benefit of going to the concert is equal to

56) You paid $35 for a ticket (which is nonrefundable) to The cost to you of working
see SPAM, a local rock band, in concert on Saturday. Assume is $2/hr. What is the
that $35 is the most you would have been willing to pay for a opportunity cost of going
ticket. Your boss called, and she is looking for someone to to the concert?
cover a shift on Saturday at the same time as the concert. You
would have to work 4 hours and she would pay you $11/hr.

C) $35
A) $1 D) $36
B) $9

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57) You paid $35 for a ticket (which is nonrefundable) to The cost to you of working
see SPAM, a local rock band, in concert on Saturday. Assume is $2/hr. What is your
that $35 is the most you would have been willing to pay for a opportunity cost of going
ticket. Your boss called, and she is looking for someone to to work on Saturday?
cover a shift on Saturday at the same time as the concert. You
would have to work 4 hours and she would pay you $11/hr.

C) $35
A) $0 D) $36
B) $9

58) You paid $35 for a ticket (which is nonrefundable) to The cost to you of working
see SPAM, a local rock band, in concert on Saturday. Assume is $2/hr. Your economic
that $35 is the most you would have been willing to pay for a surplus from going to work
ticket. Your boss called, and she is looking for someone to instead of seeing SPAM on
cover a shift on Saturday at the same time as the concert. You Saturday is
would have to work 4 hours and she would pay you $11/hr.

C) $35.
A) $0. D) $36.
B) $1.

59) Matt has decided to purchase his textbooks for the $16. The benefit to Matt of
semester. His options are to purchase the books online with buying his books at the
next-day delivery at a cost of $175, or to drive to campus university bookstore
tomorrow to buy the books at the university bookstore at a instead of online is
cost of $170. Last week he drove to campus to buy a concert
ticket because they offered 25 percent off the regular price of

C) $170.
A) $5. D) $175.
B) $9.

60) Matt has decided to

purchase his textbooks for

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the semester. His options are to purchase the books online $16. The benefit to Matt of
with next-day delivery at a cost of $175, or to drive to campus driving to campus to buy
tomorrow to buy the books at the university bookstore at a the concert ticket last week
cost of $170. Last week he drove to campus to buy a concert was
ticket because they offered 25 percent off the regular price of

C) $9.
A) $2. D) $16.
B) $4.

61) Matt has decided to purchase his textbooks for the $16. Given that driving to
semester. His options are to purchase the books online with campus to buy the concert
next-day delivery at a cost of $175, or to drive to campus ticket was rational for
tomorrow to buy the books at the university bookstore at a Matt, Matt should
cost of $170. Last week he drove to campus to buy a concert
ticket because they offered 25 percent off the regular price of

the concert ticket.

A) not drive to campus to buy the books because the D) not drive to
$5 he would save is only two percent of the cost of the books, campus to buy the books
and that is much less than the 25 percent he saved on the because the cost of gas and
concert ticket. his time must certainly be
B) drive to campus to buy the books because the more than the $5 he would
books are cheaper at the bookstore than online. save.
C) drive to campus to buy the books because the $5 he
would save is more than he saved by driving to campus to buy

62) Matt has decided to

purchase his textbooks for
the semester. His options
are to purchase the books
online with next-day
delivery at a cost of $175,
or to drive to campus
tomorrow to buy the books
at the university bookstore
at a cost of $170. Last

Version 1 21
week he drove to campus to buy a concert ticket because they the university bookstore
offered 25 percent off the regular price of $16. Assume the rather than online?
minimum that Matt would be willing to accept to drive to
campus is equal to the $4 he saved on the concert ticket. What
would his economic surplus be if he bought his textbooks at

C) $50
A) $5 D) $20
B) $1

63) The marginal benefit of an activity is the

activity.
A) same as the total benefit of an activity. D) total benefit
B) total benefit of an activity divided by the level of associated with an extra
the activity. unit of the activity.
C) extra benefit associated with an extra unit of the

64) Suppose the total benefit of watching 1 baseball game marginal benefit of
is 100, the total benefit of watching 2 games is 120, and the watching the 3rd game is
total benefit of watching 3 games is 125. In this case, the

C) 41.67.
A) 125. D) 375.
B) 5.

65) Suppose the total benefit of watching 1 baseball game marginal benefit of
is 100, the total benefit of watching 2 games is 175, and the watching the 2nd game is
total benefit of watching 3 games is 225. In this case, the

C) 175.
A) 87.5. D) 75.
B) 50.

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66) The extra benefit that results from carrying out one
additional unit of an activity is the ______ of the activity.

D) economic
A) marginal benefit benefit
B) total benefit
C) average benefit

67) The marginal cost of an activity is the

activity.
A) change in the total cost of the activity that results D) change in the
from carrying out an additional unit of the activity. level of the activity divided
B) total cost of the activity divided by the change in by the change in the cost of
the level of the activity. the activity.
C) total cost of the activity divided by the level of the

68) The extra cost that results from carrying out one
additional unit of an activity is the _____ of the activity.

C) reservation cost
A) marginal benefit D) opportunity cost
B) marginal cost

69) Dividing the total cost of undertaking n units of an

activity by n reveals the

C) units per cost.

A) average benefit. D) average cost.
B) marginal cost.

70) For the fall

semester, you had to pay a

Version 1 23
nonrefundable fee of $600 for your meal plan, which gives
you up to 150 meals. If you eat all of the meals, your average
cost per meal is

C) $4.00.
A) $6.00. D) $0.25.
B) $5.00.

71) For the fall semester, you had to pay a nonrefundable

fee of $500 for your meal plan, which gives you up to 300
meals. If you eat 300 meals, your average cost per meal is

C) $3.33.
A) $0.60. D) $1.67.
B) $6.00.

72) For the fall semester, you had to pay a nonrefundable

fee of $600 for your meal plan, which gives you up to 150
meals. If you only eat 1 meal, your average cost for a meal is

C) $4.
A) $600. D) $596.
B) $150.

73) For the fall semester, you had to pay a nonrefundable

fee of $600 for your meal plan, which gives you up to 150
meals. If you eat 100 meals, your marginal cost of the 100th
meal is

C) $0.25.
A) $6.00. D) $0.
B) $4.00.

Version 1 24
74) The average benefit of n units of an activity is the

of the activity.
A) total benefit of n units divided by n.
B) n divided by the total benefit of n units.
C) n times the total benefit of n units.
D) extra benefit from carrying out one additional unit

75) You save $10 on gas every week because you take the average benefit per day of
bus to school. You have class 5 days a week. What is your taking the bus to school?

C) $2
A) $10 D) $0
B) $5

76) Your scholarship depends on your maintaining a 3.5

cumulative GPA. Your GPA for last semester was 3.6, which
brought your cumulative GPA down. What must be true?

D) If this semester's
A) Last semester's grades were higher than your grades are the same as last
overall GPA. semester's, you might lose
B) Last semester's grades were lower than your overall your scholarship.
GPA.
C) If this semester's grades are the same as last
semester's, your overall GPA will stay the same.

77) Refer to the accompanying table. The average cost of

4 units of this activity is

Units of Total Cost Total Benefit

Activity
0 $ 0 $ 0

Version 1 25
 1 30 100
2 40 160 A) $20.
3 60 190 B) $25.
C) $30.
4 100 210
D) $40.
5 150 220
6 210 225

78) Refer to the accompanying table. The marginal cost of

the 3rd unit of this activity is

Units of Total Cost Total Benefit 5 1 2

Activity 5 2
0 $ 0 $ 0 0 0
1 30 100 6 2 2
1 2
2 40 160
0 5
3 60 190
4 100 210

C) $20
A) $30 D) $10
B) $25

79) Refer to the accompanying table. The average benefit

of 2 units of activity is

Units of Total Cost Total Benefit 4 1 2

Activity 0 1
0 $ 0 $ 0 0 0
1 30 100 5 1 2
5 2
2 40 160
0 0
3 60 190

Version 1 26
 6 210 225
A) $80.
B) $60.
C) $40.
D) $20.

80) Refer to the accompanying table. The marginal benefit

of the 5th unit of activity is

Units of Total Cost Total Benefit 5 1 2

Activity 5 2
0 $ 0 $ 0 0 0
1 30 100 6 2 2
1 2
2 40 160
0 5
3 60 190
4 100 210

C) $10.
A) $50. D) $5.
B) $44.

81) Refer to the accompanying table. According to the

Cost-Benefit Principle, how many units of this activity should
be carried out?

Units of Total Cost Total Benefit 4 1 2

Activity 0 1
0 $ 0 $ 0 0 0
1 30 100 5 1 2
5 2
2 40 160
0 0
3 60 190

Version 1 27
 6 210 225

C) 4
A) 1 D) 6
B) 3

82) Refer to the accompanying table. The average cost of

5 units of activity is

Units of Total Cost Total Benefit 6 4 4

Activity 7 5 4
0 $ 0 $ 0
1 2 12 A) $4.
2 6 22 B) $6.
3 12 30 C) $8.
4 20 36 D) $10.
5 30 40

83) Refer to the accompanying table. The marginal cost of

the 4th unit of activity is

Units of Total Cost Total Benefit 6 4 4

Activity 7 5 4
0 $ 0 $ 0
1 2 12 A) $5.
2 6 22 B) $6.
3 12 30 C) $8.
4 20 36 D) $10.
5 30 40

Version 1 28
84) Refer to the accompanying table. The average benefit
of 4 units of activity is

Units of Total Cost Total Benefit

Activity
0 $ 0 $ 0
1 2 12
2 6 22
3 12 30
4 20 36
5 30 40
6 42 42
7 56 43

Version 1 29
 C) $9.
A) $4. D) $10.
B) $5.

85) Refer to the accompanying table. The marginal benefit

of the 6th unit of activity is

Units of Total Cost Total Benefit

Activity
0 $ 0 $ 0
1 2 12
2 6 22
3 12 30
4 20 36
5 30 40
6 42 42
7 56 43

Version 1 30
 C) $4.
A) $1. D) $7.
B) $2.

86) Refer to the accompanying table. According to the

Cost-Benefit Principle, how many units of this activity should
be carried out?

Units of Total Cost Total Benefit

Activity
0 $ 0 $ 0
1 2 12
2 6 22
3 12 30
4 20 36
5 30 40
6 42 42
7 56 43

Version 1 31
 C) 4
A) 2 D) 5
B) 3

87) The accompanying table shows how total donations,

average donations, total labor costs, and average labor costs
vary depending on the number of employees State U hires for
its fundraising activities:

Number Total Average Total Average 5 13 50

of Donation Donation Labor Labor ,4 ,0
Employee s s Costs Costs 16 00
s
1 $ $ 8,000 The total value of
30,000 donations raised by three
2 42,426 $ employees is
17,000
3 $ 27,000
17,321
4 60,000 9,500

C) $48,911.
A) $43,899. D) $51,963.
B) $45,000.

88) The accompanying table shows how total donations,

average donations, total labor costs, and average labor costs
vary depending on the number of employees State U hires for
its fundraising activities:

Number Total Average Total Average Emp s s Cost Cost

of Donation Donation Labor Labor loy s s

Version 1 32
 ees 5 13 50
1 $ $ 8,000 ,4 ,0
30,000 16 00
2 42,426 $
17,000 The total labor cost with 4
3 $ 27,000 employees is
17,321
4 60,000 9,500

C) $38,000.
A) $21,500. D) $43,121.
B) $22,000.

89) The accompanying table shows how total donations,

average donations, total labor costs, and average labor costs
vary depending on the number of employees State U hires for
its fundraising activities:

Number Total Average Total Average

of Donation Donation Labor Labor The president of State U
Employee s s Costs Costs decides to hire fundraising
s employees as long as their
1 $ $ 8,000 average benefit exceeds
30,000 their average cost. This
2 42,426 $ results in ______
17,000 employees being hired and
3 $ 27,000 a net benefit (total
17,321 donations minus total labor
4 60,000 9,500 costs) of ______.

5 13,416 50,000

C) 4; $60,000
A) 5; $17,080 D) 4; $22,000
B) 5; $67,080

Version 1 33
90) The accompanying table shows how total donations,
average donations, total labor costs, and average labor costs
vary depending on the number of employees State U hires for
its fundraising activities:

Number Total Average Total Average 5 13 50

of Donation Donation Labor Labor ,4 ,0
Employee s s Costs Costs 16 00
s
1 $ $ 8,000 The marginal benefit (in
30,000 terms of extra donations)
2 42,426 $ of the 2nd employee is
17,000
3 $ 27,000
17,321
4 60,000 9,500

C) $12,426.
A) $42,426. D) $11,337.
B) $21,213.

91) The accompanying table shows how total donations,

average donations, total labor costs, and average labor costs
vary depending on the number of employees State U hires for
its fundraising activities:

Number Total Average Total Average

of Donation Donation Labor Labor
Employee s s Costs Costs
s
1 $ $ 8,000
30,000

Version 1 34
 2 42,426 $ 5 13 50
17,000 ,4 ,0
3 $ 27,000 16 00
17,321
4 60,000 9,500 The marginal cost of the
4th employee is

C) $11,000.
A) $9,500. D) $13,000.
B) $10,750.

92) The accompanying table shows how total donations,

average donations, total labor costs, and average labor costs
vary depending on the number of employees State U hires for
its fundraising activities:

Number Total Average Total Average

of Donation Donation Labor Labor The Chair of the
Employee s s Costs Costs Economics Department at
s State U says that
1 $ $ 8,000 fundraising employees
30,000 should be hired as long as
2 42,426 $ their marginal benefit
17,000 exceeds their marginal
3 $ 27,000 cost. If the University
17,321 follows this advice, then
4 60,000 9,500 ______ employee(s) will
hired, and the net benefit
5 13,416 50,000 (total donations minus total
labor costs) will be
______.

C) 3; $25,426
A) 1; $22,000 D) 2; $3,476
B) 2; $25,426

Version 1 35
93) The accompanying table shows how total donations,
average donations, total labor costs, and average labor costs
vary depending on the number of employees State U hires for
its fundraising activities:

Number Total Average Total Average 5 13 50

of Donation Donation Labor Labor ,4 ,0
Employee s s Costs Costs 16 00
s
1 $ $ 8,000 The net benefit of hiring
30,000 fundraisers is largest when
2 42,426 $ ______ employees are
17,000 hired.
3 $ 27,000
17,321
4 60,000 9,500

C) 2
A) 4 D) 1
B) 3

94) Ginger bought a phone that came with a $10 rebate.

Ginger should fill out and mail in the rebate form if

opportunity cost.
A) the opportunity cost of the time and trouble of D) Ginger's surplus
sending in the rebate form is less than $10. from purchasing the phone
B) the opportunity cost of the time and trouble of was less than $10.
sending in the rebate form is more than $10.
C) she would have bought the phone without the
rebate, and so sending in the rebate form involves no

Version 1 36
95) Tony notes that an electronics store is offering a flat not a good offer. This is an
$20 off all prices in the store. Tony reasons that if he wants to example of
buy something with a price of $50, then it is a good offer, but
if he wants to buy something with a price of $500, then it is

than saving 4 percent.

A) inconsistent reasoning; saving $20 is saving $20. D) inconsistent
B) the proper application of the Cost-Benefit reasoning because prices
Principle. are sunk costs.
C) rational choice because saving 40 percent is better

96) Suppose a retail store was offering 10 percent off list

prices on all goods. The benefit of the 10 percent savings is

D) zero since costs

A) unrelated to the list price of the good. and benefits shouldn't be
B) negatively related to the list price of the good. measured proportionally.
C) positively related to the list price of the good.

97) A firm pays Alexa $40 per hour to assemble personal

computers. Each day, Alexa can assemble 4 computers if she
works 1 hour, 7 computers if she works 2 hours, 9 computers
if she works 3 hours, and 10 computers if she works 4 hours.
Alexa cannot work more than 4 hours day. Each computer
consists of a motherboard, a hard drive, a case, a monitor, a
keyboard, and a mouse. The total cost of these parts is $600
per computer. What is the marginal cost of producing the
computers that Alexa can assemble during her 3rd hour of
work?

C) $1,200
A) $5,400 D) $1,240
B) $5,520

98) A firm pays Alexa

Version 1 37
$40 per hour to assemble personal computers. Each day, What is the marginal cost
Alexa can assemble 4 computers if she works 1 hour, 7 of producing the
computers if she works 2 hours, 9 computers if she works 3 computers that Alexa can
hours, and 10 computers if she works 4 hours. Alexa cannot assemble during her 2nd
work more than 4 hours day. Each computer consists of a hour of work?
motherboard, a hard drive, a case, a monitor, a keyboard, and
a mouse. The total cost of these parts is $600 per computer.

C) $4,200
A) $1,800 D) $4,280
B) $1,840

99) A firm pays Alexa $40 per hour to assemble personal per computer. If the firm
computers. Each day, Alexa can assemble 4 computers if she sells each computer for
works 1 hour, 7 computers if she works 2 hours, 9 computers $625, then how many
if she works 3 hours, and 10 computers if she works 4 hours. hours a day should the firm
Alexa cannot work more than 4 hours day. Each computer employ Alexa to maximize
consists of a motherboard, a hard drive, a case, a monitor, a its net benefit from her
keyboard, and a mouse. The total cost of these parts is $600 employment?

C) 3 hours
A) 1 hour D) 4 hours
B) 2 hours

100) A firm pays Alexa $40 per hour to assemble personal

computers. Each day, Alexa can assemble 4 computers if she
works 1 hour, 7 computers if she works 2 hours, 9 computers
if she works 3 hours, and 10 computers if she works 4 hours.
Alexa cannot work more than 4 hours day. Each computer
consists of a motherboard, a hard drive, a case, a monitor, a
keyboard, and a mouse. The total cost of these parts is $600
per computer. If the firm sells each computer for $650, then
how many hours a day should the firm employ Alexa to
maximize its net benefit from her employment?

B) 2 hours
A) 1 hour C) 3 hours

Version 1 38
 D) 4 hours

Version 1 39
101) If Sasha works for 6 hours she can rent out 9
apartments, and if she works for 7 hours she can rent out 12
apartments. The marginal benefit of Sasha's 7th hour of work
equals

C) 3 apartments.
A) 12 apartments. D) 1 apartment.
B) 9 apartments.

102) If Sasha works for 6 hours she can rent out 9

apartments, and if she works for 7 hours she can rent out 12
apartments. The marginal benefit of Sasha's 7th hour of work
equals

C) 9 apartments.
A) 1 apartment. D) 3 apartments.
B) 12 apartments.

103) The accompanying table shows the relationship

between the speed of a computer's CPU and its benefits and
costs. Assume that all other features of the computer are the
same (that is, CPU speed is the only source of variation), and
only the CPU speeds listed in the table are available for
purchase.

CPU Total Marginal Total Marginal 3. $ $

GHz Benefit Benefit Cost Costs 5 1,90 1,
2.0 $ 1,000 $ 900 0 50
0
2.5 $ 1,400 $ 100 4. $ $
0 2,00
3.0 $ 300 $ 0 4
1,200 0

Version 1 40
 0

The marginal benefit of upgrading from a 2.0GHz computer

to a 2.5GHz computer is

C) $400.
A) $1,400. D) $100.
B) $1,000.

104) The accompanying table shows the relationship

between the speed of a computer's CPU and its benefits and
costs. Assume that all other features of the computer are the
same (that is, CPU speed is the only source of variation), and
only the CPU speeds listed in the table are available for
purchase.

CPU Total Marginal Total Marginal 4. $ $

GHz Benefit Benefit Cost Costs 0 2,00
2.0 $ 1,000 $ 900 0 4
0
2.5 $ 1,400 $ 100 0

3.0 $ 300 $ The total benefit of a

1,200
3.0GHz computer is
3.5 $ 1,900 $
1,500

C) $1,700.
A) $300. D) $1,650.
B) $900.

105) The accompanying table shows the relationship same (that is, CPU speed is
between the speed of a computer's CPU and its benefits and the only source of
costs. Assume that all other features of the computer are the variation), and only the

Version 1 41
CPU speeds listed in the table are available for purchase.

CPU Total Marginal Total Marginal 4. $ $

GHz Benefit Benefit Cost Costs 0 2,00
2.0 $ 1,000 $ 900 0 4
0
2.5 $ 1,400 $ 100 0

3.0 $ 300 $ The total cost of a 2.5GHz

1,200
computer is
3.5 $ 1,900 $
1,500

C) $200.
A) $1,000. D) $100.
B) $900.

106) The accompanying table shows the relationship

between the speed of a computer's CPU and its benefits and
costs. Assume that all other features of the computer are the
same (that is, CPU speed is the only source of variation), and
only the CPU speeds listed in the table are available for
purchase.

CPU Total Marginal Total Marginal 4. $ $

GHz Benefit Benefit Cost Costs 0 2,00
2.0 $ 1,000 $ 900 0 4
0
2.5 $ 1,400 $ 100 0

3.0 $ 300 $ The marginal cost of

1,200
upgrading from a 2.5GHz
3.5 $ 1,900 $ to 3.0GHz computer is
1,500

B) $300.
A) $400.

Version 1 42
 C) $200.
D) $100.

Version 1 43
107) The accompanying table shows the relationship
between the speed of a computer's CPU and its benefits and
costs. Assume that all other features of the computer are the
same (that is, CPU speed is the only source of variation), and
only the CPU speeds listed in the table are available for
purchase.

CPU Total Marginal Total Marginal 4. $ $

GHz Benefit Benefit Cost Costs 0 2,00
2.0 $ 1,000 $ 900 0 4
0
2.5 $ 1,400 $ 100 0

3.0 $ 300 $ Application of the Cost-

1,200
Benefit Principle would
3.5 $ 1,900 $ lead one to purchase a
1,500 ______ computer.

C) 3.0GHz
A) 2.0GHz D) 4.0GHz
B) 2.5GHz

108) The accompanying table shows the relationship

between the speed of a computer's CPU and its benefits and
costs. Assume that all other features of the computer are the
same (that is, CPU speed is the only source of variation), and
only the CPU speeds listed in the table are available for
purchase.

CPU Total Marginal Total Marginal

GHz Benefit Benefit Cost Costs
2.0 $ 1,000 $ 900

Version 1 44
 2.5 $ 1,400 $ 100
Choosing a 3.5GHz
3.0 $ 300 $ computer would be
1,200 irrational because
3.5 $ 1,900 $
1,500
4.0 $ 2,000 $ 400

D) its marginal
A) its marginal benefit is less than its marginal cost. benefit is greater than its
B) its marginal benefit is equal to its marginal cost. marginal cost.
C) it is impossible to tell the difference compared to a
3.0GHz computer.

109) Jack has a ticket to see Post Malone for which he paid keep his ticket. At the time
$30 yesterday. He takes an unpaid day off from work to get he makes this decision, his
ready for the concert. When he arrives at the concert, five opportunity cost of seeing
different people offer him $70 for his ticket. Jack decides to Post Malone is

D) $70 plus his

A) $30 plus his forgone earnings. forgone earnings.
B) $40.
C) $70.

110) Jody has purchased a nonrefundable $75 ticket to concert and going out to
attend a Miley Cyrus concert on Friday night. Subsequently, dinner, the opportunity
she is asked to go to out dinner at no expense to her. If she cost of going out to dinner
uses cost-benefit analysis to choose between going to the should include

D) neither the cost

A) only the entertainment value of the concert. of the ticket nor the
B) the cost of the ticket plus the entertainment value of entertainment value of the
the concert. concert.
C) only the cost of concert ticket.

Version 1 45
111) You won a free ticket to see the latest superhero movie willing to pay as much as
this Friday night (which you can costlessly resell for its face $50 for a ticket. Based on
value of $15). Your favorite band is also performing on this information, what is
Friday and is your only alternative activity. Friday is your last your opportunity cost of
chance to see either the movie or the band. Tickets to see your going to see the movie on
favorite band cost $30, and on any given day, you would be Friday?

C) $35
A) $0 D) $50
B) $30

112) You want to buy a TV that regularly costs $250. You

can either buy the TV from a nearby store or from a store
that's downtown. Relative to going to the nearby store, driving
downtown involves additional time and gas. The downtown
store, however, has a 10 percent off sale this week. Last week
you drove downtown to save $20 on some concert tickets, a
15 percent savings. Should you drive downtown to buy the
TV?

D) No, because you

A) Yes, because you will save 10 percent, which is will only save 10 percent,
better than nothing. which is less than 15
B) No, because you will save more than $20. percent.
C) Yes, because you will save more than $20.

113) The accompanying table shows the relationship

between the number of times you get your car washed each
month and your total monthly benefit from car washes. Each
car wash costs $15.

Number of Car Total Monthly Benefit from 3 48

Washes Per Month Car Washes 4 56
0 $ 0 5 60
1 20
2 36

Version 1 46
What's the average benefit of 4 car washes per month?

C) $8
A) $14 D) $4
B) $12

114) The accompanying table shows the relationship

between the number of times you get your car washed each
month and your total monthly benefit from car washes. Each
car wash costs $15.

Number of Car Total Monthly Benefit from 4 56

Washes Per Month Car Washes 5 60
0 $ 0
1 20 What is the marginal cost
2 36 of the 5th car wash each
3 48 month?

C) $12
A) $15 D) $4
B) $14

115) The accompanying table shows the relationship

between the number of times you get your car washed each
month and your total monthly benefit from car washes. Each
car wash costs $15.

Number of Car Total Monthly Benefit from 3 48

Washes Per Month Car Washes 4 56
0 $ 0 5 60
1 20
2 36

Version 1 47
What is the marginal benefit of the 3rd car wash each month?

C) $16
A) $4 D) $48
B) $12

116) The accompanying table shows the relationship

between the number of times you get your car washed each
month and your total monthly benefit from car washes. Each
car wash costs $15.

Number of Car Total Monthly Benefit from 4 56

Washes Per Month Car Washes 5 60
0 $ 0
1 20 How many times a month
2 36 should you get your car
3 48 washed?

C) 3
A) 1 D) 4
B) 2

117) Ushi owns an apple farm and plans to spend 4 hours

today picking apples. The number of apples he can pick per
hour depends on the total number of hours he spends working
in either the east orchard or the west orchard in the manner
shown in the accompanying table:

Hours in Number of Hours in Number of

East Apples Per West Apples Per
Orchard Hour Orchard Hour

Version 1 48
 1 40 1 10
2 32 2 10 If Ushi spends 2 hours
3 25 3 10 picking apples in the east
orchard and 2 hours
4 20 4 10
picking apples in the west
orchard, how many apples
in total will Ushi be able to
pick today?

C) 84
A) 21 D) 92
B) 42

118) Ushi owns an apple farm and plans to spend 4 hours

today picking apples. The number of apples he can pick per
hour depends on the total number of hours he spends working
in either the east orchard or the west orchard in the manner
shown in the accompanying table:

Hours in Number of Hours in Number of 4 20 4 10

East Apples Per West Apples Per
Orchard Hour Orchard Hour
What is the opportunity
1 40 1 10 cost to Ushi of spending an
2 32 2 10 additional hour picking
3 25 3 10 apples in the East orchard?

C) 30 apples
A) 10 apples D) 40 apples
B) 20 apples

Version 1 49
Hours in Number of Hours in Number of 4 20 4 10
East Apples Per West Apples Per
Orchard Hour Orchard Hour
What is the marginal
1 40 1 10 benefit to Ushi of the 2nd
2 32 2 10 hour he spends picking in
3 25 3 10 the east orchard?

C) 32 apples
A) 8 apples D) 64 apples
B) 24 apples

120) Ushi owns an apple farm and plans to spend 4 hours

today picking apples. The number of apples he can pick per
hour depends on the total number of hours he spends working
in either the east orchard or the west orchard in the manner
shown in the accompanying table:

Hours in Number of Hours in Number of 3 25 3 10

East Apples Per West Apples Per 4 20 4 10
Orchard Hour Orchard Hour
1 40 1 10
How should Ushi divide
2 32 2 10 his time between the east
and the west orchard?

D) He should spend
A) He should spend all 4 hours in the east orchard. 1 hour in the east orchard
B) He should spend 3 hours in the east orchard and 1 and 3 hours in the west
hour in the west orchard. orchard.
C) He should spend 2 hours in east orchard and 2
hours in the west orchard.

121) Positive economic principles are those that

B) are influenced
A) are always correct. by political ideology.

Version 1 50
 C) indicate how people should behave.
D) predict how people will behave.

122) One thing that distinguishes normative economic

principles from positive economic principles is that

behave.
A) normative principles are pessimistic and positive D) normative
principles are optimistic. principles tell us how
B) normative principles reflect social norms, and people will behave, and
positive principles reflect universal truths. positive principles tell us
C) normative principles tell us how people should how people should behave.
behave, and positive principles tell us how people will

123) Normative economic principles are concerned with

how people ______ make decisions while positive economic
principles are concerned with how people ______ make
decisions.

D) in ordinary life;
A) do; should in power
B) should; do
C) in power; in ordinary life

124) An editorial in the paper argues that a person only educating that person. The
should be allowed to attend school if the marginal cost of writer's reasoning is an
educating that person is less than the marginal benefit of application of

D) economic
A) positive economics. naturalism.
B) negative economics.
C) normative economics.

Version 1 51
125) The Incentive Principle states that a person

D) should take an
A) is more likely to take an action if its cost increases. action if its benefit
increases.
B) is more likely to take an action if its benefit
increases.
C) should take an action if its cost increases.

126) The Incentive Principle is an example of

D) a normative
A) an economic decision-making pitfall. economic principle.
B) overestimating the benefits of an action.
C) a positive economic principle.

127) According to the Incentive Principle, people will be

less likely to smoke if the government

D) invests more
A) increases taxes on smoking-cessation devices such money in cancer research.
as nicotine patches.
B) increases taxes on cigarettes, effectively raising the
price.
C) subsidizes hospitals treating lung disease.

128) According to the Incentive Principle

D) people tend to
A) it is irrational to perform volunteer services. do more of something
B) people will always take the highest-paying job they when its benefits are
are offered. greater.
C) benefits are more important than costs in making a
decision.

Version 1 52
129) Microeconomics differs from macroeconomics in that
microeconomics focuses on

D) government
A) the performance of the entire economy. policies designed improve
B) issues such as inflation, unemployment, and the performance of the
economic growth. national economy.
C) the choices made by individuals and the
implications of those choices.

130) Macroeconomics differs from microeconomics in that

macroeconomics focuses on

C) production in
A) individual choices and group behavior in individual specific markets.
markets. D) prices in
B) the performance of national economies and ways to specific markets.
improve that performance.

131) The study of individual choice and its implications for

the behavior of prices and quantities in individual markets is

D)
A) microeconomics. macroeconomics.
B) a normative economic principle.
C) the Scarcity Principle.

132) Which branch of economics is most likely to study

differences in countries' growth rates?

D) Experimental
A) Microeconomics economics
B) Normative economics
C) Macroeconomics

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133) Which of the following would not be studied in
microeconomics?

price of fruit
A) How individual firms decide how much to produce D) Whether the
federal budget should be
B) Whether to study or watch TV tonight balanced
C) How an early freeze in California will affect the

134) Which of the following would not be studied in

macroeconomics?

D) The impact of
A) The causes of the Great Depression government spending on
B) The growth rate of the U.S. economy the economy
C) How a sharp increase in gasoline prices is likely to
affect SUV sales

135) By convention, there are two major divisions of

economics, called

D) rational
A) marginal benefit and marginal cost. economics and irrational
B) reservation price and opportunity cost. economics.
C) microeconomics and macroeconomics.

136) A study that deals with the salaries of university

professors would be considered

D) real economics.
A) macroeconomics.
B) microeconomics.
C) economic naturalism.

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137) A study that deals with interest rates and bond prices
would be considered

D)
A) rational economics. macroeconomics.
B) microeconomics.
C) normative economics.

138) In deciding how many guitars to buy for his shop

before the Christmas season, Miguel is making a(n) ______
decision.

C) normative
A) microeconomic D) irrational
B) macroeconomic

139) A study of the impact of various government policies

on economic growth would be considered

D) marginal
A) microeconomics. economics.
B) macroeconomics.
C) government economics.

140) The field of economics that would be most concerned

with a recent fall in interest rates is

D) marginal
A) microeconomics. economics.
B) macroeconomics.
C) economic naturalism.

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141) An economic naturalist is someone who

D) studies the
A) uses economic arguments to protect the process of natural selection
environment. in a cost-benefit
B) has an innate talent for using economic concepts. framework.
C) applies economic insights to understand everyday
life.

142) With ATMs, it is possible to retrieve cash from the p.m. The present
bank at any time. One hundred years ago, one could only get availability of 24-hour
cash from the bank during business hours, say, 9 a.m. to 3 service has arisen because

today.
A) flexibility was not valued 100 years ago. D) government
B) it was impossible to provide 24-hour service 100 forced banks to become
years ago. more convenient.
C) the cost of providing 24-hour service is much lower

143) The number of U.S. households with access to the

Internet has grown rapidly. Compared to 50 years ago, one
would predict that when considering a major purchase, people
today will gather

D) more
A) less information because the Internet has lowered information because the
the cost of gathering information. Internet has increased the
B) less information because the Internet has increased cost of gathering
the benefit of gathering information. information.
C) more information because the Internet has lowered
the cost of gathering information.

144) Every time you go

to the grocery store, you

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try to wait in the shortest line. But the lines always seem to be
roughly the same length. Why?

D) The cashiers do
A) Random chance equalizes the length of the lines. not have an incentive to
B) Other people are trying to choose the shortest line work faster.
too.
C) The cashiers work at the same speed.

145) Suppose there are two parallel highways between two

cities with approximately equal traffic. What would you
expect to happen if the state began charging tolls to drive on
one of those highways?

two roads as drivers

A) More drivers would drive on the non-toll road, continuously sought the
making the toll road less congested. less-congested route.
B) More drivers would drive on the toll road making D) Traffic would
the non-toll road less congested. decrease on both roads.
C) Traffic would remain evenly divided between the

146) During times of high unemployment, colleges often

observe an increase in enrollment even if tuition remains
unchanged. Why?

D) The benefit of
A) Students go to college even when the net benefit is attending college is lower
negative. because college graduates
B) The opportunity cost of attending college is lower are less likely to find jobs.
when unemployment is high.
C) The opportunity cost of attending college is higher
when unemployment is high.

147) The last time gas prices increased drastically, sales of

large sport utility vehicles (SUVs) fell. Why?

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 SUV.
A) Higher gas prices lowered the benefit of driving an D) Higher gas
SUV. prices lowered the cost of
B) Higher gas prices increased the benefit of driving driving a SUV.
an SUV.
C) Higher gas prices increased the cost of driving a

148) Due to the fact that Curly used his frequent flyer miles anything to visit. Is Curly
to fly to visit Moe, Curly told Moe that it didn't cost him correct?

D) No, because
A) Yes, because Curly's frequent flyer miles made the Curly had to pay for earlier
trip free. trips in order to earn the
B) Yes, because Curly could stay at Moe's house for frequent flyer miles.
free.
C) No, because Curly could have used his frequent
flyer miles to go somewhere else instead.

149) Enrique can either drive to work, which takes half an

hour and uses $1.50 worth of gas, or take the bus, which takes
an hour and costs $1. How should Enrique get to work?

$0.50 or more.
A) Enrique should take the bus because it costs $0.50 D) Enrique should
less than driving. take the bus if saving half
B) Enrique should drive because it saves half an hour an hour is worth $0.50 or
relative to taking the bus. more.
C) Enrique should drive if saving half an hour is worth

150) You have two

options for how to spend
the afternoon. You can
either go see a movie with
your roommate or work as
a tutor for the Math

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Department. From experience, you know that going to see a afternoon working as a
movie gives you $20 worth of enjoyment, and with your math tutor for less than
student discount, a movie ticket only costs $12. If you spend $35. What is your
the afternoon working as a math tutor, you will get paid $45. opportunity cost of seeing
On a typical day, you wouldn't be willing to spend the a movie this afternoon?

C) $22
A) $8 D) $57
B) $12

151) You have two options for how to spend the afternoon. spend the afternoon
You can either go see a movie with your roommate or work as working as a math tutor for
a tutor for the Math Department. From experience, you know less than $35. What is your
that going to see a movie gives you $20 worth of enjoyment, economic surplus from
and with your student discount, a movie ticket only costs $12. working as a math tutor
If you spend the afternoon working as a math tutor, you will instead of going to the
get paid $45. On a typical day, you wouldn't be willing to movies?

C) $12
A) $8 D) $10
B) $2

152) You have two options for how to spend the afternoon. spend the afternoon
You can either go see a movie with your roommate or work as working as a math tutor for
a tutor for the Math Department. From experience, you know less than $35. Should you
that going to see a movie gives you $20 worth of enjoyment, go see a movie or work as
and with your student discount, a movie ticket only costs $12. a math tutor?
If you spend the afternoon working as a math tutor, you will
get paid $45. On a typical day, you wouldn't be willing to

D) Both options are

A) You should work as a math tutor. equally good.
B) You should go to the movies.
C) You should do neither.

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Version 1 60
Answer Key

Test name: Chap 01_8e_Frank

1) C
2) C
3) B
4) C
5) D
6) A
7) D
8) C
9) A
10) D
11) C
12) B
13) D
14) C
15) B
16) A
17) A
18) B
19) B

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20) B
21) A
22) C
23) A
24) A
25) C
26) C
27) B
28) D
29) C
30) D
31) B
32) B
33) D
34) A
35) C
36) B
37) C
38) C
39) D
40) D

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41) C
42) A
43) B
44) A
45) D
46) C
47) C
48) C
49) B
50) B
51) B
52) B
53) C
54) C
55) B
56) D
57) C
58) B
59) A
60) B
61) C

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62) B
63) C
64) B
65) D
66) A
67) A
68) B
69) D
70) C
71) D
72) A
73) D
74) A
75) C
76) B
77) B
78) C
79) A
80) C
81) B
82) B

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83) C
84) C
85) B
86) B
87) D
88) C
89) A
90) C
91) C
92) B
93) C
94) A
95) A
96) C
97) D
98) B
99) C
100) D
101) C
102) D
103) C

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104) C
105) A
106) C
107) C
108) A
109) C
110) A
111) C
112) C
113) A
114) A
115) B
116) B
117) C
118) A
119) B
120) B
121) D
122) C
123) B
124) C

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125) B
126) C
127) B
128) D
129) C
130) B
131) A
132) C
133) D
134) C
135) C
136) B
137) D
138) A
139) B
140) B
141) C
142) C
143) C
144) B
145) A

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146) B
147) C
148) C
149) C
150) C
151) B
152) A

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