Chap 01 18e - Gwartney
Indicate the answer choice that best completes the statement or answers the question.
1. Which of the following groups would most likely benefit from a law that is extremely tough on those who drink
and drive?
a. truck drivers
b. ride-share drivers
c. bartenders
d. doctors and nurses
ANSWER: b
2. Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of
trees the woodpeckers like to nest in. This is an example of which of the following?
a. Association is not causation.
b. The fallacy of composition.
c. The use of ceteris paribus conditions in economic analysis.
d. Good intentions do not always lead to desirable outcomes.
ANSWER: d
3. The consequences of an economic change that are not immediately identifiable but are felt only with the
passage of time are known in economics as
a. opportunity costs.
b. utility curves.
c. secondary effects.
d. comparative advantages.
ANSWER: c
4. A restaurant offers an "all you can eat" meal for $12. Tyrone has eaten three servings and is trying to decide
whether or not to go back for a fourth. The economic way of thinking suggests that Tyrone should go back for
the fourth serving if and only if
a. his marginal benefit of the additional serving is greater than zero.
b. his marginal benefit of the additional serving is at least $4.
c. his marginal benefit of the additional serving is $12 or more.
d. his total value from the meal exceeds $12.
ANSWER: a
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,Name: Class: Date:
Chap 01 18e - Gwartney
5. Which of the following is a normative economic statement?
a. If we doubled the size of welfare payments, we would reduce the number of homeless persons.
b. Companies should be concerned with more than just their profits.
c. An increase in spending on airport security will reduce the number of hijackings.
d. If social security were to be privatized, workers would earn a higher rate of return on their retirement
contributions.
ANSWER: b
6. Which of the following is a positive economic statement?
a. Too much government spending is the biggest problem facing the U.S. economy.
b. Creating jobs is the most serious problem facing the U.S. economy.
c. Raising taxes provides additional revenue that should be used to finance health care.
d. If taxes are over 50 percent of national income, job creation falls.
ANSWER: d
7. A marginal change usually is a
a. change that involves little, if anything, that is important.
b. large, significant adjustment.
c. change for the worse, and so it is usually a short-term change.
d. small, incremental adjustment.
ANSWER: d
8. Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines
affected?
a. They lose, because the standby passengers do not cover the full cost of the seats.
b. They gain, because the additional revenue covers the "fixed costs" of the flight.
c. They lose, because the gain of the passengers must necessarily come at the expense of the airline.
d. They benefit as long as the additional revenue from the passengers exceeds the marginal cost.
ANSWER: d
9. Economic theory
a. is a set of definitions, postulates, and principles assembled in a manner that helps make cause-and-effect
relationships clear in economics.
b. focuses primarily on the usage of capital within a society.
c. focuses primarily on the roles and responsibilities of government in a society.
d. is a set of definitions, postulates, and principles that help maximize opportunity costs of a society.
ANSWER: a
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,Name: Class: Date:
Chap 01 18e - Gwartney
10. When a society cannot produce all the goods and services people wish to have, it is said that the economy is
experiencing
a. scarcity.
b. shortages.
c. inefficiencies.
d. inequities.
ANSWER: a
11. A local restaurant offers an "all you can eat" buffet for $15. Mia eats four servings but leaves half of a fifth
helping uneaten. Why?
a. Her marginal value of a serving of brunch has fallen below $15.
b. Her marginal value of a serving has fallen below $3 ($15 divided by 5 servings).
c. Her marginal value of food has fallen to zero.
d. The total value she places on the buffet exactly equals $15.
ANSWER: c
12. Which of the following is true?
a. Human choice is generally not influenced by changes in incentives.
b. What is true for the individual must be true for the group as a whole.
c. Using scarce resources to meet one need reduces our ability to meet needs in other areas.
d. The economic way of thinking stresses that good intentions usually lead to sound economic policy.
ANSWER: c
13. Ethan washes and irons his own shirts. Tiana, his boss, sends her clothes to a laundry. Which is the most
plausible economic explanation for this difference?
a. Ethan must enjoy ironing more than Tiana does.
b. Ethan must be better at ironing than Tiana is.
c. The opportunity cost of ironing is greater for Ethan.
d. Tiana has a higher opportunity cost of laundering her clothes than Ethan does.
ANSWER: d
14. According to marginal analysis, you should spend more time studying economics if the extra benefit from an
additional hour of study
a. is positive.
b. outweighs the extra cost.
c. exceeds the benefits of the previous hour of study.
d. will raise your exam score.
ANSWER: b
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, Name: Class: Date:
Chap 01 18e - Gwartney
15. When price is the rationing criterion, individuals have a strong incentive to
a. ignore the wishes of others when making decisions about how to use their resources.
b. provide services to others in exchange for income.
c. avoid exchanges because in every exchange there will be one person who gains and another who loses.
d. substitute promises for the consistent delivery of a quality product.
ANSWER: b
16. Economic choice and competitive behavior are the result of
a. basic human greed.
b. poverty.
c. private ownership of resources.
d. scarcity.
ANSWER: d
17. Modern economics as a field of study is usually thought to have begun with
a. Adam Smith and the writing of The Wealth of Nations.
b. David Ricardo and the writing of The Principles of Political Economy and Taxation.
c. Aristotle and the writing of Politics and Ethics.
d. John Maynard Keynes and the writing of The General Theory of Employment, Interest and Money.
ANSWER: a
18. The expression "There's no such thing as a free lunch" means
a. in an exchange, if one person gains, someone else must lose.
b. each person must pay for exactly what they receive.
c. the use of resources to meet one need means that those resources can no longer be used to meet another
need.
d. in an exchange, if one person gains, someone else must lose an equal amount.
ANSWER: c
19. The economizing problem is essentially one of deciding how to make the best use of
a. limited resources to satisfy limited wants.
b. unlimited resources to satisfy limited wants.
c. limited resources to satisfy virtually unlimited wants.
d. unlimited resources to satisfy unlimited wants.
ANSWER: c
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Indicate the answer choice that best completes the statement or answers the question.
1. Which of the following groups would most likely benefit from a law that is extremely tough on those who drink
and drive?
a. truck drivers
b. ride-share drivers
c. bartenders
d. doctors and nurses
ANSWER: b
2. Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of
trees the woodpeckers like to nest in. This is an example of which of the following?
a. Association is not causation.
b. The fallacy of composition.
c. The use of ceteris paribus conditions in economic analysis.
d. Good intentions do not always lead to desirable outcomes.
ANSWER: d
3. The consequences of an economic change that are not immediately identifiable but are felt only with the
passage of time are known in economics as
a. opportunity costs.
b. utility curves.
c. secondary effects.
d. comparative advantages.
ANSWER: c
4. A restaurant offers an "all you can eat" meal for $12. Tyrone has eaten three servings and is trying to decide
whether or not to go back for a fourth. The economic way of thinking suggests that Tyrone should go back for
the fourth serving if and only if
a. his marginal benefit of the additional serving is greater than zero.
b. his marginal benefit of the additional serving is at least $4.
c. his marginal benefit of the additional serving is $12 or more.
d. his total value from the meal exceeds $12.
ANSWER: a
. Page 1
,Name: Class: Date:
Chap 01 18e - Gwartney
5. Which of the following is a normative economic statement?
a. If we doubled the size of welfare payments, we would reduce the number of homeless persons.
b. Companies should be concerned with more than just their profits.
c. An increase in spending on airport security will reduce the number of hijackings.
d. If social security were to be privatized, workers would earn a higher rate of return on their retirement
contributions.
ANSWER: b
6. Which of the following is a positive economic statement?
a. Too much government spending is the biggest problem facing the U.S. economy.
b. Creating jobs is the most serious problem facing the U.S. economy.
c. Raising taxes provides additional revenue that should be used to finance health care.
d. If taxes are over 50 percent of national income, job creation falls.
ANSWER: d
7. A marginal change usually is a
a. change that involves little, if anything, that is important.
b. large, significant adjustment.
c. change for the worse, and so it is usually a short-term change.
d. small, incremental adjustment.
ANSWER: d
8. Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines
affected?
a. They lose, because the standby passengers do not cover the full cost of the seats.
b. They gain, because the additional revenue covers the "fixed costs" of the flight.
c. They lose, because the gain of the passengers must necessarily come at the expense of the airline.
d. They benefit as long as the additional revenue from the passengers exceeds the marginal cost.
ANSWER: d
9. Economic theory
a. is a set of definitions, postulates, and principles assembled in a manner that helps make cause-and-effect
relationships clear in economics.
b. focuses primarily on the usage of capital within a society.
c. focuses primarily on the roles and responsibilities of government in a society.
d. is a set of definitions, postulates, and principles that help maximize opportunity costs of a society.
ANSWER: a
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,Name: Class: Date:
Chap 01 18e - Gwartney
10. When a society cannot produce all the goods and services people wish to have, it is said that the economy is
experiencing
a. scarcity.
b. shortages.
c. inefficiencies.
d. inequities.
ANSWER: a
11. A local restaurant offers an "all you can eat" buffet for $15. Mia eats four servings but leaves half of a fifth
helping uneaten. Why?
a. Her marginal value of a serving of brunch has fallen below $15.
b. Her marginal value of a serving has fallen below $3 ($15 divided by 5 servings).
c. Her marginal value of food has fallen to zero.
d. The total value she places on the buffet exactly equals $15.
ANSWER: c
12. Which of the following is true?
a. Human choice is generally not influenced by changes in incentives.
b. What is true for the individual must be true for the group as a whole.
c. Using scarce resources to meet one need reduces our ability to meet needs in other areas.
d. The economic way of thinking stresses that good intentions usually lead to sound economic policy.
ANSWER: c
13. Ethan washes and irons his own shirts. Tiana, his boss, sends her clothes to a laundry. Which is the most
plausible economic explanation for this difference?
a. Ethan must enjoy ironing more than Tiana does.
b. Ethan must be better at ironing than Tiana is.
c. The opportunity cost of ironing is greater for Ethan.
d. Tiana has a higher opportunity cost of laundering her clothes than Ethan does.
ANSWER: d
14. According to marginal analysis, you should spend more time studying economics if the extra benefit from an
additional hour of study
a. is positive.
b. outweighs the extra cost.
c. exceeds the benefits of the previous hour of study.
d. will raise your exam score.
ANSWER: b
. Page 3
, Name: Class: Date:
Chap 01 18e - Gwartney
15. When price is the rationing criterion, individuals have a strong incentive to
a. ignore the wishes of others when making decisions about how to use their resources.
b. provide services to others in exchange for income.
c. avoid exchanges because in every exchange there will be one person who gains and another who loses.
d. substitute promises for the consistent delivery of a quality product.
ANSWER: b
16. Economic choice and competitive behavior are the result of
a. basic human greed.
b. poverty.
c. private ownership of resources.
d. scarcity.
ANSWER: d
17. Modern economics as a field of study is usually thought to have begun with
a. Adam Smith and the writing of The Wealth of Nations.
b. David Ricardo and the writing of The Principles of Political Economy and Taxation.
c. Aristotle and the writing of Politics and Ethics.
d. John Maynard Keynes and the writing of The General Theory of Employment, Interest and Money.
ANSWER: a
18. The expression "There's no such thing as a free lunch" means
a. in an exchange, if one person gains, someone else must lose.
b. each person must pay for exactly what they receive.
c. the use of resources to meet one need means that those resources can no longer be used to meet another
need.
d. in an exchange, if one person gains, someone else must lose an equal amount.
ANSWER: c
19. The economizing problem is essentially one of deciding how to make the best use of
a. limited resources to satisfy limited wants.
b. unlimited resources to satisfy limited wants.
c. limited resources to satisfy virtually unlimited wants.
d. unlimited resources to satisfy unlimited wants.
ANSWER: c
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