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| 1 | |
If Fred plays tennis every day, but tells his wife he would rather be working longer hours at his job, economists would say which of the following about his behavior, assuming that his work hours are totally up to him. |
| | A) | Fred has a preference for tennis over work at the times he plays tennis. |
| | B) | Fred prefers to work rather than to play more tennis since that is what he tells his wife. Economists are not about to question a person's motives. |
| | C) | Fred is irrational because he is not doing what he says he wants to do. |
| | D) | There is no way to model the behavior of someone who claims one thing and does another. |
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| 2 | |
A fairy offers you and you alone a million free wishes that will all come true. Being a good student of economic methods you know that you |
| | A) | are no longer living in a world of scarcity and economic principles will not apply to you anymore. |
| | B) | are faced with a serious economic problem of scarcity because you don't have time to absorb the benefits of a million wishes. |
| | C) | feel unfulfilled since humans cannot be fulfilled unless they strive and compete for pleasure. |
| | D) | feel quilty because your happiness will fall if you have advantages that others do not have |
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| 3 | |
The graph below depicts the benefits of additional sips of lemonade on a very hot day.  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078021693/236468/chap01_1.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (3.0K)</a>]]>
If someone is giving away lemonade, then your reservation price for lemonade is |
| | A) | P1 |
| | B) | P2 |
| | C) | P3 |
| | D) | Some negative value |
| | E) | Not discernable from this graph. |
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| 4 | |
Economists believe that human behavior follows economic principles to some extent because |
| | A) | people are intelligent and study the principles until it becomes natural for them to act according to the principles. |
| | B) | Everyone is socialized into similar preferences and therefore no one is really free to choose. |
| | C) | People muddle through life learning from their mistakes and finally end up doing what economic theory predicts they will do. |
| | D) | Emotions, social norms, and values are all based on rational choice concepts. |
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| 5 | |
Phil is considering whether to buy a townhouse or rent one. If he puts 20% down, his monthly payment on the balance borrowed from the bank will be $500. The rental charge is $600 for a similar place. He decides he should buy because $500 is less than $600. Which of the following is true? Assume no tax complications are involved. |
| | A) | He definitely made a wise choice since his reasoning is sound. |
| | B) | He definitely made a bad choice because the bank loan must be added to the $500 as a cost. |
| | C) | He may have made a wrong decision because he must add to the $500 the lost interest he experiences by taking his down payment out of the bank. |
| | D) | None of the above statements are true. |
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| 6 | |
On a recent golfing outing our foursome paid for the 18 hole greens fees. On the fifth hole it started to rain, but we still managed to enjoy the game. By the twelfth hole it was pouring and we were sloshing around complaining how nice it would be to be dry in the clubhouse. Unfortunately the golf management would not refund us for unplayed holes so we kept beating the ball through the mud to "get our money's worth." An observant economist would say we were |
| | A) | inaccurately measuring our benefits. |
| | B) | inaccurately measuring our costs. |
| | C) | ignoring all costs and benefits. |
| | D) | exercising good economic judgement since no refunds were available. |
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| 7 | |
Rationality in economics implies that |
| | A) | people follow their own interests |
| | B) | people are unable to assess their own preferences. |
| | C) | people have similar, if not identical, IQs. |
| | D) | no one can be considered irrational. |
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| 8 | |
If external costs are significant in a production process it is likely that |
| | A) | The output of the production process will be greater than it should be for efficiency. |
| | B) | The output of the production process will be less than it should be for efficiency. |
| | C) | The output of the production process will not deviate from the efficient output even if the external costs persist. |
| | D) | The costs will be automatically eliminated by the market forces that push toward efficiency. |
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| 9 | |
Which is true of homo economicus? |
| | A) | He is inclined to ignore any social cost of his behavior that he is not required to consider. |
| | B) | He is not driven by social norms, emotions, or values other than self-interest. |
| | C) | He tends to avoid being actively involved in community volunteer projects that might be inconvenient. |
| | D) | All of the above are true of homo economicus. |
| | E) | None of the above are true or homo economicus. |
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| 10 | |
Which statement is a normative statement? |
| | A) | Manual transmissions have four speeds and automatic transmissions have five speeds. |
| | B) | Paper towels should be used in all restrooms instead of hot air dryers. |
| | C) | Airline food is worse than restaurant food. |
| | D) | All computers now have at least 64 Megabytes of RAM. |
| | E) | None of the above are normative. They all are positive statements. |
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| 11 | |
Rationally speaking, you should definitely attend class today. This statement |
| | A) | is true if the professor takes points off your grade if you are not there. |
| | B) | is true if you will get a lower score on the next exam if you miss the class. |
| | C) | is true if your being in class will contribute to the discussion and help many other students. |
| | D) | is true for all of the above statements. |
| | E) | cannot be answered without more information. |
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| 12 | |
Economic theory claims to |
| | A) | describe human actions in as realistic a manner as possible. |
| | B) | have tools which predict normal and abnormal behavior. |
| | C) | be as accurate as the physical sciences in its predictions. |
| | D) | arrive at the best available predictions by assuming that people merely act as if they constantly calculated costs and benefits of all actions. |
| | E) | do all of the above. |
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| 13 | |
Our choir is recording a CD on the day I was offered $500 for doing a simple task that would have been as much fun as recording. If I fulfill my obligation to the choir it is correct to say that |
| | A) | the $500 is an implicit cost of singing that day. |
| | B) | the $500 is a sunk cost since I will never see it if I sing that day. |
| | C) | the $500 is no cost at all since I do not have to pay anything to sing. |
| | D) | I should definitely not sing because I get no money for singing. |
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| 14 | |
Which statement is always true? |
| | A) | Implicit costs are always sunk costs. |
| | B) | Sunk costs are always implicit costs. |
| | C) | Sunk costs do not enter into the cost-benefit analysis of a given decision. |
| | D) | All of the above are correct statements. |
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| 15 | |
When I go golfing I sometimes complain that it is an expensive sport. If I am deciding if I can afford to go tomorrow, which of the following costs should I consider? |
| | A) | a portion of the club's annual membership fee. |
| | B) | The greens fee, the value of the balls I hit in the water, and the wear and tear on my shoes and equipment. |
| | C) | The average cost per mile of the car trip to the golf course. |
| | D) | All of the above. |
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| 16 | |
Which activity has little, if any, external cost? |
| | A) | Driving to work in rush hour traffic. |
| | B) | Taking a nap on your lunch break. |
| | C) | Cheering for the Phillies in the Cubs ballpark. |
| | D) | All of the above have external costs. |
| | E) | None of the above are a good answer. |
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| 17 | |
Homo Economicus, as a model of behavior |
| | A) | would be a good guide for people to follow in their relationships with others. |
| | B) | focuses on personal material costs and benefits rather than other more social values. |
| | C) | is built on trust of others which is why it works in a free society where trust is important. |
| | D) | Includes many motives for behavior that are not usually part of economic thinking. |
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| 18 | |
Which of the following is least likely to interest a pure rational choice economist? |
| | A) | Why do men's public rest rooms have urinals, but almost no one has them at home? |
| | B) | Why is there a perpetual traffic jam around the south edge of Lake Michigan when traveling on Route 80. |
| | C) | Should governments allow charities to avoid property taxes when the state is running large budget deficits? |
| | D) | Is the high tax rate a detriment to capital investment? |
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| 19 | |
Your text claims that |
| | A) | macroeconomists are better at predicting behavior than macroeconomists are at predicting economy wide variables. |
| | B) | macroeconomics has increasingly related to microeconomic foundations in its analysis. |
| | C) | the distinction between macro and micro economics has become less clear in recent years. |
| | D) | all of the above are true. |
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