Multiple Choice Questions:
1. Which of the following is not true?
a. Voluntary exchange is expected to be advantageous to both parties to the exchange.
b. What one trader gains from a trade, the other must lose.
c. If one party to a potential voluntary trade decides it does not advance his interests, he can veto the potential trade.
d. The expectation of gain motivates people to engage in trade.
2. Which of the following is true?
a. Scarcity and poverty are basically the same thing.
b. The absence of scarcity means that a minimal level of income is provided to all individuals.
c. Goods are scarce because of greed.
d. Even in the wealthiest of countries, the desire for material goods is greater than productive capabilities.
3. An example of a capital resource is
a. Stock in a computer software company.
b. The funds in a CD account at a bank.
c. A bond issued by a company selling electric generators.
d. A dump truck.
e. An employee of a moving company.
4. Which of the following statements is true?
a. The opportunity cost of a decision is always expressed in monetary terms.
b. The opportunity cost of a decision is the value of the best forgone alternative.
c. Some economic decisions have zero opportunity cost.
d. The opportunity cost of attending college is the same for all students at the same university but may differ among students at different universities.
e. None of the above statements is true.
5. The opportunity cost of attending college is likely to include all except which of the following?
a. The cost of required textbooks
b. Tuition fees
c. The income you forgo in order to attend classes
d. The cost of haircuts received during the school term
e. The cost of paper and pencils needed to take notes
6. The opportunity cost of an airplane flight
a. Differs across passengers only to the extent that each traveler pays a different airfare.
b. Is identical for all passengers and equal to the number of hours a particular flight takes.
c. Differs across passengers to the extent that both the airfare paid and the highest valued use of travel time vary.
d. Is equal to the cost of a bus ticket, the next best form of alternative transportation to flying.
7. Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a romantic date. This offer will likely
a. Not affect the opportunity cost of going on the date.
b. Reduce the opportunity cost of going on the date because giving up the additional work dollars will make his girlfriend feel even more appreciated.
c. Increase the opportunity cost of going on the date.
d. Not be taken into consideration by Lance when deciding what to do tonight.
8. Which of the following best defines rational behavior?
a. Analyzing the total costs of a decision
b. Analyzing the total benefits of a decision
c. Undertaking an activity as long as the total benefit of all activities exceeds the total cost of all activities
d. Undertaking activities whenever the marginal benefit exceeds the marginal cost
e. Undertaking activities as long as the marginal benefit exceeds zero
9. Gallons of milk at a local grocery store are priced at one for $4 or two for $6. The marginal cost of buying a second gallon of milk equals
a. $6.
b. $4.
c. $3.
d. $2.
e. $0.
10. Which of the following statements is most consistent with the rule of rational choice?
a. The Environmental Protection Agency should strive to eliminate virtually all air and water pollution.
b. When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects.
c. Police forces should be enlarged until virtually all crime is eliminated.
d. Manufacturers of automobiles should seek to make cars safer, no matter the costs involved.
11. Kelly is an attorney and also an excellent typist. She can type 120 words per minute, but she is pressed for time because she has all the legal work she can handle at $75.00 per hour. Kelly's friend Todd works as a waiter and would like some typing work (provided that he can make at least his wage as a waiter, which is $25.00 per hour). Todd can type only 60 words per minute.
a. Kelly should do all the typing because she is faster.
b. Todd should do the typing as long as his earnings are more than $25.00 and less than $37.50 per hour.
c. Unless Todd can match Kelly's typing speed, he should remain a waiter.
d. Todd should do the typing, and Kelly should pay him $20.00 per hour.
e. Both a and c are correct.