31) Instead of studying for an additional two hours for the economics inal, Leann decides
to watch a movie. Leann is making
A) a decision that does not involve an opportunity cost.
B) a rational decision if her marginal cost from the movie is greater than her marginal
beneit.
C) a rational decision if her marginal beneit from the movie is greater than her marginal
cost.
D) an irrational decision because studying is more important than watching a movie.
E) a decision that is not on the margin because she will see the entire movie.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
32) When Gabriel made a rational choice to spend his entire allowance on candy bars, he
did so by comparing the
A) beneits of the candy bars to the desires he had for the candy bars.
B) marginal beneits of the candy bars to the marginal costs of the candy bars.
C) opportunity costs of the candy bars to the scarcity of the candy bars.
D) beneits of the candy bars to the scarcity candy bars.
E) self-interest to the social interest.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
33) As part of its proposal to win the 2012 Olympics, London developed a carbon ofset
plan to reduce the Games’ impact on the environment. In 2011, the organizers decided to
drop this plan to reduce emissions. We can conclude that
A) the marginal cost of reducing emissions exceeded the marginal beneits of reducing
emissions.
B) the organizers are not making a rational decision.
C) the organizers are ignoring a sunk cost.
D) there are no incentives to reduce carbon emissions.
E) it is diicult to calculate the cost of reducing emissions.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
31
34) Going skiing will cost Adam $80 a day. He also loses $40 per day in wages because he
has to take time of from work. Adam still decides to go skiing.
A) His decision is rational if Adam’s marginal beneit of spending a day skiing is greater
than his marginal cost.
B) The $80 price of skiing is not an opportunity cost and so did not afect Adam’s decision.
C) He loses a total of $120 per day, so his decision is irrational.
D) Adam’s lost $40 per day in wages is not an opportunity cost and so did not afect his
decision.
E) Adam is deinitely making a decision that is in the social interest.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
35) The decision to go to graduate school is a rational one for a college student if the
A) cost is not too great.
B) marginal cost exceeds the marginal beneit of graduate school.
C) marginal beneit of graduate school exceeds the marginal cost.
D) opportunity cost of graduate school equals zero.
E) student carefully compared the social beneits of this decision.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
36) An incentive is
A) an inducement to take a particular action.
B) the marginal cost of some course of action.
C) the marginal beneit of some course of action.
D) the net gain of some course of action.
E) a constraint that society imposes on those who make self-interested choices.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
32
37) An incentive is
A) a reward or a penalty that encourages or discourages an action.
B) when people make rational choices by comparing costs and beneits.
C) what you must give up to get something.
D) a choice is made on the margin.
E) a good or service that satisies wants.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
38) A change in a marginal beneit or cost will
A) increase consumption.
B) decrease production.
C) cause an individual to make a rational choice.
D) increase sunk costs.
E) change incentives.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
39) Proponents of cuts in income tax rates argue that when income tax rates are cut,
workers have an incentive to increase their work hours. This argument is based on the
assumption that
A) workers are irrational.
B) workers make decisions based on the marginal beneit of each hour worked compared to
the marginal cost of work.
C) the opportunity cost of working is negative.
D) the marginal cost of each additional work hour is not important to most workers.
E) workers make decisions based on the social interest.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
33
40) Your economics professor ofers 10 points extra credit if you attend a review session
before your next exam. This extra credit is an example of
A) a decrease in marginal beneit to attend the review session.
B) an increase in marginal cost to attend the review session.
C) a rational choice.
D) an incentive to attend the review session.
E) None of the above answers is correct.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
41) If the marginal beneit of getting a college degree rises, rational people will
A) attend college in greater numbers.
B) drop out of college.
C) not change their behavior.
D) require that college get easier.
E) raise the marginal cost of attending college.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
42) Correlation means
A) “after this, therefore because of this.”
B) other things remaining the same.
C) a natural experiment has been conducted.
D) the tendency for the values of two variables to move in a predictable and related way.
E) “on the margin.”
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
34
43) Correlation means
A) holding everything else constant.
B) after this, therefore because of this.
C) the values of two variables move in a predictable and related way.
D) making statements about how the world should be.
E) the same as causation.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
44) In examining two variables, we ind that as one variable changes, the other changes.
These variables are said to be
A) independent.
B) correlated.
C) statistics.
D) signiicantly related.
E) casually related.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
45) When economists use the term “correlation,” they are referring to
A) cause and efect relationships between variables.
B) how two variables move together in a predictable way.
C) positive economics.
D) normative economics.
E) economic policy.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
35
46) The tendency for the values of two variables to move in a predictable and related way is
known as
A) a natural experiment.
B) a normative relationship.
C) an economic model.
D) correlation.
E) a policy relationship.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
47) A positive statement
i. makes a statement about how the world operates.
ii. is a true statement.
iii. can be tested against the facts.
A) i and ii
B) i and iii
C) ii and iii
D) i, ii and iii
E) i only
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
48) Which of the following is a positive statement?
A) An increase in college tuition is not fair to students.
B) A recession leads to higher enrollments at universities.
C) University bookstore prices are too high.
D) Parking tickets on campus impose an excessive fee.
E) The school needs more parking for students.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
36
49) The statement that “increases in the tax on gasoline increase the price of gasoline” is
an example of a
A) normative statement.
B) positive statement.
C) macroeconomic statement.
D) rational-decision statement.
E) marginal statement.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
50) “Lower ticket prices would lead to more people attending ballgames.” This statement is
a
A) statement assessing the social interest versus the private interest.
B) normative statement.
C) positive statement.
D) macroeconomic statement.
E) statement that confuses marginal cost and sunk cost.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
51) A statement that argues that “if taxes on gasoline increase, gasoline consumption will
decrease” is an example of what kind of statement?
A) a marginal statement
B) a macroeconomic statement
C) a normative statement
D) a positive statement
E) a statement that violates rational choice
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
37
52) Which of the following statements is a positive statement?
A) Our country must increase military spending.
B) There should be a computer in every elementary school classroom.
C) We need to spend less on luxury items for the wealthy, and more on necessities for the
less fortunate.
D) Online shopping increased by 50 percent this Christmas season.
E) Too many people are unemployed.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
53) Which of the following is an example of a positive economic statement?
A) Voter ID laws should be strictly enforced in all states.
B) Illegal immigration is the biggest threat to national security that we face today.
C) Medicare recipients should only be allowed to visit a doctor for non-emergency reasons
on Mondays, Wednesdays, and Fridays.
D) The death penalty is a strong deterrent to violent criminal activity.
E) The Afordable Care Act should be repealed.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: New
AACSB: Relective thinking
54) Increasing income tax rates will solve the “Social Security time bomb issue” is an
example of
A) business economic policy.
B) a positive economic statement.
C) marginal cost exceeding marginal beneit.
D) answering the “how” question.
E) globalization.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
38
55) Which of the following is a positive statement?
A) The rich should pay more in taxes.
B) Everyone should have some knowledge of economics.
C) Taxes on gasoline should be lower so that gasoline is more afordable to the poor.
D) If we reduce welfare payments given to the poor, they will ind jobs.
E) Social Security must be reformed.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
56) Normative statements
i. describe how the world is.
ii. describe how the world ought to be.
iii. depend on people’s values and cannot be tested.
A) i only.
B) ii only.
C) iii only.
D) ii and iii.
E) i and iii.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
57) A normative statement
A) depends on someone’s values.
B) cannot use the word “should.”
C) says what is currently believed about the way the world operates.
D) must be tested to determine if it is correct.
E) can be tested to determine if it is correct.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
39
58) The important characteristic of normative statements is that they
A) explain what really exists.
B) are based on somebody’s values and cannot be tested.
C) explain what normally happens in the real world.
D) help guide us to what will normally occur if some economic variable changes its value.
E) do not use the ceteris paribus assumption.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
59) A normative statement
i. can be tested as to whether it is true or false.
ii. is considered negative.
iii. depends on a person’s values.
A) i only
B) iii only
C) i and iii
D) ii and iii
E) i, ii, and iii
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
60) Which of the following is a normative statement?
A) Flood victims should pay for their own rebuilding.
B) When the price of kiwi fruit increases, fewer people eat kiwi fruit.
C) An increase in the supply of computers has caused computer prices to fall.
D) Recessions lead to increases in the unemployment rate.
E) Hurricanes strike mainly Florida and North Carolina.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
40