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16) Suppose you have tickets to a hockey game. The tickets cannot be refunded or resold. In
deciding whether or not to attend the game, the cost of the tickets is
A) a marginal benefit of choosing to attend.
B) a marginal cost of choosing to attend.
C) a sunk cost.
D) an opportunity cost of missing the game.
E) an incentive.
17) Which of the following is an example of a sunk cost?
A) after you start watching a movie, the $8 you paid for the ticket
B) the $100,000 a shoe factory will pay for the leather it uses to make shoes
C) the electricity purchased by a horse breeder
D) the $10 being spent on gasoline purchased by a traveling salesperson
E) the $6,000 Tommy's insurance company pays him after an accident.
18) A cost that is previously incurred and irreversible is known as ________ cost.
A) a sunk
B) a benefit's
C) an opportunity
D) an explicit
E) marginal
19) Suppose you paid $400 tuition for a three-credit course. After the official withdrawal date
has elapsed, you decide to drop the course but you cannot get back your $400. At this time, the
$400 is
A) the benefit of earning three credits.
B) an expenditure made on the margin.
C) a sunk cost.
D) the opportunity cost of the course.
E) the marginal cost of the course.
20) The benefit from a good or service that you purchase is measured by
A) the dollar amount that is paid for the good or service.
B) the dollar amount you can get by selling the good or service.
C) what you are willing to give up to obtain the good or service.
D) how strong the incentives were that lead to buying the good or service.
E) None of the above answers is correct because there is no way to measure the benefit you
receive from purchasing a good or service.
21) Suppose you take a trip during Spring Break. To determine the benefit of taking the trip, you
A) calculate the opportunity cost of the trip.
B) measure what you are willing to give up to take the trip.
C) determine the sunk cost of taking the trip.
D) calculate the value of the next best alternative foregone.
E) must measure what the trip is worth to you and then subtract the cost of the trip.
22) The cost of a one-unit increase in an activity is called the
A) opportunity benefit.
B) sunk cost.
C) marginal cost.
D) marginal benefit.
E) margin.
23) The opportunity cost of a one-unit increase in an activity
A) is greater than the marginal benefit.
B) is called sunk cost.
C) decreases as you do more of it.
D) is called marginal cost.
E) is measured by what the person is willing to give up to get one more unit of the activity.
24) The marginal cost of an activity is a measure of ________ the activity.
A) what is forgone with every one unit increase in
B) the total cost of
C) the benefit derived from every one unit decrease in
D) the benefit derived from every one unit increase in
E) sunk cost of
25) Mothers Against Drunk Drivers (MADD) campaigned to increase the legal penalties of
drunk driving. This successful campaign ________ of drunk driving.
A) increased the marginal benefit
B) decreased the marginal benefit
C) increased the marginal cost
D) decreased the marginal cost
E) increased the sunk cost
26) The marginal cost of an activity ________ as you do more of it.
A) increases
B) decreases
C) doesn't change
D) changes only if the marginal benefit of the activity does not change
E) changes only if the marginal benefit of the activity changes
27) The benefit of a one-unit increase in an activity
A) is called marginal cost.
B) is always greater than the opportunity cost of that activity.
C) decreases as you do more of it.
D) is measured by what you must give up.
E) is called "sunk benefit."
28) Huey has eaten two hamburgers and is considering a third. The marginal benefit in his
decision is the pleasure from consuming
A) the two previous hamburgers.
B) all three hamburgers.
C) just the third hamburger.
D) just the second hamburger.
E) the third hamburger minus the pleasure from consuming zero hamburgers.
29) What typically happens to benefits as the amount of an activity is increased?
A) Total benefits remain constant.
B) Marginal benefit increases.
C) Marginal benefit remains constant.
D) Marginal benefit decreases.
E) The marginal benefit changes only if the marginal cost changes.
30) Suppose you eat two hamburgers for lunch. The marginal benefit of the first burger is
________ of the second burger.
A) larger than the marginal benefit
B) smaller than the marginal benefit
C) equal to the marginal benefit
D) not related to the marginal benefit
E) equal to the marginal cost and the marginal benefit
31) A choice made by comparing all relevant alternatives systematically and incrementally is
A) an opportunity cost.
B) a choice on the margin.
C) a benefit.
D) a sunk cost.
E) a choice made in the social interest.
32) Making choices on the margin means
A) scribbling on the edges of your notebook paper.
B) comparing all relevant alternatives systematically and incrementally.
C) making a decision based on emotions.
D) making decisions in the largest possible increments.
E) taking account of all marginal benefits, all opportunity costs, and all sunk costs.
33) Decision making on the margin involves
A) comparing the marginal cost and marginal benefits when making a decision.
B) comparing the total cost and the total benefit when making a decision.
C) eliminating the additional cost when making a decision.
D) determining the total benefits of a decision.
E) comparing the benefits from the social interest to the benefits from the person's self-interest.
34) In making your decision whether to take a trip during Spring Break, you compare all the
other activities you could undertake. As a result, you
A) are making a choice on the margin.
B) incur a sunk cost.
C) are not making a rational choice.
D) do not face an opportunity cost.
E) must have made a choice in the social interest.
35) To make a rational choice, a person
A) compares the extra benefits of one more unit to the extra costs of one more unit.
B) adds the total benefits and the total costs and then compares the two totals.
C) adds the total benefits to determine if the total is large enough.
D) adds the total costs to determine if the total is small enough.
E) takes account of all benefits and all opportunity costs, including both marginal costs and sunk
costs.
36) In order to determine whether to major in economics, a rational individual compares the
________ of the decision.
A) marginal benefit and marginal cost
B) opportunity cost and the sunk cost
C) positive benefits and normative costs
D) normative benefits and positive costs
E) self-interest and social-interest
37) In order to make a rational choice, people must
A) only know what they want.
B) be able to afford the choice decided upon.
C) decide quickly without wasting time.
D) compare marginal costs and marginal benefits.
E) determine what is in the social interest.
38) Instead of studying for an additional two hours for the economics final, 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 benefit.
C) a rational decision if her marginal benefit 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.
39) When Gabriel made a rational choice to spend his entire allowance on candy bars, he did so
by comparing the
A) benefits of the candy bars to the desires he had for the candy bars.
B) marginal benefits 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) benefits of the candy bars to the scarcity candy bars.
E) self-interest to the social interest.
40) Going skiing will cost Adam $80 a day. He also loses $40 per day in wages because he has
to take time off from work. Adam still decides to go skiing.
A) His decision is rational if Adam's marginal benefit of spending a day skiing is greater than his
marginal cost.
B) The $80 price of skiing is a sunk cost and so did not affect 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 a sunk cost and so did not affect his decision.
E) Adam is definitely making a decision that is in the social interest.
41) 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 benefit of graduate school.
C) marginal benefit of graduate school exceeds the marginal cost.
D) opportunity cost of graduate school equals zero.
E) student carefully compared the benefits of this decision to the sunk costs of the decision.
42) An incentive is
A) an inducement to take a particular action.
B) the marginal cost of some course of action.
C) the marginal benefit 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.
43) 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 benefits.
C) what you must give up to get something.
D) a choice is made on the margin.
E) a good or service that satisfies wants.
44) A change in a marginal benefit 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.
45) 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 benefit 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.
46) Your economics professor offers 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 benefit 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) a sunk cost.
47) If the marginal benefit 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.
48) The study of the choices of one individual or business is called
A) macroeconomics.
B) microeconomics.
C) scarcity.
D) finance.
E) ceteris paribus.
49) Microeconomics includes the study of the
A) aggregate effects on the national economy.
B) recessions and inflation in the global economy.
C) choices made by individuals and businesses.
D) reasons why the government changes interest rates.
E) nationwide unemployment rate.
50) The primary focus of microeconomics is
A) to examine the operation of the entire (aggregate) economy.
B) to examine the behavior and operation of the individual units or sectors that make up the
economy.
C) our government's monetary policy.
D) the levels of employment and inflation.
E) to study how we managed to eliminate scarcity.
51) Which of the following is a microeconomic issue?
A) The price of gasoline increases in the United States this year.
B) The Brazilian economy experiences rapid economic growth.
C) The unemployment rate soars in Spain.
D) Inflation skyrockets in Russia.
E) The U.S. government cuts taxes to combat a recession.
52) Which of the following is a microeconomic issue?
A) Growth in the U.S. economy slowed.
B) Increased federal government expenditures have lowered the unemployment rate.
C) The inflation rate fell this year.
D) The quantity of wheat grown in the United States increases this year.
E) The U.S. government cuts taxes to combat a recession.
53) Which of the following is a microeconomic topic?
i. K-Mart's decision to close stores that are not making a profit
ii. Home Depot's choice to hire more full-time employees because its sales increased
iii. Delta Airlines changes its fares
A) i only.
B) ii only.
C) i and iii.
D) ii and iii.
E) i, ii, and iii.
54) Which of the following is a microeconomic topic?
A) Northwest Airlines analyzes the benefits of adding one more flight to Salt Lake City.
B) Unemployment soars as taxes increase.
C) The government leaves interest rates unchanged as the economy improves.
D) Germany's government increases taxes to avoid a budget deficit.
E) Chinese economic growth slows.
55) Macroeconomics is the study of
A) the actions of individual consumers.
B) national or global economies.
C) the actions of individual businesses.
D) the government.
E) how ceteris paribus affects causation.
56) Which of the following BEST describes macroeconomics?
A) It analyzes the aggregate effects on the national economy of the choices made by individuals,
firms, and governments.
B) It studies the choices that individuals and businesses make when coping with scarcity.
C) It examines how the choices that individuals affect governments.
D) It never uses the ceteris paribus assumption.
E) Proving causation is never a problem for macroeconomics.
57) Which of the following is a topic studied in macroeconomics?
A) The pricing decisions in the computer hardware industry
B) The effect on economic growth if the government raises taxes
C) How the wheat industry determines how much wheat to grow
D) The impact of labor unions on wages
E) The impact of higher prices for gasoline on the number of SUVs people buy
58) Which of the following is a macroeconomic topic?
A) The federal government's decision to spend more on environmental protection
B) The county government's decision to increase the sales tax for your county
C) Why did production and jobs expand rapidly in 2004?
D) General Motors decides what prices to set for their new models.
E) The effect of floods in the growing areas on the price and quantity of wheat.
59) Which of the following is a macroeconomic topic?
A) The growth of the amount of money that Americans are borrowing from the rest of the world.
B) The government's choice to sue Microsoft for acting like a monopoly
C) How your local phone company decides to set its fee structure
D) How you decide whether to take out a loan to finance your college education
E) Whether Honda will make more gasoline powered cars or more hybrid powered cars
60) Which of the following is a macroeconomic issue?
A) The price of a ticket to Walt Disney World in Orlando is increased.
B) The National Football League signs a new television contract.
C) The number of jobs and production in Zimbabwe increase.
D) The Iowa corn harvest is smaller than normal.
E) Utilities are required to install more anti-pollution devices.
61) 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
62) 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.
63) 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) ceteris paribus statement.
E) marginal statement.
64) "Lower ticket prices would lead to more people attending ballgames." This statement is a
A) ceteris paribus assertion.
B) normative statement.
C) positive statement.
D) macroeconomic statement.
E) statement that confuses marginal cost and sunk cost.
65) 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
66) 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.
67) 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 affordable to the poor.
D) If we reduce welfare payments given to the poor, they will find jobs.
E) social Security must be reformed.
68) 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.
69) 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.
70) 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.
71) 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
72) 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.
73) A statement that "All children should receive free health care" is an example of what kind of
statement?
A) a fair statement
B) a natural experiment statement
C) a normative statement
D) a positive statement
E) a statement on the margin
74) Which of the following statements is a normative statement?
A) Inflation has been at an all time low this year.
B) The minimum wage should be increased to $8.50 per hour.
C) Unemployment this month has increased by less than 0.5 percentage point..
D) Additional spending on education has not produced any rise in test scores.
E) Pepsi is less expensive than Coke this week.
75) Which of the following statements is a normative statement?
A) Every American household should have health care insurance coverage.
B) Military spending as a percent of government spending decreased by 5 percent in the 1990s.
C) Welfare reform has decreased the amount the government spends on welfare.
D) The price of computers fell last year.
E) Fewer people are unemployed this year than last year.
