BE 301 EXAM 1 MULTIPLE CHOICE UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Question:
An example of price control is:
A. Minimum wages
B. Rent controls in New York
C. Both a and b
D. None of the above
Answer:
C. Both a and b
Question:
One lesson of business:
a. is tracing the consequences of a policy
b. promoting a policy change to eradicate inefficiencies
c. buy a low-valued assets and sell it to someone who
values it higher.
d. None of the above
Answer:
c. buy a low-valued assets and sell it to someone who values it higher.
Question:
If you are willing to purchase a house for $500,000 and
you purchase the house for $500,000 , this
transaction will generate:
a. There is no surplus created
b. $0 worth of seller surplus and unknown amount of
buyer surplus
c. $0 worth of buyer surplus and unknown amount of
seller surplus
d. Not information provided
Answer:
c. $0 worth of buyer surplus and unknown amount of seller surplus
Question:
If you are willing to sell your lawn mower business for
$355,000 and someone offers you $420,000
for it, this transaction will generate:
a. There is no surplus created
b. $65,000 worth of seller surplus and unknown amount
of buyer surplus
c. $30,000 worth of buyer surplus and $35,000 of seller
surplus
d. $65,000 worth of buyer surplus and unknown amount
of seller surplus
,Answer:
b. $65,000 worth of seller surplus and unknown amount of buyer surplus
Question:
The biggest advantage of capitalism is that
a. It generates wealth with the help of government
intervention
b. Prices hinder in moving assets from high-value to low-
value uses
c. It forces involuntary exchanges
d. It creates wealth by letting a person follow his or her
own self-interest
Answer:
d. It creates wealth by letting a person follow his or her own self-interest
Question:
The idea that a person values something more if they own
it is sometimes called:
A. The zero-sum fallacy
B. The sunk-cost fallacy
C. The endowment effect
D. The anchoring effect
E. None of the above
Answer:
C. The endowment effect
Question:
The opportunity cost of an action is:
A. equal to the marginal cost of an action
b. equal to explicit costs of that action
c. equal to the value of the next best alternative
d. the total cost of an action
Answer:
c. equal to the value of the next best alternative
Question:
Taxes cause:
a. market distortions
b. reduce incentives to work
c. decrease wealth creating transactions
d. neither a, b, nor c are correct
e. all of a, b, and c are correct
Answer:
e. all of a, b, and c are correct
Question:
Kirby's lawn care company has found that they can
increase output by creating additional work teams to
, mow lawns. Each team consists of three employees. Also,
each team has a lawn mower, a trimmer, and a rake. Using
this system, the average total cost doesn't change even
as more yards are mowed. This is an example of:
a. increasing returns to scale
b. constant returns to scale
c. decreasing returns to scale
d. not enough information has been provided
Answer:
b. constant returns to scale
Question:
Weighted Average Cost of Capital (WACC)
Answer:
the weighted average of the cost of equity and the aftertax cost of debt
= (cost of capital x internal funds) + (int. rate x loan funds)
Question:
In economics, we say that an individual's value for a good
or service is:
a. the amount of money they actually paid
b. the amount of money they were willing to pay
c. the difference between what they actually paid and
were willing to pay
d. neither a, b, nor c are correct
e. all of a, b, and c are correct
Answer:
b. the amount of money they were willing to pay
Question:
The level of an economic activity should be increased to
the point where
a. marginal benefits equal to zero
b. marginal costs of the investment are less than marginal
benefits
c. marginal benefits are greater than marginal costs
d. marginal costs are equal to marginal benefits
e. none of the above are correct
Answer:
d. marginal costs are equal to marginal benefits
Question:
Economists argue that subsidies lead to inefficient
outcomes because
a. lead to too many transactions because the costs
appear too low
b. lead to too few transactions because the cost appears
QUESTIONS AND CORRECT ANSWERS
Question:
An example of price control is:
A. Minimum wages
B. Rent controls in New York
C. Both a and b
D. None of the above
Answer:
C. Both a and b
Question:
One lesson of business:
a. is tracing the consequences of a policy
b. promoting a policy change to eradicate inefficiencies
c. buy a low-valued assets and sell it to someone who
values it higher.
d. None of the above
Answer:
c. buy a low-valued assets and sell it to someone who values it higher.
Question:
If you are willing to purchase a house for $500,000 and
you purchase the house for $500,000 , this
transaction will generate:
a. There is no surplus created
b. $0 worth of seller surplus and unknown amount of
buyer surplus
c. $0 worth of buyer surplus and unknown amount of
seller surplus
d. Not information provided
Answer:
c. $0 worth of buyer surplus and unknown amount of seller surplus
Question:
If you are willing to sell your lawn mower business for
$355,000 and someone offers you $420,000
for it, this transaction will generate:
a. There is no surplus created
b. $65,000 worth of seller surplus and unknown amount
of buyer surplus
c. $30,000 worth of buyer surplus and $35,000 of seller
surplus
d. $65,000 worth of buyer surplus and unknown amount
of seller surplus
,Answer:
b. $65,000 worth of seller surplus and unknown amount of buyer surplus
Question:
The biggest advantage of capitalism is that
a. It generates wealth with the help of government
intervention
b. Prices hinder in moving assets from high-value to low-
value uses
c. It forces involuntary exchanges
d. It creates wealth by letting a person follow his or her
own self-interest
Answer:
d. It creates wealth by letting a person follow his or her own self-interest
Question:
The idea that a person values something more if they own
it is sometimes called:
A. The zero-sum fallacy
B. The sunk-cost fallacy
C. The endowment effect
D. The anchoring effect
E. None of the above
Answer:
C. The endowment effect
Question:
The opportunity cost of an action is:
A. equal to the marginal cost of an action
b. equal to explicit costs of that action
c. equal to the value of the next best alternative
d. the total cost of an action
Answer:
c. equal to the value of the next best alternative
Question:
Taxes cause:
a. market distortions
b. reduce incentives to work
c. decrease wealth creating transactions
d. neither a, b, nor c are correct
e. all of a, b, and c are correct
Answer:
e. all of a, b, and c are correct
Question:
Kirby's lawn care company has found that they can
increase output by creating additional work teams to
, mow lawns. Each team consists of three employees. Also,
each team has a lawn mower, a trimmer, and a rake. Using
this system, the average total cost doesn't change even
as more yards are mowed. This is an example of:
a. increasing returns to scale
b. constant returns to scale
c. decreasing returns to scale
d. not enough information has been provided
Answer:
b. constant returns to scale
Question:
Weighted Average Cost of Capital (WACC)
Answer:
the weighted average of the cost of equity and the aftertax cost of debt
= (cost of capital x internal funds) + (int. rate x loan funds)
Question:
In economics, we say that an individual's value for a good
or service is:
a. the amount of money they actually paid
b. the amount of money they were willing to pay
c. the difference between what they actually paid and
were willing to pay
d. neither a, b, nor c are correct
e. all of a, b, and c are correct
Answer:
b. the amount of money they were willing to pay
Question:
The level of an economic activity should be increased to
the point where
a. marginal benefits equal to zero
b. marginal costs of the investment are less than marginal
benefits
c. marginal benefits are greater than marginal costs
d. marginal costs are equal to marginal benefits
e. none of the above are correct
Answer:
d. marginal costs are equal to marginal benefits
Question:
Economists argue that subsidies lead to inefficient
outcomes because
a. lead to too many transactions because the costs
appear too low
b. lead to too few transactions because the cost appears
