AAEC 2305 Exam 1 Questions with Correct Answers Latest Update 2025/2026
Economics is best defined as the study of - Answers how people make choices in the face of
scarcity and the implications of those choices for society as a whole.
The Scarcity Principle states that - Answers with limited resources, having more of one thing
means having less of another.
An implication of scarcity is that - Answers people must make trade-offs.
Forest lives in complete isolation in Montana. He is self-sufficient and feeds himself through
hunting, fishing, and farming. Which of the following statements about Forest is true? - Answers
Forest has to make trade-offs.
Josh wants to go to the football game this weekend, but he has a paper due on Monday. It will
take him the whole weekend to write the paper. Josh decides to stay home and work on the
paper. According to the Scarcity Principle, the reason Josh doesn't go to the game is that -
Answers Josh can't go the game and finish the paper.
The Cost-Benefit Principle indicates that an action should be taken if - Answers its extra benefit
is greater than or equal to its extra cost.
The Scarcity Principle tells us ______, and the Cost-Benefit Principle tells us ______. - Answers
that choices must be made; how to make good choices
Suppose that the extra cost to Tim of a third glass of soda is zero because he's at a restaurant
that gives free refills. According to the Cost-Benefit Principle Tim should: - Answers drink a third
glass of soda if the extra benefit of doing so is positive.
Janie must choose to either mow the lawn or wash clothes. If she mows the lawn, she will earn
$30, and if she washes clothes, she will earn $45. She dislikes both tasks equally and they both
take the same amount of time. Janie will therefore choose to ______ because it generates a
______ economic surplus. - Answers wash clothes; bigger
Larry was accepted at three different graduate schools, and must choose one. Elite U costs
$50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at
$60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000
scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000
per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at
$15,000 per year. Larry's opportunity cost of attending Elite U is: - Answers $70,000
Larry was accepted at three different graduate schools, and must choose one. Elite U costs
$50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at
$60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000
scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000
, per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at
$15,000 per year. Larry's opportunity cost of attending State College is: - Answers $35,000
Larry was accepted at three different graduate schools, and must choose one. Elite U costs
$50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at
$60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000
scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000
per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at
$15,000 per year. Larry's opportunity cost of attending State NoName U is: - Answers $20,000
Larry was accepted at three different graduate schools, and must choose one. Elite U costs
$50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at
$60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000
scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000
per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at
$15,000 per year. Larry maximizes his economic surplus by attending: - Answers State College
Larry was accepted at three different graduate schools, and must choose one. Elite U costs
$50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at
$60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000
scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000
per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at
$15,000 per year. What is Larry's economic surplus from attending State College instead of his
next best alternative? - Answers $5,000
Amy is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to
cancel a $20 dog-sitting job that she would have been willing to do for free. The opportunity to
Amy cost of going to the movies is: - Answers $35
The economic surplus of an action is - Answers the difference between the benefit and the
opportunity cost of taking an action.
If individuals are rational, they should choose actions that yield the: - Answers largest economic
surplus.
Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy one for
$175, then your economic surplus is: - Answers $75
The fact that most people make some decisions based on intuition rather than calculation is -
Answers consistent with the cost-benefit model because most people intuitively weigh costs
and benefits
Moe has a big exam tomorrow. He considered studying this evening, but decided to hang out
with Curly instead. If neither activity involves any explicit costs and Moe always chooses
rationally, it must be true that: - Answers Moe gets more benefit from spending time with Curly
Economics is best defined as the study of - Answers how people make choices in the face of
scarcity and the implications of those choices for society as a whole.
The Scarcity Principle states that - Answers with limited resources, having more of one thing
means having less of another.
An implication of scarcity is that - Answers people must make trade-offs.
Forest lives in complete isolation in Montana. He is self-sufficient and feeds himself through
hunting, fishing, and farming. Which of the following statements about Forest is true? - Answers
Forest has to make trade-offs.
Josh wants to go to the football game this weekend, but he has a paper due on Monday. It will
take him the whole weekend to write the paper. Josh decides to stay home and work on the
paper. According to the Scarcity Principle, the reason Josh doesn't go to the game is that -
Answers Josh can't go the game and finish the paper.
The Cost-Benefit Principle indicates that an action should be taken if - Answers its extra benefit
is greater than or equal to its extra cost.
The Scarcity Principle tells us ______, and the Cost-Benefit Principle tells us ______. - Answers
that choices must be made; how to make good choices
Suppose that the extra cost to Tim of a third glass of soda is zero because he's at a restaurant
that gives free refills. According to the Cost-Benefit Principle Tim should: - Answers drink a third
glass of soda if the extra benefit of doing so is positive.
Janie must choose to either mow the lawn or wash clothes. If she mows the lawn, she will earn
$30, and if she washes clothes, she will earn $45. She dislikes both tasks equally and they both
take the same amount of time. Janie will therefore choose to ______ because it generates a
______ economic surplus. - Answers wash clothes; bigger
Larry was accepted at three different graduate schools, and must choose one. Elite U costs
$50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at
$60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000
scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000
per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at
$15,000 per year. Larry's opportunity cost of attending Elite U is: - Answers $70,000
Larry was accepted at three different graduate schools, and must choose one. Elite U costs
$50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at
$60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000
scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000
, per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at
$15,000 per year. Larry's opportunity cost of attending State College is: - Answers $35,000
Larry was accepted at three different graduate schools, and must choose one. Elite U costs
$50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at
$60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000
scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000
per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at
$15,000 per year. Larry's opportunity cost of attending State NoName U is: - Answers $20,000
Larry was accepted at three different graduate schools, and must choose one. Elite U costs
$50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at
$60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000
scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000
per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at
$15,000 per year. Larry maximizes his economic surplus by attending: - Answers State College
Larry was accepted at three different graduate schools, and must choose one. Elite U costs
$50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at
$60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000
scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000
per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at
$15,000 per year. What is Larry's economic surplus from attending State College instead of his
next best alternative? - Answers $5,000
Amy is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to
cancel a $20 dog-sitting job that she would have been willing to do for free. The opportunity to
Amy cost of going to the movies is: - Answers $35
The economic surplus of an action is - Answers the difference between the benefit and the
opportunity cost of taking an action.
If individuals are rational, they should choose actions that yield the: - Answers largest economic
surplus.
Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy one for
$175, then your economic surplus is: - Answers $75
The fact that most people make some decisions based on intuition rather than calculation is -
Answers consistent with the cost-benefit model because most people intuitively weigh costs
and benefits
Moe has a big exam tomorrow. He considered studying this evening, but decided to hang out
with Curly instead. If neither activity involves any explicit costs and Moe always chooses
rationally, it must be true that: - Answers Moe gets more benefit from spending time with Curly
