Chapter 01
Thinking Like an Economist
Multiple Choice Questions
1. Microeconomics is primarily the study of how
A. the stock market works.
B. people choose among alternatives.
C. businesses can make money.
D. the economy functions as a whole.
2. If you are at an all-you-can-eat buffet dinner and you are considering whether to eat another
dessert, you, as a rational consumer should decide to eat the desert
A. if it brings you any pleasure at all.
B. if it brings you more pleasure than the price you paid for the meal.
C. if it brings you as much pleasure as the desert costs if it is ordered a la carte.
D. no matter what because you want to get more for your money.
3. Say your girlfriend has received two free tickets to the Sunday movie matinee and she wants
you to go with her. Nevertheless, the movie plays at the same time you were planning to
watch the football game on the TV. As a rational person you should decide to go to the movie
A. always, since the tickets were free.
B. only if you would gain some pleasure from it.
C. only if the pleasure you will gain from it outweighs the pleasure you would gain from
watching the football game.
D. only if it brings you more pleasure than the cost of the tickets.
4. The reservation price of good X is
A. the market price for a good.
B. any price above what you would be willing to pay for the good.
C. the price at which one would be indifferent between good X and simply keeping the
money.
D. the cost of producing good X.
,5. If the benefits of X = $50 and the price of X = $50, then
A. $100 is the reservation price.
B. you will be indifferent between buying X and keeping your money.
C. $0 is the reservation price.
D. you should buy X.
6. Your bank account pays 3% interest per year. You loan a friend $100 for one year at zero
interest. Assuming the loan is paid on time the opportunity cost of the loan is
A. $3.
B. $100.
C. $103.
D. $0.
7. You decide to go skiing this weekend. It costs $50 for transportation, $50 for lodging, $30 for
ski lift tickets and you could have earned $100 as a waiter. What is the total cost of the ski
weekend?
A. $230
B. $130
C. $100
D. $80
8. You decide to go skiing this weekend. It costs $50 for transportation, $50 for lodging, $30 for
ski lift tickets. You are unemployed. What is the total cost of the ski weekend?
A. $230
B. $130
C. $100
D. $80
9. You decide to go skiing this weekend. It costs $50 for transportation, $50 for lodging, $30 for
ski lift tickets and you could have earned $100 as a waiter at a job you love so much you
would do it as a volunteer. What is the total cost of the ski weekend?
A. $230
B. $130
C. $100
D. $80
,10. Your parents have given you a new car on your 16th birthday for which they paid about
$24,000. Assume this is also the price you would get if you decided to sell the car a month
after getting it. The monthly costs of driving the car are $100 for oil changes and $200 for gas.
If you decide to keep the car, the total costs of the car to you this month will be
A. $2,300.
B. $300.
C. $24,300.
D. $0.
11. Your parents have given you a new car on your 16th birthday for which they paid about
$24,000. Assume this is also the price you would get if you decided to sell the car a month
after getting it. The monthly costs of driving the car are $100 for oil changes and $200 for gas.
What are the opportunity costs of driving the car this month?
A. $300
B. $2,000
C. $24,300
D. $0
12. Here are the costs of going to college: tuition $5,000; books $200; housing $1,000; food
$1,000; lost income from work $10,000. Studying and work are equally desirable in your
mind. Suppose that you could live at home at no cost to you if you worked, but must live on
campus if you go to school. What is the total opportunity cost to you of going to school rather
than working? (Food costs the same at school or home.)
A. $16,200
B. $7,200
C. $5,200
D. $15,200
13. Here are the costs of going to college: tuition $5,000; books $200; housing $1,000; food
$1,000; lost income from work $10,000. Studying and work are equally desirable in your
mind. Suppose you must live on your own anyway. What is the cost of going to school?
A. $17,200
B. $7,200
C. $15,200
D. $16,200
, 14. Here are the costs of going to college: tuition $5,000; books $200; housing $1,000; food
$1,000; lost income from work $10,000. Studying and work are equally desirable in your
mind. Suppose that you could work part-time and make $5,000 at a job you would volunteer
to do. You live on campus instead of at home. What is the cost of going to school?
A. $16,200
B. $7,200
C. $5,200
D. $11,200
15. You decide to lend $100 to a friend interest free for one year. You calculate that you could
have earned 10% interest. What is the opportunity cost of the loan if it is paid on time?
A. $10
B. $100
C. $110
D. $0
16. You are considering renting a car for the weekend. It costs $200 for the car plus $0.20 per
mile (including gas). If you decide to go on a 300 mile voyage what is the total cost of the
rental?
A. $200
B. $60
C. $260
D. $0
17. You are considering renting a car for the weekend. It costs $200 for the car plus $0.20 per
mile (including gas). Suppose you have already rented the car for the week and then add the
300 mile addition to your trip. Now what is the cost of the journey?
A. $100
B. $60
C. $260
D. $0
Thinking Like an Economist
Multiple Choice Questions
1. Microeconomics is primarily the study of how
A. the stock market works.
B. people choose among alternatives.
C. businesses can make money.
D. the economy functions as a whole.
2. If you are at an all-you-can-eat buffet dinner and you are considering whether to eat another
dessert, you, as a rational consumer should decide to eat the desert
A. if it brings you any pleasure at all.
B. if it brings you more pleasure than the price you paid for the meal.
C. if it brings you as much pleasure as the desert costs if it is ordered a la carte.
D. no matter what because you want to get more for your money.
3. Say your girlfriend has received two free tickets to the Sunday movie matinee and she wants
you to go with her. Nevertheless, the movie plays at the same time you were planning to
watch the football game on the TV. As a rational person you should decide to go to the movie
A. always, since the tickets were free.
B. only if you would gain some pleasure from it.
C. only if the pleasure you will gain from it outweighs the pleasure you would gain from
watching the football game.
D. only if it brings you more pleasure than the cost of the tickets.
4. The reservation price of good X is
A. the market price for a good.
B. any price above what you would be willing to pay for the good.
C. the price at which one would be indifferent between good X and simply keeping the
money.
D. the cost of producing good X.
,5. If the benefits of X = $50 and the price of X = $50, then
A. $100 is the reservation price.
B. you will be indifferent between buying X and keeping your money.
C. $0 is the reservation price.
D. you should buy X.
6. Your bank account pays 3% interest per year. You loan a friend $100 for one year at zero
interest. Assuming the loan is paid on time the opportunity cost of the loan is
A. $3.
B. $100.
C. $103.
D. $0.
7. You decide to go skiing this weekend. It costs $50 for transportation, $50 for lodging, $30 for
ski lift tickets and you could have earned $100 as a waiter. What is the total cost of the ski
weekend?
A. $230
B. $130
C. $100
D. $80
8. You decide to go skiing this weekend. It costs $50 for transportation, $50 for lodging, $30 for
ski lift tickets. You are unemployed. What is the total cost of the ski weekend?
A. $230
B. $130
C. $100
D. $80
9. You decide to go skiing this weekend. It costs $50 for transportation, $50 for lodging, $30 for
ski lift tickets and you could have earned $100 as a waiter at a job you love so much you
would do it as a volunteer. What is the total cost of the ski weekend?
A. $230
B. $130
C. $100
D. $80
,10. Your parents have given you a new car on your 16th birthday for which they paid about
$24,000. Assume this is also the price you would get if you decided to sell the car a month
after getting it. The monthly costs of driving the car are $100 for oil changes and $200 for gas.
If you decide to keep the car, the total costs of the car to you this month will be
A. $2,300.
B. $300.
C. $24,300.
D. $0.
11. Your parents have given you a new car on your 16th birthday for which they paid about
$24,000. Assume this is also the price you would get if you decided to sell the car a month
after getting it. The monthly costs of driving the car are $100 for oil changes and $200 for gas.
What are the opportunity costs of driving the car this month?
A. $300
B. $2,000
C. $24,300
D. $0
12. Here are the costs of going to college: tuition $5,000; books $200; housing $1,000; food
$1,000; lost income from work $10,000. Studying and work are equally desirable in your
mind. Suppose that you could live at home at no cost to you if you worked, but must live on
campus if you go to school. What is the total opportunity cost to you of going to school rather
than working? (Food costs the same at school or home.)
A. $16,200
B. $7,200
C. $5,200
D. $15,200
13. Here are the costs of going to college: tuition $5,000; books $200; housing $1,000; food
$1,000; lost income from work $10,000. Studying and work are equally desirable in your
mind. Suppose you must live on your own anyway. What is the cost of going to school?
A. $17,200
B. $7,200
C. $15,200
D. $16,200
, 14. Here are the costs of going to college: tuition $5,000; books $200; housing $1,000; food
$1,000; lost income from work $10,000. Studying and work are equally desirable in your
mind. Suppose that you could work part-time and make $5,000 at a job you would volunteer
to do. You live on campus instead of at home. What is the cost of going to school?
A. $16,200
B. $7,200
C. $5,200
D. $11,200
15. You decide to lend $100 to a friend interest free for one year. You calculate that you could
have earned 10% interest. What is the opportunity cost of the loan if it is paid on time?
A. $10
B. $100
C. $110
D. $0
16. You are considering renting a car for the weekend. It costs $200 for the car plus $0.20 per
mile (including gas). If you decide to go on a 300 mile voyage what is the total cost of the
rental?
A. $200
B. $60
C. $260
D. $0
17. You are considering renting a car for the weekend. It costs $200 for the car plus $0.20 per
mile (including gas). Suppose you have already rented the car for the week and then add the
300 mile addition to your trip. Now what is the cost of the journey?
A. $100
B. $60
C. $260
D. $0
