EC350 EXAM 1 QUESTIONS & ANSWERS
Economists believe that an individual or firm should continue any activity until: - Answer
-marginal benefit is equal to the marginal cost
Example of a positive economic statement - Answer -If minimum wage rates rise, then
unemployment will rise
What is NOT a possible opportunity cost of attending college? - Answer -the cost of
housing
According to the rationality assumption, people: - Answer -Do not intentionally make
decisions that would leave them worse off
What is the name given to the development of a new good? - Answer -invention
Tangible products like cars and televisions are referred to as - Answer -goods
Jim declined to take part in a health study on a free basis but changed his mind after
being offered $1,000 to participate in the study. Jim's behavior best illustrates which
economic principle? - Answer -People respond to economic incentives
One of the first steps in deciding whether to complete your education is to: - Answer -
evaluate the marginal cost and marginal benefit of that decision
Economics is the study of choice under the conditions of: - Answer -scarcity
What country has an economy where most of the resource allocation is determined by a
central planning authority? - Answer -North Korea
The principle of opportunity cost evolves from the concept of: - Answer -scarcity
The United States economy is best classified as a: - Answer -mixed economy
In what type of economy does the government decide how economic resources will be
allocated? - Answer -A centrally planned economy
natural resources - Answer -the resources provided by nature and used to produce
goods and services
Macroeconomics is NOT concerned with: - Answer -political party affiliation
the stock of computers, factory buildings and machine tools used to produce goods is
known as: - Answer -physical capital
, Capital goods and services - Answer -those bought by businesses to be used to
increase efficiency or enhance production
Economic decisions are made at every level in society. When we try to decide which
production method to use among several alternatives, which of the following key
economic questions are we trying to answer? - Answer -How do we produce the
products?
Economics: - Answer -is concerned with how people respond to incentives
When you think of an arrangement or institution that brings buyers and sellers of a good
or service together, what are you thinking of? - Answer -A market
Macroeconomics can NOT be used to understand: - Answer -how a consumer decides
between the purchase of two different cars
Jay Bhattacharya and M. Kate Bundorf of Stanford University have found evidence that
people who are obese and work for firms that have employer-provided health insurance
receive lower wages than people working at those firms who are not obese. At firms that
do not provide health insurance, obese workers do not receive lower wages than
workers who are not obese. Firms that provide workers with health insurance may pay a
lower wage to obese workers than to workers who are not obese because the
former
tend to be
less healthy
and consequently - Answer -less productive at work, more costly to insure and
therefore employ due to their higher claim submission rate, experience higher rates of
absenteeism and early retirement
A large corporation that runs nursing homes estimates that changes to Medicare will
result in lower payments by Medicare to nursing homes for short-term stays by patients
that require therapy or care upon leaving hospitals. Assume the corporation is
considering expanding the number of "beds" it offers at its nursing homes.
Given the changes to Medicare, if the marginal benefit of offering an additional bed is
$4,000 and the marginal cost is $5,000 per bed, then the corporation _________ offer
additional beds. - Answer -should not
productive efficiency means that - Answer -a good or service is produced at the lowest
possible cost
allocative efficiency means that - Answer -every good or service is produced up to the
point where marginal benefit is equal to marginal cost
Efficiency means that goods are distributed in a way that _____________, while equity
means that goods are distributed in a way that ______________ - Answer -maximizes
benefits to society, is fair
Economists believe that an individual or firm should continue any activity until: - Answer
-marginal benefit is equal to the marginal cost
Example of a positive economic statement - Answer -If minimum wage rates rise, then
unemployment will rise
What is NOT a possible opportunity cost of attending college? - Answer -the cost of
housing
According to the rationality assumption, people: - Answer -Do not intentionally make
decisions that would leave them worse off
What is the name given to the development of a new good? - Answer -invention
Tangible products like cars and televisions are referred to as - Answer -goods
Jim declined to take part in a health study on a free basis but changed his mind after
being offered $1,000 to participate in the study. Jim's behavior best illustrates which
economic principle? - Answer -People respond to economic incentives
One of the first steps in deciding whether to complete your education is to: - Answer -
evaluate the marginal cost and marginal benefit of that decision
Economics is the study of choice under the conditions of: - Answer -scarcity
What country has an economy where most of the resource allocation is determined by a
central planning authority? - Answer -North Korea
The principle of opportunity cost evolves from the concept of: - Answer -scarcity
The United States economy is best classified as a: - Answer -mixed economy
In what type of economy does the government decide how economic resources will be
allocated? - Answer -A centrally planned economy
natural resources - Answer -the resources provided by nature and used to produce
goods and services
Macroeconomics is NOT concerned with: - Answer -political party affiliation
the stock of computers, factory buildings and machine tools used to produce goods is
known as: - Answer -physical capital
, Capital goods and services - Answer -those bought by businesses to be used to
increase efficiency or enhance production
Economic decisions are made at every level in society. When we try to decide which
production method to use among several alternatives, which of the following key
economic questions are we trying to answer? - Answer -How do we produce the
products?
Economics: - Answer -is concerned with how people respond to incentives
When you think of an arrangement or institution that brings buyers and sellers of a good
or service together, what are you thinking of? - Answer -A market
Macroeconomics can NOT be used to understand: - Answer -how a consumer decides
between the purchase of two different cars
Jay Bhattacharya and M. Kate Bundorf of Stanford University have found evidence that
people who are obese and work for firms that have employer-provided health insurance
receive lower wages than people working at those firms who are not obese. At firms that
do not provide health insurance, obese workers do not receive lower wages than
workers who are not obese. Firms that provide workers with health insurance may pay a
lower wage to obese workers than to workers who are not obese because the
former
tend to be
less healthy
and consequently - Answer -less productive at work, more costly to insure and
therefore employ due to their higher claim submission rate, experience higher rates of
absenteeism and early retirement
A large corporation that runs nursing homes estimates that changes to Medicare will
result in lower payments by Medicare to nursing homes for short-term stays by patients
that require therapy or care upon leaving hospitals. Assume the corporation is
considering expanding the number of "beds" it offers at its nursing homes.
Given the changes to Medicare, if the marginal benefit of offering an additional bed is
$4,000 and the marginal cost is $5,000 per bed, then the corporation _________ offer
additional beds. - Answer -should not
productive efficiency means that - Answer -a good or service is produced at the lowest
possible cost
allocative efficiency means that - Answer -every good or service is produced up to the
point where marginal benefit is equal to marginal cost
Efficiency means that goods are distributed in a way that _____________, while equity
means that goods are distributed in a way that ______________ - Answer -maximizes
benefits to society, is fair
