question
Which of the following concepts do economists focus their study on when explaining how humans behave?
answer
incentives
question
An example of a direct negative incentive is:
answer
threatening to fire those who do not perform well.
question
A car insurance company is willing to offer accident-free drivers a discount. This is an example of
answer
a positive incentive.
question
Rational decision-making under conditions of scarcity requires individuals to:
answer
understand that trade-offs are necessary.
question
Economics is concerned with the trade-offs that emerge because of scarcity. The term "trade-offs" refers to:
answer
the alternatives given up when making choices.
question
The opportunity cost of a purchase is:
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the alternative good or service that one sacrifices because a different good was purchased.
question
How are changes in opportunity cost related to decision-making behavior?
answer
The lower the opportunity cost of doing an activity X, the more likely activity X will be done.
question
Instead of taking an economics course, you could have taken a history course that meets at the exact same time. The total cost of taking the economics course would be:
answer
the tuition cost, the cost of the textbook and notebook, and the fact that you could not take the history course at the same time.
question
The opportunity cost of working rather than going to school is:
answer
the higher wages that come with additional education.
question
Restaurants, bars, and convenience stores are often located near college campuses. These businesses frequently charge higher than normal prices. They are taking advantage of the fact that:
answer
students place a high value on their scarce time and are willing to pay higher prices than they would at locations farther from campus.
question
Economists believe that individuals compare the benefits and costs of various options when making a decision and in so doing act ________.
answer
rationally
question
Many stores are open 24 hours a day. When store managers make the decision to stay open 24 hours, it must be the case that:
answer
the marginal benefit of staying open all day and the marginal cost to remaining open all day are at least equal.
question
Who benefits from voluntary trade?
answer
buyers and sellers
question
A person has a comparative advantage in the production of a good when she or he can produce the product at a(n) ________ opportunity cost compared to another person.
answer
lower
question
More oranges are grown in Florida than North Dakota because Florida's warm climate gives it a ________ in growing oranges.
answer
comparative advantage
question
Which of the following will most likely occur under a system of clearly defined and enforced private property rights?
answer
Resource owners will gain by discovering and employing their resources in ways that are highly valued by others.
question
Which of the following is a private owner prohibited from doing?
answer
using the property in a manner that invades or infringes on the property of another
question
Todd owns a truck that he values at $2,000. Susan, who does a lot of hauling, values the truck at $6,000. If these two are allowed to negotiate, which of the following will most likely occur?
answer
The truck will be sold at a price greater than $2,000 but less than $6,000, and both parties will benefit.
question
Beginning in the early 1990s, private landowners in Zimbabwe have started fencing in large areas of land that contain black rhinos, which were on the verge of extinction. These private owners charge fees for a stay at the lodges on the property (eco-tourism) and also sell hunting safaris and photo safaris. As a result,
answer
the population of black rhinos has increased.
question
The invisible hand principle indicates that competitive markets can help promote the efficient use of resources
answer
even when each market participant cares only about their own self interest rather than about the overall efficiency of resource use.
question
Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?
answer
Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
question
Which of the following most accurately describes the invisible hand concept?
answer
In a market setting, when individuals pursue their own interests, they simultaneously tend to promote the public interest.
question
According to Adam Smith, what is the primary source of a nation's wealth?
answer
The people's ability to produce products and trade in free markets
question
"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." What famous economist made this statement?
answer
Adam Smith
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