The assertion that "there is no free lunch" means that

For economists, the word "utility" means:
1. A. versatility and flexibility.
2. B. rationality.
3. C. pleasure or satisfaction.
4. D. purposefulness.
In economics, the pleasure, happiness, or satisfaction received from a product is called:
1. A. marginal cost.
2. B. rational outcome.
3. C. status fulfillment.
4. D. utility.
When economists say that people act rationally in their self interest, they mean that individuals:
1. A. look for and pursue opportunities to increase their utility.
2. B. generally disregard the interests of others.
3. C. are mainly creatures of habit.
4. D. are usually impulsive and unpredictable.
According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because:
1. A. people are greedy.
2. B. productive resources are limited.
3. C. human beings are inherently insecure.
4. D. people are irrational.
According to economists, economic self-interest:
1. A. is a reality that underlies economic behavior.
2. B. has the same meaning as selfishness.
3. C. is more characteristic of men than of women.
4. D. is usually self-defeating.
Joe sold gold coins for $1000 that he bought a year ago for $1000.He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:
1. A. opportunity costs.
2. B. marginal benefits that exceed marginal costs.
3. C. imperfect information.
4. D. normative economics.
A person should consume more of something when its marginal:
1. A. benefit exceeds its marginal cost.
2. B. cost exceeds its marginal benefit.
3. C. cost equals its marginal benefit.
4. D. benefit is still positive.
Economics may best be defined as the:
1. A. interaction between macro and micro considerations.
2. B. social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.
3. C. empirical testing of value judgments through the use of logic.
4. D. use of policy to refute facts and hypotheses.
The study of economics is primarily concerned with:
1. A. keeping private businesses from losing money.
2. B. demonstrating that capitalistic economies are superior to socialistic economies.
3. C. choices that are made in seeking the best use of resources.
4. D. determining the most equitable distribution of society's output.
The economic perspective entails:
1. A. irrational behavior by individuals and institutions.
2. B. a comparison of marginal benefits and marginal costs in decision making.
3. C. short-term but not long-term thinking.
4. D. rejection of the scientific method.
Purposeful behavior suggests that:
1. A. everyone will make identical choices.
2. B. resource availability exceeds economic wants.
3. C. individuals may make different choices because of different desired outcomes.
4. D. an individual's economic goals cannot involve tradeoffs.
Purposeful behavior means that:
1. A. people are selfish in their decision-making.
2. B. people weigh costs and benefits to make decisions.
3. C. people are immune from emotions affecting their decisions.
4. D. decision-makers do not make mistakes when weighing costs and benefits.
Economics involves marginal analysis because:
1. A. most decisions involve changes from the present situation.
2. B. marginal benefits always exceed marginal costs.
3. C. marginal costs always exceed marginal benefits.
4. D. much economic behavior is irrational.
You should decide to go to a movie:
1. A. if the marginal cost of the movie exceeds its marginal benefit.
2. B. if the marginal benefit of the movie exceeds its marginal cost.
3. C. if your income will allow you to buy a ticket.
4. D. because movies are enjoyable.
Marginal costs exist because:
1. A. the decision to engage in one activity means forgoing some other activity.
2. B. wants are scarce relative to resources.
3. C. households and businesses make rational decisions.
4. D. most decisions do not involve sacrifices or tradeoffs.
The assertion that "There is no free lunch" means that:
1. A. there are always tradeoffs between economic goals.
2. B. all production involves the use of scarce resources and thus the sacrifice of alternative goods.
3. C. marginal analysis is not used in economic reasoning.
4. D. choices need not be made if behavior is rational.
Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of:
1. A. resource scarcity and the necessity of choice.
2. B. purposeful behavior.
3. C. marginal costs that exceed marginal benefits.
4. D. the tradeoff problem that exists between competing goals.
If someone produced too much of a good, this would suggest that:
1. A. rational choice cannot be applied to many economic decisions.
2. B. the good was produced to the point where its marginal cost exceeded its marginal benefit.
3. C. certain goods and services such as education and health care are inherently desirable and should be produced regardless of costs and benefits.
4. D. the good was produced to the point where its marginal benefit exceeded its marginal cost.
Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact:
1. A. is an example of irrational behavior.
2. B. implies that reading should be taught through phonics rather than the whole language method.
3. C. contradicts the economic perspective.
4. D. implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.
In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:
1. A. scarcity and opportunity costs.
2. B. money and real capital.
3. C. complementary economic goals.
4. D. full production.
Which one of the following expressions best states the idea of opportunity cost?
1. A. "A penny saved is a penny earned."
2. B. "He who hesitates is lost."
3. C. "There is no such thing as a free lunch."
4. D. "All that glitters is not gold."
Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This example illustrates:
1. A. distorted priorities.
2. B. opportunity costs.
3. C. increasing opportunity costs.
4. D. productive efficiency.
Which of the following most closely relates to the idea of opportunity costs?
1. A. tradeoffs.
2. B. economic growth.
3. C. technological change.
4. D. capitalism.
Economists contend that most economic decisions are:
1. A. random
2. B. chaotic
3. C. spontaneous
4. D. purposeful
Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as:
1. A. rational self-interest, because he attempting to increase his own income by identifying and satisfying someone else's wants.
2. B. greedy, because he is asking for a high wage.
3. C. selfish, because he is asking for a wage that is higher than others might charge.
4. D. irrational, because some neighbors refused his offer.
Kara was out jogging and despite being tired, decided to run one more mile. Based on her actions, economists would conclude that Kara:
1. A. must be an avid runner.
2. B. decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile.
3. C. decided that the marginal cost of running one more mile would outweigh the benefit of the additional mile.
4. D. was not very tired, so the marginal cost of the extra mile was very low.
An economic hypothesis:
1. A. has the same meaning as an economic principle or economic law.
2. B. is usually a normative statement.
3. C. is a possible explanation of cause and effect.
4. D. is a stronger generalization than an economic law.
Which of the following terms implies the least degree of confidence in an economic generalization?
1. A. a hypothesis.
2. B. a theory.
3. C. a principle.
4. D. a law.
Which of the following terms implies the greatest degree of confidence in an economic generalization?
1. A. a hypothesis.
2. B. a comparison.
3. C. a principle.
4. D. an anomaly.
A well-tested economic theory is often called:
1. A. an hypothesis.
2. B. a prototype.
3. C. a principle.
4. D. an anomaly.
The scientific method is:
1. A. not applicable to economics, because economics deals with human beings.
2. B. also known as the economic perspective.
3. C. analysis that moves from broad generalizations called laws to theories and then to hypotheses.
4. D. used by economists and other social scientists, as well as by physical scientists and life scientists.
The process by which economists test hypotheses against facts to develop theories, principles, and models is called:
1. A. the economic perspective.
2. B. the scientific method.
3. C. policy economics.
4. D. microeconomics.
Economic theories:
1. A. are useless because they are not based on laboratory experimentation.
2. B. that are true for individual economic units are never true for the economy as a whole.
3. C. are generalizations based on a careful observation of facts.
4. D. are abstractions and therefore of no application to real situations.
Which of the following is a correct statement?
1. A. Economic concepts or laws that are valid during depression are necessarily valid during prosperity.
2. B. Although they are generalizations, economic laws are useful because they allow us to predict and therefore control or adjust to events.
3. C. Economics is as scientific as are physics and chemistry because economic laws are as quantitatively precise as the laws of physics or chemistry.
4. D. Because economics is concerned with questions of "ought," it is a branch of applied ethics and not scientific.
In constructing models, economists:
1. A. make simplifying assumptions.
2. B. include all available information.
3. C. must use mathematical equations.
4. D. attempt to duplicate the real world.
The Latin term "ceteris paribus" means:
1. A. that if event A precedes event B, A has caused B.
2. B. that economics deals with facts, not values.
3. C. other things equal.
4. D. prosperity inevitably follows recession.
The basic purpose of the other-things-equal assumption is to:
1. A. allow one to reason about the relationship between variables X and Y without the intrusion of variable Z.
2. B. allow one to focus upon micro variables by ignoring macro variables.
3. C. allow one to focus upon macro variables by ignoring micro variables.
4. D. determine whether X causes Y or vice versa.
Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:
1. A. the quantity of bananas purchased determines the price of bananas.
2. B. all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.
3. C. economists can conduct controlled laboratory experiments.
4. D. one cannot generalize about the relationship between the price of bananas and the quantity purchased.
The term "other things equal" means that:
1. A. the associated statement is normative.
2. B. many variables affect the variable under consideration.
3. C. a number of relevant variables are assumed to be constant.
4. D. when variable X increases so does related variable Y.
Kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from day to day. For a couple of weeks she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the scientific method to better understand ice cream buying habits, her next step is to:
1. A. conclude definitively that people buy more ice cream when the temperature rises.
2. B. state her findings as a well-tested economic principle.
3. C. use the observed data to form an hypothesis about ice cream buying behavior.
4. D. throw out the data if it does not show a perfect relationship between buying habits and the other information she has collected.