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Dr. Bromley
ECN112
(Microeconomics):

Additional
Multiple Choice
Questions

Chapter 1

1-1 The epigram "time is money" expresses, in part, the concept of

A. opportunity cost	B. comparative advantage	C. specialization
D. efficiency in production	E. the margin

1-2 Efficiency in production is said to exist only if
A. it is not possible to produce more of one good without producing less of another.
B. if is not possible to make one person better off without making another worse off.
C. it is possible to produce more of one good without producing less of another.
D. if is possible to make one person better off without making another worse off.
E. scarcity does not exist.

1-3 Efficiency in distribution (allocation) is said to exist only if
A. it is not possible to produce more of one good without producing less of another.
B. if is not possible to make one person better off without making another worse off.
C. it is possible to produce more of one good without producing less of another.
D. if is possible to make one person better off without making another worse off.
E. specialization does not occur.

1-4 When resources are being used inefficiently,
A. the economy is operating inside (below) the production possibilities curve.
B. the economy is operating outside (above) the production possibilities curve.
C. the production possibilities curve shifts out (to the right).
D. the production possibilities curve shifts inward (to the left).
E. the economy is operating right on the production possibilities curve.

1-5 When economists speak of "marginal," they mean

A. a substitute for butter	B. Marge and Al, a couple living in Mesa
C. the same thing as "scarcity"	D. trivial or unimportant
E. a small increment or addition

1-6 The opportunity cost of building a new sports arena in Phoenix would be
A. the money expense involved in building the arena.
B. the necessary increase in taxes to build the arena.
C. the highest-valued bundle of other goods which must be given up in order to build the arena.
D. the loss of business revenues from traffic jams caused by people using the new arena.
E. the loss of revenues which now go to current facilities, but which will be spent instead at the new arena, if it is built.

1-7 Suppose the government canceled a building project after spending $3 billion on it already. The $3 billion cannot be recovered. If the estimated value of the benefit of the completed project would have been $25 billion, then the cancellation makes economic sense...
A. only if the remaining cost of the project exceeds $22 billion.
B. only if the remaining cost of the project exceeds $25 billion.
C. only if the remaining cost of the project exceeds $28 billion.
D. only if the remaining cost was more than the $3 billion already spent.
E. under no circumstances, since $3 billion had already been spent, and the project must be finished to get any benefit from that cost.

1-8 Mortimer can go from Phoenix to Los Angeles in 7 hours by bus (bus fare is $20), or go from Phoenix to Los Angeles in 2 hours by airplane (air fare is $120). Assume that Mortimer does not get any particular enjoyment or discomfort from either form of transportation. Which statement is correct?
A. It is certainly less costly for Mortimer to take the bus.
B. It is certainly less costly for Mortimer to fly.
C. It is less costly for Mortimer to fly if he values his time at more than $20 per hour.
D. It is less costly for Mortimer to fly if he values his time at less than $20 per hour.
E. None of the above.

1-9 The Arizona Cardinals give away complimentary tickets to several charity groups. Among those receiving the gift tickets are kids from a local orphanage, volunteer athletic coaches from the Boys Clubs of America, students from Phoenix College SAM Council, and doctors from the Arizona Heart Institute. What can you say about the cost of giving these tickets away?
A. In all cases, the tickets are free, so it costs nothing to give them away.
B. The cost of giving the tickets away is lowest for the group least likely to pay to see a game.
C. The cost of giving away tickets to a particular game does not depend on how many tickets would have been sold for that game.
D. The cost of giving the tickets away is highest for the group least likely to pay to see a game, since that group may not use the free tickets.
E. The cost of giving away free tickets is the same, no matter who gets them.

1-10 Which of the following is true?
A. The cost of attending school is lower if the number of high-paying jobs for college-age workers increases.
B. Your cost of attending school does not depend on such personal things as your marital status or the number of children that you have.
C. The cost of attending school would fall for many people if a new law made it illegal to work until the age of 25.
D. The cost of attending school is the same for everybody.
E. The cost of attending school is tuition, the price of books, transportation expenses, and other fees, all added together.

1-11 Which statement is true?
A. The value of every human life is infinite, thus cost is irrelevant when deciding whether to provide an individual with life-saving treatment.
B. In some places, hiring women to cut grass by hand (using knives) might make more sense than cutting the grass by other means, if the women had little else to do with their time.
C. A business that owns its own warehouse building does not have to be concerned with the rental rates for warehouse space, since it can use its own warehouse for free.
D. The cost of living in a house that you own consists of the taxes, utilities, and mortgage payment.
E. The cost of washing your car is the boredom and drudgery involved in the task.

1-12 A hospital decides not to use its coronary care facilities to give a 95-year old woman a heart transplant (which may not be successful). Instead, it uses the coronary care facilities to save a 42-year old man who has just had a massive heart attack. The hospital seems to be concerned with
A. men instead of women B. money instead of lives
C. opportunity costs D. the young instead of the old
E. corporate profits instead of people

1-13 Which of the following is correct?
A. The opportunity cost of an action includes the unpleasant results of the action.
B. The opportunity cost of an action is the highest valued alternative thing or things that must be given up when the action is taken.
C. The opportunity cost of waiting in the dentist's office includes the fear and boredom involved in waiting.
D. The opportunity cost of washing your car includes the boredom and sore muscles you receive as a result.
E. The opportunity cost of a decision is just the money that decision will cost you.

1-14 During popular televised sports events, advertising rates are very high. This reflects
A. the expense of electricity and cameras used in broadcasting the events.
B. the high fees that have been paid for the rights to broadcast such events.
C. nothing but corporate greed.
D. the situation that the opportunity cost of selling advertising time to one advertiser is the amount some other advertiser is willing to pay for the time.
E. the high salaries of the players in sports today.

1-15 Right after natural disasters (such as earthquakes) the prices of certain emergency items (such as flashlights) rise, while the prices of other items (such as Rolex watches) do not. One possible reason for this is that
A. the sellers of luxury items, such as Rolex watches, are less greedy than the sellers of flashlights.
B. the opportunity cost of selling a flashlight to any one person has gone up, while this is not the case with watches.
C. the people who sell flashlights are able to force people to buy the flashlights against their wills.
D. the value of keeping a flashlight for one's own use has gone down because of the disaster.
E. if a person buys a flashlight, only the seller benefits, but if a person buys a watch, both the buyer and seller benefit.

1-16 "Since I am going to start school soon, I will have to give up my current job." This statement most clearly reflects

A. comparative advantage	B. opportunity cost	C. gains from technology
D. failure to economize	E. laziness

1-17 Pat says, "If I didn't go to the movie tonight, I would save $7.00 and spend the evening studying." The opportunity cost to Pat of going to the movie is
A. $7 B. dependent on how good the movie is
C. an evening of studying D. $7 plus an evening of studying
E. nothing

1-18 Retired people are more likely than working people to travel by bus, train or car. Working people more often choose to travel by airplane. An economic explanation of this might be
A. working people like airplanes.
B. retired people like buses and trains because they are more old-fashioned.
C. working people own stock in airlines while retired people probably don't.
D. working people have higher opportunity costs associated with their time than retired people do.
E. retired people live closer to bus stations, while working people live near airports.

1-19 A production possibilities curve that is concave to the origin (bulges out towards the upper right) means that
A. there is a market at which trade can take place.
B. marginal costs rise as we try to produce more of a particular good.
C. there is a way to produce more of all goods without using any more resources.
D. marginal opportunity costs are constant (they do not increase as we try to produce more of a particular good).
E. somebody is using a protractor to draw the production possibilities curve


1-20 The diagram above shows the production possibilities of rice and soybeans for the country of Pneumonia. Given this picture, Pneumonia's opportunity cost of producing more soybeans

A. is higher at D than at A	B. is higher at A than at D	C. is highest at C
D. is the same at D and A	E. impossible to determine without more information

1-21 The diagram above shows the production possibilities of rice and soybeans for the country of Pneumonia. Given this picture, Pneumonia's opportunity cost of producing more rice

A. is higher at B than at C	B. is higher at C than at B	C. is highest at A
D. is the same at B and C	E. impossible to determine without more information

1-22 The diagram above shows the production possibilities of rice and soybeans for the country of Pneumonia. Which of the following combinations is both possible and efficient?
A. D

B. E

C. G
D. H

E. none of these

1-23 Which statement is true?
A. The opportunity cost of washing your car is the discomfort and drudgery involved.
B. The value of time is not a component of opportunity cost.
C. An individual should consider only monetary costs when making consumption decisions.
D. It costs just as much to go out to dinner on Valentine's Day or Mothers' Day as it does on Groundhog's day .
E. For housing construction workers, the opportunity cost of taking the day off to see a movie may be lower on a rainy day than on a sunny, dry one.

1-24 The statement that "there are no free lunches" means...
A. Individuals must always pay money for the food they eat.
B. No restaurant owner will provide food to patrons unless they pay her.
C. Restaurant owners act selfishly.
D. Consumption of any good requires that other goods be given up (foregone).
E. Lunch is the most expensive meal of the day.

1-25 If Jones drives from Phoenix to New Orleans, it takes her three days longer than flying would. Thus, if she drives on her vacation, she will have take three more days off than she would if she flies (she is self-employed). She figures she could earn $80 per day (after taxes) on each of those days. She enjoys driving, and considers the value to her of being able to see the scenery along the way to be about $50 (total). She will drive if the airline fare
A. is more than $50 above the expense of driving.
B. is more than $80 above the expense of driving.
C. is more than $130 above the expense of driving.
D. is more than $190 above the expense of driving.
E. is more than $240 above the expense of driving.

1-26 The relevant cost of producing an additional Whiskey Flowers music video is
A. the profit to be made from producing a Whiskey Flowers music video
B. the retail price of a Whiskey Flowers music video
C. the cheapest method of producing a Whiskey Flowers music video
D. the sacrifice of other goods necessary to get another Whiskey Flowers music video
E. the sum of the marginal and average cost of producing a Whiskey Flowers music video

1-27 A recurring theme in economics is
A. people have unlimited wants in the face of limited resources
B. there are unlimited resources
C. our country is rich; we just don't realize it
D. people have limited wants in the face of limited resources
E. people have unlimited wants in the face of unlimited resources

1-28 A student in microeconomics will study for microeconomics
A. as long as she can.
B. until she knows everything.
C. very little.
D. as long as the marginal opportunity cost exceeds the marginal benefit of doing so.
E. as long as the marginal opportunity cost is less than the marginal benefit.

1-29 The opportunity cost of an action is
A. the highest valued thing(s) that must be given up when the action is undertaken.
B. the total of all things given up when the action is undertaken.
C. the bad results that happen as a result of the action.
D. A and C
E. all of the above.

1-30 By "the margin" we in microeconomics will usually mean
A. the white space down the side of a piece of paper.
B. a small incremental change.
C. something used instead of butter.
D. the same thing as "merging" (in Texas).
E. none of the above

1-31 Which of the following is not scarce?
A. A's in microeconomics.
B. Tender Porterhouse steaks.
C. Workout tapes.
D. Trash which no one wants.
E. Economics text books.

1-32 The opportunity cost of an action is
A. the sum of all of the possible things which could have been done instead.
B. the best thing(s) which must be given up in order to take that action.
C. the money which must be paid to take that action.
D. the time that must be spent to take that action.
E. zero, since it represents opportunities that have been missed.

1-33 We face costs when we have
A. more than one option to choose between.
B. scarcity.
C. decisions to make.
D. any and all of the above.
E. none of the above.

1-34 As one tries to produce more of a good or perform more of a task, the marginal cost
A. increases

B. decreases

C. stays the same
D. loses its meaning

E. cannot be found

1-35 The production possibilities curve
A. shows all of the production combinations of two goods which are possible under all circumstances.
B. shows all of the curves of two goods which are possible.
C. shows all of the curves which can be produced.
D. shows all of the production combinations of two goods possible. using available resources and technology.
E. shows the ideal technology that is possible with current resources.

1-36 Suppose an economy can produce various amounts of two goods, food and shelter, using its available resources. The economy is currently producing a mix of food and shelter, and is on its productions possibilities curve. Which statement is also true?
A. It is not possible for the economy to produce more food.
B. It is not possible for the economy to produce more shelter.
C. The economy is not using its resources efficiently.
D. The economy cannot simultaneously increase its production of both food and shelter.
E. The economy should not produce a mix of goods, but rather should use all resources to produce only food or only shelter.

1-37 Suppose an economy can produce various amounts of two goods, food and shelter, using its available resources. The economy is currently producing a mix of food and shelter, and is below its productions possibilities curve. Which statement is also true?
A. It is not possible for the economy to produce more food.
B. It is not possible for the economy to produce more shelter.
C. The economy is not using its resources efficiently.
D. The economy cannot simultaneously increase its production of both food and shelter.
E. The economy should not produce a mix of goods, but rather should use all resources to produce only food or only shelter.

 

1-38. The slope of the production possibilities curve tells us
A. the trade-off possible between two goods.
B. the marginal cost of producing one of the goods, in terms of the other good given up.
C. the opportunity cost of one of the goods, if the other good is the best thing given up.
D. the "rise over the run", or the vertical change over the horizontal change.
E. all of the above.

1-39. Which of the following might correctly be considered when determining the cost of reading a chapter in your textbook?
A. the price of the textbook.
B. tuition for school.
C. the value of reading a book for another class instead.
D. the expense of driving to school to buy the textbook.
E. all of the above

1-40 Suppose a production possibilities curve is constructed for two goods, bread and circuses. The slope of such a production possibilities curve does not indicate
A. the trade-off possible between bread and circuses.
B. the marginal cost of producing bread, in terms of the circuses given up.
C. that the marginal cost of bread is rising as we move to higher quantities of bread.
D. that the marginal cost of circuses is rising as we produce fewer circuses.
E. that scarcity exists, in that choices must be made and costs must be borne to produce bread.

1-41 The law of diminishing returns implies that
A. the marginal cost of an activity (such as studying) falls as we do more.
B. the marginal benefit of an activity (such as studying) rises as we do more.
C. the marginal benefit of an activity (such as studying) falls as we do more.
D. diminishing a return is now illegal, just like driving without a seat-belt.
E. returning a "diminishing" is now the responsibility of every citizen who finds one.

1-42 Scarcity means that
A. we cannot have everything that we might want.
B. we have to make choices between the things we desire.
C. there are costs to just about any activity we undertake.
D. we must give up some things in order to obtain other things.
E. all of the above are correct.

1-43 The slope of a production possibilities curve which bulges out towards the upper right tells us
A. that no trade-off possible is between two goods (that is, it is not possible to give up some of one good to get more of the other).
B. that the marginal cost of producing one of the goods is constant.
C. whether the economy is enjoying productive efficiency or not.
D. the horizontal change divided by the vertical change.
E. that the marginal opportunity cost of producing either good increases as we try to increase the quantity of it which is produced.

1-44 Which of the following might correctly be considered when determining the cost of coming to class today?
A. the price of the textbook.
B. the money paid as tuition for school.
C. the value of being somewhere else.
D. all of the above.
E. none of the above

 

1-45 A travel agent wishes to inform her customers about the costs of flying to Chicago rather than taking Amtrak (the train). The fare on the train is about half of the lowest-price coach airline ticket. A plane travels at 500 mph on average, a train at 50 mph. What can you tell her?
A. Since the fare is higher to fly, it is always more costly for everyone to fly.
B. Since some people like to take planes, they might prefer to fly, but it is obviously less costly to take a train.
C. Rich people like to fly because they can afford the higher fare.
D. The train will be less costly to ride, since it is subsidized by taxpayers.
E. People who value their time highly will find it less costly to fly.

1-46 At any point on the production possibilities frontier, the cost of producing the good measured on the horizontal axis is
A. the vertical height of the PPC.
B. the slope of the PPC at that point.
C. the horizontal distance that we are from the origin.
D. the vertical distance that we are form the origin.
E. difficult to determine.

1-47 The Wall Street Journal reported that during a recession, many people seek more training and education (including MBA degrees). An economic explanation for this phenomenon might be that
A. the opportunity cost of education is lower during a recession.
B. it is easier to find a new job during a recession.
C. it is easier to find a school during a recession.
D. during a recession. schools lower their academic standards for graduating.
E. during a recession, faculty are more sympathetic to their students.

1-48 Homer plans to get his car washed and buy gasoline. He discovers that if he buys seven gallons of gasoline at a price of one dollar per gallon, the price of a car wash is $4.99. However, if he buys eight gallons of gasoline (he has room in his tank for that much), the car wash price goes down to $4.00 (all prices are tax included). The marginal cost (in terms of money) of the eighth gallon of gasoline is
A. one dollar
B. one-eighth of a dollar
C. $.99
D. one cent
E. one-seventh of a dollar

1-49 In Los Angeles, the value of land is high compared to Phoenix (an acre of land in L.A. is about 3-6 times as expensive as in Phoenix, depending on the exact area). Most other things are about the same price in L.A. as in Phoenix. This situation explains why
A. it is hotter in Phoenix than in L.A. in the summer.
B. shopping centers in L.A. are more likely to have multi-level parking structures than those in Phoenix.
C. there are fewer 70mm-Dolby™ theaters in Phoenix than in L.A.
D. per-person sales of ice cream are higher in Phoenix than in L.A.
E. the L.A. newspapers use more space on stories involving the entertainment industry.

1-50. The marginal opportunity cost to you of taking this quiz at this moment
A. must include the cost of enrolling in the class.
B. includes the cost of buying the textbook.
C. includes the alternative use of a Scantron 882 form.
D. includes the cost of missing the David Letterman Show last night so you could study.
E. all of the above are correct.

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Chapter 1 Questions