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Chapter 1 Post-Reading Quiz
1. The invisible hand
A. is the most effective method in driving economic growth.
B. does not exist.
C. is the least effective method in driving economic growth.
D. has no effect on economic growth.
Answer: A
2. When markets work well
A. those who pursue their own interest end up promoting the social interest.
B. when self-interests and social interests do not align.
C. those who do not pursue their own interest end up promoting the social interest.
D. individuals are not free to pursue their own self-interests.
Answer: A
3. Opportunity costs are the
A. marginal value of the things given up in order to get something else.
B. highest-valued alternative given up in order to get something else.
C. monetary value of the things given up in order to get something else.
D. measure of the benefit of the good or service received.
Answer: B
4. This Sunday, Alex can either: study for his economics exam, watch football on television, or work
and earn $50.00. Although Alex believes his grades are a big priority, he decides to go to work, and
decides that watching television is a waste of time. The opportunity cost of going to work is
A. studying for his economics exam.
B. watching football on television.
C. $50.00.
D. nothing, because his job pays him $50.00.
Answer: A
5. In economics, something that must be given up in order to obtain something else is considered a(n)
A. cost.
B. benefit.
C. choice.
D. margin.
Answer: A
6. Suppose that Megan owns a Cola production facility, where her firm specializes in producing both
the Cola, and the associated Cola bottles. To increase the production of Cola by one gallon, she
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must decrease the production of bottles by 4. What is the opportunity cost of producing one
additional bottle?
A. ¼ of a gallon of Cola.
B. 1 gallon of Cola.
C. ½ of a gallon of Cola.
D. 1 Cola bottle.
Answer: A
7. Imagine that you own a bakery, specializing in cakes for special occasions. In a normal day, you can
produce either 1 large wedding cake or 2 ornate birthday cakes. Your opportunity cost of producing
one birthday cake would be
A. 2 wedding cakes.
B. ½ of a wedding cake.
C. 1 wedding cake.
D. 3 birthday cakes.
Answer: B
8. A tradeoff is different than the economic theory of a free lunch, in that
A. free lunches exist.
B. with tradeoffs you have to give up something to get more of another thing, and with free
lunches you can get more of one thing without giving up anything else.
C. with free lunches you have to give up something to get more of another thing, and with
tradeoffs you can get more of one thing without giving up anything else.
D. trade offs do not exist.
Answer: B
9. Tradeoffs impact
A. everyone, as in order to get one item, we must give up another item.
B. only low income individuals, as their choices are fewer.
C. the wealthy primarily, through deciding what to invest in.
D. only businesses, as business decision-making is more important that individual decisionmaking.
Answer: A
10. The real cost of something is
A. the dollar value of the item.
B. the dollar value of the substitute.
C. what we must give up in order to get it.
D. the utility of the item.
Answer: C
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11. People are forced to make choices because
A. we have scarce resources.
B. there are many available options.
C. people enjoy going shopping.
D. we have unlimited income.
Answer: A
12. Amanda is considering going to graduate school, where she could earn an MBA in one year then
take a job as a financial analyst. The cost of tuition and books is $40,000. After the year is over,
she can get a job earning $100,000 per year. Amanda also has the option of not going to school
and getting a job earning $52,000 per year right now. In terms of dollars, the opportunity cost of
attending school instead is:
A. $92,000.
B. $40,000.
C. $52,000.
D. $192,000.
Answer: A
13. Jen has four hours of free time this evening, and is considering what to do. She ranked her
alternatives, first of which is going to a baseball game, second go to a movie, third study for a
test, and fourth send friend requests on Facebook. What is the opportunity cost of attending a
baseball game for Jen?
A. attending a movie.
B. studying for a test.
C. send friend requests on Facebook.
D. attending a movie, studying for a test, and sending friend request on Facebook.
Answer: A
14. When considering how much tax there will be on your additional income if you take a new job, you
are exhibiting the concept of
A. supply and demand.
B. thinking on the margin.
C. opportunity cost.
D. economic growth.
Answer: B
15. When utilizing the concept of marginal analysis, the main goal of a firm is
A. to ensure that total revenue is positive.
B. to ensure that total cost is in line with historical cost structures.
C. produce additional output whenever the marginal benefit is equal to or greater than the
marginal cost.
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D. produce additional output whenever the marginal cost is greater than the marginal benefit.
Answer: C
16. If the cost of producing one additional unit of your product is $7.00, but the selling price of your
product is $6.75, you should
A. produce the product, since you could earn $6.75.
B. not produce the product, as the marginal cost exceeds the marginal benefit.
C. not produce the product, as the marginal benefit exceeds the marginal cost.
D. produce the product, since you need to keep producing output.
Answer: B
17. How is marginal benefit measured?
A. by what you are willing to give up to get one additional unit of something
B. by the total amount you have paid for all products consumed
C. There is no way to measure marginal benefit, as it is different for each person.
D. by the opportunity cost
Answer: A
18. If the marginal benefit of spending an hour shopping in the local mall exceeds the marginal cost, it
is rational to
A. shop at the mall for the hour.
B. ignore the opportunity costs associated with the decision.
C. increase the marginal benefit of shopping by not shopping.
D. decrease the marginal cost by going shopping.
Answer: A
19. At 1:00am, Ava decided she would be better off going to bed rather than spending one more hour
studying for her economics midterm. If Ava’s choice was correct, she must have concluded that
A. the marginal cost of studying one more hour was greater than the marginal benefit of
studying.
B. the marginal benefit of studying one more hour was greater than the marginal cost of
studying.
C. studying one more hour would have been the better thing to do.
D. the benefit derived from studying more would have outweighed the cost of less sleep.
Answer: A
20. Marginal thinking is done by
A. comparing all the relevant alternatives, incrementally.
B. doing calculation on the margin of a notebook.
C. by rounding numbers up.
D. finance and economic professionals, but no one else.
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Answer: A
21. The cost of increasing production by one unit is called
A. the sunk cost.
B. the total cost.
C. the marginal cost.
D. the marginal benefit.
Answer: C
22. Economic growth causes a(n)
A. increase in the quality of life in a country.
B. decrease in the quality of life in a country.
C. decrease in the quality of life in all countries.
D. minimal impact on standard of living.
Answer: A
23. Economic growth is most closely attributed to
A. a sustained expansion of production possibilities.
B. an increase in nominal wages.
C. an increase in population.
D. an increase in employment.
Answer: A
24. Inflation fell rather steadily from 1980 to the year 2000. If you were reviewing a graph of this,
with inflation on the vertical axis and time on the horizontal axis, you would deduce that
A. the rate of inflation is a flat horizontal line.
B. inflation was following an upward sloping trend line.
C. inflation had a positive trend.
D. inflation had a negative trend.
Answer: D
25. Inflation
A. erodes the purchasing power of your money.
B. has no effect on the purchasing power of your money.
C. increases the purchasing power of your money.
D. allows you to purchase more goods.
Answer: A
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