1. What does the adage, "There is no such thing as a free lunch," mean?
a. Even people on welfare have to pay for food.
b. The cost of living is always increasing.
c. To get something we like, we usually have to give up another thing we like.
d. All costs are included in the price of a product.
2. What does efficiency mean?
a. Society is conserving resources in order to save them for the future.
b. Society’s goods and services are distributed fairly among society's members.
c. Society has lessened its dependence on foreign energy sources.
d. Society is getting the most it can from its scarce resources.
3. What is a marginal change?
a. a long-term trend
b. a large, significant adjustment
c. a change for the worse, and so is usually short-term
d. a small incremental adjustment
4. Suppose your management professor has been offered a corporate job with a 30% pay increase. He has
decided to take the job. What happened for him?
a. The marginal cost of leaving was greater than the marginal benefit.
b. The marginal benefit of leaving was greater than the marginal cost.
c. The marginal benefit of teaching was greater than the marginal cost.
d. The marginal cost of teaching was greater than the marginal benefit.
5. A friend of yours asks you why market prices are better than government-determined prices. What do you
a. because they generally reflect the value of a good to society, but not the cost of making it
b. because they generally reflect the cost of making a good to society, but not its value
c. because they generally reflect both the value of a good to society and the cost of making it
d. because they generally reflect neither the value of a good to society nor the cost of making
6. What can cause market failure?
a. low consumer demand
b. government intervention and price controls
c. externalities and market power
d. high prices and foreign competition
7. When economists attempt to simplify the real world and make it easier to understand, what do they do?
a. They make assumptions.
b. They make mistakes in judgment.
c. They make predictions.
d. They make evaluations.