CSE.2010.PartIPQ_.Student - Common Sense Economics Part I...

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Common Sense Economics Part I: Twelve Key Elements of Economics Practice Test 1. Incentives matter a. only when people are greedy and selfish. b. only in a free market system. c. only in the private sector. d. to all human beings regardless of environment. 2. Which of the following is often referred to as the basic postulate of economics? a. Individuals act only out of selfish motives. b. Incentives matter—individuals respond in predictable ways to changes in personal costs and benefits. c. The accuracy of the assumptions is the best test of an economic theory. d. The value of a good is objective; it is equal to the cost of producing the good. 3. The expression, "There's no such thing as a free lunch," implies that a. everyone has to pay for his own lunch. b. the person consuming a good must always pay for it. c. opportunity costs are incurred when resources are used to produce goods and services. d. no one has time for a good lunch anymore. 4. Maria wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $2.50 per gallon, the car wash costs $2, but if she buys 10 gallons of gasoline, the car wash is free. For Maria, the marginal cost of the tenth gallon of gasoline is a. zero. b. 50 cents. c. $2.00. d. $2.50. 5. If the market price of a good is more than the opportunity cost of producing it, a. the market price of the product will increase in the long run. b. producers will increase supply in the long run. c. resources will flow away from production of the good, causing supply to decline with the passage of time. d. the situation will remain unchanged as long as supply and demand remain in balance.
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6. Who gains in a voluntary trade? a. the buyer only b. the seller only c. both the buyer and the seller d. both the buyer and the seller, but the seller usually gains more 7. Economic progress a. reflects that people are achieving higher income levels and living
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CSE.2010.PartIPQ_.Student - Common Sense Economics Part I...

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