Pretest1 - Pre-Test 1 Multiple Choice Identify the letter...

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Pre-Test 1 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. Some college students think that because a college degree greatly increases their earning potential there is no op- portunity cost of attending college. How would an economist look at the matter? a. There is no opportunity cost, assuming that future earnings actually increase as expected. b. The opportunity cost is much less than it would appear, assuming that earnings increase. c. Opportunity cost is a meaningless concept in this situation. d. The college students are completely correct in all respects. e. There is still an opportunity cost, even if it is justified by higher future earnings. ____ 2. The principle of comparative advantage explains how a. one nation can take advantage of another one through international trade. b. two nations may engage in mutually beneficial trade, even though one of them is more productive than the other. c. one individual can take advantage of another through international trade. d. some people are good at producing everything, while others have no comparative advant- ages. e. some nations end up with large trade surpluses. ____ 3. An externality is defined as a. an opportunity cost that is not considered, which causes inefficiency. b. a social cost that affects parties external to a transaction. c. a transaction which imposes a loss on one of the parties involved. d. a "cost of doing business" that cannot be allocated to any particular good. e. the increase in cost associated with increased production. ____ 4. A large factory pours its toxic wastewater into a nearby river, and as a result, the residents of a downstream com- munity experience high rates of illness and birth defects. The economic problem illustrated by this example is a. marginal thinking. b. comparative advantage. c. repealing the laws of supply and demand. d. externalities. e. productivity growth.
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____ 5. Tools used by economists include a. historical study. b. mathematical reasoning. c. statistical inference. d. All of the above are correct. ____ 6. During one winter quarter at Frozen U., snow falls every Friday night. Students assume that, on their campus, Fri- days cause snow. This hypothesis a. should more properly be considered a theory. b. assumes that correlation implies causation. c. assumes that causation implies correlation. d. reflects the fallacy of composition. ____ 7. In the 19th century, Russian peasants noticed that during cholera epidemics there were lots of doctors around; in an attempt to eliminate cholera, they killed all the doctors. This is an example of a. mistaking correlation with causation. b. the fallacy of opportunism. c.
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This note was uploaded on 12/04/2011 for the course ECON 261 taught by Professor Jozellbristole during the Spring '11 term at Abilene Christian University.

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Pretest1 - Pre-Test 1 Multiple Choice Identify the letter...

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