Test 1

Question 1

Why do people tend to purchase more when the price of something falls? (That is, why is demand downward sloping?)

• Because people must compete for scarce resources..
• Because more is preferred to less.
• Because marginal values are decreasing.
• Because you can’t always get what you want at the price you want to pay.

Answer 1

Because marginal values are decreasing.

Question 2

Of the options given below, check all that apply.

Which of the following are examples of a price?

• The ratio at which two things exchange.
• The value of a good to a consumer.
• $5.99
• $5.99 for a gallon of premium gasoline.
• A political donation in exchange for casting a supportive vote on a particular school bond measure.
• Three bushels of wheat for a pair of shoes.

Answer 2

• The ratio at which two things exchange.
• $5.99 for a gallon of premium gasoline.
• $5.99
• A political donation in exchange for casting a supportive vote on a particular school bond measure.
• Three bushels of wheat for a pair of shoes.

Question 3

Fill in the blanks in the following statement:
It is _____ to change just one _____.

It is difficult to change just one behavior.
It is beneficial to change just one price.
It is impossible to change just one policy.
It is impossible to change just one price.

Answer 3

It is impossible to change just one price.

Question 4

What is the strongest statement of support that one should make in evaluating a theory?

This theory predicts behavior well.
The evidence fails to disprove this theory.
This theory is correct.
This theory is the right theory.

Answer 4

The evidence fails to disprove this theory.

Question 5

At an equilibrium price and quantity,

• there is downward pressure on price, otherwise price would be rising with inflation.
• there is downward pressure on price.
• there is upward pressure on quantity.
• there is no pressure for price to change.
• None of the above.

Answer 5

there is no pressure for price to change.

Question 6

Fill-in the blank1: When there is currently a shortage in a market, one should expect ______ .

• Prices to Rise
  or
• Prices to fall

Answer 6

Prices to rise

Question 7

Fill-in the blank2: When there is currently a surplus in a market, one should expect ____________.

• the quantity demanded to fall
  or
• the quantity supplied to fall

Answer 7

the quantity supplied to fall.

Question 8

Economists consider the value of a good to be best measured by

• the price one is observed paying in order to acquire the good.
• the cost to firms of producing the good.
• what one is willing to give up in order to acquire the good.
• None of the above.

Answer 8

what one is willing to give up in order to acquire the good.

Question 9

Of the options given below, check all that apply.

If Texas passes a law that raises the cost of obtaining an abortion in Texas

• the price of obtaining an abortion in Texas will increase.
• we would expect fewer abortions to be performed in Texas.
• we would expect fewer abortions to be performed in neighbouring states.

Answer 9

• the price of obtaining an abortion in Texas will increase.
• we would expect fewer abortions to be performed in Texas.

Question 10

Fill-in the blank: Due to ______ , people must make choices about what and when to consume.

Answer 10

scarcity

Question 11

When we see that someone is willing to pay more for something just because it saves them time, we would expect that

• they are among those who see their time as more valuable.
• they are among those who see their time as less valuable.

Answer 11

they are among those who see their time as more valuable.

Question 12

Suppose we learn from a survey that people think the Portland Police Bureau is more important than any other of the public services provided by the city of Portland–the most valuable to them, in a way. Does this imply that people are likely to support a ballot measure that requests additional funding for purpose of hiring additional police officers?

• Yes. If it’s the most valuable of services, people would be inclined to support additional funding when given the opportunity.
• No, it doesn’t inform whether people will support such a ballot measure. To be informative, the survey should have inquired into the value of hiring additional officers in Portland.

Answer 12

No, it doesn’t inform whether people will support such a ballot measure. To be informative, the survey should have inquired into the value of hiring additional officers in Portland.

Question 13

Fill-in the blanks: Every _____ has a _____ associated with it.

• Every choice has a benefit associated with it.
• Every human action has a cost associated with it.
• Every price has a demand associated with it.

Answer 13

Every human action has a cost associated with it.

Question 14

How is the diamond-water paradox resolved?

• People are greedy.
• Prices are determined by marginal values and water’s marginal value is lower.
• The total value of diamonds exceeds that of water so people are willing to pay more for a diamond.
• None of the above.

Answer 14

Prices are determined by marginal values and water’s marginal value is lower.

Question 15

What policy would you suggest be considered at the same time as fines for not wearing one’s seat belt are increased?

• Increasing the speed limit.
• Decreasing the number of police patrol officers on the highways.
• Increasing the fines associated with speeding.
• None of these options are likely to change drivers’ incentives in a beneficial way.

Answer 15

Increasing the fines associated with speeding.

Question 16

Scarcity can be defined as

• not having enough for everyone to get a share.
• not having enough of what is desirable.
• None of the above.

Answer 16

not having enough of what is desirable.

Question 17

Of the options given below, check all that apply.

Physical bullying is often more-easily identified than other forms of bullying and harassment. You worry, then, that a new effort to decrease bullying in Portland Public Schools may end up punishing physical bullying more often. Which of the following would be a reasonable expectation for you to have?

• The price of physical bullying will increase and physical bullying would likely subside.
• The relative price of cyber bullying will decrease and cyber bullying would likely increase.
• We would expect all other types of bullying (i.e., other than physical bullying) to increase.

Answer 17

• The price of physical bullying will increase and physical bullying would likely subside.
• The relative price of cyber bullying will decrease and cyber bullying would likely increase.

Question 18

Are market equilibria, as described in class, attractive?

Answer 18

Yes

Question 19

Are market equilibria, as described in class, stable?

Answer 19

Yes

Question 20

According to the “optimal purchase rule,” a consumer will continue purchasing additional units of a good until

• she runs out of money.
• the marginal value of the next unit becomes less than the price.
• the total value of the units purchased becomes greater than the price.
• the marginal value of the next unit becomes negative.
• the total value of the units purchased becomes equal to the price.

Answer 20

the marginal value of the next unit becomes less than the price.

Question 21

Of the options given below, check all that apply.

Slashing is the act of a player swinging their stick at an opponent, whether contact is made, or not.
Hooking is the action of impeding the progress of an opponent with a pulling or tugging motion by applying the blade of the stick to any part of an opponent’s body or stick.
Fighting is the act of throwing a punch, or an attempted punch, in the direction of an opponent, regardless as to whether contact is made.

If USA Hockey introduces more-severe penalties for fighting infractions, we would expect

• no change in the number of slashing penalties.
• an increase in the number of slashing penalties.
• a decrease in the number of fights.
• a decrease in the number of hooking penalties.

Answer 21

• an increase in the number of slashing penalties.
• a decrease in the number of fights.

Question 22

If you mention to a direct report that it is very important to have the quality of the project they are working be as high as possible, which of the following would be consistent with what we have discussed so far?

• You should at the same time consider incentivizing the deadline, to offset the implicit incentive you will have given them to miss the deadline.
• You should at the same time consider incentivizing their other projects, to raise the price associated with them attending to those projects.

Answer 22

You should at the same time consider incentivizing the deadline, to offset the implicit incentive you will have given them to miss the deadline.

Question 23

Of the options given below, check all that apply.

Canada has recently proposed a voluntary AI Code of Conduct, introducing a way for firms to signal their intention to abide by the rules and principles therein.

Which of the following is true?

• All else equal, firms operating in ways that are consistent with the code of conduct will sign, as they are likely to benefit from whatever upside there is in signing and the downside will be minimal for them.
• All else equal, the extent to which the code of conduct constrains innovation, firms will redirect their efforts to other countries.
• All else equal, we would expect large groups of competing firms to sign en masse, as their private incentives to sign are likely weak.

Answer 23

• All else equal, firms operating in ways that are consistent with the code of conduct will sign, as they are likely to benefit from whatever upside there is in signing and the downside will be minimal for them.
• All else equal, the extent to which the code of conduct constrains innovation, firms will redirect their efforts to other countries.
• All else equal, we would expect large groups of competing firms to sign en masse, as their private incentives to sign are likely weak.