Quick Quiz


1	If Fred plays tennis every day, but tells his wife he would rather be working longer hours at his job, economists would say which of the following about his behaviour, assuming that his work hours are totally up to him??
		A)	Fred has a preference for tennis over work at the times he plays tennis.
		B)	Fred prefers to work rather than to play more tennis since that is what he tells his wife. Economists are not about to question a person''s motives.
		C)	Fred is irrational because he is not doing what he says he wants to do.
		D)	There is no way to model the behaviour of someone who claims one thing and does another.


2	A genie offers you and you alone a million free wishes that will all come true. Wishing for immortality is out of bounds. Being a good student of economic methods, guided by self-interest rationality, you know that you
		A)	are no longer living in a world of scarcity, and economic principles will not apply to you any more.
		B)	are faced with a serious economic problem of scarcity, because you don''t have time to absorb the full benefits of a million wishes.
		C)	feel unfulfilled, since humans can not be fulfilled unless they strive and compete for pleasure.
		D)	feel guilty, because your happiness will fall if you have advantages that others do not have


3	The graph below depicts the benefits of additional sips of lemonade on a very hot day. If someone is giving away lemonade, then your reservation price for lemonade is frank_mci_1-3.gif
		A)	P1
		B)	P2
		C)	P3
		D)	Some negative value
		E)	Not discernible from this graph.


4	Economists believe that human behaviour follows economic principles to some extent, because
		A)	people are intelligent and study the principles until it becomes natural for them to act according to the principles.
		B)	the principles are merely a reflection of what people are naturally inclined to do.
		C)	people muddle through life learning from their mistakes and finally end up doing what economic theory predicts they will do.
		D)	emotions, social norms, and values are all based on rational choice concepts.


5	Phil is considering whether to buy a townhouse or rent one. If he puts 20% down, his monthly payment on the 80% loan will be $500. The rental charge is $600 for a similar place. He decides he should buy because $500 is less than $600. Which of the following is true? Assume that no complications from taxes or future house and rental prices are involved.
		A)	He definitely made a wise choice, since his reasoning is sound..
		B)	He definitely made a bad choice, because the 20% down payment amount must be added to the $500 as a cost.
		C)	He may have made a wrong decision because he must add to the $500 the lost interest he experiences by taking his down payment out of the bank.
		D)	None of the above statements is necessarily true.


6	On a recent golf outing, our foursome paid the 18-hole greens fees. On the fifth hole it started to rain, but we still managed to enjoy the game. By the twelfth hole it was pouring and we were sloshing around complaining how nice it would be to be dry in the clubhouse. Unfortunately, the golf club management would not give refunds for unplayed holes, and so we kept beating the ball through the mud to get our money''s worth. An observant economist would say we were
		A)	inaccurately measuring our benefits.
		B)	inaccurately measuring our costs.
		C)	ignoring all costs and benefits.
		D)	exercising good economic judgment, since no refunds were available.


7	Which kind of behaviour would best represent irrational behavior under the self-interest standard of rationality?
		A)	Doing a half-hour of exercise a day instead of working for pay that half-hour.
		B)	Working overtime every day for double pay.
		C)	Giving a birthday present to your mother.
		D)	Quitting work to go on welfare, even though welfare benefits are slightly lower than after-tax earnings potential.


8	If external costs are significant in a production process, it is likely that
		A)	the output of the production process will be greater than it should be for efficiency.
		B)	the output of the production process will be less than it should be for efficiency.
		C)	the output of the production process will not deviate from the efficient output even if the external costs persist.
		D)	the costs will be automatically eliminated by the market forces that push towards efficiency.


9	Which is true of homo economicus?
		A)	He is inclined to ignore any social cost of his behaviour that does not affect his own welfare.
		B)	He is not driven by social norms, emotions, or values other than self-interest.
		C)	He tends to avoid being actively involved in community volunteer projects.
		D)	All of the above are true of homo economicus.
		E)	None of the above are true of homo economicus.


10	Which statement is a normative statement?
		A)	Manual transmissions on average have more speeds than automatic transmissions.
		B)	Paper towels should be used in all restrooms instead of hot air dryers.
		C)	Polls reveal that Canadians believe that violent criminals should be punished more severely than tax evaders.
		D)	Only 3 percent of all computers in Canada are hooked up to the Internet.
		E)	None of the above are normative. They all are positive statements.

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