Question 1

How do people make decisions at the margin?

Accepted Answer

A)  by following the business cycle 
B)  by experience 
C)  by calculating dollar costs 
D)  by comparing costs and benefits 
A)  by following the business cycle 
B)  by experience 
C)  by calculating dollar costs 
D)  by comparing costs and benefits

Question 2

What does economics study?

Accepted Answer

A)  how society manages its scarce resources 
B)  the government's role in society 
C)  how to increase production 
D)  how firms make profits 
A)  how society manages its scarce resources 
B)  the government's role in society 
C)  how to increase production 
D)  how firms make profits

Question 3

Who coined the term "invisible hand"?

Accepted Answer

A)  Adam Smith 
B)  David Ricardo 
C)  John Maynard Keynes 
D)  Milton Friedman 
A)  Adam Smith 
B)  David Ricardo 
C)  John Maynard Keynes 
D)  Milton Friedman

Question 4

What is one advantage that market economies have over central planning?

Accepted Answer

A)  They provide an equal distribution of goods and services to consumers. 
B)  They establish government economic control. 
C)  They solve the problem of scarcity. 
D)  They are more efficient. 
A)  They provide an equal distribution of goods and services to consumers. 
B)  They establish government economic control. 
C)  They solve the problem of scarcity. 
D)  They are more efficient.

Question 5

How does the invisible hand direct economic activity?

Accepted Answer

A)  through advertising 
B)  through prices 
C)  through central planning 
D)  through government regulations 
A)  through advertising 
B)  through prices 
C)  through central planning 
D)  through government regulations

Question 6

Aimee decides to spend the last two hours of the night before her economics exam studying instead of sleeping. For Aimee, what would her tradeoff be?

Accepted Answer

A)  nothing, because no dollar value can be put on sleep 
B)  nothing, because studying would be more beneficial than sleep 
C)  the six hours of sleep she could have had if she had gone to bed before midnight 
D)  the two hours of rest she would have gotten 
A)  nothing, because no dollar value can be put on sleep 
B)  nothing, because studying would be more beneficial than sleep 
C)  the six hours of sleep she could have had if she had gone to bed before midnight 
D)  the two hours of rest she would have gotten

Question 7

Jay has spent $2400 purchasing and repairing an old tractor, which he expects to sell for $4000. He discovers that he needs an additional repair, which will cost $600. He can sell the tractor as it is now for $1200. What should he do?

Accepted Answer

A)  He should take the $1200. 
B)  He should never sell something for less than it cost. 
C)  He should complete the repairs and sell the tractor. 
D)  It doesn't matter which action he takes; the outcome is the same either way. 
A)  He should take the $1200. 
B)  He should never sell something for less than it cost. 
C)  He should complete the repairs and sell the tractor. 
D)  It doesn't matter which action he takes; the outcome is the same either way.

Question 8

What is an economy experiencing when a society cannot produce all the goods and services people wish to have?

Accepted Answer

A)  scarcity 
B)  economic growth 
C)  competition 
D)  market failure 
A)  scarcity 
B)  economic growth 
C)  competition 
D)  market failure

Question 9

What does efficiency mean?

Accepted Answer

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 non-renewable energy sources. 
D)  Society is getting the most it can from its scarce resources. 
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 non-renewable energy sources. 
D)  Society is getting the most it can from its scarce resources.

Question 10

With careful planning, we can usually get something that we like without having to give up something else that we like.

Accepted Answer

A) True 
 B)False

Question 11

When the government redistributes income from the rich to the poor, what is the result?

Accepted Answer

A)  Efficiency is improved, but equity is not. 
B)  Both rich people and poor people benefit directly. 
C)  People work less and produce fewer goods and services. 
D)  Rich people consume fewer goods, but poor people consume more goods, resulting in no real change. 
A)  Efficiency is improved, but equity is not. 
B)  Both rich people and poor people benefit directly. 
C)  People work less and produce fewer goods and services. 
D)  Rich people consume fewer goods, but poor people consume more goods, resulting in no real change.

Question 12

Which of these consumption activities will most likely impose an external cost?

Accepted Answer

A)  an executive plays a vigorous game of golf 
B)  a student in a dorm plays a YouTube video at 120 decibels late at night 
C)  a young mother exercises to a yoga video 
D)  a construction worker eats a sandwich during his lunch break 
A)  an executive plays a vigorous game of golf 
B)  a student in a dorm plays a YouTube video at 120 decibels late at night 
C)  a young mother exercises to a yoga video 
D)  a construction worker eats a sandwich during his lunch break

Question 13

When was Adam Smith's book The Wealth of Nations published?

Accepted Answer

A)  1494 
B)  1776 
C)  1812 
D)  1936 
A)  1494 
B)  1776 
C)  1812 
D)  1936

Question 14

Which good best meets the definition of scarcity?

Accepted Answer

A)  air 
B)  water in the ocean 
C)  electricity in a city 
D)  wood in a forest 
A)  air 
B)  water in the ocean 
C)  electricity in a city 
D)  wood in a forest

Question 15

When does scarcity exist?

Accepted Answer

A)  when there is less than an infinite amount of a resource or good 
B)  when society can meet the wants of every individual 
C)  when there is less of a good or resource available than people wish to have 
D)  when the government fails to produce goods 
A)  when there is less than an infinite amount of a resource or good 
B)  when society can meet the wants of every individual 
C)  when there is less of a good or resource available than people wish to have 
D)  when the government fails to produce goods

Question 16

What is the opportunity cost of an item?

Accepted Answer

A)  the number of hours needed to earn money to buy it 
B)  what you give up to get that item 
C)  usually more than the dollar value of the item 
D)  the value of the resources needed to produce the item 
A)  the number of hours needed to earn money to buy it 
B)  what you give up to get that item 
C)  usually more than the dollar value of the item 
D)  the value of the resources needed to produce the item

Question 17

A carpenter maker currently produces 50 cabinets per week and sells them for a profit. She is considering expanding her operation in order to make more cabinets. Should she expand?

Accepted Answer

A)  Yes, because making cabinets is profitable. 
B)  No, because she may not be able to sell the additional cabinets. 
C)  It depends on the marginal cost of producing more cabinets and the marginal revenue she will earn from selling more cabinets. 
D)  It depends on the average cost of producing more cabinets and the average revenue she will earn from selling more cabinets. 
A)  Yes, because making cabinets is profitable. 
B)  No, because she may not be able to sell the additional cabinets. 
C)  It depends on the marginal cost of producing more cabinets and the marginal revenue she will earn from selling more cabinets. 
D)  It depends on the average cost of producing more cabinets and the average revenue she will earn from selling more cabinets.

Question 18

Suppose you have your own pizza delivery business and receive a call to deliver to a remote client. You need to decide whether to take the call. If you don't, there are no consequences, since someone else will. Based on the distance to the client, you calculate that it would cost you $5 to deliver and expect to receive $6 for the service. You also pay monthly rent for the car, which on average, based on past experience, comes down to about $2 per trip. Your time doesn't matter, as you have nothing more enjoyable or useful to do for the time being. How do you make this decision? What economic principle is at work in your decision process?

Accepted Answer

The benefit from the trip is $6 and the

Question 19

How does a market economy reward people?

Accepted Answer

A)  according to their need for goods and services 
B)  according to their willingness to work 
C)  according to their ability to produce things that other people are willing to pay for 
D)  according to their ability to produce things of cultural importance 
A)  according to their need for goods and services 
B)  according to their willingness to work 
C)  according to their ability to produce things that other people are willing to pay for 
D)  according to their ability to produce things of cultural importance

Question 20

The tenth principle of economics shows the short-run tradeoff between inflation and economic growth.

Accepted Answer

A) True 
 B)False

How do people make decisions at the margin?

What does economics study?

Who coined the term "invisible hand"?

What is one advantage that market economies have over central planning?

How does the invisible hand direct economic activity?

Aimee decides to spend the last two hours of the night before her economics exam studying instead of sleeping. For Aimee, what would her tradeoff be?

Jay has spent $2400 purchasing and repairing an old tractor, which he expects to sell for $4000. He discovers that he needs an additional repair, which will cost $600. He can sell the tractor as it is now for $1200. What should he do?

What is an economy experiencing when a society cannot produce all the goods and services people wish to have?

What does efficiency mean?

With careful planning, we can usually get something that we like without having to give up something else that we like.

When the government redistributes income from the rich to the poor, what is the result?

Which of these consumption activities will most likely impose an external cost?

When was Adam Smith's book The Wealth of Nations published?

Which good best meets the definition of scarcity?

When does scarcity exist?

What is the opportunity cost of an item?

A carpenter maker currently produces 50 cabinets per week and sells them for a profit. She is considering expanding her operation in order to make more cabinets. Should she expand?

How does a market economy reward people?

The tenth principle of economics shows the short-run tradeoff between inflation and economic growth.

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters

Exam 1: Ten Principles of Economics

How do people make decisions at the margin?

What does economics study?

Who coined the term "invisible hand"?

What is one advantage that market economies have over central planning?

How does the invisible hand direct economic activity?

Aimee decides to spend the last two hours of the night before her economics exam studying instead of sleeping. For Aimee, what would her tradeoff be?

Jay has spent $2400 purchasing and repairing an old tractor, which he expects to sell for $4000. He discovers that he needs an additional repair, which will cost $600. He can sell the tractor as it is now for $1200. What should he do?

What is an economy experiencing when a society cannot produce all the goods and services people wish to have?

What does efficiency mean?

With careful planning, we can usually get something that we like without having to give up something else that we like.

When the government redistributes income from the rich to the poor, what is the result?

Which of these consumption activities will most likely impose an external cost?

When was Adam Smith's book The Wealth of Nations published?

Which good best meets the definition of scarcity?

When does scarcity exist?

What is the opportunity cost of an item?

A carpenter maker currently produces 50 cabinets per week and sells them for a profit. She is considering expanding her operation in order to make more cabinets. Should she expand?

How does a market economy reward people?

The tenth principle of economics shows the short-run tradeoff between inflation and economic growth.

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters