Question 1

A rational decision maker takes an action if and only if the marginal benefit exceeds the marginal cost.

Accepted Answer

A) True 
 B)False

Question 2

In most societies, resources are allocated by

Accepted Answer

A) a single central planner. 
B) a small number of central planners. 
C) those firms that use resources to provide goods and services. 
D) the combined actions of millions of households and firms. 
A) a single central planner. 
B) a small number of central planners. 
C) those firms that use resources to provide goods and services. 
D) the combined actions of millions of households and firms.

Question 3

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

Accepted Answer

A) equality is increased and efficiency is increased. 
B) equality is increased and efficiency is decreased. 
C) equality is decreased and efficiency is increased. 
D) equality is decreased and efficiency is decreased. 
A) equality is increased and efficiency is increased. 
B) equality is increased and efficiency is decreased. 
C) equality is decreased and efficiency is increased. 
D) equality is decreased and efficiency is decreased.

Question 4

Which of the following is an example of an externality?

Accepted Answer

A) A paper mill dumps waste into the river. 
B) A neighbor's loud music disrupts sleep. 
C) A drunk driver causes an accident that injures another person. 
D) All of the above are correct. 
A) A paper mill dumps waste into the river. 
B) A neighbor's loud music disrupts sleep. 
C) A drunk driver causes an accident that injures another person. 
D) All of the above are correct.

Question 5

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

Accepted Answer

A) its average cost is greater than its marginal cost. 
B) its average cost and its marginal cost are equal. 
C) its average cost is less than its marginal cost. 
D) This cannot be determined from the information given. 
A) its average cost is greater than its marginal cost. 
B) its average cost and its marginal cost are equal. 
C) its average cost is less than its marginal cost. 
D) This cannot be determined from the information given.

Question 6

It costs a company $35,000 to produce 500 graphing calculators. The company's cost will be $35,080 if it produces an additional graphing calculator. If the company produces 501 graphing calculators then

Accepted Answer

A) its average cost is greater than its marginal cost. 
B) its average cost and its marginal cost are equal. 
C) its average cost is less than its marginal cost. 
D) This cannot be determined from the information given. 
A) its average cost is greater than its marginal cost. 
B) its average cost and its marginal cost are equal. 
C) its average cost is less than its marginal cost. 
D) This cannot be determined from the information given.

Question 7

The principle that "trade can make everyone better off" applies to interactions and trade between

Accepted Answer

A) families. 
B) states within the United States. 
C) nations. 
D) All of the above are correct. 
A) families. 
B) states within the United States. 
C) nations. 
D) All of the above are correct.

Question 8

What are the two short-run effects of increasing the quantity of nation's money?

Accepted Answer

Higher inf

Question 9

Which of the following is not an example of scarcity?

Accepted Answer

A) Only some people can afford to buy a BMW automobile. 
B) Every individual in society cannot attain the highest standard of living to which he or she might aspire. 
C) Miranda has more oranges in her orchard than she will ever use. 
D) Each member of a household cannot get everything he or she wants. 
A) Only some people can afford to buy a BMW automobile. 
B) Every individual in society cannot attain the highest standard of living to which he or she might aspire. 
C) Miranda has more oranges in her orchard than she will ever use. 
D) Each member of a household cannot get everything he or she wants.

Question 10

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

Accepted Answer

A) productivity. 
B) an externality. 
C) market power. 
D) property rights. 
A) productivity. 
B) an externality. 
C) market power. 
D) property rights.

Question 11

What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?

Accepted Answer

A) inefficiency 
B) inequality 
C) scarcity 
D) market failure 
A) inefficiency 
B) inequality 
C) scarcity 
D) market failure

Question 12

The economy of the former Soviet Union is best described as a

Accepted Answer

A) primitive economy. 
B) market economy. 
C) hybrid economy. 
D) centrally-planned economy. 
A) primitive economy. 
B) market economy. 
C) hybrid economy. 
D) centrally-planned economy.

Question 13

In the short run, an increase in the money supply is likely to lead to ______ inflation and ______ unemployment.

Accepted Answer

The answer of In the short run, an increase in...

Question 14

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

Accepted Answer

A) goods are scarce. 
B) people face tradeoffs. 
C) income must be earned. 
D) households face many decisions. 
A) goods are scarce. 
B) people face tradeoffs. 
C) income must be earned. 
D) households face many decisions.

Question 15

Low rates of inflation are generally associated with

Accepted Answer

A) low rates of government spending. 
B) small or nonexistent government budget deficits. 
C) low rates of productivity growth. 
D) low rates of growth of the quantity of money. 
A) low rates of government spending. 
B) small or nonexistent government budget deficits. 
C) low rates of productivity growth. 
D) low rates of growth of the quantity of money.

Question 16

Which of the following statements about markets is most accurate?

Accepted Answer

A) Markets are usually a good way to organize economic activity. 
B) Markets are usually inferior to central planning as a way to organize economic activity. 
C) Markets fail and are therefore not an acceptable way to organize economic activity. 
D) Markets are a good way to organize economic activity in developed nations, but not in less developed nations. 
A) Markets are usually a good way to organize economic activity. 
B) Markets are usually inferior to central planning as a way to organize economic activity. 
C) Markets fail and are therefore not an acceptable way to organize economic activity. 
D) Markets are a good way to organize economic activity in developed nations, but not in less developed nations.

Question 17

Something that induces a person to act is called

Accepted Answer

A) a trade-off. 
B) a policy. 
C) an incentive. 
D) an opportunity cost. 
A) a trade-off. 
B) a policy. 
C) an incentive. 
D) an opportunity cost.

Question 18

The phrase "no such thing as a free lunch" means

Accepted Answer

A) people must face tradeoffs. 
B) rational people think at the margin. 
C) people respond to incentives. 
D) trade can make everyone better off. 
A) people must face tradeoffs. 
B) rational people think at the margin. 
C) people respond to incentives. 
D) trade can make everyone better off.

Question 19

Suppose Country A has a high average wage level and a high level of output per person, while Country B has a low average wage level and a low level of output per person. Which country can benefit from trade?

Accepted Answer

A) Only Country A can benefit. 
B) Only Country B can benefit. 
C) Both Country A and Country B can benefit. 
D) Neither Country A nor Country B can benefit. 
A) Only Country A can benefit. 
B) Only Country B can benefit. 
C) Both Country A and Country B can benefit. 
D) Neither Country A nor Country B can benefit.

Question 20

Which of the following is correct concerning opportunity cost?

Accepted Answer

A) Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway. 
B) To compute opportunity costs, you should subtract benefits from costs. 
C) Opportunity costs and the idea of trade-offs are not closely related. 
D) Rational people should compare various options without considering opportunity costs. 
A) Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway. 
B) To compute opportunity costs, you should subtract benefits from costs. 
C) Opportunity costs and the idea of trade-offs are not closely related. 
D) Rational people should compare various options without considering opportunity costs.

Exam 1: Ten Principles of Economics

A rational decision maker takes an action if and only if the marginal benefit exceeds the marginal cost.

In most societies, resources are allocated by

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

Which of the following is an example of an externality?

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

It costs a company $35,000 to produce 500 graphing calculators. The company's cost will be $35,080 if it produces an additional graphing calculator. If the company produces 501 graphing calculators then

The principle that "trade can make everyone better off" applies to interactions and trade between

What are the two short-run effects of increasing the quantity of nation's money?

Which of the following is not an example of scarcity?

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?

The economy of the former Soviet Union is best described as a

In the short run, an increase in the money supply is likely to lead to ______ inflation and ______ unemployment.

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

Low rates of inflation are generally associated with

Which of the following statements about markets is most accurate?

Something that induces a person to act is called

The phrase "no such thing as a free lunch" means

Suppose Country A has a high average wage level and a high level of output per person, while Country B has a low average wage level and a low level of output per person. Which country can benefit from trade?

Which of the following is correct concerning opportunity cost?

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26^th table. If the company produces 26 tables, then

In the short run, an increase in the money supply is likely to lead to inflation and unemployment.