Question 1

U.S. laws requiring that drivers wear seat belts have resulted in

Accepted Answer

A) a reduction in both driver deaths and pedestrian deaths. 
B) fewer accidents and fewer deaths per accident. 
C) fewer driver deaths, fewer accidents and fewer pedestrian deaths. 
D) little change in the number of driver deaths, but more accidents and more pedestrian deaths. 
A) a reduction in both driver deaths and pedestrian deaths. 
B) fewer accidents and fewer deaths per accident. 
C) fewer driver deaths, fewer accidents and fewer pedestrian deaths. 
D) little change in the number of driver deaths, but more accidents and more pedestrian deaths.

Question 2

People are likely to respond to a policy change

Accepted Answer

A) only if they think the policy is a good one. 
B) only if the policy change changes the costs of their behavior. 
C) only if the policy change changes the benefits of their behavior. 
D) if the policy changes either the costs or benefits of their behavior. 
A) only if they think the policy is a good one. 
B) only if the policy change changes the costs of their behavior. 
C) only if the policy change changes the benefits of their behavior. 
D) if the policy changes either the costs or benefits of their behavior.

Question 3

When society requires that firms reduce pollution, there is

Accepted Answer

A) a tradeoff because of reduced incomes to the firms' owners and workers. 
B) a tradeoff only if some firms are forced to close. 
C) no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. 
D) no tradeoff, since everyone benefits from reduced pollution. 
A) a tradeoff because of reduced incomes to the firms' owners and workers. 
B) a tradeoff only if some firms are forced to close. 
C) no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. 
D) no tradeoff, since everyone benefits from reduced pollution.

Question 4

Productivity is defined as the

Accepted Answer

A) amount of goods and services produced from each unit of labor input. 
B) number of workers required to produce a given amount of goods and services. 
C) amount of labor that can be saved by replacing workers with machines. 
D) actual amount of effort workers put into an hour of working time. 
A) amount of goods and services produced from each unit of labor input. 
B) number of workers required to produce a given amount of goods and services. 
C) amount of labor that can be saved by replacing workers with machines. 
D) actual amount of effort workers put into an hour of working time.

Question 5

Which of the following can lead to market failure?

Accepted Answer

A) externalities and market power 
B) externalities but not market power 
C) market power but not externalities 
D) neither externalities nor market power 
A) externalities and market power 
B) externalities but not market power 
C) market power but not externalities 
D) neither externalities nor market power

Question 6

In the short-run, society faces a tradeoff between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following can policy do?

Accepted Answer

A) alter incentives 
B) alter trade-offs 
C) change opportunity costs 
D) All of the above are correct. 
A) alter incentives 
B) alter trade-offs 
C) change opportunity costs 
D) All of the above are correct.

Question 8

In economics, the cost of something is

Accepted Answer

A) the dollar amount of obtaining it. 
B) always measured in units of time given up to get it. 
C) what you give up to get it. 
D) often impossible to quantify, even in principle. 
A) the dollar amount of obtaining it. 
B) always measured in units of time given up to get it. 
C) what you give up to get it. 
D) often impossible to quantify, even in principle.

Question 9

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

Accepted Answer

A) True 
 B)False

Question 10

Melinda quits her job at a bank, which pays $30,000 a year, to enroll in a two-year graduate program. Her annual school expenses are $22,000 for tuition and fees and $2,000 for books. What is her opportunity cost of attending the two-year graduate program?

Accepted Answer

The answer of Melinda quits her job at a bank,...

Question 11

To raise productivity, policymakers could

Accepted Answer

A) increase spending on education. 
B) provide tax credits to firms for capital improvements. 
C) fund research and development. 
D) All of the above are correct. 
A) increase spending on education. 
B) provide tax credits to firms for capital improvements. 
C) fund research and development. 
D) All of the above are correct.

Question 12

The opportunity cost of going to college is

Accepted Answer

A) the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses. 
B) the value of the best opportunity a student gives up to attend college. 
C) zero for students who are fortunate enough to have all of their college expenses paid by someone else. 
D) zero, since a college education will allow a student to earn a larger income after graduation. 
A) the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses. 
B) the value of the best opportunity a student gives up to attend college. 
C) zero for students who are fortunate enough to have all of their college expenses paid by someone else. 
D) zero, since a college education will allow a student to earn a larger income after graduation.

Question 13

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.

Accepted Answer

A) True 
 B)False

Question 14

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Accepted Answer

A) True 
 B)False

Question 15

When government policies are enacted,

Accepted Answer

A) equality can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without a reduction in equality. 
B) efficiency can usually be enhanced without a reduction in equality, but equality can never be enhanced without an efficiency loss. 
C) it is always the case that either efficiency and equality are both enhanced, or efficiency and equality are both diminished. 
D) None of the above are correct. 
A) equality can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without a reduction in equality. 
B) efficiency can usually be enhanced without a reduction in equality, but equality can never be enhanced without an efficiency loss. 
C) it is always the case that either efficiency and equality are both enhanced, or efficiency and equality are both diminished. 
D) None of the above are correct.

Question 16

Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person. Which country can benefit?

Accepted Answer

A) only the one with a low level of output per person. 
B) only the one with a high level of output per person. 
C) both 
D) neither 
A) only the one with a low level of output per person. 
B) only the one with a high level of output per person. 
C) both 
D) neither

Question 17

The irregular and largely unpredictable fluctuations in economic activity are called

Accepted Answer

A) market failure. 
B) business cycle. 
C) inflation. 
D) unemployment. 
A) market failure. 
B) business cycle. 
C) inflation. 
D) unemployment.

Question 18

For most students, the largest single cost of a college education is

Accepted Answer

A) the wages given up to attend school. 
B) tuition, fees, and books. 
C) room and board. 
D) transportation, parking, and entertainment. 
A) the wages given up to attend school. 
B) tuition, fees, and books. 
C) room and board. 
D) transportation, parking, and entertainment.

Question 19

The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that

Accepted Answer

A) equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. 
B) equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits. 
C) equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. 
D) equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs. 
A) equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. 
B) equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits. 
C) equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. 
D) equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.

Question 20

People are willing to pay more for a diamond than for a bottle of water because

Accepted Answer

A) the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. 
B) the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. 
C) producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. 
D) water prices are held artificially low by governments, since water is necessary for life. 
A) the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. 
B) the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. 
C) producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. 
D) water prices are held artificially low by governments, since water is necessary for life.

Exam 1: Ten Principles of Economics

U.S. laws requiring that drivers wear seat belts have resulted in

People are likely to respond to a policy change

When society requires that firms reduce pollution, there is

Productivity is defined as the

Which of the following can lead to market failure?

In the short-run, society faces a tradeoff between inflation and unemployment.

Which of the following can policy do?

In economics, the cost of something is

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

Melinda quits her job at a bank, which pays $30,000 a year, to enroll in a two-year graduate program. Her annual school expenses are $22,000 for tuition and fees and $2,000 for books. What is her opportunity cost of attending the two-year graduate program?

To raise productivity, policymakers could

The opportunity cost of going to college is

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

When government policies are enacted,

Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person. Which country can benefit?

The irregular and largely unpredictable fluctuations in economic activity are called

For most students, the largest single cost of a college education is

The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that

People are willing to pay more for a diamond than for a bottle of water because

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

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