Question 1

Tuition is the single-largest cost of attending college for most students.

Accepted Answer

A) True 
 B)False

Question 2

The ability of an individual to own and exercise control over scarce resources is called

Accepted Answer

A) market failure. 
B) property rights. 
C) externality. 
D) market power. 
A) market failure. 
B) property rights. 
C) externality. 
D) market power.

Question 3

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

Accepted Answer

A) Yes, because cutting hair is profitable. 
B) No, because he may not be able to sell more services. 
C) It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. 
D) It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients. 
A) Yes, because cutting hair is profitable. 
B) No, because he may not be able to sell more services. 
C) It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. 
D) It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

Question 4

Rational people make decisions "at the margin" by comparing ______.

Accepted Answer

marginal c

Question 5

Scenario 1-3
It costs a company $35,000 to produce 700 graphing calculators. The company's cost will be $35,070 if it produces an additional graphing calculator. The company is currently producing 700 graphing calculators.
-Refer to Scenario 1-3. What is the company's marginal cost?

Accepted Answer

The answer of Scenario 1-3
It costs a company $35,000 to...

Question 6

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because

Accepted Answer

A) the Federal Reserve is worried about inflation. 
B) the Federal Reserve is worried about unemployment. 
C) the Federal Reserve is hoping to reduce the demand for goods and services. 
D) the Federal Reserve is worried that the economy is growing too quickly. 
A) the Federal Reserve is worried about inflation. 
B) the Federal Reserve is worried about unemployment. 
C) the Federal Reserve is hoping to reduce the demand for goods and services. 
D) the Federal Reserve is worried that the economy is growing too quickly.

Question 7

The word "economy" comes from the Greek word oikonomos, which means

Accepted Answer

A) "environment." 
B) "production." 
C) "one who manages a household." 
D) "one who makes decisions." 
A) "environment." 
B) "production." 
C) "one who manages a household." 
D) "one who makes decisions."

Question 8

In the early 1920s,

Accepted Answer

A) Germany experienced a very high rate of inflation. 
B) the quantity of German money was declining rapidly. 
C) the value of German money remained almost constant. 
D) All of the above are correct. 
A) Germany experienced a very high rate of inflation. 
B) the quantity of German money was declining rapidly. 
C) the value of German money remained almost constant. 
D) All of the above are correct.

Question 9

Market failure occurs when no individual has the ability to substantially influence market prices.

Accepted Answer

A) True 
 B)False

Question 10

The term used to describe a situation in which markets do not allocate resources efficiently is

Accepted Answer

A) economic meltdown. 
B) market failure. 
C) equilibrium. 
D) the effect of the invisible hand. 
A) economic meltdown. 
B) market failure. 
C) equilibrium. 
D) the effect of the invisible hand.

Question 11

A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?

Accepted Answer

A) Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen. 
B) Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00 per dozen. 
C) Throw the bagels away and produce 8 fewer dozen bagels tomorrow. 
D) Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the day. 
A) Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen. 
B) Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00 per dozen. 
C) Throw the bagels away and produce 8 fewer dozen bagels tomorrow. 
D) Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the day.

Question 12

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Accepted Answer

A) True 
 B)False

Question 13

Air pollution from burning fossil fuels causes damages to crops and public health. This is an example of

Accepted Answer

A) a market failure caused by an externality. 
B) a market failure caused by market power. 
C) a market failure caused by equality. 
D) There is no market failure in this case. 
A) a market failure caused by an externality. 
B) a market failure caused by market power. 
C) a market failure caused by equality. 
D) There is no market failure in this case.

Question 14

Adam Smith's insight was that prices adjust to guide individual buyers and sellers to reach outcomes where, in many cases,

Accepted Answer

A) opportunity cost is minimized for buyers. 
B) scarcity is reduced for society. 
C) well-being of society is maximized. 
D) opportunity cost of production is maximized. 
A) opportunity cost is minimized for buyers. 
B) scarcity is reduced for society. 
C) well-being of society is maximized. 
D) opportunity cost of production is maximized.

Question 15

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Accepted Answer

In Germany. Almost all variati

Question 16

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

Accepted Answer

A) The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
B) The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
C) Only half of the cost of the parking permit is part of the opportunity cost of attending college. 
D) The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances. 
A) The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
B) The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
C) Only half of the cost of the parking permit is part of the opportunity cost of attending college. 
D) The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances.

Question 17

Ramona decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is

Accepted Answer

A) the value of the knowledge she would have received had she attended class. 
B) the $24 she could have earned if she had worked at her job for those two hours. 
C) the value of her nap minus the value of attending class. 
D) nothing, since she valued sleep more than attendance at class. 
A) the value of the knowledge she would have received had she attended class. 
B) the $24 she could have earned if she had worked at her job for those two hours. 
C) the value of her nap minus the value of attending class. 
D) nothing, since she valued sleep more than attendance at class.

Question 18

During the early 1920s in Germany, prices

Accepted Answer

A) doubled annually. 
B) doubled monthly. 
C) tripled monthly. 
D) tripled annually. 
A) doubled annually. 
B) doubled monthly. 
C) tripled monthly. 
D) tripled annually.

Question 19

If the United States decides to trade with Yemen, we know that

Accepted Answer

A) Yemen will benefit, but trade with a less developed country could not benefit the United States. 
B) it will not benefit Yemen because workers in the United States are more productive. 
C) Yemen and the United States can both benefit. 
D) it will not benefit either country because their cultural differences are too vast. 
A) Yemen will benefit, but trade with a less developed country could not benefit the United States. 
B) it will not benefit Yemen because workers in the United States are more productive. 
C) Yemen and the United States can both benefit. 
D) it will not benefit either country because their cultural differences are too vast.

Question 20

What do prices reflect in a market economy?

Accepted Answer

The value of a good

Exam 1: Ten Principles of Economics

Tuition is the single-largest cost of attending college for most students.

The ability of an individual to own and exercise control over scarce resources is called

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

Rational people make decisions "at the margin" by comparing ______.

Scenario 1-3 It costs a company $35,000 to produce 700 graphing calculators. The company's cost will be $35,070 if it produces an additional graphing calculator. The company is currently producing 700 graphing calculators. -Refer to Scenario 1-3. What is the company's marginal cost?

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because

The word "economy" comes from the Greek word oikonomos, which means

In the early 1920s,

Market failure occurs when no individual has the ability to substantially influence market prices.

The term used to describe a situation in which markets do not allocate resources efficiently is

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Air pollution from burning fossil fuels causes damages to crops and public health. This is an example of

Adam Smith's insight was that prices adjust to guide individual buyers and sellers to reach outcomes where, in many cases,

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

Ramona decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is

During the early 1920s in Germany, prices

If the United States decides to trade with Yemen, we know that

What do prices reflect in a market economy?

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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