Question 1

The government can potentially improve market outcomes if market inequalities or market failure exists.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following could reduce economic efficiency?

Accepted Answer

A) laws that encourage lawsuits 
B) policies that redistribute income 
C) policies that impose significant restrictions on international trade 
D) All of the above are correct 
A) laws that encourage lawsuits 
B) policies that redistribute income 
C) policies that impose significant restrictions on international trade 
D) All of the above are correct

Question 3

Yvette buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Pine Street, intending to spend $50,000 on repairs and then sell the house for $400,000. Last week, the city government announced a plan to build a new landfill on Pine Street just down the street from the house Yvette purchased. As a result of the city's announced plan, Yvette is weighing two alternatives: She can go ahead with the $50,000 in repairs and then sell the house for $290,000, or she can forgo the repairs and sell the house as it is for $250,000. She should

Accepted Answer

A) keep the house and live in it. 
B) go ahead with the $50,000 in repairs and sell the house for $290,000. 
C) forgo the repairs and sell the house as it is for $250,000. 
D) move the house from Pine Street to a more desirable location, regardless of the cost of doing so. 
A) keep the house and live in it. 
B) go ahead with the $50,000 in repairs and sell the house for $290,000. 
C) forgo the repairs and sell the house as it is for $250,000. 
D) move the house from Pine Street to a more desirable location, regardless of the cost of doing so.

Question 4

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

Accepted Answer

A) to produce good quality products so that society would benefit from the resources used 
B) to conserve on costs, so as to maintain efficiency in the economy 
C) to produce enough to meet the output target, without regard for quality or cost 
D) to produce those products that society desires most 
A) to produce good quality products so that society would benefit from the resources used 
B) to conserve on costs, so as to maintain efficiency in the economy 
C) to produce enough to meet the output target, without regard for quality or cost 
D) to produce those products that society desires most

Question 5

Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which results in an increase in drunk driving. This illustrates the principle that people respond to incentives.

Accepted Answer

A) True 
 B)False

Question 6

Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

Accepted Answer

A) $99,000. 
B) $103,000. 
C) $108,000. 
D) $121,000. 
A) $99,000. 
B) $103,000. 
C) $108,000. 
D) $121,000.

Question 7

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

Accepted Answer

A) the amount you value the first movie + $3 
B) the amount you value the first movie + $9 
C) $3 
D) $9 
A) the amount you value the first movie + $3 
B) the amount you value the first movie + $9 
C) $3 
D) $9

Question 8

To improve living standards, policymakers should

Accepted Answer

A) impose restrictions on foreign competition. 
B) formulate policies designed to increase productivity. 
C) impose tougher immigration policies. 
D) provide tax breaks for the middle class. 
A) impose restrictions on foreign competition. 
B) formulate policies designed to increase productivity. 
C) impose tougher immigration policies. 
D) provide tax breaks for the middle class.

Question 9

Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity.

Accepted Answer

A) True 
 B)False

Question 10

Communist countries worked on the premise that government officials were in the best position to allocate the economy's scarce resources.

Accepted Answer

A) True 
 B)False

Question 11

The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by

Accepted Answer

A) unstable economic conditions in Eastern Europe. 
B) increased competition from abroad. 
C) a decline in the rate of increase in U.S. productivity. 
D) a strong U.S. dollar abroad, hurting U.S. exports. 
A) unstable economic conditions in Eastern Europe. 
B) increased competition from abroad. 
C) a decline in the rate of increase in U.S. productivity. 
D) a strong U.S. dollar abroad, hurting U.S. exports.

Question 12

Consider Frank's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Frank's cost of going to college is

Accepted Answer

A) $33,800. 
B) $42,600. 
C) $49,800. 
D) $57,000. 
A) $33,800. 
B) $42,600. 
C) $49,800. 
D) $57,000.

Question 13

Guns and butter are used to represent the classic societal tradeoff between spending on

Accepted Answer

A) durable and nondurable goods. 
B) imports and exports. 
C) national defense and consumer goods. 
D) law enforcement and agriculture. 
A) durable and nondurable goods. 
B) imports and exports. 
C) national defense and consumer goods. 
D) law enforcement and agriculture.

Question 14

In the United States, incomes have historically grown

Accepted Answer

A) about 0.5 percent per year. 
B) about 2 percent per year. 
C) about 4 percent per year. 
D) about 6 percent per year. 
A) about 0.5 percent per year. 
B) about 2 percent per year. 
C) about 4 percent per year. 
D) about 6 percent per year.

Question 15

In a particular country in 2000, the average worker needed to work 40 hours to produce 55 units of output. In that same country in 2008, the average worker needed to work 30 hours to produce 45 units of output. In that country, the productivity of the average worker

Accepted Answer

A) decreased by about 6 percent between 2000 and 2008. 
B) remained unchanged between 2000 and 2008. 
C) increased by about 9 percent between 2000 and 2008. 
D) increased by about 18 percent between 2000 and 2008. 
A) decreased by about 6 percent between 2000 and 2008. 
B) remained unchanged between 2000 and 2008. 
C) increased by about 9 percent between 2000 and 2008. 
D) increased by about 18 percent between 2000 and 2008.

Question 16

Which of these activities will most likely result in an external benefit?

Accepted Answer

A) A college student buys a deck of cards to play solitaire in her dorm room. 
B) An elderly woman plants a flower garden on the vacant lot next to her house. 
C) An executive purchases a book to read on a business trip. 
D) A ten-year-old uses his allowance to buy new Nike shoes. 
A) A college student buys a deck of cards to play solitaire in her dorm room. 
B) An elderly woman plants a flower garden on the vacant lot next to her house. 
C) An executive purchases a book to read on a business trip. 
D) A ten-year-old uses his allowance to buy new Nike shoes.

Question 17

When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included?

Accepted Answer

A) Your full room-and-board expenses should always be included. 
B) None of your room-and-board expenses should ever be included. 
C) You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college. 
D) You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college. 
A) Your full room-and-board expenses should always be included. 
B) None of your room-and-board expenses should ever be included. 
C) You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college. 
D) You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college.

Question 18

Market failure can be caused by

Accepted Answer

A) low consumer demand. 
B) equilibrium prices. 
C) externalities and market power. 
D) high prices and foreign competition. 
A) low consumer demand. 
B) equilibrium prices. 
C) externalities and market power. 
D) high prices and foreign competition.

Question 19

Government policies designed to equalize the distribution of economic well-being include (i)
The welfare system
(ii)
Unemployment insurance
(iii)
Progressive income tax

Accepted Answer

A) (i) only 
B) (ii) only 
C) (i) and (ii) only 
D) (i), (ii), and (iii) 
A) (i) only 
B) (ii) only 
C) (i) and (ii) only 
D) (i), (ii), and (iii)

Question 20

The opportunity cost of an item is

Accepted Answer

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

The government can potentially improve market outcomes if market inequalities or market failure exists.

Which of the following could reduce economic efficiency?

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

To improve living standards, policymakers should

Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity.

Communist countries worked on the premise that government officials were in the best position to allocate the economy's scarce resources.

The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by

Consider Frank's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Frank's cost of going to college is

Guns and butter are used to represent the classic societal tradeoff between spending on

In the United States, incomes have historically grown

In a particular country in 2000, the average worker needed to work 40 hours to produce 55 units of output. In that same country in 2008, the average worker needed to work 30 hours to produce 45 units of output. In that country, the productivity of the average worker

Which of these activities will most likely result in an external benefit?

When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included?

Market failure can be caused by

Government policies designed to equalize the distribution of economic well-being include (i) The welfare system (ii) Unemployment insurance (iii) Progressive income tax

The opportunity cost of an item is

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

Exam 1: Ten Principles of Economics

The government can potentially improve market outcomes if market inequalities or market failure exists.

Which of the following could reduce economic efficiency?

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

To improve living standards, policymakers should

Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity.

Communist countries worked on the premise that government officials were in the best position to allocate the economy's scarce resources.

The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by

Consider Frank's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Frank's cost of going to college is

Guns and butter are used to represent the classic societal tradeoff between spending on

In the United States, incomes have historically grown

In a particular country in 2000, the average worker needed to work 40 hours to produce 55 units of output. In that same country in 2008, the average worker needed to work 30 hours to produce 45 units of output. In that country, the productivity of the average worker

Which of these activities will most likely result in an external benefit?

When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included?

Market failure can be caused by

Government policies designed to equalize the distribution of economic well-being include (i) The welfare system (ii) Unemployment insurance (iii) Progressive income tax

The opportunity cost of an item is

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