Question 1

A direct or positive relationship exists between a country's

Accepted Answer

A) productivity and its standard of living. 
B) amount of government spending and its productivity. 
C) total population and its average citizen's income. 
D) rate of population growth and the extent of its trade with other countries. 
A) productivity and its standard of living. 
B) amount of government spending and its productivity. 
C) total population and its average citizen's income. 
D) rate of population growth and the extent of its trade with other countries.

Question 2

The "invisible hand" refers to

Accepted Answer

A) how central planners made economic decisions. 
B) how the decisions of households and firms lead to desirable market outcomes. 
C) the control that large firms have over the economy. 
D) government regulations without which the economy would be less efficient. 
A) how central planners made economic decisions. 
B) how the decisions of households and firms lead to desirable market outcomes. 
C) the control that large firms have over the economy. 
D) government regulations without which the economy would be less efficient.

Question 3

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

Accepted Answer

A) inflation 
B) unemployment 
C) both inflation and unemployment 
D) neither inflation nor unemployment 
A) inflation 
B) unemployment 
C) both inflation and unemployment 
D) neither inflation nor unemployment

Question 4

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

Accepted Answer

A) 15 years. 
B) 25 years. 
C) 35 years. 
D) 45 years. 
A) 15 years. 
B) 25 years. 
C) 35 years. 
D) 45 years.

Question 5

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Accepted Answer

A) True 
 B)False

Question 6

Betty's Bakery bakes fresh bread every morning. Any bread not sold by the end of the day is thrown away. A loaf of bread costs Betty $2.00 to produce, and she prices loaves of bread at $3.50 per loaf. Suppose near the end of one day Betty still has 12 loaves of bread on hand. Which of the following is correct?

Accepted Answer

A) Betty should only sell the remaining bread for $3.50 per loaf since that is the regular price. 
B) Betty should only sell the remaining bread for $2.00 per loaf or more since that is what the bread costs to make. 
C) Betty should be willing to sell the remaining bread for any price above $0 per loaf since she will have to throw it away if she does not sell it for something. 
D) Betty should just throw the bread away and change the price of her bread starting tomorrow to make sure she sells all of her bread each day. 
A) Betty should only sell the remaining bread for $3.50 per loaf since that is the regular price. 
B) Betty should only sell the remaining bread for $2.00 per loaf or more since that is what the bread costs to make. 
C) Betty should be willing to sell the remaining bread for any price above $0 per loaf since she will have to throw it away if she does not sell it for something. 
D) Betty should just throw the bread away and change the price of her bread starting tomorrow to make sure she sells all of her bread each day.

Question 7

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

Accepted Answer

A) is $40. 
B) is $80. 
C) is $120. 
D) cannot be determined from the information given. 
A) is $40. 
B) is $80. 
C) is $120. 
D) cannot be determined from the information given.

Question 8

The "invisible hand" directs economic activity through

Accepted Answer

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

Question 9

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 10

Prices usually reflect

Accepted Answer

A) only the value of a good to society. 
B) only the cost to society of making a good. 
C) both the value of a good to society and the cost to society of making the good. 
D) neither the value of a good to society nor the cost to society of making the good. 
A) only the value of a good to society. 
B) only the cost to society of making a good. 
C) both the value of a good to society and the cost to society of making the good. 
D) neither the value of a good to society nor the cost to society of making the good.

Question 11

The increase in living standards of American workers over the past century is primarily due to

Accepted Answer

A) the success of labor unions. 
B) minimum-wage laws. 
C) improvements in productivity. 
D) None of the above are correct. 
A) the success of labor unions. 
B) minimum-wage laws. 
C) improvements in productivity. 
D) None of the above are correct.

Question 12

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 13

A society allocates its scarce resources to various uses. These scarce resources include

Accepted Answer

A) land. 
B) people. 
C) machines. 
D) All of the above are correct. 
A) land. 
B) people. 
C) machines. 
D) All of the above are correct.

Question 14

A rational decisionmaker takes an action if and only if

Accepted Answer

A) the marginal benefit of the action exceeds the marginal cost of the action. 
B) the marginal cost of the action exceeds the marginal benefit of the action. 
C) the marginal cost of the action is zero. 
D) the opportunity cost of the action is zero. 
A) the marginal benefit of the action exceeds the marginal cost of the action. 
B) the marginal cost of the action exceeds the marginal benefit of the action. 
C) the marginal cost of the action is zero. 
D) the opportunity cost of the action is zero.

Question 15

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

Accepted Answer

A) An athlete works out at a gym. 
B) A secretary smokes a cigarette in a crowded break room. 
C) A young mother pushes her baby in a stroller. 
D) A construction worker eats a hotdog during his lunch break. 
A) An athlete works out at a gym. 
B) A secretary smokes a cigarette in a crowded break room. 
C) A young mother pushes her baby in a stroller. 
D) A construction worker eats a hotdog during his lunch break.

Question 16

The term "market failure"

Accepted Answer

A) means the same thing as "market power." 
B) refers to the dissolution of a market when firms decide to quit producing a certain product. 
C) refers to the failure of a market to produce an efficient allocation of resources. 
D) refers to government's failure to enforce the property rights of households or firms that participate in a certain market. 
A) means the same thing as "market power." 
B) refers to the dissolution of a market when firms decide to quit producing a certain product. 
C) refers to the failure of a market to produce an efficient allocation of resources. 
D) refers to government's failure to enforce the property rights of households or firms that participate in a certain market.

Question 17

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 18

Suppose the average income of a citizen of Poland is higher than the average income of a citizen of Romania. You might conclude that

Accepted Answer

A) Polish firms are faced with stricter government regulations than Romanian firms. 
B) total income is divided among fewer workers in Poland since it has a smaller labor force than Romania. 
C) Romania's climate allows for longer growing seasons and therefore Romania can produce large quantities of grain and other crops. 
D) productivity in Poland is higher than in Romania. 
A) Polish firms are faced with stricter government regulations than Romanian firms. 
B) total income is divided among fewer workers in Poland since it has a smaller labor force than Romania. 
C) Romania's climate allows for longer growing seasons and therefore Romania can produce large quantities of grain and other crops. 
D) productivity in Poland is higher than in Romania.

Question 19

Central planning refers to

Accepted Answer

A) markets guiding economic activity. Today many countries that had this system have abandoned it. 
B) markets guiding economic activity. Today many countries that did not have this system have implemented it. 
C) government guiding economic activity. Today many countries that had this system have abandoned it. 
D) government guiding economic activity. Today many countries that did not have this system have implemented it. 
A) markets guiding economic activity. Today many countries that had this system have abandoned it. 
B) markets guiding economic activity. Today many countries that did not have this system have implemented it. 
C) government guiding economic activity. Today many countries that had this system have abandoned it. 
D) government guiding economic activity. Today many countries that did not have this system have implemented it.

Question 20

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

Accepted Answer

A) an increase in the number of visits people want to make and an increase in the number of visits health care providers want to provide. 
B) an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide. 
C) a decrease in the number of visits people want to make and an increase in the number of visits health care providers want to provide. 
D) a decrease in the number of visits people want to make and a decrease in the number of visits health care providers want to provide. 
A) an increase in the number of visits people want to make and an increase in the number of visits health care providers want to provide. 
B) an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide. 
C) a decrease in the number of visits people want to make and an increase in the number of visits health care providers want to provide. 
D) a decrease in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.

Exam 1: Ten Principles of Economics

A direct or positive relationship exists between a country's

The "invisible hand" refers to

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

The "invisible hand" directs economic activity through

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Prices usually reflect

The increase in living standards of American workers over the past century is primarily due to

Low rates of inflation are generally associated with

A society allocates its scarce resources to various uses. These scarce resources include

A rational decisionmaker takes an action if and only if

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

The term "market failure"

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

Suppose the average income of a citizen of Poland is higher than the average income of a citizen of Romania. You might conclude that

Central planning refers to

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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