Question 1

Prices direct economic activity in a market economy by

Accepted Answer

A) influencing the actions of buyers and sellers. 
B) reducing scarcity of the goods and services produced. 
C) reducing opportunity cost of goods and services produced. 
D) allocating goods and services in the most equitable way. 
A) influencing the actions of buyers and sellers. 
B) reducing scarcity of the goods and services produced. 
C) reducing opportunity cost of goods and services produced. 
D) allocating goods and services in the most equitable way.

Question 2

When calculating the cost of college, which of the following should you probably include?

Accepted Answer

A) The cost of your meal plan for the cafeteria. 
B) The cost of books required for college classes 
C) The income you earn at your part-time job. 
D) The cost of living in the dormitory. 
A) The cost of your meal plan for the cafeteria. 
B) The cost of books required for college classes 
C) The income you earn at your part-time job. 
D) The cost of living in the dormitory.

Question 3

Ashley eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana

Accepted Answer

A) can be thought of as the total benefit Ashley enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana. 
B) determines Ashley's marginal cost of the first and second bananas. 
C) does not depend on how many bananas Ashley has already eaten. 
D) cannot be determined unless we know how much she paid for the bananas. 
A) can be thought of as the total benefit Ashley enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana. 
B) determines Ashley's marginal cost of the first and second bananas. 
C) does not depend on how many bananas Ashley has already eaten. 
D) cannot be determined unless we know how much she paid for the bananas.

Question 4

Cole is refinishing an antique china cabinet and has already spent $180 on the restoration. He expects to be able to sell the cabinet for $360. Cole discovers that he needs to do an additional $200 worth of work to make the cabinet worth $360 to potential buyers. He could also sell the cabinet now, without completing the additional work, for $100. What should Cole do?

Accepted Answer

A) He should sell the cabinet now for $100. 
B) He should keep the cabinet since it wouldn't be rational to spend $380 restoring a cabinet and then sell it for only $360. 
C) He should complete the additional work and sell the cabinet for $360. 
D) It does not matter which action he takes since the outcome will be the same either way. 
A) He should sell the cabinet now for $100. 
B) He should keep the cabinet since it wouldn't be rational to spend $380 restoring a cabinet and then sell it for only $360. 
C) He should complete the additional work and sell the cabinet for $360. 
D) It does not matter which action he takes since the outcome will be the same either way.

Question 5

The principle that "people face tradeoffs" applies to

Accepted Answer

A) individuals. 
B) families. 
C) societies. 
D) All of the above are correct. 
A) individuals. 
B) families. 
C) societies. 
D) All of the above are correct.

Question 6

Which of the following is true about how the "invisible hand" influences economic activity through prices when a product has lower demand than supply?​

Accepted Answer

A) ​The price must decrease, causing more buyers to buy and less sellers to sell. 
B) ​The price must decrease, causing more buyers to buy and more sellers to sell. 
C) ​The price must increase, causing less buyers to buy and more sellers to sell. 
D) ​The price must increase, causing less buyers to buy and less sellers to sell. 
A) ​The price must decrease, causing more buyers to buy and less sellers to sell. 
B) ​The price must decrease, causing more buyers to buy and more sellers to sell. 
C) ​The price must increase, causing less buyers to buy and more sellers to sell. 
D) ​The price must increase, causing less buyers to buy and less sellers to sell.

Question 7

After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

Accepted Answer

A) The marginal benefit of going to Cancun increases. 
B) The marginal cost of going to Cancun decreases. 
C) The marginal benefit of going to Ft. Lauderdale decreases. 
D) The marginal cost of going to Ft. Lauderdale decreases. 
A) The marginal benefit of going to Cancun increases. 
B) The marginal cost of going to Cancun decreases. 
C) The marginal benefit of going to Ft. Lauderdale decreases. 
D) The marginal cost of going to Ft. Lauderdale decreases.

Question 8

Rational people make decisions at the margin by

Accepted Answer

A) following marginal traditions. 
B) behaving in a random fashion. 
C) thinking in black-and-white terms. 
D) comparing marginal costs and marginal benefits. 
A) following marginal traditions. 
B) behaving in a random fashion. 
C) thinking in black-and-white terms. 
D) comparing marginal costs and marginal benefits.

Question 9

Fundamentally, economics deals with

Accepted Answer

A) scarcity. 
B) money. 
C) poverty. 
D) banking. 
A) scarcity. 
B) money. 
C) poverty. 
D) banking.

Question 10

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 11

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 12

If Faith attends college, it will take her four years, during which time she will earn no income. She will pay $50,000 for tuition, $12,000 for room and board, and $5,000 for books. If she spends the four years working rather than attending college, she will pay $18,000 for room and board, pay no intuition, and buy no books. Based on this information, Faith's economic cost of attending college would be $67,000 if, over the four years, she could earn

Accepted Answer

A) $12,000 instead of attending college. 
B) $14,000 instead of attending college. 
C) $16,000 instead of attending college. 
D) $18,000 instead of attending college. 
A) $12,000 instead of attending college. 
B) $14,000 instead of attending college. 
C) $16,000 instead of attending college. 
D) $18,000 instead of attending college.

Question 13

An increase in the overall level of prices in an economy is referred to as

Accepted Answer

A) the income effect. 
B) inflation. 
C) deflation. 
D) the substitution effect. 
A) the income effect. 
B) inflation. 
C) deflation. 
D) the substitution effect.

Question 14

The basic principles of economics suggest that

Accepted Answer

A) markets are seldom, if ever, a good way to organize economic activity. 
B) government should become involved in markets when trade between countries is involved. 
C) government should become involved in markets when those markets fail to produce efficient or fair outcomes. 
D) All of the above are correct. 
A) markets are seldom, if ever, a good way to organize economic activity. 
B) government should become involved in markets when trade between countries is involved. 
C) government should become involved in markets when those markets fail to produce efficient or fair outcomes. 
D) All of the above are correct.

Question 15

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. A customer is willing to pay $60 for the 701th calculator. Should the company produce and sell it? Explain.

Accepted Answer

No, because the marg

Question 16

Inflation measures the increase in the quantity of goods and services produced from each hour of a worker's time.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Market failure refers to a situation in which the market does not allocate resources efficiently.

Accepted Answer

A) True 
 B)False

Question 19

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 20

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Prices direct economic activity in a market economy by

When calculating the cost of college, which of the following should you probably include?

Ashley eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana

The principle that "people face tradeoffs" applies to

Which of the following is true about how the "invisible hand" influences economic activity through prices when a product has lower demand than supply?​

After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

Rational people make decisions at the margin by

Fundamentally, economics deals with

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

When government policies are enacted,

An increase in the overall level of prices in an economy is referred to as

The basic principles of economics suggest that

Inflation measures the increase in the quantity of goods and services produced from each hour of a worker's time.

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

Market failure refers to a situation in which the market does not allocate resources efficiently.

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

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.

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

Filters

Which of the following is true about how the "invisible hand" influences economic activity through prices when a product has lower demand than supply?