Question 1

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 2

The principle that trade can make everyone better off applies to

Accepted Answer

A) individuals. 
B) families. 
C) countries. 
D) All of the above 
A) individuals. 
B) families. 
C) countries. 
D) All of the above

Question 3

Scenario 1-1
You have the afternoon free. You have a choice between going to the movies with a friend or studying economics for three hours. If you go to the movies, you will spend $8.00 on a ticket and $4.50 on popcorn. If you choose to study economics for three hours, you will raise your exam grade by 10 points.
-Refer to Scenario 1-1. What is your opportunity cost of going to the movies?

Accepted Answer

$12.50 and

Question 4

The marginal benefit Kyra gets from eating a second sandwich is

Accepted Answer

A) the total benefit Kyra gets from eating two sandwiches minus the total benefit she gets from eating one sandwich. 
B) the same as the total benefit she gets from eating two sandwiches. 
C) less than the marginal cost of eating the second sandwich since she chose to eat the second sandwich. 
D) the total benefit Kyra gets from eating three sandwiches minus the total benefit she gets from eating two sandwiches. 
A) the total benefit Kyra gets from eating two sandwiches minus the total benefit she gets from eating one sandwich. 
B) the same as the total benefit she gets from eating two sandwiches. 
C) less than the marginal cost of eating the second sandwich since she chose to eat the second sandwich. 
D) the total benefit Kyra gets from eating three sandwiches minus the total benefit she gets from eating two sandwiches.

Question 5

Which of the following is a principle concerning how people interact?

Accepted Answer

A) Markets are usually a good way to organize economic activity. 
B) Rational people think at the margin. 
C) People respond to incentives. 
D) All of the above are correct. 
A) Markets are usually a good way to organize economic activity. 
B) Rational people think at the margin. 
C) People respond to incentives. 
D) All of the above are correct.

Question 6

Barb's aunt gave her $100 for her birthday with the condition that Barb buy herself something. In deciding how to spend the money, Barb narrows her options down to four choices: Option A, Option B, Option C, and Option D. Each option costs $100. Finally she decides on Option B. The opportunity cost of this decision is

Accepted Answer

A) the value to Barb of the option she would have chosen had Option B not been available. 
B) the value to Barb of Options A, C and D combined. 
C) the average of the values to Barb of Options A, C, and D. 
D) $100. 
A) the value to Barb of the option she would have chosen had Option B not been available. 
B) the value to Barb of Options A, C and D combined. 
C) the average of the values to Barb of Options A, C, and D. 
D) $100.

Question 7

If the government were to intervene and set the rent for apartments in New York City below the market rent, then we would expect, relative to the market outcome,

Accepted Answer

A) an increase in the number of people wanting to live in apartments in New York City. 
B) a decrease in the number of people wanting to live in apartments in New York City. 
C) an increase in the number of apartments available for rent in New York City. 
D) None of the above is correct. 
A) an increase in the number of people wanting to live in apartments in New York City. 
B) a decrease in the number of people wanting to live in apartments in New York City. 
C) an increase in the number of apartments available for rent in New York City. 
D) None of the above is correct.

Question 8

When the government prevents prices from adjusting naturally to supply and demand,

Accepted Answer

A) it equates the amount buyers want to buy with the amount sellers want to sell. 
B) it adversely affects the allocation of resources. 
C) it improves equality and efficiency. 
D) it improves efficiency but reduces equality. 
A) it equates the amount buyers want to buy with the amount sellers want to sell. 
B) it adversely affects the allocation of resources. 
C) it improves equality and efficiency. 
D) it improves efficiency but reduces equality.

Question 9

Slow growth in US incomes during the 1970s and 1980s was primarily due to

Accepted Answer

A) slow productivity growth in the US. 
B) increased competition from Japan. 
C) increased competition from European countries. 
D) a rapid decrease in the quantity of money in the economy. 
A) slow productivity growth in the US. 
B) increased competition from Japan. 
C) increased competition from European countries. 
D) a rapid decrease in the quantity of money in the economy.

Question 10

Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires.

Accepted Answer

A) True 
 B)False

Question 11

Scenario 1-6
It costs a company $30,000 to produce 600 heart rate monitors. The company's cost will be $30,070 if it produces an additional heart rate monitor. The company is currently producing 600 heart rate monitors.
-Refer to Scenario 1-6. What is the company's average cost?

Accepted Answer

The answer of Scenario 1-6
It costs a company $30,000 to...

Question 12

What are the two basic types of economies?

Accepted Answer

Centrally

Question 13

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 14

A rational decisionmaker

Accepted Answer

A) ignores marginal changes and focuses instead on "the big picture." 
B) ignores the likely effects of government policies when he or she makes choices. 
C) takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. 
D) takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions. 
A) ignores marginal changes and focuses instead on "the big picture." 
B) ignores the likely effects of government policies when he or she makes choices. 
C) takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. 
D) takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.

Question 15

For a very long time the country of Zeeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate

Accepted Answer

A) could be due to slower money supply growth. We would expect unemployment to be higher. 
B) could be due to slower money supply growth. We would expect unemployment to be lower. 
C) could be due to higher money supply growth. We would expect unemployment to be higher. 
D) could be due to higher money supply growth. We would expect unemployment to be lower. 
A) could be due to slower money supply growth. We would expect unemployment to be higher. 
B) could be due to slower money supply growth. We would expect unemployment to be lower. 
C) could be due to higher money supply growth. We would expect unemployment to be higher. 
D) could be due to higher money supply growth. We would expect unemployment to be lower.

Question 16

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

Accepted Answer

A) sell the ticket because the marginal benefit exceeds the marginal cost. 
B) sell the ticket because the marginal benefit exceeds the average cost. 
C) not sell the ticket because the marginal benefit is less than the marginal cost. 
D) not sell the ticket because the marginal benefit is less than the average cost. 
A) sell the ticket because the marginal benefit exceeds the marginal cost. 
B) sell the ticket because the marginal benefit exceeds the average cost. 
C) not sell the ticket because the marginal benefit is less than the marginal cost. 
D) not sell the ticket because the marginal benefit is less than the average cost.

Question 17

Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from drinking the third soda

Accepted Answer

A) can be thought of as the total benefit Bridget enjoys by drinking three sodas minus the total benefit she would have enjoyed by drinking just two sodas. 
B) determines Bridget's willingness to pay for the third soda. 
C) is likely different from the marginal benefit provided to Bridget by the second soda. 
D) All of the above are correct. 
A) can be thought of as the total benefit Bridget enjoys by drinking three sodas minus the total benefit she would have enjoyed by drinking just two sodas. 
B) determines Bridget's willingness to pay for the third soda. 
C) is likely different from the marginal benefit provided to Bridget by the second soda. 
D) All of the above are correct.

Question 18

Economics is the study of how society allocates its unlimited resources.

Accepted Answer

A) True 
 B)False

Question 19

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. 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 20

If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Which of the following can lead to market failure?

The principle that trade can make everyone better off applies to

The marginal benefit Kyra gets from eating a second sandwich is

Which of the following is a principle concerning how people interact?

If the government were to intervene and set the rent for apartments in New York City below the market rent, then we would expect, relative to the market outcome,

When the government prevents prices from adjusting naturally to supply and demand,

Slow growth in US incomes during the 1970s and 1980s was primarily due to

Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires.

Scenario 1-6 It costs a company $30,000 to produce 600 heart rate monitors. The company's cost will be $30,070 if it produces an additional heart rate monitor. The company is currently producing 600 heart rate monitors. -Refer to Scenario 1-6. What is the company's average cost?

What are the two basic types of economies?

During the early 1920s in Germany, prices

A rational decisionmaker

For a very long time the country of Zeeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from drinking the third soda

Economics is the study of how society allocates its unlimited resources.

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost.

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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