Question 1

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Economists use the word equality to describe a situation in which

Accepted Answer

A) each member of society has the same income. 
B) each member of society has access to abundant quantities of goods and services, regardless of his or her income. 
C) society is getting the maximum benefits from its scarce resources. 
D) society's resources are used efficiently. 
A) each member of society has the same income. 
B) each member of society has access to abundant quantities of goods and services, regardless of his or her income. 
C) society is getting the maximum benefits from its scarce resources. 
D) society's resources are used efficiently.

Question 4

Which of the following is a decision that economists study?

Accepted Answer

A) how much people work 
B) what people buy 
C) how much money people save 
D) All of the above are correct. 
A) how much people work 
B) what people buy 
C) how much money people save 
D) All of the above are correct.

Question 5

Which of the following is the primary cause of inflation?

Accepted Answer

A) an increase in the quantity of money 
B) an increase in government spending 
C) an increase in unemployment 
D) an increase in productivity 
A) an increase in the quantity of money 
B) an increase in government spending 
C) an increase in unemployment 
D) an increase in productivity

Question 6

Most economists believe that an increase in the quantity of money results in

Accepted Answer

A) an increase in the demand for goods and services. 
B) lower unemployment in the short run. 
C) higher inflation in the long run. 
D) All of the above are correct. 
A) an increase in the demand for goods and services. 
B) lower unemployment in the short run. 
C) higher inflation in the long run. 
D) All of the above are correct.

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

Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate?

Accepted Answer

A) People respond to incentives. 
B) Rational people think at the margin. 
C) Trade can make everyone better off. 
D) Markets are usually a good way to organize economic activity. 
A) People respond to incentives. 
B) Rational people think at the margin. 
C) Trade can make everyone better off. 
D) Markets are usually a good way to organize economic activity.

Question 9

The economy of the former Soviet Union is best described as a

Accepted Answer

A) primitive economy. 
B) market economy. 
C) hybrid economy. 
D) centrally-planned economy. 
A) primitive economy. 
B) market economy. 
C) hybrid economy. 
D) centrally-planned economy.

Question 10

Trade

Accepted Answer

A) allows specialization, which increases costs. 
B) allows specialization, which reduces costs. 
C) reduces specialization, which increases costs. 
D) reduces specialization, which reduces costs. 
A) allows specialization, which increases costs. 
B) allows specialization, which reduces costs. 
C) reduces specialization, which increases costs. 
D) reduces specialization, which reduces costs.

Question 11

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Accepted Answer

Whatever must be given up to obtain some

Question 12

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 13

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 14

What does the term "marginal change" mean?

Accepted Answer

A small incremental

Question 15

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

Accepted Answer

marginal c

Question 16

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 17

The government enforces property rights by

Accepted Answer

A) requiring property owners to pay property taxes. 
B) providing police and courts. 
C) forcing people to own property. 
D) providing public parks and recreation facilities. 
A) requiring property owners to pay property taxes. 
B) providing police and courts. 
C) forcing people to own property. 
D) providing public parks and recreation facilities.

Question 18

One of the 20th century's worst episodes of inflation occurred in

Accepted Answer

A) the United States in the 1960s. 
B) Italy in the 1950s. 
C) Russia in the 1930s. 
D) Germany in the 1920s. 
A) the United States in the 1960s. 
B) Italy in the 1950s. 
C) Russia in the 1930s. 
D) Germany in the 1920s.

Question 19

For markets to work well, there must be

Accepted Answer

A) market power. 
B) a central planner. 
C) property rights. 
D) abundant, not scarce, resources. 
A) market power. 
B) a central planner. 
C) property rights. 
D) abundant, not scarce, resources.

Question 20

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Accepted Answer

A) For the first 24 houses, the average cost per house was $205,000. 
B) The marginal cost of the 25th house, if it is built, will equal $250,000. 
C) If the company can sell the 25th house for at least $202,000, then it should build it. 
D) All of the above are correct. 
A) For the first 24 houses, the average cost per house was $205,000. 
B) The marginal cost of the 25th house, if it is built, will equal $250,000. 
C) If the company can sell the 25th house for at least $202,000, then it should build it. 
D) All of the above are correct.

Exam 1: Ten Principles of Economics

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

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

Economists use the word equality to describe a situation in which

Which of the following is a decision that economists study?

Which of the following is the primary cause of inflation?

Most economists believe that an increase in the quantity of money results in

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

Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate?

The economy of the former Soviet Union is best described as a

Trade

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

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?

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

What does the term "marginal change" mean?

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

In the United States, incomes have historically grown

The government enforces property rights by

One of the 20th century's worst episodes of inflation occurred in

For markets to work well, there must be

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

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

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25^th house, its total cost will increase to $5.05 million. Which of the following statements is correct?